Strategic Management

Module 1: Resource Based model and I/O model

Prof. Jay Padh

M.H. Gardi School of Mgnt.

(M) 8866656695

Resources

Resources are the inputs into a firms production process: such as

Physical Organizational Capital

According to resource based model,

Differences in the firms performances are due to their unique resources rather than their structural characteristics.

The I/O Model of Above Average Returns

From 1960-80, it was believed that the external environment plays the vital role in determining the strategy Thus, the Industrial Organization (I/O) model focuses on external environments influence on a firms strategic actions.

According to this model, the industry that a company chooses to compete has a strong influence on performance rather than the operational issues handled by the managers.

Key factors to decide the firms performance as per I/O model

It is determined primarily by industry environment such as

Economies of scale Barriers to market entry Diversification Product differentiation

Assumptions
This model has assumed the following facts: 1. External environment imposes pressures and constraints that determine the strategies that would result in above average returns

Assumptions
2. Most firms of the industry have strategically similar resources and adopt the similar strategies to use the resources. 3. Resources are highly mobile within the industry. 4. The decision makers are rational and acts for the firms best interest.

Thus, the I/O model challenges the firms to locate the most attractive industry in which to compete.

Five forces model of competition is an analytical tool used to help firms with this task.

Stake Holders

What Are the Stakeholders of a Business?

Any person or entity interested in a particular business is called a stakeholder. They are affected by the business activity, and they may be part of the core decisionmaking team. Internal and external stakeholders may have different interests and priorities, possibly leading to conflicts of interest.

Kinds of Stakeholders

Internal stakeholders are owners, managers, and workers. External stakeholders are the customers and the suppliers. The community in which the organization does business also is a stakeholder. All the stakeholders are not equal, and different stakeholders will have varying considerations. These stakeholders can have direct or indirect stake in the organization and in policy-making.

Influence of Stakeholders

Different stakeholders have different influence. Owners have a major say in the way the company functions. Owners generally tend to extract the maximum efficiency and make the maximum profit from their investments in the company. Customers are also key stakeholders in any organization. The way they are catered to and their level of satisfaction determines how the company runs.