Strategic Business Theory

Paper Summary:

The paper explains that the industrial/organization paradigm of strategy model bases its focus on the external environment; on evaluations of opportunities and threats, as well as the competition and relationships with other entities present on the market. The paper compares this to the resource based view (RBV) model that bases its focus on the internal plan and on the internal development of the organization. The paper relates that both of these models propose means by which the organization can gain a competitive advantage on the market, however, one of the models proposes that external factors are essential while the other suggests that it is the internal key resources that make the difference.

From the Paper:

"Basically, following this model, the constraints for the decision making process are not internal, as in the resource based view model, but external. The external variables from the macroeconomic environment determine internal decisions reflecting themselves in the company's strategy and its performance. As such, the I/O Paradigm follow a three-steps approach: industry structure -> company strategy -> performance (Michael Porter, 1983, Page 611). As we can see, the industry structure is essential in the decision making process, as one of its important determinants."

Sample of Sources Used:

• Wernerfelt, B. (1984), The Resource-Based View of the Firm. Strategic Management Journal; 5, (2), pp. 171-180
• Rumelt, D.P., (1984), Towards a Strategic Theory of the Firm. Alternative theories of the firm; 2002, (2) pp. 286-300, Elgar Reference Collection. International Library of Critical Writings in Economics, vol. 154.
• Porter, Michael. (1983). The Contributions of Industrial Organization to Strategic Management. Academy of Management Review. Vol. 6, No. 4 Pages 609-620
• Kotelnikov, Vadim. Resource - Based View (RBV) of Firms. On the Internet at http://www.1000ventures.com/business_guide/mgmt_stategic_resource-based.html. Last retrieved on August 8, 2007

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