Chapter 1
A competitive advantage can be identified only if it has been unsuccessfully challenged by competitors.
Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar level of risk.
All of the following are assumptions of the industrial organization (I/O) model:
First, the external environment is assumed to impose pressures and constraints that determine the strategies that would result in above-average returns.
Most firms competing within an industry or within a segment of that industry are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources.
Resources used to implement strategies are assumed to be highly mobile across firms, so any resource differences that might develop between firms will be short-lived.
Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interest, as shown by their profit-maximizing behaviors.
The industrial organization (I/O) model argues that the key factor in success is choosing the correct industry in which to compete.
Under the I/O view performance of the firm is most directly attributable to THE PROFIABILITY OF THE INDUSTRY THE FIRM COMPETES IN.
Firms use the five forces model to identify attractiveness of the industry as measured by its PROFITABILITY.
When a firm is competing in an unattractive industry yet has had superior performance by focusing on its core capabilities, this is best explained by the model
Research shows that approximately 20 percent of a firm’s profitability is explained by the industry in which it competes, whereas 36 percent is explained by the firm’s characteristics and actions.
All of the following are assumptions of the resource-based model:
Differences in firms’ performances across time are due primarily to their unique resources and capabilities rather than the industry’s structural...