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Unformatted text preview: pertain to the overall company while others will be more narrowly focused. THE INDUSTRIAL ORGANIZATION (I/O) VIEW
External Factors versus Internal Factors • External factors are more important than internal factors in a firm achieving competitive advantage. Organizational performance is primarily determined by industry forces.
• Managing strategically from the I/O perspective entails firms striving to compete in attractive industries, avoiding weak or faltering industries, and gaining a full understanding of key external factor relationships. THE INDUSTRIAL ORGANIZATION (I/O) VIEW Factors Affecting Firm Performance 1. Firm performance is primarily based on industry properties such as economies of scale, barriers to market entry, product differentiation, and level of competitiveness. 2. Approximately 20% of a firm’s profitability can be explained by industry factors while about 36% of the variance is attributed to a firm’s internal factors. ECONOMIC FORCES
A. Economic Factors Have a Direct Impact
1. Economic factors have a direct impact on the potential attractiveness of various strategies. For example, if...
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This document was uploaded on 02/19/2014.
- Spring '13