This paper is going to try and identify the important issues that is critical to organisations is as far as the implementation of the both the Resource-Based View (RBV) and the Industrial organization (IO) models of Above Average Returns. It will draw results after comparing and contrasting the impacts of the internal and external environments on the organisation and in particular how strategically important it is to use or adopt the correct model. Both models have their advantages and disadvantages and this paper is going to try and capture them and put into perspective what issues that can be adopted from both models so that the organisation is able to sustain its operations and growth.
When studying Strategic Management, one cannot overlook the fact that there are two critical theories that are subjugated in the study and furthermore are deeply rooted on a diverse set of basic assumptions. These are Barney’s (1991) Resource-Based View (RBV) and Porter’s (1980) philosophy of Industrial Organization (IO). Dwelling further on these two models, it is evident that with the IO Model, its competitive advantage is greatly influenced by the industry whereas with the RBV Model, it is the company’s resources that will influence its economic growth or competitive edge.
Hypothetical and experimental results have indicated that industrial and organisational factors critically contribute to the required growth. They are inevitably part of both models and therefore are important to consider when deciding what model to adopt.
Resource-Based View (RBV) and Porter’s Industrial organization (IO), over the years, has proved to be one of the controlling viewpoints for strategic management studies. Spanos and Lioukas have identified that traditionally, these viewpoints were beheld reasonable vis-à-vis the root of unrelenting financial uprising. (Spanos & Lioukas 2001).
Drnevich & Kriauciunas both support the idea that when looking at the IO in detail, it is noted that the assets of any organisation are homogenous and transportable – in detail the homogeneous attributes of the resources can be identified as being comparatively undifferentiated, exclusive to the firm, widespread in the industry, idiosyncratic and not specific to the organisation or its competitors. (Drnevich & Kriauciunas, 2011:255).
Barney on the other hand says that with the RBV standpoint, the resources within a corporation is both permanent and heterogeneous. (Barney 1991). Amit & Schoemaker, Teece, Picano & Schuen and Drnevich & Kriaciunas all subscribe to the fact that the heterogeneous proficiencies are idiosyncratic, customized, unique, and/or specific to an organisation. Amit & Schoemaker (1993), Teece, Picano & Schuen (1997), Drnevich & Kriaciunas (2011:255)
Furthermore, commercial entities have the chance to develop on its competitive edge by utilising internal resources that are exclusive to the firm, uncommon, valuable, not easily imitated, and of course well systemised that is considered a VIRO Criteria. (Value, Imitability, Rarity, Organisation)