Defination * Strategic Competitiveness * When a firm successfully formulates and implements a value-creating strategy. * Strategy * An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. * Competitive Advantage * When a firm implements a strategy that its competitors are unable to duplicate or find too costly to try to imitate. * Average Returns * Returns equal to those an investor expects to earn from other investments with a similar amount of risk. * Above-average Returns * Returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
Four Assumptions of the I/O Model

1.External environment imposes pressures and constraints that determine strategies leading to above-average returns.
2. Most firms competing in an industry control similar strategically relevant resources and pursue similar strategies.
3. Resources used to implement strategies are highly mobile across firms.
4. Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests (profit-maximizing).

© 2007 Thomson/South-Western. All rights reserved.
© 2007 Thomson/South-Western. All rights reserved.
1–17
1–17
FIGURE 1.2

The I/O Model of Above-Average Returns
FIGURE 1.2

The I/O Model of Above-Average Returns

Assumption of Resource Based Model:

The Five Forces of Competition Model

Threat of New Entrants: Barriers to Entry * Economies of scale * Product differentiation * Capital requirements * Switching costs * Access to distribution channels * Cost disadvantages independent of scale * Government policy * Expected retaliation
Bargaining Power of Suppliers * Supplier power