Free Essay On Strategic Management

Strategic management is a process that encompasses the complete set of commitments, decisions, and actions needed for a business to create value and realize above-average returns. The Industrial Organization (IO) model and the resource-based model are two fundamental schools of thought in strategic management.
The IO model postulates that forces outside the business largely determine above-average returns for any business. This model concentrates on the structure or attractiveness of the industry rather than the internal factors affecting the firm. If the leadership of my corporation wishes to outperform rival businesses by applying this model, it has to identify the opportunities and threats that they face in a particular industry and use the available assets and skills to implement a selected strategy. However, corporate leaders must understand that forces in the external environment put limitations on the strategies that can lead to superior profitability.
Unlike the IO model, the resource-based model proposes that forces within the business largely determine above-average returns for any business. This model emphasizes developing valuable resources and capabilities that are hard or almost impossible for competitors to imitate. In order to apply this model of above-average returns, the leaders of my corporation need to: identify the corporation’s level of resources in terms of strengths and weaknesses and compare it with that of other players in the industry; determine where they can perform better than their competitors; and measure the capability of the corporation to outrival its competitors. Once these steps have been taken, the leaders of the corporation can go on to choose an industry that presents opportunities, which can be exploited using the available resources and capabilities.
All in all, the choice of either model of above-average returns depends on the corporation’s level of understanding of the internal and external business environments since both environments are separate and distinctive yet still inextricably connected.