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ential for aboveaverage returnsAttractive industry: one whose structural characteristics suggest aboveaverage returnsIndustrial Organization ModelThe External EnvironmentAn Attractive Industry16I/O Model of AboveAverage Returns3. Identify the strategy called for by the attractive industry to earn aboveaverage returnsStrategy formulation: selection of a strategy linked with aboveaverage returns in a particular industryIndustrial Organization ModelThe External EnvironmentAn Attractive IndustryStrategy Formulation17I/O Model of AboveAverage Returns4. Develop or acquire assets and skills needed to implement the strategyAssets and skills: those assets and skills required to implement a chosen strategyIndustrial Organization ModelThe External EnvironmentAn Attractive IndustryStrategy FormulationAssets and Skills18I/O Model of AboveAverage Returns5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategyStrategy implementation: select strategic actions linked with effective implementation of the chosen strategyIndustrial Organization ModelThe External EnvironmentAn Attractive IndustryStrategy FormulationAssets and SkillsStrategy Implementation19I/O Model of AboveAverage ReturnsIndustrial Organization ModelThe External EnvironmentAn Attractive IndustryStrategy FormulationAssets and SkillsStrategy ImplementationSuperior ReturnsSuperior returns: earning of aboveaverage returns20 dictated by unique resources and capabilities of the firm (what can the firm do best?) an environment in which to exploit these assets (where are the best opportunities?)Resourcebased Model of Above Average Returns1. Firm’s Resources211. Identify the firm’s resources strengths and weaknesses pared with petitorsResources: inputs into a firm’s production processResourcebased Model of Above Average ReturnsResourcebased ModelResources222. Determine the firm’s capabilitieswhat it can do better than its petitorsCapability: capacity of an integrated set of resources to integratively perform a task or activityResourcebased Model of Above Average ReturnsResourcebased ModelResourcesCapabilit