Question

The industrial organization (I/O) model of above-average returns:

Answer 1

Answer:

The answer is A) Puts emphasis on the external environment, which plays a role in determining a company´s ability to achieve above-average returns.

Explanation:

The I/O Model of Above-Average Returns basically assumes that the industry in which a company decides to compete in has a much larger influence on performance (earnings and profit) than the choices the managers of this company make.

The basic assumptions of this organization model are:

• The external environment imposes pressures and constraints that determine the strategies of the company and will result in above average returns.
• It assumes competing companies control similar strategically relevant resources and pursue similar strategies.
• Resources are highly mobile across companies, so that any differences that might develop between companies will be short-lived.
• Decision-makers within the company are assumed to be rational and committed to acting in the company´s profit-maximizing behaviors.