Question

How important is the environment to the performance of airlines in the airline industry? What does this suggest regarding the industrial organization (I/O) model to explain how firms can earn above-average returns?

Answer 1

Answer:

External and internal environment is very important to the performance of airlines in the airline industry.

The industrial organization (I/O) model suggests that environments is the key point for firms to earn above-average returns.

Explanation:

The airlines´ external and internal environments analysis is important because it is the first step in developing the frim´s strategic management process.

This analysis will establish the firm´s resources availability and capability, along with the core competencies looking forward setting commitments, making decisions, and taking actions aiming to reach competitiveness and to earn above-average returns.

The industrial organization, or I/O model, suggests that the  external environment is the key of a firm’s strategic actions as firms use the sources information of these continuously evolving "strategic inputs" to develop its vision  and mission and to formulate its strategy to respond to the challenging landscape brought by globalization and the resulting economy featuring rapid technological changes, and achieve strategic competitiveness and above-average returns.