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The industry based view of strategy explains how industry attributes affect the performance of companies. According to Peng et al., the industry specific attributes relate to factors in the external environment of a company (1). These are factors that are determined by many players in the market and not just an operating company.
This means that the company in question does not have full control over how it performs in the market because of the power of external factors. This approach to strategy formation brings out that managers should consider external factors that affect their operations. The manager should not just consider internal characteristics of his company but also those of competitors and other market stakeholders.
Even though businesses operate independently in markets, their activities are affected by those of other similar businesses in the same industry. Many markets are perfectly competitive and so prices and the level of output produced are determined by many parties.
The business level model of global competitive dynamics brings out how different organizational functions enable companies to compete in the global market.
Businesses must make use of different functions such as production, accounts and marketing so as to create competitive advantage. Since profits are what keep businesses in operation, all activities must be competitive so that the organization gains advantage over its rivals in the global market.
The industry based view of strategy works well with the business level model of entrepreneurship since the two factors are inter-related. Managers must develop strategies in relation to industry factors. When this is done, the strategies become practical and realistic in relation to the market.
This approach enables managers to consider how industry factors affect individual business functions and the demand and supply of their products so that pricing and product strategies can be effective in creating profits. The industry based approach however neglects the firm’s internal capabilities of dealing with challenges. At times the resources and skills possessed internally are enough to meet the needs of the market while industry factors complicate what could have been solved easily.
The corporate-level model of multinational strategy, structure, and learning looks at the firm as a corporate body. This means that all activities are interrelated so that the organization moves in one direction. In the global arena, organizations need to develop strategies that create harmony and cooperation between individual departments. Corporate strategies also determine organizational activities, structure and acquisition of knowledge.
The industry based approach to strategy formulation puts the focus of managers on industry factors. When managers consider the impact of industry forces on the firm’s activities, they are able to develop strategies that can overcome challenges from the external environment.
When global strategies are based on the industry view, organizations gain the advantage of being in touch with the actual situation in the market. The industry based view however does not optimize on available resources within the organization such as manpower, time, finances and skills since its focus is on the industry factors.
In conclusion, the industry based view on strategy has both advantages and disadvantages in relation to the business-level model of global competitive dynamics and the corporate-level model of multinational strategy, structure, and learning. The industry specific factors affect corporate strategies especially in the global business environment.
Strategy formulation and implementation should be based on the global perspective of markets. Global strategies therefore have to consider industry factors and how these affect the operations of individual businesses. Managers are faced with the task of ensuring that their organizations remain competitive so that they gain advantage over their competitors.
Bibliography
Peng Mike W, Wang Denis Y and Jiang Yi. “An institution-based view of international business strategy: a focus on Emerging economies”. Journal of International Business Studies. 39(2008): 920–936. Web.
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