Final answer:
Firms utilize both the industrial organization (I/O) model, focusing on external industry factors, and the resource-based model, which looks at internal resources and core competencies for success. By concentrating on core competencies, a firm can gain a competitive advantage in the market.
Step-by-step explanation:
Firms use both the industrial organization (I/O) and resource-based models. In fact, these models complement each other in that one focuses outside the firm while the other focuses inside the firm. The I/O model is concerned with external factors such as competition, market structure, and the overall industry environment which affect a firm's strategies and performance. On the other hand, the resource-based model looks at the internal resources and capabilities of a firm, including its core competencies, which are often the basis for competitive advantage and long-term success.
A similar pattern often operates within businesses. A business that concentrates on its core competency, which could be one or a few products, usually performs better than firms with a broader product range. This focus enables a firm to build specialized skills and knowledge, ultimately leading to superior products or services. The insider-outsider model also related to business operations, recognizes that insiders, or current employees, are familiar with the company's procedures, while outsiders are either new hires or potential hires who may not yet be acquainted with the firm's processes.