Final answer:
Firms use both the I/O and resource-based models to formulate strategies. The I/O model emphasizes external industry structures, while the resource-based model focuses on a firm's internal resources and capabilities, such as employing a core competency strategy.
Step-by-step explanation:
Firms use both the I/O (Industrial/Organizational) and resource-based models. The I/O model focuses on the industry's structure or the external environment in which a company operates and suggests that the external environment dictates the strategies that would be most effective in achieving competitive advantage. On the other hand, the resource-based model looks inside the firm, concentrating on the internal capabilities, or the resources and competences, that a firm possesses, which can lead to a sustainable competitive advantage. The insider-outsider model is related but more focused on employment dynamics, describing those already working for the firm as “insiders” who know the procedures, while other workers are "outsiders" who are recent or prospective hires. This plug into resource-based perspectives, considering a firm's human resources and their knowledge as key competencies.
A similar pattern to the resource-based model often operates within businesses focusing on core competencies. This approach is more successful than attempt at a wide product range because it leverages the firm's unique strengths and capabilities. The combination of both the I/O and resource-based views offers a comprehensive overview, where effective strategy should align external opportunities and threats with a firm's internal strengths and weaknesses.