literature support the issue

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Literature support the issue

Contribution of Industrial organization

According to Michael E. Porter, Industrial organization can gives the new research breakdown

the difference for the contribution of industrial organization to grow rapidly. In other words, industrial

organization can offer to the analysis of strategic choices by the firms within industries. Based on the

journal, Michael E. Porter stated that industrial organization brought new methodological tradition.

Which mean, a techniques, method and tools to solve problems of strategic management of a certain firms.

While according to LCAG (Learned, Christensen, Andrews, and Guth) explain about strategy as

how environment of a firm manage to compete and encompassing the key choice about product, goals,

markets and manufacturing. In addition, LCAG explained that a successful firm may has to match its

internal organization. Which mean in terms of resource, capabilities, core competence, and competitive

advantages. LCAG comes out an idea of consistency test to stress out the need of a firm and examine its

strategy to see whether it is related these element. Whereby, it was illustrated as below figure 1.

According to [Bain,1968; Mason,1953], behavior or conduct of a firm is determined by the

industry structure, whose joint conduct determined the collective performance of the firms in marketplace.

Whereby, it offer sa useful contribution of strategy formulation in industry and also gives a systematic

model to guide the nature of competition in an industry.

Company strength,

weakness

Industry economic &

technical

opportunities, threats

Personal values of key

implementers

Broader societal

expectations

Figure 1

The Four Key Element of

Effective Strategy Formulatio

Industry

Structure

Conduct

(strategy)Performance

Figure 2

The Traditional Bain/Mason

Industrial Organization Paradigm


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Literature not support the issue

From Michael E. Porter point of view, he argued that there is disadvantage of the traditional

Brain/Mason industrial organization paradigm. One of the arguments are there is a translation problem

owing to different frame of reference. Which means, the scale of their observation and the idea of their

frame was different from the coordinate system He did not support is the Industrial Organization

(IO)explanation industry competition and performance could either applied for private or social. In

addition, he explained that the fundamental different of frame of reference meant by the IO theory had to

be translated before it can be consistence with privately perspective and recognized to the policy

practitioners.

Michael E porter also argue that there IO views the firms as the free-standing entity. The

diversification of IO is largely different from the literature in the oligopolistic market on the competitive

outcomes. Moreover, the need of the corporation is strongly affect the objective of unit as well as theresource that made available to it will influence the market outcome. He also explain by giving example

of a firm manufacture a motor and it uses to manufacture another product such as hair dryer and cooling

fans, it will partly determine the total sale of unrelated product. Therefore to handle such shared cost,

firms must formulate strategy of the both individual business unit level and the whole group of related

business unit.

IO had a static perspective is one of Michael E. Porter argue yet comes out a question that is

still unanswered by Brian/Mason theory that is, what make structure what is was, and what did a person

will do about the changes in strategic viewpoint.? He stated that rom the Brian/Mason viewpoint of anindustry performance is result from the industry structure. Therefore it was stated the structure is stable.

Eventually, policy practitioner was used to cope with the changes of the structure in industry.

Another argument from Michael E. Porter is the IO is too limited. IO theory are identified too

few in a critical aspect of structure for example the distribution of a firm sizes and entry barrier.

Unmentioned variable is crucial to strategy in individual industries. However policy practitioners are

more interested in long list than generality of various items. For an example, the concept of entry barrier

included with specific factors, and many of it are not explained in the usual industrial organization

accounts.


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Reference

Journal :

Porter, M.E. The Contributions of Industrial Organization to Strategic Management

Harvard university Graduate School of Business Administration, 1979

Mason, E.S. Price and production policies of large-scale enterprises.

Americnn Economic Review, March 1939, 29, 61-74.

Scherer, F.M. Industrinl mnrket structure rlnd economir p~rformnnce.

Chicago: Rand McNally, 1970.

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