Introduction

In the journal “The Contributions of Industrial Organization to Strategic Management” by Porter (1981), we learn that the industrial organization had small effect on the business policy concept of strategy and business policy had small effect on industrial organization.

Porter (1981) stated that it is becoming recognized today that industrial organization can offer much to the analysis of strategic choice by firms within industries and the contribution is growing rapidly as new research by bringing a new methodological tradition and examine some existing and potential contributions of industrial organization to strategic management, especially to the formulation of competitive strategy in individual industries.

The Promise of the Industrial Organization Paradigm

Andrews (1971) stated that Learned, Christensen, Andrews and Guth (LCAG) framework has become the foundation of business policy by defined strategy as how a firm attempts to compete in its environment, encompassing key choices about goals, products, markets, marketing, manufacturing, and so on. It is also stated that the successful firm had to match its internal competence and values to its external environment.

The four key elements of effective strategy formulation by Porter (1981) show that strengths, weakness, opportunities and threats (SWOT) has become personal values of key implementers and broader societal expectations.

Porter (1981) also show that industry structure determined the behavior or conduct of firms, whose joint conduct then determined the collective performance of the firms in the market place.  Scherer (1970) explained an important branch of industrial organization research was so called oligopoly study or the study of the outcome of competitive interactions in markets where one firm’s action affect its rivals and to specify the link between industry structure and firm-to-firm rivalry by providing a rich set of determinants of the difficulty firms face in coordinating their actions in the marketplace.

The Limitations of The Bain/Mason Paradigm

Porter (1981) stated that many policy scholars were not aware of the developments going on in Industrial organization, but they also seemed to be innately suspicious of economists work, possibly because of their exposure to microeconomics at the introductory level as outline below:

There were translation problems owing to different frames of reference, whereby policy teachers and practitioners had at different definition whereby policy aimed at understanding the multiple functions and objectives and practitioners focused much more narrowly on the economic bases of competition.

Industrial Organization differs in its unit of analysis and related assumptions, whereby policy and practitioners have been vitally interested in the problems of the individual company and have viewed each firms as unique entity with unique strengths and problems.

Industrial Organization and BP have different views of the decision maker, whereby policy and practitioners viewed the firm as a single decision-making unit making choices based on economic objectives.

To be continued..