The I/O (Industrial Organization) Model adopts an external perspective to explain that forces outside of the organization represent the dominate influences on a firm’s strategic actions and is based on the following four assumptions:

1. The external Environment The general, industry, and competitive environments impose pressures and constraints on firms and determines strategies that will result in superior returns. (External Environment à Organization)

2. Most firms competing in an industry or an industry segment control similar sets of strategically-relevant resources and thus pursue similar strategies.

3. Resources used to implement strategies are highly mobile across firms.

4. Organizational decision-makers are assumed to be rational and committed to acting only in the best interests of the firm.