Which is more important: Resources or industry? In the big picture of things, there are two opposing strategic views on the most important contributor to above average returns. Usually companies are rewarded when they produce greater profits than do rivals. These are referred to as either an industrial organization model (I/O) or a resource based view model (RBV). Proponents of the industrial organization (I/O) model believe that a firm's competitive advantage is based on external factors. According to this model, a company will get ahead by observing the actions of competitors and predicting their next moves. Competitive advantage, therefore, is obtained by gaining information on what other players in the market are doing. The I/O model specifies a firm's strategy based on external environment with the characteristics of general, industry and competitor environments (Hanson). This model allows the firms in an industry to compete on their performance regarding to the threat of new entrants, rivalry among competing firms threat of substitute products, bargaining power of suppliers and bargaining power of buyers. Specifically, this I/O relationship is easily observed in the stock market whereby price performance of firms tends to move in tandem over a period of years. Why enter the retail clothing industry when you could go marketing a variety of products online. According to the resource-based perspective (RBV), on the other hand, competitive advantage comes from internal rather than external sources. In other words, it is the human capital of the business, the customer loyalty that has built up around the brand, and other assets that the business already has that will make it more successful. As the name implies, the company will develop its competitive advantage based on the resources that it has. According to Dr. Jay Hanson, the RBV model specifies a firm's strategy internally to earn above- average returns based on its unique resources and capabilities. Resources such as capital, equipment, individuals' skills, patents and finances are formed into a capability and is managed dynamically to achieve competitive advantages over its rivals. Specifically, this is shown in obtaining superior financing, marketing, or use of technology. Examples are Nike loyalty and advertising. The RBV focuses on internal factors while the I/O model focuses on external factors to achieve above-average returns. It may seem the logical answer is both are important, and both are important. However organizations have limited resources and must decide the best way to allocate those resources. While both models may be considered, the emphasis perhaps should be on one or the other.