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Resource Base View of the Firms

Resource Base View of the Firms-2

1. RBV is a method of analyzing and identifying a firms strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles. 2. Each firm develops competencies from these resources, and these become the source of the firms competitive advantages.

Resource Base View of the Firms-3

1. Tangible assets are the easiest resources to identify and are often found on a firms balance sheet . 2. Intangible assets are resources such as brand names, company reputation, organizational morale, technical knowledge, patents and trademarks, and accumulated experience. 3. Organizational capabilities are not specific inputs. They are the skills that a company uses to transform inputs into outputs .

Resource Base View of the Firms-4

1. Is the resource or skill critical to fulfilling a customers need better than that of the firms competitors? 2. Is the resource scarce? Is it in short supply or not easily substituted for or imitated? 3. Appropriability: Who actually gets the profit created by a resource? 4. Durability: How rapidly will the resource depreciate?

Element of Scarcity in RBV

Short Supply Availability of Substitutes Imitation Isolating Mechanisms:
Physically Unique Resources Path-Dependent Resources Casual Ambiguity Economic Deterrence

Using RBV in Internal Analysis.

It is helpful to: Disaggregate resources Utilize a functional perspective Look at organizational processes Use the value chain approach

1. Traditional strategy models such as Michael Porter's five forces model focus on the company's external competitive environment. 2. Most of them do not attempt to look inside the company. 3. In contrast, the resource-based perspective highlights the need for a fit between the external market context in which a company operates and its internal capabilities.

4. In contrast to the Input / Output Model (I/O model), the resource-based view is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic action than is the external environment. 5. "Instead of focusing on the accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external environment (I/O model),

The resource-based view suggests that a firm's unique resources and capabilities provide the basis for a strategy. The business strategy chosen should allow the firm to best exploit its core competencies relative to opportunities in the external environment.

Resources are inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finance, and talented managers. Resources are either tangible or intangible in nature. Individual resources may not yield to a competitive advantage. It is through the synergistic combination and integration of sets of resources that competitive advantages are formed.