Theresource-based view of a firm plays a significant role in theassessment of various resources available within an organization toattain a sustainable competitive edge over the competitors in themarket. The view helps explain why firms either succeed or fail inthe marketplace by outlining various attributes of resources requiredto give an organization a competitive advantage. Various researchersin the field of strategic management have developed differentmarketing theories and concepts that are interrelated to theresource-based view of the firm in attaining a sustainablecompetitive advantage. Notably, SWOT analysis illustrates strategiesby which organizations can achieve a competitive edge by exploitingvarious opportunities in the environment and optimizing the use ofits strengths while eliminating external threats and minimizingweaknesses within the organization. According to Porter’s fiveforces model, various characteristics determine the attractiveness ofan industry thereby maximizing the opportunities while minimizingthreats affecting the business (Porter, 1985). On the other hand,resource-based view approach depicts the interrelationship betweenthe organization’s internal attributes and its performance therebyoverriding the assumptions made by other models used in the marketingtheories suggesting that firms have similar resources and are likelyto take similar strategies to achieve a competitive edge. Moreover,marketing models make an assumption that resources used to implementvarious strategies aimed at attaining a competitive edge are highlymobile hence heterogeneity only lasts for a short period. Theresource-based approach uses different concepts rife in marketing toexplain how the organizations attains a competitive edge such as firmresources, competitive advantage, and sustainable competitiveadvantage (Bromiley & Fleming, 2002).
First,firm resources describe various assets, firm attributes, processes,knowledge, information, and capabilities that enable the firm todevelop and actualize strategies that increase organization’sefficiency and effectiveness. Therefore, organizations use their firmresources to implement value-creating strategies and may beclassified in various categories namely organizational capital,human capital and physical capital resources. Human capital resourcescompose of training, judgment, experience, interpersonalrelationships and individuals’ mode of thinking in the organizationwhile physical capital resources comprise of the geographic locationof the firm, plants, and equipment. Additionally, organizationalcapital resources entail various management functions within theorganization such as control function, Coordination, planning,reporting structures, formal and informal relationships betweendifferent groups within the organization as well as relationshipsbetween the organizations. However, all these attributes are notrelevant in implementing strategies meant to improve the efficiencyand effectiveness of an organization, and some of them may hinderimplementation of various strategies. Therefore, the resource-basedview of a firm only focuses on resources that enable organizationsimplement strategies aimed at improving efficiency and effectiveness(Hunt & Lambe, 2000).
CompetitiveAdvantage and Sustained Competitive Advantage
Competitiveadvantage refers to the process by which an organization implements avalue-creating strategy that is different from other competitors inthe market and potential competitors. On the other hand, sustainedcompetitive advantage is described as the process by which anorganization develops and implements a value based strategy uniquefrom competitors and difficult for competitors to leap benefits fromthis strategy when they try to implement it. These definitions putinto considerations potential competitors who will enter the industryin future thereby enabling an organization to benefit from acompetitive advantage or sustained competitive advantage. However,sustained competitive advantage does not depend on the duration ofcalendar time during which an organization enjoys the competitiveadvantage but rather on the ability of the other firms duplicatingthe unique attributes that give the firm a competitive edge.Furthermore, unexpected changes in the economic structures may affectthe competitive advantage of an organization in an industryespecially when significant innovations in a new industry structuremake products that were giving an organization a competitive edgeobsolete.
ResourceHomogeneity, Mobility and Sustained Competitive Advantage
Thisapproach assumes that all the firms in an industry possess similarphysical, human and organizational resources thereby eliminating thepossibility of competition between the organizations. Firms improvetheir efficiency and effectiveness the same way since they havesimilar resources hence implement same strategies to attain acompetitive advantage making it difficult for a firm to benefit froma sustained competitive advantage in this type of an industry.
ResourceHomogeneity, Mobility and First Mover Advantages
Thisapproach elaborates that firms can attain a sustained competitiveadvantage through acquiring first mover advantages through variousways such as good customer relations, developing a good reputationand gaining access to the distribution channels. First moversidentify opportunities available in the environment that cannot bedeveloped by current competitors and potential competitors in theindustry thus making the informed firm implement the strategy beforethe other firms. However, numerous researchers suggest that thisapproach is impossible as identical firms will develop and implementstrategies similar to the first movers. Therefore, first movers oughtto have heterogeneous resources to attain a sustainable competitiveadvantage.
ResourceHomogeneity, Mobility and Entry Barriers
Thisapproach stipulates that some firms within an industry gain asustainable competitive advantage through the creation of barriers toentry that hinder other firms outside the industry from joining thatindustry. These barriers to entry exist when the competitors haveheterogeneous resources that are immobile limiting their movementfrom one firm to the other among current and potential competitors.Therefore, firms seeking to enter into this industry must neitherhave same resources nor implement same strategies as the existingfirms to avoid competition from taking place. Barriers to entry thuslead to a sustained competitive advantage when the firm resources areheterogeneous and perfectly immobile. Recent studies by Porter bringsout the concept of the value chain that helps in identifyingpotential resource-based advantages by leaders in their firms wherebythe resource based view examines various attributes that resourcesmust possess to give a firm sustainable competitive advantage.
FirmResources and Competitive Advantage
Theresource-based view labels an organization as a group of humanorganizational and physical resources and is assigned variousattributes that are sources of a sustainable competitive advantage inan organization. Firm resources help in achieving a sustainablecompetitive advantage when they are, rare, valuable, perfectlyimitable and imperfectly substitutable. Resources are assigned theattribute of valuable if they enable the firm to exploit marketopportunities and minimize threats in the market environment therebyproviding strategic value to the firm. Therefore, firms improve theirperformances when strategies for exploiting opportunities andminimizing threats exist which enables the application ofenvironmental models that help in isolating various opportunities andthreats. Next, these resources must be absent among the current andpotential competitors with unique characteristics that enable thefirm to attain a sustainable competitive advantage. Resources thatare valuable but common gives a firm competitive parity whilevaluable, and rare resources provide a sustainable competitiveadvantage. Imperfect imitability suggests that resources must bedifficult to be copied by current and potential competitors in theindustry. Valuable and rare organizational resources only help inachieving a competitive advantage if other firms find it difficult inobtaining resources. Various conditions influence imperfectimitability of the firm resources and include, the ease of the firmto obtain resources whereby unique historical conditions increasesthe difficulty of imitating resources used by a firm with a greatcompetitive advantage. Additionally, the relationship betweenresources and the sustained competitive advantage must be ambiguous,and the resource that acts as the source of competitive advantagemust be socially complex (Barney, 2010).
Environmentalmodels used in the marketing concepts suggest that the performance ofthe organization is independent of its history and variousorganizational attributes. Researchers who developed these modelssuggest that the history of the organization does not influence itsperformance. However, resource-based view approach differs from theseenvironmental models by stating that the historical and social natureof organizations coupled with their ease of acquiring and exploitingresources depend on the space and the duration of time. Therefore,the passage of this time in history hinders other firms fromacquiring various time-dependent resources making such resourcesimperfectly imitable. Strategy researchers have shown that either theuniqueness of the circumstances via which an organization wasestablished or circumstances under which new management takes overmay influence the performance of the organization. As a matter offact, path-dependent models suggest that the industry structure doesnot influence the performance of the organization but rather dependson the path through history which greatly influences where thecurrent economic performance of the organization. Therefore, anorganization that has a unique path through history benefits fromvaluable and rare resources by implementing a value-based strategythat cannot be imitated by other firms in the industry which cannotaccess resources from the industry required to compete with thepioneers.
Onthe other hand, the historical position of the organization alsogives an organization a competitive edge whereby firms with avaluable location in the industry are perceived as possessing animperfectly imitable physical capital resource. Also, a firm withgreat scientists through history benefits from unique human capitalwhile firms with unique and valuable organizational culture have acompetitive edge over other competitors especially when suchorganizational values and beliefs dominate in the industry.
CausalAmbiguity and Imperfectly Imitable Resources
Causalambiguity is the situation by which the relationship between firmresources and its sustained competitive advantage cannot be perfectlyexplained since the link is hardly understood. The ambiguity makes itdifficult for firms wishing to imitate the strategies of a successfulfirm since the link between the firm’s resources and sustainedcompetitive advantage is difficult to establish. However, sometimesfirms without resources employ knowledgeable managers from the firmwith the competitive advantage to determine activities that give thefirm a competitive edge. The casual ambiguity comes to an end whenthe link between the resources enveloped by a firm and its ability toimplement strategies aimed at attaining sustained competitiveadvantages leaks to other competing firms in the industry (Brumagim,1994).
Finally,firm resources must have no strategic equivalent valuable resourcesthat can be substituted by other competitors in the industry therebygiving the firm with the unique resource a sustainable competitiveedge. Therefore, it is difficult for competitors in this industry torealize same performance with a firm having a strategic resourcesince alternative resources do not exist.
StrategicPlanning and Sustained Competitive Advantage
Strategicplanning can be used by firms as a source of competitive advantage byenabling the organization identify various opportunities in theenvironment and utilize them for its benefit and recognize threatsthat may act as roadblocks towards accomplishing the goals of theorganization. However, various researchers suggest that since thereis the likelihood of imitating the planning process, planning byitself is not a source of sustained competitive advantage. On theother hand, formal strategic planning may enable a firm to exploitthe available resources towards developing a competitive edge,therefore the competitive edge results from the resources as opposedto the formal strategic planning. Other researchers suggest thatinformal and formal planning processes cannot substitute each otherhence if the conditions such as imperfectly imitability and rarenessexist, then informal strategy making process could provide asustainable competitive advantage.
InformationProcessing Systems and Sustained Competitive Advantage
Variousstudies show that the ability of an information system being a sourceof a sustainable competitive advantage lies in the type of theinformation system being analyzed, whereby a given firm may perceivethe use of computers as their source of competitive advantage.However, this approach has been criticized whereby researchers whocriticize it suggest that firms can purchase various machines acrossmarkets thus making the strategy imitable hence not a source of asustainable competitive advantage. On the contrary, rare informationsystems that are part of the organization’s formal and informaldecision-making process act as a source of sustainable competitiveadvantage (Chan, 2000).
PositiveReputation and Sustainable Competitive Advantage
Positivereputations developed in organizations while serving their customersacts as a source of a sustainable competitive advantage. Positivereputation gives a competitive edge when here are few firms withinthe industry holding good reputation hence making positive reputationelement rare. Positive firm reputation could be perceived as a typeof relationship between a firm and various stakeholders in theorganization hence the relationship tends to be socially complex andimperfectly imitable.
SustainedCompetitive Advantage and Organizational Theory and Behavior
Variouseconomic models about the organization disapprove models within theorganization that are drawn from organizational theory and behavior.However, resource-based view model suggests that resources thatenable the organization to attain a sustainable competitive advantageought to be rare, valuable, non-substitutable and imperfectlyimitable. These resources are key ingredients during the research oforganizational theory and behavior and comprises of organizational,social and individual phenomena within the firm. The resource-basedview model implies that organizational theory and behavior mayprovide evidence of rare, valuable, non-substitutable and imperfectlyimitable resources in the organization. Finally, resource-based viewmodel of strategic management emphasizes on the integration oforganizational and economical approach to achieving a sustainedcompetitive advantage (Coates & McDermott, 2002).
FirmEndowments and Sustained Competitive Advantage
Theapproach focuses on the endowment of a firm with resources thatenable it to achieve a sustained competitive advantage whereby itmakes an assumption that managers have limited capacity inmanipulating attributes of their firms. Due to this limitation, somefirm resources are characterized as imperfectly imitable henceforming the source of a competitive advantage, and this makesresource endowment a significant part of the study of sustainedcompetitive advantage. Additionally, managers play a key role indetermining the potential economic performance of various endowmentsin the firm hence without their interception a firm is unlikely toachieve a sustained competitive edge. Therefore, managerial skillsare paramount in distinguishing various resources endowed in a firmas rare, non-substitutable and imperfectly imitable.
SustainedCompetitive Advantage and Social Welfare
Theapproach discusses social welfare issues that are related to researchon strategic management and is consistent with the resource basedmodel that implies that strategic management looks into socialwelfare issues of the economists. The approach assumes that firmresources are heterogeneous and immobile hence firms that exploitresources improve their efficiency and effectiveness while those thatdo not exploit resources fail to maximize social welfare. Therefore,high performance in the result firm exploitation of various resourcesthat improve the efficiency within the firm as opposed to thecreation of imperfectly competitive conditions that do not maximizesocial welfare.
Inconclusion, resource-based view analyzes the internal environment ofa firm thereby making it similar to the porters five force model.Firms attain a sustained competitive advantage by focusing on theirinternal resources and capabilities and developing a value creationstrategy that enables them to stay at the top of the competition.Additionally, the resource-based view asserts that a firm onlyachieves a competitive advantage when its resources have attributesof heterogeneity and immobility. Indeed, an imitable andsubstitutable resource does not lead to the development of asustained competitive advantage. Therefore, organizations ought to beflexible in the current competitive market to be able to respond tovarious changes in the industry to gain a sustainable competitiveadvantage (Eisenhardt & Martin, (2000)).
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