Question

Discuss how the resource-based view (RBV) of the firm combines the two perspectives of (1) an internal analysis of a firm and (2) an external analysis of its industry and its competitive environment. Include comments on the different types of firm resources and how these resources can be used by a firm to build sustainable competitive advantages.

Answer 1

ANSWER:

Resource based view (RBV) is a contemporary issue in the strategic management to claim superior performance compared to your competitors. The main aim of this approach is to analyze internal strengths to capitalize on it in achieving the competitive advantage.

However it must be noted that there are certain features that need to be verified before confirmation of so said competitive advantage.

1. Valuable Resources
2. Rare Resources
3. Imitability not possible
4. Organized resources

Are your resources so valuable ?

No. Then there is no question of competitive advantage. Don’t try to capitalize here.

Yes then proceed

Are such resources are Rare enough

No Then it may lead to oligopoly. There will be sharing of such valuable resources. Capitalizing is not free from doubts.

Yes then proceed for further analysis

Is it too costly to imitate your capabilities

No Short term competitive advantage only

Yes then proceed to test last step

Are the resouces well organized

No Again short term competitive advantage

Yes Long term (or) sustainable competitive advantage, ready for capitalization for the entity.

Here resources can be anything tangible or intangible, circulating or fixed but capable of creating competitive edge to the organization. Nothing is exceptional here. Any asset like land, building, patent right, loyal customer base ect can be the resource.

Finally the question of external analysis. Identification of strengths and weakness is the subject matter of internal analysis. But is not always true to say that external analysis is irrelevant for VIRO analysis for the purpose of RBV. Unless organization are dynamic enough to change according to changes in external environment internal strength can of little help in achieving competitive advantage. Thus for sustainable competitive advantage external analysis is also had its own importance.