Resource Based View (Strategy) - Explained
What is the Resource-Based View of the Firm?
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Table of ContentsWhat the Resource-Based View of the Firm?What are Tangible and Intangible Resources? What are Heterogeneous Resources? What is an Immobile Resource? What is the VRIO Framework? ValuableRarityImitabilityCreating a Competitive Advantage?
What the Resource-Based View of the Firm?
The Resource-Based View (RBV) is a group of theories proposing that companies are able to establish competitive advantage through internal resources of the firm that are valuable, rare, not imitable, and organized for value capture.
Organizations use internal resources in new ways to exploit external resources and thereby establish competitive advantage rather than focusing on the competitive environment.
Research in support of the RBV include the Knowledge-Based View of the firm, dynamic capabilities, and the relationship view.
Back to: STRATEGY & PLANNING
What are Tangible and Intangible Resources?
Tangible assets are physical things, such as land, buildings, machinery, equipment and capital.
Intangible assets are non-physical things, such as intellectual property, skills, knowledge, goodwill, brand reputation, etc.
Physical resources rarely offer a competitive advantage - as they can generally be acquired by competitors. Intangible resources are difficult to imitate and generally offer the main source of sustainable competitive advantage.
What are Heterogeneous Resources?
Heterogeneous resources are those that are unique or different.
Intangible assets/resources (as well as some tangible resources) differ between companies. This allows them to employ different strategies and outcompete each other.
Without unique resources, the competitive market would reach a state of perfect competition.
What is an Immobile Resource?
Immobile resources are those that do not easily move from company to company in the short run.
This stops competitors from easily replicating resources and competitive strategies employing those resources.
Intangible resources are usually immobile.
What is the VRIO Framework?
The VRIO framework identifies resources that are valuable, rare, costly to imitate and non-substitutable, and the company is organized to exploit these resources.
Valuable resources allow organizations to increase the value offered to the customers. It allows for differentiation or decreased cost of production.
A resources that is not valuable is a competitive disadvantage.
Rare resources are those that cannot be acquired easily by multiple companies.
A resources that is not rare allows for competitive parity.
A resource that is not readily imitable if it is costly to replicate or substitute for a rival.
A resource that is costly to imitate will only allow for a short-term competitive advantage.
A company can be organized or structured in a way that allows it to use or employ resources.
Even if a resource is valuable, rare, an difficult to imitate, the company must be organized in a manner that allows it to employ the resource to create a competitive advantage.
Creating a Competitive Advantage?
If all of these elements align, the resources can be used by a company to create a sustainable competitive advantage.
- Competitive Strategies
- Contestable Market Theory
- Value Disciplines
- Porter's Generic Strategies
- Differentiation (Strategy)
- Niche Market Strategy
- Long Tail
- Low-Cost Production
- Resource-Based View of the Firm
- Ansoff Matrix
- Customer-Centric Strategy
- Blue Ocean Strategy
- Overfished Ocean Strategy
- Hedgehog Concept (Strategy)
- Innovation Strategy
- Bleeding Edge
- Disintermediation (Strategy)
- Strategic Alliance
- Coopetition (Strategy)
- Loss Leader Strategy
- Lean Strategy
- Game Theory Perspectives