Resource-based view (RBV)
RBV is an approach to achieving competitive advantage that advantage that emerged in 1980s and 1990s. The supporters of this view argue that organizations should look inside the compan to find the sources of competitive advantage instead of looking at competitive environment for it. The following model e!plains RBV and emphasizes the ke points of it.
"ccording to RBV proponents# it is much more feasi$le to e!ploit e!ternal opportunities using e!isting resources in a new wa rather than tring to ac%uire new skills for each different opportunit. &n &n RBV model# resources are given the ma'or role in helping companies to achieve higher organizational performance. There are two tpes of resources( tangi$le and intangi$le. $u ildings# machiner# e%uipment e%uipment and capital * all Tangible assets are phsical things. )and# $uildings# Tangible these assets are tangi$le. +hsical resources can easil $e $ought in the market so the the confer little advantage to the companies in the long run $ecause rivals can soon ac%uire the identical assets. Intangible assets are everthing else that has no phsical presence $ut can still $e owned $ the compan. Brand reputation# trademarks# intellectual propert are all intangi$le assets. ,nlike phsical resources# $rand reputation is $uilt over a long time and is something that other companies cannot $u from the market. &ntangi$le resources usuall sta within a compan and are the main source of sustaina$le competitive advantage. advan tage.
The two critical assumptions of RBV are that resources must also $e heterogeneous and immo$ile. Heterogeneous . The first assumption is that skills# capa$ilities and other resources that organizations possess differ from one compan to another. &f organizations would have the same amount and mi! of resources# the could not emplo different strategies to outcompete each other. -hat one compan would do# the other could simpl follow and no competitive advantage could $e achieved. Therefore# RBV assumes that companies achieve competitive advantage $ using their different $undles of resources.
!ample( The competition $etween "pple &nc. and /amsung lectronics is a good e!ample of how two companies that operate in the same industr and thus# are e!posed to the same e!ternal forces# can achieve different organizational performance due to the difference in resources. "pple competes with /amsung in ta$lets and smartphones markets# where "pple sells its products at much higher prices and# as a result# reaps higher profit margins. -h /amsung does not follow the same strateg /impl $ecause /amsung does not have the same $rand reputation or is capa$le to design userfriendl products like "pple does. 2heterogeneous resources3 Immobile . The second assumption of RBV is that resources are not mo$ile and do not move from compan to compan# at least in shortrun. 4ue to this immo$ilit# companies cannot replicate rivals5 resources and implement the same strategies. &ntangi$le resources# such as $rand e%uit# processes# knowledge or intellectual propert are usuall immo$ile. VRIO framework
"lthough# having heterogeneous and immo$ile resources is critical in achieving competitive advantage# it is not enough alone if the firm wants to sustain it. Barne 219913 has identified VR&6 framework that e!amines if resources are valua$le# rare# costl to imitate and non su$stituta$le. The resources and capa$ilities that answer es to all the %uestions are the sustained competitive advantages. The framework was later improved from VR&6 to VR&7 $ adding the following %uestion( &s a compan organized to e!ploit these resources
Valuable The first %uestion of the framework asks if a resource adds value $ ena$ling a firm to e!ploit opportunities or defend against threats. &f the answer is es# then a resource is considered valua$le. Resources are also valua$le if the help organizations to increase the perceived customer value. This is done $ increasing differentiation or:and decreasing the price of the product. The resources that cannot meet this condition# lead to competitive disadvantage. &t is important to continuall review the value of the resources $ecause constantl changing internal or e!ternal conditions can make them less valua$le or useless at all. Rare Resources that can onl $e ac%uired $ one or ver few companies are considered rare. Rare and valua$le resources grant temporar competitive advantage. 7n the other hand# the situation when more than few companies have the same resource or uses the capa$ilit in the similar wa# leads to competitive parit. This is $ecause firms can use identical resources to implement the same strategies and no organization can achieve superior performance.
ven though competitive parit is not the desired position# a firm should not neglect the resources that are valua$le $ut common. )osing valua$le resources and capa$ilities would hurt an organization $ecause the are essential for staing in the market.
Costl to Imitate " resource is costl to imitate if other organizations that doesn5t have it can5t imitate# $u or su$stitute it at a reasona$le price. &mitation can occur in two was( $ directl imitating 2duplicating3 the resource or providing the compara$le product:service 2su$stituting3. " firm that has valua$le# rare and costl to imitate resources can 2$ut not nece ssaril will3 achieve sustained competitive advantage. Barne has identified three reasons wh resources can $e hard to imitate( •
;istorical conditions. Resources that were developed due to historical events or over a long period usuall are costl to imitate.
•
•
Organi!ed to Ca"ture Value The resources itself do not confer an advantage for a compan if it5s not organized to capture the value from them. " firm must organize its management sstems# processes# policies# organizational structure and culture to $e a$le to full realize the potential of its valua$le# rare and costl to imitate resources and capa$ilities. 7nl then the companies can achieve sustained competitive advantage. How to use the tool?
There are two tpes of resources( tangi$le and intangi$le. Tangi$le assets are phsical things like land# $uildings and machiner.
•
•
•
-hich activities lower the cost of production without decreasing pe rceived customer value -hich activities increase product or service differentiation and perceived customer value ;ave our compan won an award or $een recognized as the $est in something 2most innovative# $est emploer# highest customer retention or $est e!porter3 4o ou have an access to scarce raw materials or hard to get in distri$ution channels
•
4o ou have special relationship with our suppliers /uch as tightl integrated order and distri$ution sstem powered $ uni%ue software
•
4o ou have emploees with uni%ue skills and capa$ilities
•
4o ou have $rand reputation for %ualit# innovation# customer service
•
•
4o ou perform an tasks $etter than our competitors do 2Benchmarking is useful here3 4oes our compan hold an other strengths compared to rivals
=inding rare resources( •
;ow man other companies own a resource or can perform capa$ilit in the same wa in our industr
•
•
=inding costl to imitate resources( •
4o other companies can easil duplicate a resource
•
•
4o patents protect it
•
&s a resource or capa$ilit sociall comple!
•
&s it hard to identif the particular processes# tasks# or other factors that form the resource
$te" %# &ind out if our com"an is organi!ed to e'"loit tese resources =ollowing %uestions might $e helpful( •
4oes our compan have effective strategic management process in organization
•
"re there effective motivation and reward sstems in place
•
4oes our compan5s culture reward innovative ideas
•
&s an organizational structure designed to use a resource
•
"re there e!cellent management and control sstems
$te" # *rotect te resources -hen ou identified a resource or capa$ilit that has all > VR&7 attri$utes# ou should protect it using all possi$le means. "fter all# it is the source of our sustained competitive advantage. The first thing ou should do is to make the top management aware of such resource and suggest how it can $e used to lower the costs or to differentiate the products and services. Then ou should think of ideas how to make it more costl to imitate. &f other companies won5t $e a$le to imitate a resource at reasona$le prices# it will sta rare for much longer.
$te" +# Constantl review VRIO resources and ca"abilities
The value of the resources changes over time and the must $e reviewed constantl to find out if the are as valua$le as the once were.
?oogle5s capa$ilit evaluated using VR&7 framework !cellent emploee management Valua$le
Rare
&s a compan organized to e!ploit it
@es
@es
@es
@es
/ustained
?oogle5s a$ilit to manage their people effectivel is a source of $oth differentiation and cost advantages. ,nlike other companies# which rel on trust and relationship in people management# ?oogle uses data a$out its emploees to manage them. This capa$ilit allows making correct 2data $ased3 decisions a$out which people to hire and the $est wa to use their skills. "s a result# ?oogle is a$le to hire innovative emploees that are also ver productive 2A1 million in revenue per emploee3. Besides $eing valua$le# it is also a rare capa$ilit $ecause no other compan uses data $ased emploee management so e!tensivel. &s it costl to imitate &t is costl to imitate# at least# in the near future. =irst# companies should $uild the highl sophisticated software# which is $oth costl and hard to do. /econd# ;R managers should $e newl trained to make data $ased
decisions and forget their old management methods. &s ?oogle organized to capture value from this capa$ilit
