Resource Based View Strategy Formulation

Resource-based view (RBV) is a tool to determine proper resources and exactly how it impacts the performance of the firm based only on researching its internal environment while the exterior environment remains set. Firm's using RBV competes in terms of the resources and functions. The purpose of this newspaper is to review the factors that effect firm's performance. The RBV stresses on the firm's resources as the essential elements of competitive edge and performance. It assumes two assumptions in examining sources of competitive advantage that are that the companies are heterogeneous in conditions of the resources they control and this source of information heterogeneity can continue over a period as the resources used to apply their strategies are not easily portable across firms (Bridoux, F, n. d). .

The RBV approach to examining firm's performance is targeted that other vital factors have a tendency to be disregarded. Resources are not valuable of themselves; instead these are valuable because they allow firms to perform activities that in return create advantages for them. The competitive value of resources can be increased or removed by changes in technology, rival action, or buyer needs which an inward concentrate on resources will neglect (Sheehan, N & Foss, N, 2007). Resource uniqueness is vital as this differentiates between your firms. However, learning resource uniqueness is not sufficient to achieve sustainable competitive edge and thus the resources must also be valuable, exceptional, imperfectly imitable and non-substitutable. RBV shows that business processes that exploit valuable but common resources can only just be a source of competitive equality; business procedures that exploit valuable and rare resources can be considered a source of short-term competitive benefits; and business techniques that exploit valuable, unusual, and costly-to-imitate resources can be a source of sustained competitive advantage (Bridoux, F, n. d).

The merits and demerits of RBV as the best strategy route

One of the top contributions of RBV is the ability of it to assess and identify the inner environment of the organization. The importance of using RBV as a technique route is to be able to work the inside-out way. Which means that companies using RBV focus on their internal strengths more as it's the reason behind their competitiveness. Furthermore, RBV advises that effective management of functions can create uniqueness in the firm's resources. Louis Vuitton is one organization in a competitive industry which includes the edge over their opponents because of their product uniqueness. Louis Vuitton's expertises are their design skills and creation efficiency (R. Duane Ireland, Robert E. Hoskisson, & Michael A. Hitt, 2008). While they might not be able to control the exterior environment, Louis Vuitton may use the RBV model and evaluate their position and focus on their strategies.

Many organizations have been confronted with dilemmas about how to utilize their resources strategically. Organizations that neglect to successfully convert their resources and capacities into business operations cannot expect to recognize the actual competitive benefit of these resources. The RBV has little contribution in conditions of predicting strong performance due to its nature of being tautological (Truijens, O. (n. d) and its concentrate is too narrow. Also, as a strategy which only targets the inner environment, the RBV can't be used as the 'best strategy' way. Many firms which concentrate mainly on the internal environment come across competitive disadvantages to their business. For example, when IBM, a successful company achieved its success many of their competitors got into into the market. IBM's opponents included other big brands such as Hewlett Packard (Horsepower), Dell and Compaq (McNeilly, 2000). IBM didn't pay close attention to their rivals because they were focused greatly on the internal strengths rather than those of their opponents. Some other companies that have experienced failures from the strategies are Marlborough. Marlborough got the price trim strategy too far as they did not consider their rivals possible moves. The CEO of Marlborough began a price warfare by minimizing their prices to catch the attention of consumers and gain more market share. However, their competition also adopted in reducing their prices which resulted in Marlborough facing deficits. (McNeillly, 2000).

RBV is not the only real factor which establishes performance of the firm. In industries such as the air travel industry, other exterior factors such as timing and marketing are also essential. Getting into the industry requires good timing and this can be influenced by the financial position and consumer choice of quality and lower price. For instance, Southwest airlines which can be one of the well-known low cost carriers in america used the niche market technique to maintain competitive benefits from its rivals. They avoided large airports, concentrated mainly on short flights that happen to be ideal for young families and business people, as well as excluded seats need and on journey meals to lessen their cost (Private, 2010).

Porter also mentions the normal strategy of lowering cost, and product differentiation allows companies to access its strengths. Businesses achieve superior positions predicated on being truly a cost innovator or earning price payments at the experience level (Private, 2010). In the price leader approach to achieving lasting competitive advantages, the firm would sell its products either at the common price to earn revenue or below the common price to gain market talk about. The broader market usually adopts cost management. Wal-Mart is an expense innovator. Their strategy was to create a close relationship with the suppliers which allowed them to lessen cost when purchasing in large (Walden School, 2010). Differentiation is another strategy pointed out by Porter. Companies produce products that change from others and also have unique features to compete keenly against their rivals. This uniqueness of the merchandise also allows businesses to bill higher charges for their product. However, there are many different types of differentiation strategies. The few common ones include differentiation predicated on additional features, product packaging, and design and setting (Scribd, 2011). Louis Vuitton is an example of a firm that is applicable differentiation through design and positioning.

Exploring processes, capabilities and the capability to appropriate lease and Porter's commercial analysis

Porter's framework talks about the role of companies in formulating appropriate competitive strategy to achieve superior economic performance, and competitive procedure. Also, the foundation of earnings is never to be within the firm but rather in the framework of the industry, especially the type and balance of its competitive pushes (Bridoux, F, n. d). However, the assumption of any romantic relationship between solid performance and hire technology may be inaccurate. The RBV expresses that performance contains rent generation and hire appropriation and we can not predict firm performance from lease generation only. One particular example is IBM. IBM built the strategic capabilities that built most of the modem for the non-public computer industry. Yet Intel and Microsoft were ultimately in a position to appropriate much more of the related rent (Russell W. Coff, 1999).

The factors that allow resources to create rents should be valuable, uncommon, imperfectly imitable and non-substitutable. This issue was addressed by identifying the conditions under which a firm's resources become valuable by having the external environment into the resource-based view. Through nurturing the inner competencies and making use of them to an appropriate external environment, a firm can develop a viable strategy. Thus, for a firm's source to be valuable, it must permit the firm to "exploit opportunities or neutralize threats" in the firm's environment (Russo, M & Fouts, P, 1986). Resources as a choice or real options make reference to resources that happen to be bought in present time and are either used or stored to be used in a later period. For example, land can be bought and used immediately or it could be placed for use later. Real options create tactical flexibility for organizations and when used effectively they can hold on to or upsurge in value. These kinds of resources are very useful in market sectors that contain high competitiveness and use high technology. The pharmaceutical industry is one industry where there is high competitiveness. Companies such as Johnson & Johnson, and Pfizer invest hugely in research and development in order to develop many drugs which can used to take care of different conditions although most of the time these drugs fail. Due to the uncertain characteristics of the merchandise, these organizations have to focus greatly (R. Duane Ireland, Robert E. Hoskisson, & Michael A. Hitt, 2008).

However, firm's resources on their own accord do not donate to competitive edge. Thus, these resources must be put together to form capacities which develop into central competencies and are used by firms to build value. Capabilities derive from incorporating resources. Honda uses its capabilities in product design, engineering and manufacturing. In addition, they place a great deal of focus on their labor force. Honda induces their technical engineers to 'desire'. This allows their employees to discover new things which increase their knowledge. This knowledge subsequently will simplify their daily work. Primary competencies are the capabilities which the strong pursuits and performs well. Core competencies have a competitive edge when the firms add value and outperform their competition. The factors of center competencies which lead to a competitive edge are valuable, rare, imperfectly imitable and non-substitutable (R. Duane Ireland, Robert E. Hoskisson, & Michael A. Hitt 2008).


In summary, the RBV can't be accepted as the 'best strategy' road due its aspect of being narrowly scoped and ignorant of the external environment. This measure will not provide accurate home elevators the firm's performance. However, in a stable industry the RBV can be viewed as as among the best strategy option. A firm's performance should carry out many other factors such as timing, marketing, and progression of technology, rival action as well as the needs of consumers. I disagree that RBV is the 'best' way as exterior factors are also very important in identifying the performance and lease generation of organizations as other external factors must also be considered. Porter's external environment analysis focuses on the exterior factors that affect a firm's performance. Active sectors focus more on the external environment thus preferring to utilize Porter's theory For the RBV method to be more effective and productive; it has to be studied along together with the external environment. Like that, firms are aware of their resources and capabilities and can nurture the inner competencies to apply them with appropriate exterior environment, which will allow the company to develop functional approaches.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)