Assignment No.

Questions to Answer:

1. How does the resource-based view of firms help in determining the sustainability of a
competitive advantage

Answer: The Resource based view (RBV) analyzes and interpret internal resources of the
organizations and emphasizes resources and capabilities in formulating strategy to
achieve sustainable competitive advantages. Resources may be considered as inputs
that enable firms to carry out its activities. Internal resources and capabilities determine
strategic choices made by firms while competing in its external business environment.
According to RBV, not all the resources of firm will be strategic resources. Competitive
advantage occurs only when there is a situation of resource heterogeneity (different
resources across firms) and resource immobility (the inability of competing firms to
obtain resources from other firms).

2. How does VRIO framework analysis help in evaluating a company’s competencies?

Answer: VRIO framework of analysis, proposing four questions to evaluate a firm’s

competencies:
1. Valuable: Does it provide customer value and competitive advantage?
2. Rareness: Does only one other competitor or preferably do no competitors possess it
at relatively the same level?
3. Imitability: Do the competitors have the financial ability (viewed in the widest sense)
to imitate?
4. Organization: Is the firm organized to exploit the resource?

If the answer to each of these questions is yes for a particular competency, it is

considered to be strength and thus a distinctive competence. This should provide the
company with a possible competitive advantage and lead to higher performance.

3. Why is organizational culture important for a business to effectively formulate its

strategy?

Answer: Because this can encourage and develop a very efficient and strategic competitive
advantage for a company. A strong organizational culture can focus on establishing and
sustaining the management of company, and make employees believe that they are one the
very crucial parts of the company.
4. How are organizational resources linked to the competitive advantages and corporate
performance of an organization?

Answer: Resources and capabilities are only of value if they provide the organization an
ability to make extraordinary returns. The resource-based approach is a well-
researched, very effective means of analyzing resources and capabilities in order to
determine which might provide the organization with real competitive advantages.

5. How is the possession of valuable and scarce resources of an organization related to the
planning and formulation of its corporate-level strategy for enhancing its competitive
advantages in the market?

Answer: The desire to build or upgrade a set of resources and core competencies is one
reason entrepreneurial and other fast-growing firms tend to locate close to their
competitors. They form clusters—geographic concentrations of interconnected
companies and industries. Employees from competitive firms in these clusters often
socialize. As a result, companies learn from each other while competing with each other.
Interestingly, research reveals that companies with strong core competencies have little
to gain from locating in a cluster with other firms and therefore do not do so. In
contrast, firms with the weakest technologies, human resources, training programs,
suppliers, and distributors are strongly motivated to cluster. They have little to lose and
a lot to gain from locating close to their competitors.