AMITY UNIVERSITY

INTERNAL ASSIGNMENT-STRA302

SUBMITTED BY-
ASHISH TIWARI
[A1833318065]
BBA [IB] – [2018-2021]

SUBMITTED TO-
HARENDRA KU. PANDEY
RBV and strategy formulation
RBV is an approach to achieving competitive advantage that emerged in 1980s and 1990s, after
the major works published by Wernerfelt, B. (“The Resource-Based View of the Firm”),
Prahalad and Hamel (“The Core Competence of The Corporation”), Barney, J. (“Firm resources
and sustained competitive advantage”) and others. The supporters of this view argue that
organizations should look inside the company to find the sources of competitive advantage
instead of looking at competitive environment for it.

The following model explains RBV and emphasizes the key points of it.

According to RBV proponents, it is much more feasible to exploit external opportunities using
existing resources in a new way rather than trying to acquire new skills for each different
opportunity. In RBV model, resources are given the major role in helping companies to achieve
higher organizational performance. There are two types of resources: tangible and intangible

Firms in possession of a resource, or mix of resources that are rare among competitors, are said
to have a comparative advantage. This comparative advantage enables firms to produce
marketing offerings that are either (a) perceived as having superior value or (b) can be produced
at lower costs. Therefore, a comparative advantage in resources can lead to a competitive
advantage in market position.
In the resource-based view, strategists select the strategy or competitive position that best
exploits the internal resources and capabilities relative to external opportunities. Given that
strategic resources represent a complex network of inter-related assets and capabilities,
organisations can adopt many possible competitive positions. Although scholars debate the
precise categories of competitive positions that are used, there is general agreement, within the
literature, that the resource-based view is much more flexible than Porter's prescriptive approach
to strategy formulation. Hooley et al. suggest the following classification of competitive
positions:

 Price positioning
 Quality positioning
 Innovation positioning
 Service positioning
 Benefit positioning
 Tailored positioning (one-to-one marketing)

Achieving a sustainable competitive advantage lies at the heart of much of the literature in
strategic management and strategic marketing.[11] The resource-based view offers strategists a
means of evaluating potential factors that can be deployed to confer a competitive edge. A key
insight arising from the resource-based view is that not all resources are of equal importance, nor
do they possess the potential to become a source of sustainable competitive advantage.[11] The
sustainability of any competitive advantage depends on the extent to which resources can be
imitated or substituted.[12] Barney and others point out that understanding the causal relationship
between the sources of advantage and successful strategies can be very difficult in practice.
[13]
 Thus, a great deal of managerial effort must be invested in identifying, understanding and
classifying core competencies. In addition, management must invest in organisational learning to
develop, nurture and maintain key resources and competencies.
In the resource-based view, strategists select the strategy or competitive position that best
exploits the internal resources and capabilities relative to external opportunities. Given that
strategic resources represent a complex network of inter-related assets and capabilities,
organisations can adopt many possible competitive positions. Although scholars debate the
precise categories of competitive positions that are used, there is general agreement, within the
literature, that the resource-based view is much more flexible than Porter's prescriptive approach
to strategy formulation.
The key managerial tasks are:

1. Identify the firm's potential key resources.

2. Evaluate whether these resources fulfill the following criteria,
o Valuable - they enable a firm to implement strategies that improve its efficiency
and effectiveness.
o Rare - not available to other competitors.
 o Imperfectly imitable - not easily implemented by others.
o Non-substitutable - not able to be replaced by some other non-rare resource.
3. Develop, nurture and protect resources that pass these evaluations.

What is a SWOT analysis?

A SWOT analysis is a simple and practical form of evaluation model. SWOTs look at a
combination of internal and external factors, as well as assessing strengths and weaknesses. This
combination of evaluation metrics means a SWOT analysis is particularly useful for gaining a
thorough overview of a business, product, brand, or a new project early on in the project life
cycle.
 
SWOTs allow you to think about your own internal strengths and weaknesses, and well as begin
to think about external opportunities and threats that could affect your company performance. It
also allows you to explore what the differentiators between yourself and your competitors is.
SWOTs have been around since at least the 1960s, although their origins are unclear, and are still
used today in businesses across the world.
 

While a SWOT is good starting point for evaluation, the disadvantage of a SWOT is that it
doesn’t produce actionable outcomes – rather it helps you understand where you currently stand,
and how you can begin to move your business forward.
A good SWOT should always be followed by further planning and development.

If you haven’t had a great deal of experience with formulating a strategy for your business or unit,
you’re in good company. It’s not an everyday activity. Some firms coast along for years with the
same strategy and address that strategy only when it is obviously obsolete.

Even then, many turn to strategy consultants to do the job. Strategic thinking is not a core
managerial competence at most companies, says Harvard Business School professor Clayton
Christensen. “Executives hone their management capabilities by tackling problems over and over
again,” he writes in “Making Strategy: Learning by Doing” (Harvard Business Review, November-
December 1997). “Changing strategy, however, is not usually a task that managers face repeatedly.
Once companies have found a strategy that works, they want to use it, not change it. Consequently,
most management teams do not develop a competence in strategic thinking.”

So if you are not highly practiced at formulating strategy–or you want to give a helping hand to
someone on your team who is tackling strategy for the first time–here are steps to follow. They
involve looking both outside and inside the organization, since the market to be served is outside
the organization and the capabilities for making the strategy work are within it.
1. Look outside to identify threats and opportunities

At the highest level, strategy is concerned with the external market and how the firm’s resources
should be allocated to create an exploitable advantage. There are always threats: new entrants,
demographic changes, suppliers who might cut you off, substitute products that could undermine
your business, and macroeconomic trends that may reduce your customers’ ability to pay.

The business may be threatened by a competitor that can produce the same quality goods at a much
lower price–or a much better product at the same price.

A strategy must be able to cope with these threats. The outer environment also harbors
opportunities: a new-to-the-world technology, an un-served customer base, and so forth. Thus, the
first job of strategists is to scan the outer environment for threats and opportunities. Here’s a
proven approach: Form a team of executives, a department manager, and individuals with special
insights. The team’s job is to identify the core threats and opportunities. Avoid having anyone on
the team who appears complacent or wedded to the status quo.

Gather the views of customers, suppliers, and industry experts. These outside views can be
powerful. Some firms, particularly those in technological fields, enlist teams of scientists and
engineers to look outward to markets, competitors, and technical developments. It’s their job to
find anything that could threaten a firm’s current business or point toward new directions in the
industry or market.

2. Look inside at resources, capabilities, and practices

Resources and internal capabilities can constrain your choice of strategy. A strategy to exploit an
un-served market in the electronics industry might not be feasible if your firm lacks the necessary
financial capital and human know-how.

Likewise, a strategy that would require substantial entrepreneurial behavior on the part of
employees, for example, would seem doomed from the beginning if your people practices reward
years of service over individual performance.

These internal capabilities–especially the human ones–matter greatly and are too often overlooked
by strategists. A strategy can succeed only if it has the backing of the right set of people and other
resources; these must be properly aligned with the strategy.

3. Consider strategies for addressing threats and opportunities

Christensen has advocated that strategy teams first prioritize the threats and opportunities they find
(he calls them “driving forces” of competition), and then discuss each in broad strokes. As you
follow this advice when developing strategies that focus on each core threat and opportunity, be
sure to do the following:

• Create many alternatives. There is seldom one way to do things. In some cases, the best parts of
two different strategies can be combined to make a stronger third strategy.
• Check all facts, and question all assumptions.

• Look for missing information; there is bound to be some. Determine what data you need to better
assess a particular strategy. Then get it.

• Vet the leading strategy choices among the wisest heads you know. Doing so will help you avoid
“groupthink” within the strategy team.

4. Build a good “fit” among strategy-supporting activities

Michael Porter, the Bishop William Lawrence University Professor at Harvard Business School,
has made the point that strategy is more than just a blueprint for winning customers; it is also about
combining company activities into a chain whose links are mutually supporting and effective in
locking out imitators.

He uses Southwest Airlines to illustrate his notion of “fit.” Southwest’s strategy is based on rapid
gate turnaround. Rapid turnaround allows Southwest to make frequent departures and better utilize
its expensive aircraft assets. This, in turn, supports the low-cost, high-convenience proposition it
offers customers. Thus, each activity supports the other and the higher goal. That goal, Porter
points out, is further supported by other critical activities, which include highly motivated and
effective gate personnel and ground crews, a no meals policy, and no interline baggage transfers.
Those activities make rapid turnarounds possible.

“Southwest’s strategy,” writes Porter, “involves a whole system of activities, not a collection of
parts. Its competitive advantage comes from the way its activities fit and reinforce one another.”

5. Create alignment

Once you’ve developed a satisfactory strategy, your job is only half done. Now you have to create
alignment between the people and the activities of the organization and its strategy. Alignment is a
condition in which every employee at every level understands the strategy, and understands her
role in making the strategy work. As a manager, your role in creating alignment is twofold:

• Communicating. You must help people understand the strategy and how their jobs contribute to
it. You want to create a situation in which even the lowest-ranking employees can articulate the
goals of the organization and explain how what they do every day furthers them.

• Coordinating work processes. You must align people’s activities with the business’s strategic
intentions.

Be prepared for change

Create a winning strategy and implement it well, and you might cruise along for years without any
problems. But no strategy is effective forever. Something in the external environment eventually
changes–new technology appears, customer needs shift, new competitors emerge–rendering it
ineffective. Unfortunately, many management teams cannot recognize when their strategies have
become obsolete.

The temporary nature of successful strategy should caution you to continually scan the external
environment for threats and new opportunities, as described in Step 1. Does your company do this
already? If it doesn’t, who would be the people to conduct this duty?

Strategy formulation, then, is an ongoing requirement of good management. It is, to quote Michael
Porter, “a process of perceiving new positions that woo customers from established positions or
draw new customers into the market.” This is a process you must permanently embed in your
organization.

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