Collis, D. J., & Montgomery, C. A. (2008).

Competing on Resources. Harvard Business Review,

86(7/8), 140–150.

What gives your firm a competitive edge ?

Your strategically valuable resources, which enables you to perform activities better than or
more cheaply than your rivals. These can be physical assets, intangible assets or capabilities.

RBV – Resource Based View – Combines internal analysis of phenomena within companies
with the external analysis of the industry and the competitive environment.

All firms use different resources, different capabilities, different skills, etc & hence do not
produce the same output/results.

Superior performance will be based on developing a competitively distinct set of resources

and deploying them in a well-conceived strategy.

For a resource to qualify as the basis for an effective strategy, it must pass a number of
external market tests of its value.
Strategically valuable resources have 5 characteristics: (these are the tests!)
1. They’re difficult to copy – Test of Inimitability
Sources of imitability : Physical uniqueness, Path dependency (Scarce resources -
Competitors cannot procure the resources instantaneously), Casual Ambiguity
(organisational capabilities), Economic deterrence (when a company pre-empts a competitor
by making a sizeable investment in an asset.)
2. They depreciate slowly – Test of Durability
Early movers in a dynamic environment dominate the market and earn substantial profits.
3. Your company – not employees, suppliers, or customers – controls their value – Test of
Appropriability
4. They can’t be easily substituted – Test of Substitutability
They’re superior to similar resources your competitors own – Test of Competitive Superiority
Disaggregation of core competencies – provides granularity to find out which resource really
provides the competitive superiority. Sometimes it’s not just one resource is superior by itself,
but when combined, makes a better package.

The best of these resources are often intangible and not physical – hence emphasis needs to be
given to those aspects.

Invest in resources – Invest in core competencies but not without examining the competitive
dynamics that determine industry attractiveness.
Upgrade resources – Move beyond what the company is already good at to a structurally
attractive industry -> By adding a new resource and upgrade to alternative resource that are
threatening the company’s current capabilities.
Leverage resources – Continuous reassessment of Company’s scope is needed.

Strategic errors that a company could make when trying to grow by leveraging resources:
- Overestimating the transferability of assets & capabilities.
- Overestimating their ability to compete in highly profitable industries.
- Assuming that leveraging generic resources will be a major competitive advantage in a
new market.