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PRDV227 Introduction to Business Planning and Strategy / Unit 1 Planning and Strategy / 1.2 Management Strategy Frameworks
/ Resource-Based View
Resource-Based View
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Read this article, which describes how to utilize an organization's valuable resources to create a
long-term sustainable strategy.
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The Resource-Based View Z
In the resource-based view RBV , strategic planning uses organizational resources to
generate a viable strategy.
Learning Objectives
Describe the intrinsic competitive advantage defined by the resource-based view strategy
Key Takeaways
Key Points
Strategic approaches are wide and varied, and the resource-based view is a commonly
cited strategic approach to attaining competitive advantage.
To transform a short-run competitive advantage into a sustained competitive advantage
requires that these resources be varied in nature and not perfectly mobile. They also
must not be easily imitated or substituted without great effort.
The RBV theory involves first identifying the firmʼs potential key resources and deriving a
strategy to apply them to create synergy.
If key resources are valuable, rare, inimitable, and non-substitutable VRIN , they may
enable a strategy for achieving competitive advantage.
Key Terms
heterogeneous: Diverse in kind or nature; composed of diverse parts.
imitable: Capable of being copied.
substitutable: Capable of being replaced.
The resource-based view RBV) of strategy holds company assets as the primary input for
overall strategic planning, emphasizing the way in which competitive advantage can be
derived via rare resource combinations. To transform a short-run competitive advantage
into a sustained competitive advantage requires that these resources are heterogeneous in
nature and not perfectly mobile. Effectively, this principle translates into valuable resources
that are cannot be either imitated or substituted without great effort. If the firmʼs strategy
emphasizes and accomplishes this goal, its resources can help it sustain above-average
returns.
Applicability to Strategy
In many ways, business strategy aims to achieve competitive advantage through the proper
use of organizational resources. As a result, the resource-based view offers some insight
as to what defines strategic resources and furthermore what enables them to generate
above-average returns (profit). Upper management must carefully consider what resources
are at the companyʼs disposal and how these assets may equate to operational value
through strategic processes.
The VRIN Characteristics
In achieving a competitive advantage, the resource-based view defines characteristics
which make a competitive process sustainable. These characteristics are described as
valuable, rare, inimitable, and non-substitutable, referred to as VRIN
Valuable – A resource must enable a firm to employ a value-creating strategy by either
outperforming its competitors or reducing its own weaknesses. The value factor
requires that the costs invested in the resource remain lower than the future rents
demanded by the value-creating strategy.
Rare – To be of value, a resource must be rare by definition. In a perfectly competitive
strategic factor market for a resource, the price of the resource will reflect expected
future above-average returns.
Inimitable – If a valuable resource is controlled by only one firm, it can be a source of
competitive advantage. This advantage can be sustained if competitors are not able to
duplicate this strategic asset perfectly. Knowledge-based resources are “the essence
of the resource-based perspective.”
Non-substitutable – Even if a resource is rare, potentially value-creating and
imperfectly imitable, of equal importance is a lack of substitutability. If competitors are
able to counter the firmʼs value-creating strategy with a substitute, prices are driven
down to the point that the price equals the discounted future rents, resulting in zero
economic profits.
A company should care for and protect resources that possess these characteristics,
because doing so can improve organizational performance. The VRIN characteristics
mentioned are individually necessary, but each is insufficient on its own to sustain
competitive advantage. Within the framework of the RBV, the chain is as strong as its
weakest link, and therefore requires the resource to display each of the four characteristics
to be a viable strategy for competitive advantage.
Source: Boundless Management, [Link]
management/chapter/internal-analysis-inputs-to-strategy/
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Last modified: Monday, September 23, 2019, 4 17 PM
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