Resource based view

Resource based view (RBV) is an approach to strategy formulation that focuses on the internal resources of an organization as the key to building a competitive advantage. It emphasizes the importance of understanding and leveraging a firm’s resources, capabilities, and competencies in order to gain a sustainable advantage in the marketplace. RBV posits that organizations should identify and develop their core capabilities and knowledge in order to create and sustain a competitive advantage. It also suggests that a firm should focus on the management of its internal resources instead of its external environment. This approach encourages managers to view their resources as the foundation of their strategies, while also promoting the idea that successful strategies start from within.

Example of resource based view

• Apple Inc. is a great example of the resource based view in practice. Apple has identified its core capabilities, resources, and competencies and has leveraged them to achieve a sustainable competitive advantage. The company has focused on developing its own operating system and software, along with its own hardware, which has allowed it to differentiate itself from other technology companies. Apple has also invested heavily in research and development to remain at the forefront of technology and innovation, and has built a strong brand and customer base. This has enabled the company to gain a significant competitive advantage in the market.
• Starbucks is another example of the resource based view in action. The company has identified its core competencies and resources and leveraged them to create a differentiated customer experience. Starbucks has developed its own unique products, such as the Frappuccino and the Venti, which have attracted new customers and enabled the company to differentiate itself from its competitors. Furthermore, Starbucks has invested heavily in its customer experience, offering free Wi-Fi, music, and loyalty rewards. This has enabled the company to create a unique and differentiated experience for its customers, which has helped it to gain a competitive advantage.

When to use resource based view

Resource based view (RBV) is an approach to strategy formulation that focuses on the internal resources of an organization as the key to building a competitive advantage. It emphasizes the importance of understanding and leveraging a firm’s resources, capabilities, and competencies in order to gain a sustainable advantage in the marketplace. RBV should be used in a variety of contexts, including:

• Analyzing a firm’s competitive position: RBV can be used to identify and understand a firm’s resources and capabilities to identify areas of strength and weaknesses in comparison to its competitors.
• Developing strategies: RBV can be used to develop strategies that are based on the firm’s unique resources and capabilities. This approach encourages managers to focus on exploiting the firm’s strengths to gain a competitive advantage.
• Implementing and sustaining success: RBV is also useful for implementing a successful strategy and sustaining success in the long run. This approach emphasizes the importance of managing and developing the firm’s internal resources to ensure that the strategy is successful and sustainable over time.

Types of resources

Resource based view (RBV) is an approach to strategy formulation that emphasizes the importance of understanding and leveraging a firm’s resources, capabilities, and competencies in order to gain a sustainable advantage in the marketplace. The following are the types of RBV:

• Human resources: A firm’s human resources are its most important asset and can be used to gain a competitive advantage. A firm should focus on developing and managing its internal human resources in order to create and sustain a competitive advantage.
• Physical resources: Physical resources such as facilities, equipment, and resources can be used to gain a competitive advantage. A firm should focus on developing and managing its physical resources in order to create and sustain a competitive advantage.
• Financial resources: Financial resources can be used to gain a competitive advantage. A firm should focus on developing and managing its financial resources in order to create and sustain a competitive advantage.
• Technological resources: Technological resources can be used to gain a competitive advantage. A firm should focus on developing and managing its technological resources in order to create and sustain a competitive advantage.
• Intellectual resources: Intellectual resources such as patents, copyrights, and trademarks can be used to gain a competitive advantage. A firm should focus on developing and managing its intellectual resources in order to create and sustain a competitive advantage.

Advantages of resource based view

Resource based view (RBV) offers several advantages as a strategy formulation approach. These advantages include:

• Increased clarity: RBV encourages managers to focus on the resources and capabilities available to them, rather than external factors. This helps create a clearer understanding of the organization’s capabilities, allowing the firm to better allocate resources and create more effective strategies.
• Competitive advantage: By leveraging and developing an organization’s core competencies, RBV helps create a sustainable competitive advantage in the marketplace. This can be achieved by leveraging the firm’s unique resources and capabilities to create unique products or services that are difficult for competitors to imitate.
• Cost-effective: Since RBV focuses on leveraging existing resources, it is a more cost-effective strategy formulation approach than alternatives that require large investments in new resources and capabilities.
• Long-term success: By focusing on the management of internal resources and capabilities, RBV encourages the development of strategies that can produce long-term success and sustainability.

Limitations of resource based view

The resource based view (RBV) of strategy formulation is an important tool for gaining a competitive advantage in the marketplace, however, it is not without its limitations. These limitations include:

• Ignoring the external environment - RBV focuses on internal resources and capabilities, and this can lead to a lack of awareness of external factors such as competition, customer needs, and technology trends.
• Rigid view of resources - RBV assumes that certain resources are the key to gaining a competitive advantage, when in reality resources can be dynamic and may need to be adapted to changing market conditions.
• Difficulty in assessing resources - RBV assumes that it is easy to assess a firm’s resources and capabilities, but this is often not the case as resources can be difficult to measure and quantify.
• Limited scope - RBV is limited to the internal resources of a firm and does not consider external factors such as the macroeconomic environment, regulatory changes, and government policies.
• Over-reliance on resources - RBV encourages firms to focus on their internal resources, but this can lead to an over-reliance on existing resources and capabilities, rather than looking for new opportunities.

Other approaches related to resource based view

In addition to the resource-based view, there are several other approaches related to strategy formulation. These include:

• Industrial Organization (IO) Model: This model is based on the premise that industries are shaped by the competitive forces of rivalry, market entry, and buyer power. IO suggests that firms should analyze their industry structure and competitive dynamics in order to gain an understanding of their competitive landscape and develop strategies accordingly.
• Dynamic Capabilities Theory: This approach suggests that firms should focus on developing their dynamic capabilities in order to gain a competitive advantage. These capabilities include the ability to sense, shape, and seize opportunities in the marketplace.
• Blue Ocean Strategy: This approach encourages firms to develop strategies that are not based on competition, but instead focus on creating uncontested market space. It suggests that firms should look for ways to differentiate themselves and create new markets instead of competing in existing ones.
• Network Perspective: This approach suggests that firms should analyze their networks and relationships in order to identify opportunities to build competitive advantages. It also suggests that firms should look for ways to leverage their relationships to gain access to resources that can provide a competitive edge.

In summary, there are several approaches related to strategy formulation which focus on the internal resources of an organization. These include the industrial organization model, dynamic capabilities theory, blue ocean strategy, and network perspective. By understanding and leveraging these approaches, firms can gain valuable insights into how to create and sustain a competitive edge.

Resource based view — recommended articles

Vrio model — Sustained competitive advantage — Competitive environment — Resource dependence theory — Radical innovation — Sustainable competitive advantage — Industry life cycle — Management of innovation — Growth potential

References

• Kraaijenbrink, J., Spender, J. C., & Groen, A. J. (2010). The resource-based view: A review and assessment of its critiques. Journal of management, 36(1), 349-372.
• Armstrong, C. E., & Shimizu, K. (2007). A review of approaches to empirical research on the resource-based view of the firm. Journal of management, 33(6), 959-986.