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Resource Based View

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Biondi Bachew

on 16 October 2013

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Transcript of Resource Based View

Resource Based View: Team Innovatus
Basis of RBV
RBV is grounded in economics.

RBV combines an internal analysis of companies with an external analysis of the industry and the competitive environment (Collis and Montgomery 2008).

No two competing firms have exactly the same collection of resources. Since the utilization of these resources determines how successful a company will be, it stands to reason that the resources possessed are a determining factor in a company’s ability to succeed in the long term (Collins & Montgomery, 2008).
Mullin's Team Domain focuses on the team's mission, aspirations, propensity for risk., and its ability to execute on CSFs..

RBV focuses more on the firm’s resources and these resources in the context of the market as the drivers of sustained competitive advantage.

The central proposition of the Resource Based View (RBV)is that if a firm is to achieve a state of sustained competitive advantage (SCA), it must acquire and control Valuable, Rare, Inimitable and Non-substitutable (VRIN) resources and capabilities, plus have the Organization (O of VRIO) in place that can apply them (Kraaijenbrink, Spender and Groen 2010)
Capitalizing on Resources
What types of resources should be evaluated?
Limitations of RBV
The common theme underlying RBV’s critiques is that it follows a “narrow neo-classical economic rationality.”

Critiques fall into 8 categories (Kraaijenbrink, Spender and Groen 2010).

RBV has no managerial implications
RBV implies infinite regress
RBV's applicability is too limited
SCA is not achievable
RBV is not a theory of the firm
VRIN is not necessary or efficient for SCA.
The value of resources is too indeterminate
The definition of a resource is unworkable
RBV Application
Marks and Spencer has applied the RBV to their business level strategy by capitalizing on their key resources: freehold locations, brand reputation, employee loyalty, supplier chain and managerial judgement.

In so doing, the theory seeks to explain why some competitors are more profitable than others in an industry, how to put core competencies into practice, and how to develop diversification strategies that make sense (Collis and Montgomery 2008).

Economic Rent
RBV is based on the concept of economic rent and the view of the company as a collection of capabilities.(Koteinokov 2008).

The objective should be to increase economic rent rather than profit. “ A company which increases its profits but not its economic rent (through investments or acquisitions) which yield less than the cost of capital destroys value. (Markides 2009).
The Question of Value:

Does a resource enable a firm to exploit an environmental opportunity, and/or neutralize an environmental threat?

Value Chain

Walmart's distribution network (“Distribution Prowess” 70)
The Question of Rarity:

Is a resource currently controlled by only a small number of competing firms? Are the resources used to make the products/services or the products/services themselves rare?

Zara's mindset and supply chain Tokatli, 22)
The Question of Inimitability:
Do firms without a resource face a cost disadvantage in obtaining or developing it? Example, is what a firm is doing difficult to imitate?

Patents (Mlot 15) Lee 282)
The Question of Non-Substitutability:
If competitors are able to counter the firm’s value-creating strategy with a substitute, prices are driven down to the point that the price equals the discounted future rents

Organisational Culture at Virgin. (Moores 36)
The purpose of the RBV is for the firm to attain a competitive advantage over its competitors through capitalizing upon internal resources and competencies and relative strengths.. The key is not just to achieve a competitive advantage but the challenge of maintaining it. - ie sustainability.
Marks & Spencer
Tobago Cocoa Estates Co.
Valuable: Undoubtedly the Trinitario Cocoa bean is their most valuable resource which is indigenous to 17 select regions around the world. However only 8 regions produce Fine Select Cocoa (Waldropt, 2007).

Value Added
Tobago Cocoa Estates Co
Trinitario Bean

Trinidad and Tobago is the custodian of the International Cocoa Genebank (ICG,T)

Not easily replicated.
Tobago Cocoa Estates Co
Local Trinitario Cocoa is incomparable worldwide (ICT, 2013).

RBV’ over-emphasizes resources and under-emphasizes the importance of bundling resources and the human involvement in assessing and creating value. In so doing, it does not sufficiently capture the essence of competitive advantage, whether statically or dynamically.

2012. "Distribution Prowess a Differentiator." Mmr 29, no. 11: 70. Business Source Complete, EBSCOhost (accessed October 7, 2013).

Collis, David and Cynthia Montgomery. 2008. “Competing on Resources.” Harvard Business Review 86 (7/8): 140 – 150.


Kraaijenbrink, Jeroen, JC Spender and Aard Groen. 2010. “The Resource Based View: A Review and Assessment of its Critiques.” Journal of Management 36 (1): 349-372.

Lee, Seung Hwan, and Gail Leizerovici. 2011. "A Longitudinal Study of Consumers Need for Uniqueness on Development of Networks." Advances In Consumer Research 39, 279-286. Business Source Complete, EBSCOhost (accessed October 7, 2013).

Mlot, Stephanie. 2012. "Google Sued for Patent Infringement Over Google Docs, Drive." PC Magazine 1. Business Source Complete, EBSCOhost (accessed October 7, 2013).

Moores, Victoria. 2009. "VIRGIN TALES." Airline Business 25, no. 5: 34-41. Business Source Complete, EBSCOhost (accessed October 7, 2013).

Tokatli, Nebahat. 2008. "Global Sourcing: Insights from the Global Clothing Industry--The Case of Zara, a Fast Fashion Retailer." Journal Of Economic Geography 8, no. 1: 21-38. EconLit with Full Text, EBSCOhost (accessed October 7, 2013).

Organisational Capabilities
-Firm competencies
or skills the firm employs to transfer inputs to outputs
-Capacity to combine tangible and intangible resources, using
firm processes
to attain desired end.

-Outstanding customer service
-Excellent product development capabilities
-Innovations on products and services
-Ability to hire, motivate, and retain human capital
-Firm’s cash and cash equivalents
-Firm’s capacity to raise equity
-Firm’s borrowing capacity

-Modern plant and facilities
-Favourable manufacturing capabilities
-State of the art machinery & Equipment

-Trade Secrets
-Innovative production processes
-Patents, copyrights & trademarks

-Effective strategic planning process
-Excellent evaluation & control systems
-Experience and capabilities of employees
-Managerial skills
-Firm-specific practices and procedures

Innovation & Creativity
-Technical and scientific skills
-Innovation capacities

Brand name
-Reputation with customers for quality and reliability
-Reputation with suppliers for fairness, non-zero-sum relationships
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