Resource Based View, Essay Example

In the business world, the purpose of building a business strategy is to find success and gain a competitive edge over other businesses in the market. The widespread rapid growth in globalization has helped changed the business world into a competitive environment. This change has given foreign and domestic firms the opportunities to compete against each other in the international market. (Gomez-Mejia et al 2007) Businesses that have a global presence now have to more to set themselves apart from other firms and gain a more competitive edge. Innovations in technology have helped to offer more profitability, qualitative low cost solutions, and effective management of their human assets. (Wright 2008) Resourced Based View is an approach that has become the main tool utilized by businesses to determine which resources can be strategically used for the company. According to Barney (2001) the resource based view stems from the central ideal that sources of the firms competitive edge comes from the resources internally within the business in opposition to their position in the external environment. (Barney 1995) The purpose of this paper is to expound upon the two factors that helped firms gain their competitive advantages, internal resources and internal capabilities.

In a matter of decades throughout the business community the Resource Based View has been an attractive option to growing firms as it has help to influence the contemporary theory,where the primary factors in success and competitive advantage is rooted in the both the strategic and organizational insights. Organizations in the global market seek to obtain and sustain competitive advantage as it is the principle of their strategic management. In order for these organizations to not only achieve a position within the market that provides them with a competitive advantage, but also to enhance the performance of the firm in regards to their competitors, they must have the tools necessary.In the global market, competitive advantage is essential and critical to an organization’s longevity and success in the global business environment. Sustaining competitive advantage is not an easy feat as it requires the proper strategy and practice to be implemented within the business. (Ainuddin et al 2007) The underlying principle to the Resource Based View is the basis in which competitive advantage is achieved and sustained, by the implementation of the firm’s a valuable resource available at the disposal of the firm. (Warnerfelt 1984)

Resource Based View provides firms with the clear understanding of why some internal resources are valuable than others, where some are able to generate more of an advantage to the competition.The main focus is helping firms acknowledge their internal resources can help to obtained and maintain a competitive advantage in the global market. Multinational firms are deploying their human capital throughout the global market in order to meet the growing demand and gain a competitive advantage. The value of Resource Based View is that it allows firms to not only compete against existent companies within the market, but also hold off new entrants. The competition threats of substitute products that have provided a bargaining of power with suppliers and with the buyers. (Hanson et al, 2011) The value of human and organizational capital that provides innovation and creativity can be easily substituted and imitated, but the Resourced Based View provides firms with the abilities to integrate and manage these capitals with the potential capabilities to develop customer value and sustain customer relationships. (Hanson et al.2011) The theory is rootedhowever in the firms’ capability to be observant in gathering information in regards to the wants of the customers, and how its products differ from the competition.

Resource based view provides the assumption that in order to outperform other firms within the competitive market, one must consider the capabilities and resources that the firm has. (Das, Teng, 2000) Wernerfelt over 30 years ago expressed his definition as being that resources can be seen as intangible and tangible assets to the firms, and Grant felt that resources are accessible to the company within open markets to be manageable and utilized. (Wernerfelt 1984; Grant 1991) Resource Based View helps firms acquire the capacity in identifying, deploying, and developing the internal resources to lead to the core competencies. Internal resources do not all the capacity to be resourceful in helping the firms acquire success and profitably, however, the key factors in determining the invaluable resources include their; inimitability, durability, rareness, non-substantiality, match with strategic industry factors, and low traceability. (Grant 1991) Internal resources can be viewed as the capabilities, assets, information knowledge, processes, and other sources that are controlled and acquired by the firms. (Barney 1991) These internal resources are reflected as the core strengths within the business that can be categorized in human capital, physical capital, and the company’s capital resources. These internal resources provide efficiency and effectiveness that allows the firm to see the value and success as compared to other their competition. (Amit, Schoemaker 1993)

The tangible and intangible resources described by Hanson (2011) placeimportance on innovation, human, financial, technology, physical, and reputation resources. (Hanson et al 2011) Intangible resources unlike tangible can be managed, and leverage over time to develop a competitive edge.For example, an airplane is considered a tangible resource, it cannot be utilized for different locations at the same time, but the features such as the manufacturing process or the quality control process can be created to develop a competitive edge. Firms are more able to rely on intangible resources because they are difficult to manage and less visible to the competition. These resources include the creativity, knowledge, and the brand that they company exemplifies. Another example of this advantage includes, Apple which brand name is a valuable asset where customers are able to identify from their logo, products, and other resources. (Troianovskif, 2011) When the new iPhone came out, users lined the blocks in order to wait hours ahead of the release for a chance to obtain the new iPhone. Apple is able to sustain the competitive edge over the competition in the market because they have the intangible assets available at their disposal. This helps them to create products that show their high reputation for innovation, and reliability in regards to the competition.

The Resource Base View is a requirement of two factors besides the usage of internal resources, is the capabilities of the firm. In explanation, it is the ability of the firm to customize the resources that the firm has at their disposal. (Arthurs, Busenitz 2006) The abilities for firms and the core competencies that the firms possess, are rooted in the attributes and features that the firm possess that allows for the resources to be used as a competitive advantage. In understanding the firms’ capabilities, the firm must acknowledge the central features that allow firms to establish their strengths with open up the market for more opportunities and a better position against rivalries. Honda for example has provided the capabilities of being able to develop an engine that is efficient, that is leveraged for it to both compete in the car and lawnmower markets. When the firms have the ability to structure and reconfigure their resources such as human capital to create a valuable competency, they are able to offer customer benefits and sustain profitable success. According to Fahy (2000), the value that BMW possesses is almost incomparable to other luxury models because they have long built a reputation in which they have provided distinctive engineering capabilities that have provided them with the ability to create high performing cars that they can offer to their customers at a premium price. (Fahy 2000) The value that BMW and other likeminded firms are able to utilize reconfirms the value that they possess in giving customers a product that not only creates a customer recognition but product differentiation that provides them with a competitive advantage.

The capabilities of a firm go hand in hand with the recognition of the internal resources within the firm. The resources have the potential to provide the firm with the capabilities in sustaining a market position and products that cannot be imitated by others. The firm must develop distinctive capabilities that encourage their tangible and intangible resources such as innovation, and creativity to further propel the business and strategic strategy that the Resource Based View expounds.While Resource Based View tells the firms not to rely on the external environment, firms must do resource on their competition in the market and analyze the external factors that help to provide market share, product differentiation, and what the customers want. The Resource Based View is parallel to the enactment based theory in which gives firms the tools to identify opportunities. They are used in the market that furthers the success of the strategic factors that are needed in the application of the value created strategy.

The Resource Based View provides a comprehension of the benefits from the combination of internal resources and the capabilities of the firm to use in the global market in order to develop a competitive advantage over the competition. Through the process of identifying the intangible and tangible resources that provide value to the company, firms are able to achieve and sustain a competitive edge, in addition to understating the business strategy to be used to hold off new entrants, substitute products, and other factors. Paired with traditional business models used in displaying the firm’s strength and weaknesses, the Resource Based View is a tool that furthers what resources in the firm’s disposal have the capacity to generate value and profit used in gaining a position in the market that can sustain customer demand and growth. Like leading companies such as Apple, BMW, and Honda, they are firms that are able to sustain a competitive edge.

References

Amit, R. and Schoemaker, P.J., 1993. “Strategic assets and organizational rent.” Strategic Management Journal, Vol.14, pp.33-46.

Arthurs, J.A., and Busenitz, L.W. 2006. “Dynamic Capabilities and New Venture Performance: The Moderating Effects of Venture Capitalists.”Journal of Business Venturing, 21: 195-215.

Barney, J. B. 1991. “Firm Resources and Sustained Competitive Advantage” Journal of Management, 17, pp.99-120

Barney, J. B. 2001 “Is the resource-based “view” a useful perspective for strategic management research? Yes” Academy of Management Review, 26(1), pp.41-56

Das, T.K. and Teng, B.S., 2000. “A Resource-Based Theory of Strategic Alliances”Journal of Management, 26(1), pp.31-61.

Dierickx, I. andCool, K. 1989. “Asset stock accumulation and sustainability of competitive advantage” Management Science 35(12), pp.1504-1511

Fahy, J., 2000. “The Resource-Based View of the Firm: Some Stumbling Blocks on the Road to Understanding Sustainable Competitive Advantage.”Journal of European Industrial Training, 24 (2), pp.94-104.

Fahy, J. and Smithee, A. 1999. “Strategic Marketing and the Resource Based View of the Firm.” Academy of Marketing Science Review 1999(10)

Grant, R. M. 1991. “The Resource Based Theory of Competitive Advantage: Implications for Strategy Formulation”, in: California Management Review, vol. 33, issue 3, pp. 114-135.

Gomez-Mejia, L. R., Haynes, K., Nuñez-Nickel, M., Jacobson, K. J. L., &Moyano-Fuentes, J. 2007. “Socio-emotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. “Administrative Science Quarterly, 52, 106-137.

Hanson, D., Hitt, Michael A., Ireland, R. Duane and Hoskisson, Robert E. 2011.
Strategic Management: Competitiveness andGlobalization, Asia- Pacific Fourth Edition. Cengage Learning Australia.

Makhija, M., 2003. “Comparing the Resource-Based and market- Based Views of the Firm: Empirical Evidence from Czech Privatization.”Strategic Management Journal, Vol.24, pp.433-451.

Prahalad, C. K.; Hamel, Gary. 1990. “The Core Competence of the Corporation.” Harvard Business Review, Vol. 68 Issue 3, p79-91

Priem, R. L. and Butler, J. E.2001. “Is the resource-based “view” a useful perspective for strategic management research?” Academy of Management Review, 26(1), pp.22-40

Sirmon, D. G., Hitt, M. A. and Ireland, R. D. (2007) “Managing firm resources in dynamic environments to create value: looking inside the black box” Academy of Management Review32(1), pp.273-292

Troianovskif, Anton. 2011. “Sprint jumps into iPhone frenzy.” World Street Journal. Retrieved from
http://online.wsj.com/article/SB10001424052970204002304576629413133310144.html?KEYWORDS=Iphonesv.

Volberdaet al (2011) “Strategic Management Competitiveness and Globalization” UK, Cengage.

Wernerfelt, B., 1984. “A resource-based view of the firm.” Strategic Management Journal, 5(2), pp.171-180.

Wright, P. 2008. “Human Resource Strategy: Adapting to the Age of Globalization” Society for Human Resource Management (SHRM) Foundation, available at:
http://www.shrm.org/FOUNDATION/HR_Strategy_EPG.pdf