Organizations also need to focus on using resources that cannot be substituted. For example, resources derived from a company's history or culture may be difficult to imitate. If your competitors use the same resources as you, your business cannot achieve superior performance. Those resources also need to be rare and inimitable, meaning that other companies don't have access to them or cannot easily imitate them. Resources that enable a company to identify and leverage opportunities while protecting itself against threats are considered valuable. The VRIO framework, an integral component of this theory, emphasizes the same qualities except for "nonsubstitutable," which is replaced with "organization-wide supported". In order to do so, they must be valuable, rare, inimitable and nonsubstitutable. If you develop a proprietary software program, they may have a hard time creating a product that's just as good as yours or better than yours.Īccording to the RBV, not all resources have the potential to drive competitive advantage. If, say, you have a creative genius on your team, your competitors may not be able to find and hire someone with similar skills and competencies. The extent to which these resources can be substituted or imitated determines whether or not your business can achieve sustainable competitive advantage.įurthermore, the RBV assumes that a company's strategic resources are difficult to identify through formal analysis and thus, its competitors may find it difficult to replicate them. According to this theory, each firm has different resources and thus may use different strategies to accomplish its goals. The resource-based view has been widely applied to numerous areas of strategic management. A firm's resources should hold value in the context of the target market and require an extended learning curve so that they cannot be easily imitated by competitors. The resource-based view theory, on the other hand, states that companies should look within at the resources they already have available rather than seeking to acquire new competencies, functions or skills. Traditional theories focused on leveraging external factors as a means to set your business apart. To put it simply, sustainable competitive advantage and business performance derive from developing strategic resources. This theory emerged in the early '90s and became popular due to Jay Barney's article "Firm Resources and Sustained Competitive Advantage." Its proponents state that organizations can use their key resources, assets and capabilities to gain a competitive edge. The resource-based view is based on the idea that a company's resources determine its success. Regardless of your industry or type of business, it's essential to identify your key resources and align them with your strategic goals. A startup competing against other new companies in emerging markets can leverage its financial, intellectual and human resources to gain a competitive edge. A real estate company, on the other hand, relies on physical resources. Highlight those that bring the most value to your small business and set you apart from your competitors.Ī product-driven business, for instance, relies on human and intellectual resources. Make a list and classify these tools and capabilities into tangible and intangible assets/intangible resources. Think about what you need to create, promote and sell your products or services. Not all resources are equally important, so you must identify your key resources and then seek ways to leverage them. Copyrights, trademarks and other intellectual resources can make it easier to attract investors, strengthen your market position and increase brand recognition, among other perks. A company's human capital, on the other hand, is often an invaluable resource. Most types of computers and other equipment can be easily replaced. Furthermore, they are not available to competitors and cannot be easily imitated or implemented by others.įor example, your office equipment isn't necessarily a strategic resource. These types of resources create value for an organization and may become a sustainable competitive advantage. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.The resource-based view theory revolves around a company's strategic resources, which are the building blocks of business growth.
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