"The Resource Based View (RBV) analyses and interprets internal resources of the organizations and emphasizes resources and capabilities in formulating strategy to achieve sustainable competitive advantages. Resources may be considered as inputs that enable firms to carry out their activities. Internal resources and capabilities determine strategic choices made by firms while competing in their external business environment. Firm’s abilities also allow some firms to add value in customer value chain, develop new products or expand in new marketplace. The RBV draws upon the resources and capabilities that reside within the organization in order to develop sustainable competitive advantages. According to RBV, not all the resources of firm will be strategic and hence, sources of competitive advantage. Competitive advantage occurs only when there is a situation of resource heterogeneity and resource immobility." Ref.: Madhani (2010)
"Barney's summary of resource based view is that firm can only have a sustained competitive advantage if it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and controls its physical, human or organisational resources that are valuable, rare, inimitable and non-substitutable. In analysing sources of competitive advantage, the resource-based view has two assumptions.
- Firstly, a firm within an industry may be heterogeneous with respect to the strategic resources they control.
- Secondly, the model assumes that these resources may not be perfectly mobile across firms, and thus heterogeneity can be long lasting.
"The resource-based model of the firm examines the implications of these two assumptions for the analysis of sources of sustained competitive advantage.
"Today managers are moving manufacturing offshore to lower costs of labour, rationalizing product lines to capture global scale economies, instituting quality circles and just in time production, and adopting Japanese human resource practices. It was believed that the application of concepts like ‘strategic fit’ (between resources and opportunities), ‘generic strategies’ (low cost, differentiation and market focus) and the ‘strategy hierarchy’ (goals, strategies, and tactics) have often aided the process of competitive advantage. Most companies have approached competitor analysis that focuses on the existing resources like human, technical and financial of present competitors. Whereas, the only threat those companies aware are those with the resources to erode margins and market share in the future." MBA Knowledge Base (2020)
Key theorists who have contributed to the development of a coherent body of (RBV) literature include Jay B. Barney, George S. Day, Gary Hamel, Shelby D. Hunt, G. Hooley and C.K. Prahalad.
Utilise video Ref.: LO.2.1: Resource Based View (RBV)
