There is no common definition of strategy or the way how to implement it. However, it is common understanding that the purpose of each business is to maximise profit and that this is reached through a competitive advantage a firm might have over its rivals. Therefore, strategy should describe a mean to manage and direct a business in its environment towards a favourable market position which offers a competitive advantage (e.g. Rumelt, 1996; Porter, 1996).
In this sense, “a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy.” (Barney, 1991: 102) However, there are different approaches regarding what strategies need to be based upon to achieve that competitive advantage, i.e. what are the sources for a favourable market position and a competitive advantage.
This paper then goes on explaining the resource-based view before listing its criticisms and concluding with an outlook into the future of strategic planning.
Table of Contents
1. Introduction
2. The Resource-based View
3. Criticisms of the Resource-based View
4. Conclusions
5. References
Research Objectives and Themes
This paper provides a critical review of the resource-based view (RBV) and its contribution to the modern understanding of competitive strategy. It examines how the theory shifts the analytical focus from the external environment—as championed by the positioning-based view—to the internal resource endowment of a firm, while simultaneously addressing theoretical limitations and criticisms regarding its empirical testability and logic.
- The historical emergence of the resource-based view as a counter-perspective to environmental models.
- Core assumptions of the RBV: resource heterogeneity and resource immobility.
- The conceptual distinction between positioning-based strategy and resource-based competitive advantage.
- Critical academic discourse on tautology and the measurement of resource value within the RBV.
- The complementary role of internal and external analysis in formulating long-term strategy.
Excerpt from the Book
2. The Resource-based View
Although, a resource-based perspective has long been central to strategy researchers (Conner, 1991), the resource-based view (RBV) received a fresh impetus only during the 1980s. It emerged as opponent to the until then prevalent environmental model, or positioning-based view (PBV). Strategists with this classical view regard the external environment as the primary determinant of strategy. That is, strategy is formulated with a view to a as advantageous perceived position in the market. Grant (1991) argues that firms start the formulation of their strategy generally with a mission statement which is usually related to the market or the customers a firm wants to serve. “But in a world where customer preferences are volatile, the identity of customers is changing, and the technologies for serving customer requirements are continually evolving, an externally focused orientation does not provide a secure foundation for formulating long-term strategy. “ (Grant, 1991: 116)
Whereas in positioning models firms are seen as systems “of discrete but interrelated socio-economic activities” (Oosthuizen, 2003: 3) and a strategy should create a fit between a firm’s activities and its environment within an industry, the RBV thinks of the firm as a unique bundle of resources. Firm resources are defined as “all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness” (Barney, 1991: 101). The RBV makes two assumptions:
1) ”… firms within an industry … may be heterogeneous with respect to the strategic resources they control” (Barney, 1991: 101)
2) “… these resources may not be perfectly mobile across firms, and thus heterogeneity can be long lasting.” (Barney, 1991: 101)
That means, firms in different industries as well as within one industry differ in their supply with resources and should, to achieve a competitive advantage, exploit those differences. A competitive advantage can be sustained if those resources are valuable, rare, imperfectly imitable, and not substitutable. (Barney 1991) Because strategic resources as reputation, organisational knowledge, and staff motivation for example are not mobile, they can not be bought in factor markets, they can be valuable and hard to imitate. In general the resource-based theory of competitive advantage is about exploiting differences in the resource base of the firms.
Summary of Chapters
1. Introduction: Defines the general understanding of business strategy as a tool for achieving competitive advantage and introduces the divergence between internal and external strategic perspectives.
2. The Resource-based View: Explains the core assumptions of the RBV, specifically resource heterogeneity and immobility, and contrasts this with the traditional positioning-based view.
3. Criticisms of the Resource-based View: Discusses academic challenges regarding the theory's status as a tautology, its potential for empirical testing, and the difficulties in pre-determining the value of firm resources.
4. Conclusions: Synthesizes the discussion by noting that while the RBV faces significant theoretical criticism, it has fundamentally improved strategic research by encouraging an inside-out approach to firm analysis.
5. References: Provides a comprehensive list of the academic sources and citations used throughout the assignment.
Keywords
Resource-based view, RBV, Competitive advantage, Strategy formulation, Positioning-based view, Resource heterogeneity, Firm resources, Strategic management, Organizational capabilities, Path dependency, Tautology, Core competencies, Value creation, Business strategy.
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides a critical review of the resource-based view (RBV) in strategic management, evaluating its theoretical foundations and its contribution to our understanding of how firms achieve competitive advantage.
What are the central themes discussed in the work?
The core themes include the contrast between environmental (positioning) models and resource-based models, the assumptions of resource heterogeneity and immobility, and the academic criticisms regarding the theory's scientific rigor.
What is the primary research goal?
The goal is to analyze how the RBV has influenced the development of strategic management by shifting focus from external market positioning to internal firm-specific resources.
Which scientific methodology is applied here?
The paper employs a critical literature review methodology, examining established theories and academic debates from key scholars such as Barney, Grant, and Porter to evaluate the utility of the RBV.
What is covered in the main section of the assignment?
The main section details the conceptual framework of the RBV, compares it with the positioning-based view (PBV), and extensively discusses the critique surrounding its potential tautological nature and testability.
Which keywords best characterize this work?
The work is characterized by terms such as resource-based view, competitive advantage, resource heterogeneity, strategic management, and internal vs. external perspectives.
How does the RBV differ from the positioning-based view regarding strategy formulation?
While the positioning-based view focuses on finding a favorable market position based on external environmental factors, the RBV argues that sustainable competitive advantage stems from the unique bundle of internal resources and competencies a firm controls.
What does the author conclude regarding the scientific validity of the RBV?
The author concludes that while the RBV is criticized for being a tautology and difficult to test empirically, it has provided a valuable shift in perspective, encouraging researchers to look at the internal side of firms rather than solely at market-side factors.
- Quote paper
- Katja Kirsch (Author), 2004, Critically review how the resource-based view has developed our understanding of strategy., Munich, GRIN Verlag, https://www.hausarbeiten.de/document/36615
