Advantages and Challenges of Developing a Strategy for Competitive Advantage Based on Resources and Capabilities

1064 Words Aug 30th, 2012 5 Pages
Examine the advantages and challenges of developing a strategy for competitive advantage based on resources and capabilities. Illustrate your answer with appropriate examples.

In lights of changing technical advancements, cut-throat competitions and unstable global economic conditions, managers need to consider strategies to sustain competitive advantage more frequently then ever. And no matter how organized their companies are and which industries they are working in, they can quickly start by doing an internal analysis of the company and define the strengths or weaknesses in different areas. In that case, these companies are trying to developing a strategy for competitive advantage based on “resources and capabilities”. Prahalad and
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In other words, by appraising and exploiting such resources and capabilities, the blueprint on developing a strategy for competitive advantage will be ready and profit is guaranteed by RBV analysis.

The challenges of developing a strategy for competitive advantage based on RBV:

As previously mentioned, RBV focuses on analyzing internal strengths and weaknesses. One of the key challenges of RBV is the fact that it doesn’t consider competitions from “external” sources. In short, RBV ignores external factors concerning the industry as a whole. In the Five Forces model developed by Michael Porter (cited in B820, Unit 2, p. 19), there are already three forces from external environment: the threat of substitute products, the threat of established rivals, and the threat of new entrants.

To evaluate external strengths and weaknesses (macro-environment) further, considerations should be taken based on Fahey and Narayanan’s (cited in B820, Unit 1, p. 9-10) STEP analysis “Sociological, Technological, Economic and Political factors” as well. A good example is the influence of technology (in B820, Unit 2, p. 44-45) on conventional cameras. No matter how competence USA’s Kodak and Japan’s Fuji are at the production of conventional cameras, they could not stop the replacement by digital cameras and the emerge of smart
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