Case Study: Resource-Based View of Competitive Advantage

Strategic capability can be defined as the adequacy and suitability of the resources and competences of an organization for it to survive and prosper. (Johnson et al, 2005) Porter (1980) argues that it’s the industry structure within which the organization competes and how they position themselves that determine how profitable the firm will be and his models revolve around this argument. The resource base view of strategy however points not to industry structure but to the unique clusters of resource and capabilities each company possesses (Collis and Montgomery 1995, Stalk et al 1992) and therefore is much better suited in analyzing Amazon’s strategic capabilities. The Resource Based View assumes that firms can be conceptualized as bundles of resources and those resources are heterogeneously distributed across firms and that resource differences persist over time (Amit and Schoemaker, 1993) and when firms have resources that are valuable, rare, inimitable and non- substitutable (VRIN) they can achieve competitive advantage that cannot be easily duplicated by other firms. (Conner and Prahalad, 1996)

Strategy is a set of complicated tactics formulated by the executives of a company directed towards the achievement of company’s goal (Salmela, 2002). It is about all the path ways that a company would follow to reach its ultimate goal. It is a company’s strategy which helps to identify what it does better than the other companies in the industries, which may be different from what it does best. For successful strategy formulation and implementation, a company should know the needs of customers and should have knowledge of its competitors. Through a good strategy a company would identify that opportunity which makes it different from the others (Thompson, 2005).

Nowadays, businesses endeavor to achieve a competitive advantage and so an outstanding performance by applying different strategies and examining various strategic analyses. Key role for this strategy is the manager’s contribution, as he is the one to defy the company’s objectives. The manager is responsible in order to exploit the firm’s available resources and strengthen its competencies in order to produce competitive goods and services. The resources and capabilities are among the fundamental sources a manager can use, when he structures the strategic management.

* Resources and capabilities serve as a source of competitive advantage for a firm over its rival.

Especially in times where raw materials and resources are gaining more and more value, companies need to use their assets and resources in the most efficient way, in order to stay competitive. These opportunities are called “capabilities”. Capabilities can be described as organizationally embedded non-transferable firm-specific resources. (Crook, T. R., et. al., 2008). Capabilities can be divided into distinctive and threshold capabilities. On the one hand, Threshold capabilities or resources are fulfilling the general criteria a firm has to provide, in order to survive on the market. Regarding our example of Adidas, the threshold criteria for their certain industry are buildings, land, workforce, several departments and outsourced manufactories.

A successful business strategy can help companies effectively execute and stay ahead of the competition. Maintaining strategic direction and relentlessly executing - rather than reacting to competitive conditions - is the most consistent route to success. Along with a successful strategy, a company needs to focus its culture and align it with employees. Aligning the right people in the right roles with the right strategy for your business will lead to organizational success.

He suggested that sustained competitive advantage derives from the resources and capabilities a firm controls that are valuable, rare, imperfectly imitable, and not substitutable. He further added that the resources and capabilities can be viewed in form of tangible and intangible assets. There are four different categories of resources financial, physical, human, and organization.

A competitive strategy, or business-level strategy, is the way a business used to successfully enter and penetrate into a market (Eastwood et al, 2006), and also, to succeed in this chosen market against its competitors (Johnson et al, 2014). A company needs to develop and apply appropriate strategy to help the company to generate distinctive competences (David, 2007). Compared with the strategies implemented in other levels of operation, competitive strategy is more focused on the competition against other competitors and strategic choices to better attain market share (Harrison and St. John, 2009). According to

For a business to be successful and have a competitive advantage, it is important to evaluate the company’s resources and capabilities (Pitt & Koufopoulos, 2012). Resources in a company are the productive assets owned (tangible or intangible) whereas capabilities are what the company can do with this (Grant, 2010). “Establishing competitive

Compare and contrast the market-based approach and the resource-based view as approaches to competitive strategy. To what extent are they rival or complementary views?

A business strategy is concerned with major resource problems e.g. raising the finance to create a brand new industrial plant. Strategies are also involved with choosing on what products to allocate major resources to.

1. What is competitive advantage, and how does it relate to a company’s business model?

This strategy emphasizes the use of an organization’s resources and capabilities to achieve a core competence that cannot be imitated by competitors. Furthermore, the resource based school argues that if an organization distinctively improves its internal capability; that is being able to have effective inside machinery to deliver products and services to customers, the organization will enjoy a massive advantage in the market. This school also argues that in order to have a competitive advantage, an organization must have resource and capabilities that are sophisticated to those of competitors (QuickMBA,

Competitive advantage is explained by Mahoney and Pandian (1992) as the function of industry analysis, organizational governance and the firm’s effects in the form of resource advantages and strategies. In order for a firm to be competitive it must adapt to the volatile business environment and through strategic management decisions establish a competitive advantage that will ultimately produce superior performance relative to its competitors (Akimova 2000).

If   a   company   wants   to   be   successfull   in   their   business   it   has   to   be   able   to   create   competitive   advantage  over  it  competitor  in  a  same  business  area.  (De  Wit  &  Meyer,  2010).  What  approach   or   strategy   should   the   company   take   into   account   in   order   to   create   competitive   advantage   in   their  business  environment  is  the  core  issue  for  the  managers.