Comparison of the Resource-Based vs Market-Based View Approaches to Competitive Strategy

The ability of some firms to sustain longer term competitive advantage relates to their capabilities according to the resource based theory of the firm. Summarise this approach to explain why some firms perform better than others in an industry.

“Generic strategies” was first set out by Michael Porter in 1985 in his book “Competitive Advantage: Creating and Sustaining Superior Performance.” Academic work in the field of strategic management, Porter (1980, 1985) typology of general competitive strategies: cost leadership, differentiation and focus. The three virtually divided into two basic categories. Focus strategy requires a niche or narrow segment concentration. But Porter said, can cost leadership in the success of this strategy or differentiation to achieve. Therefore, cost leadership and differentiation are two basic strategies Porter 's typology. These two topics are discussed in this article.

3.How these strategies are related the performance of these companies over time? Why? What is going on in terms of industry competition and markets that makes one strategy outperform the other at any point in time?

Argyres, N. & McGahan, M. A., 2002. Introduction: Michael Porter's "Competitive Strategy". The Academy of Management executive, 16(2), pp. 41-42.

Firms need to adapt themselves to market developments they need to build on strengths of their resources base and activity system. Immediate action in developing the products/services and resource base is required to remain in constant alignment with the fluctuating external environment (De Wit, Meyer, 2010, p.250). The process of generating knowledge and applying it in ways that support delivering superior customer value helps the firm develop the basis for a competitive advantage (Vorhies, Harker and Rao, 1999).

The resource-based view (RBV) emphasizes the firm’s resources as the fundamental determinants of competitive advantage and performance. It adopts two assumptions in analyzing sources of competitive advantage (

The main goal of strategic management research is to underline how competitive moves help firms develop long-term advantage and improve performance (Hitt, Boyd & Li, 2004). But each move does not take place in isolation. Each move must be coordinated with other moves and must evaluate the response it will generate from competitors. The authors then indicated how competitive interactions could be both destructive and threatens survival, as well as constructive and enhance firm success. The authors then defined each research streams. Competition action and response means how a firm’s action will affect their customers and can generate rival’s reaction too. First-mover advantage considers the role of timing and order of actions and responses. Co-opetition is the process wherein two or more firms compete and cooperate with each other simultaneously. Multipoint competition refers to a situation

This is an excellent model to analyze the industry. The analysis of the industry is essential for choosing the strategy. Factors that influence an industry influence all companies within that industry and every company reacts to those factors. The attractiveness of an industry is measured with the average profitability. According to Porter, the competitive rivalry has great impact on the profitability of an industry. Different intensity of the competitive rivalry causes the differences in the profitability degree. The biggest profits are realized in industries with moderate performance of competitive rivalry while the industries with the extreme acting of competitive rivalry, like monopoles, suffer from the profitability crisis.

It is never doubted by academic circles and business environments that the strength of competitive analysis, if not the top, is one of the most important critical success factors in creating and managing marketing strategies. The way a business adapts to competitive environments, characteristic of its focus being self-centered, competitor-centered, customer-driven or market driven (Day and Nebugandi, 1994), will define its place in the complex marketing arena.

The mid-eighties witnessed the emergence of a growing body of work collectively labelled the resource and capability-based view of the firm (RBV). In reality, Resource Competence View (RCV) first adopted an “economic” orientation. Pioneer studies (Wernerfelt, 1984) , Barney, 1986, 1991, Dierickx and Cool, 1989, Peteraf, 1993) focused on the type of resources and competencies that could offer to its owner a sustainable competitive advantage. Therefore, resources and competencies approach first appeared as a theory of competitive advantage or a theory of “performance of the firm” (Argyres & Zenger, 2007).

There are five generic business strategies that companies choose from when trying to successfully compete within their respective industries. This is the first choice a company must make, even before deciding an overall strategy. These generic business strategies include low-cost provider strategy, broad differentiation strategy, best-cost provider strategy; focused strategy based on low costs, and focused strategy based on differentiation. These strategies have many advantages as well as disadvantages. Choosing which one to use depends on what market position a company wants to pursue. Deciding to be more offensive or defensive also plays a role in choosing a

We study competitive strategy within the overall context of technology firms, which operate within a so-called industry, e.g., the computer industry, the consumer electronic industry, the cellular phone industry. Each industry, ideally, serves a market, which denotes the buyers or customers of the products and services offered by the industry.

Critically discuss the proposition that a firm 's choice of strategy depends on the competitive environment rather than the resources under its control.

The purpose of this essay is to provide a comprehensive understanding of the competitive advantage concept and its challenging issues that are important for every firm to operate effectively and efficiently. This paper also outlines and discusses the theoretical of achieving sustainable competitive advantage within an organization and the viewpoint of this concept to the modern competitive environment. Competitive advantage, which has two main types: cost leadership and differentiation, helps firms survive and develop through the competition in any commerce. However, the competitive advantage does not last forever, particularly in the current period with the increased improvement of technologies and communications. Moreover, the future of an organization is determined by its abilities to achieve and sustain competitive advantage. It is obviously a difficult position for dealing with challenges commencing from the concept. This essay will first consist of the theoretical frames of competitive advantage concept and its importance. The second part involves the issue of achieving and sustaining the competitive advantage. The last part is to give suggestions on the viewpoint of the extent to which competitive advantage is still relevant to the modern competitive environment. The methodology applied in this essay is the using of the previously published research papers to support the raising ideas.

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.