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

1474 Words Mar 17th, 2014 6 Pages
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?

Competitive strategy, after Porter, came to be defined as the strategy of a business unit which seeks to achieve sustainable Competitive Advantage (SCA). The literature on strategy deems the market-based view (MBV) and the resource –based view (RBV) as two approaches to giving businesses the competitive edge they need to compete in their industries. Aside from having competitive advantage as their ultimate goal, the two approaches are also similar in the sense that they both make use of particular tools and models in their undertakings. They also differ in numerous ways
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Only through knowledge of their available resources will firms be able to profit from the white spaces in the market place.

The different assumption made about the market place is another point of comparison between the MBV and RBV approaches. Under the market-based approach, the assumption of the ultimate arrival at conditions of market equilibrium prevails; with a balance of supply and demand and abnormal profits being computed away with new entrants. The most efficient firms will be those with low costs and minimal differentiation strategies. However, by contrast, the resource-based approach assumes a state of disequilibrium as the market norm. Given that firms will have differing core competencies, coupled with the fact that at different moments in time, the industry will make certain factors key to achieving profitability, the firms with the required key competencies as dictated by the industry, will the ones able to achieve above average profits.

Nevertheless, although the differences highlighted between the two approaches to competitive strategy, may portray them as rivals theoretically, in practice the two are complementary views as firms making use of one approach will be making use of the other by default.

Taking Southwest Airlines as a first example; the…