Essay on Competing on Resources: Strategy in the 1990s.

991 Words 4 Pages
In the article, the authors introduce a new approach to strategic management called the “Resource Based View of the Firm” – RVB. RVB attempts to develop a business model framework that helps describe how a company’s resources drive its performance in a dynamic competitive environment. This approach integrates the internal analysis of the company (i.e. core competencies) with the external analysis of the industry and the competitive environment (i.e. Porter’s Five Force Model). The article argues that both analyses are required to accurately assess a company’s competitive position. While Porter’s Five Forces Model helped strategic managers choose the right industries and, within them, the most attractive competitive positions, it did not …show more content…
RVB translates these general economic requirements into the following five tests:

1) Test of inimitability – is the resource difficult to copy? Having a resource that competitors can easily copy only generates temporary value creation. If a resource is inimitable, then profits will be more sustainable. However, inimitability does not last forever. Competitors can eventually find ways to copy most valuable resources. Managers can delay the onset of competitors and sustain profits for a while longer by building strategies around resources that have at least one of the following characteristics: 1) physical uniqueness (i.e. patents), 2) path dependency (i.e. resources that are unique because they have been built over time and cannot be purchased, like brand name), 3) causal ambiguity (i.e. competitors does how to recreate the resource, like company’s recipe to innovation), 4) economic deterrence (i.e. company preempts a competitor by making a sizable investment in an asset).
2) Test of durability: How quickly a resource depreciates? Current technologies will inevitably be surpassed by the next great innovation. It is critical that companies realize this and respond to macroenvironmental forces appropriately.
3) Test of appropropriability: Does the company capture the value that the resource creates? Key individuals are often times viewed as the key resources and can leave an organization at any given notice. It’s important to base a…