Sustainable Competitive Advantage Through Core Competencies in a Resource Based Approach

Acquisition and organisation of resources can be critical success factor in an organization. While on the other hand, change requires a firm to gain expand and utilise resource such as human, financial, knowledge as a crucial asset. Resource based approach supports this view and as Tywoniak (2007) claimed by that resource based view is the most dominant theory in history of management. This is achieved by targeting state of sustained competitive advantage by controlling resources and capabilities. This view emphasis on the need for a ‘fit’ among capabilities and external market, and since each firm has unique capabilities and resources, this result in achieving strategic

Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources.

Barney, J. (2004). Firm resources and Sustained Competitive Advantage. Strategy: Process Content Context: an international perspective, de Wit & Meyer , 285-292.

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,

The strengths are its resources and capabilities with which the firm has its advantage over its competitors.

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

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

To begin with, heterogeneity of capabilities and resources of firms, which is explained as “enduring and systematic performance differences among relatively close rivals”, provides a foundation of the resource-based view (Song, et al.,2006). The implication of this assumption is that core competence conveys the valuable and unique feature of products to customers. The RBV disagrees with the opinion that the resources are homogeneous; if homogeneity is assumed to be essential to develop a proper strategy, the strategy can be easily copied by competitors, which will ultimately result in the dissipation of above-normal rents. Conversely, the unique and fixed resources on hand will lead to outstanding performance and ultimately turn to be a competitive advantage, under the circumstances that sustainable competitive advantage is achieved in an environment where competition does not exist.

1) Barney, J., (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, vol. 17 (1991), no. 1, pp. 99–120.

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).

Resources are the source of the firm’s capabilities. Resources are bundled to create organisational capabilities. Some of a firm’s resources are tangible and intangible. Tangible resources are assets that can be seen and quantified. Intangible resources include assets that typically are rooted deeply in the firm’s history and have accumulated over time. Intangible resources are relatively difficult for competitors to analyse and imitate. The four types of tangible resources are financial, organisational, physical and technological. And the three types of intangible resources are human, innovation and reputational (Hanson, D., Hitt, M., Ireland, R. D., & Hoskisson, R. E., 2011, pp. 75-78).

For transforming a short-run competitive advantage into a sustained competitive advantage we require resources that are heterogeneous in nature and not perfectly mobile. This translates into valuable resources that are neither perfectly imitable nor substitutable without great effort. If these conditions are fulfilled then the bundle of resources can sustain the firm's above average returns.

Reputation is an intangible asset , it often is difficult to measure precisely its impact on the bottom line . However , a superior , if indirect , gauge of reputation can make a huge impact on a company’s financial results . Maxwell can make a good use of its superior reputation by using it as a motivation to improve itself . A good reputation provides a company goal for which to keep striving . Besides , Maxwell can use its superior reputation to increase its business opportunities . A company’s reputation is just like a magnet . It attracts not only customers but also attention of interested future investors and business partners . A superior reputation generates many possibilities for business growth and expansion .

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

Competitive advantage is viewed as a explanation of a firm success and long-term survival. With knowing the firm and competitiors, competitive advantage can be established by delivering more value to the customers in a more efficient manner (Day and Wensley 1988; Porter 1985). However, to a competitive advantage, the firm should focusing on the customers needs instead of their internal operations (Czepiel 1992; Zeithaml 1988).