Resource Based View (RVB) – Competitive Advantages
A firm profitability derives from: i) broad enviroment (PESTEL); ii) the industry (Porter 5 Forces) and iii) its competitive advantages. Considering that nowadays both the broad environment and the industry are essentially comples and unstable, the firm’s primary source of profitability is its competitive advantages (80% or more).
What is a competitive advantage?
To have a competitive advantage is to be able to create value to customers and then capture more value than competitors. Trying to define a company’s competitive advantages from the attribures of its products or services is not recomended because this attributes and their value to customers can change rapidly with the appearance of new technologies, new business models and changes in customer’s trends. The way to determine the firms’ competitive advantages is through the Resource Based View (RBV).
RESOURCE BASED VIEW (RBV)
According to the RBV of the firm, a company’s competitive advantage derives from its resources and capabilities. Resources are those assests (tangible, intangible and human) owned by the company. However, the resources are not productive on their own. So the competitive advantages also derive from the company’s capabilities, i.e. its ability to organize the resources in order to deploy the desired results.
How to use RBV
The first objective of the RBV is to understand the company’s competitive advantages and thus create value to customers and thus be profitable. Second, select a strategy to exploit them (see B-C framework). Third, determine the value of your resources and capabilities. Finally, pay attention to continuously develop your resources and capabilities.
Appraisal of resources and capabilitiets
How to determine the potential of your resources and capabilities:
- Scarcity and Relevance (can they create value?)
- Durability, Transferability and Replicability (can you capture value?)
- Property rights, Relative bargaing power and Embeddedness (can you own them or hold them?)
Porter's 4 Generic Strategies
Tags: business level strategy, competitive advantages, resource based view of the firm, resources and capabilities, RVB