In this paper, authors are exploring the concept of Dynamic Capabilities and thereby enhancing the value of Resource -based View (RBV) literature. Scholars have criticized RBV for its inability to explain the mechanism by which resources contribute to competitive advantage. Some scholars consider RBV as a vague and tautological concept. The authors attempt to address some of these concerns. The authors focus on the nature of dynamic capabilities, the impact of market dynamism on dynamic capabilities and the evolution of dynamic capabilities.
Nature of Dynamic Capabilities
Authors’ define Dynamic capabilities as “the firm’s processes that use resources—specifically the processes to integrate, reconfigure, gain and release resources—to match and even create market change”. Dynamic capabilities are thus the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die”. Dynamic capabilities include routines, integration of resources and reconfiguration of the resource. Organizational processes such as product development, alliance formation, strategic decision, knowledge creation are dynamic capabilities. They include routines, resource integration, and reconfiguration of resources. Dynamic capabilities emerge from the path -dependent histories of individual firms. Dynamic capabilities show commonalities among different effective processes across firms even though they are idiosyncratic in nature. For
If a firm’s resources are both valuable and rare, a firm may achieve a competitive advantage (Newbert, 2008). A resource is considered valuable when it improves the efficiency and effectiveness of a strategy, and when it exploits external opportunities or neutralises external threats (Barney, 1991). This wording is somewhat confusing as it draws a direct connection with the environmental model, i.e. Porter’s (1985) five forces. The ‘value’ variable could therefore be rendered exogenous to the RBV (Priem and Butler, 2001). On the other hand, Peteraf (1993) praises the model for its internal focus and ability to uncover potential sources of competitive advantage which cannot be attributed to the external environment, notably because areas of value are often so difficult to identify (Newbert, 2008). The term ‘potential’ is used because not all resources have the ability to create a SCA
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
The resource-based view was developed to help emphasize internal capabilities as a means of creating competitive advantage (Henry, n.d.) In this view, the organization is comprised of a series of resources that are used by management. These resources are the source of new products and the internal improvements that help companies to better compete in the marketplace. There are two different types of resources tangible and intangible. The former category consists of physical assets, and is characterized as physical resources, human resources and capital resources. So physical resources are the buildings, machinery, materials and productive capacity. At Coca-Cola, the company's physical resources
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.
He suggested that sustained competitive advantage derives from the resources and capabilities a firm controls that are valuable, rare, imperfectly imitable, and not substitutable. He further added that the resources and capabilities can be viewed in form of tangible and intangible assets. There are four different categories of resources financial, physical, human, and organization.
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 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,
McKinsey consultants suggest that firms need to change with changing industry conditions and that often firms needs to choose between protecting what they have built versus letting them go to make room to focus on new business opportunities (McDonald, Duff (September 10, 2013). The Firm: The Story of McKinsey and its Secret Influence on American Business. Simon & Schuster). McKinsey’s further supports this position with their three horizons model that replaces core businesses in decline with new growth options (McGrath; Ian MacMillan (March 16, 2009). Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity. Harvard Business Review Press. p. 198). At the product level, we see products transitioning through different stages of their lifecycle. Products move from introduction to growth and maturity stages, eventually passing into commoditization and ultimately falling into decline. Each stage of the product life cycle requires differing strategies to achieve successful product commercialization.
This strategy emphasizes the use of an organization’s resources and capabilities to achieve a core competence that cannot be imitated by competitors. Furthermore, the resource based school argues that if an organization distinctively improves its internal capability; that is being able to have effective inside machinery to deliver products and services to customers, the organization will enjoy a massive advantage in the market. This school also argues that in order to have a competitive advantage, an organization must have resource and capabilities that are sophisticated to those of competitors (QuickMBA,
These two streams of research - market orientation and the RBV of the firm - form
As indicated by Teece, Pisano, and Shuen, a dynamic capacity alludes to organization 's ability to incorporate, form and change interior and outer skills. They can help an association to accomplish creative types of upper hand through joining, building and change of inside and outside skills, as to react to the evolution in nature. Eisenhardt and Martin characterize dynamic capabilities in a comparable way, i.e. with regards to accomplishing authoritative change, adjusted to the extreme weight: in particular, these skills seen as business procedures that utilization assets - particularly the processes of incorporation, rebuilding, procurement and discharge assets - to adjust or make showcase changes. Dynamic capabilities are
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).
This article is a discussion about the competitive advantages Zappos has, using resource based view and dynamic capabilities analysis. Although there are SWOT framework and Porter’s five forces model etc. to understand the firm’s competitive advantage, those are environmental analysis, which is “only the half story” as Barney,(1995) suggested. So, an analysis of a firm’s internal strengths and weaknesses is required. Barney (2001) states "resource-based logic can help managers more completely understand the kind of resources that help generate sustained strategic advantages, help them use this understanding to evaluate the full range of resources their firm may possess, and then exploit those resources that
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.