The resource-based view and sustainable competitive advantage: the case of a financial services firm Val Clulow School of Business, Swinburne University of Technology, Hawthorn, Australia Julie Gerstman School of Business, Swinburne University of Technology, Hawthorn, Australia Carol Barry School of Business, Swinburne University of Technology, Hawthorn, Australia Keywords Resources, Competitive advantage, Financial services, Intangible assets Introduction The study of sustainable competitive advantage (SCA) within particular service industries was encouraged as far back as 1993. Bharadwaj et al. (1993, p. 83) proposed a conceptual model which attempted to integrate SCA issues from the fields of marketing, strategic management …show more content…
The paper concludes with a discussion of the implications of the results for Fahy's (2000) model. Resource-based view of the firm The RBV of the firm is a theory that has been explored in the academic literature as a means of explaining competitive advantage and, in turn, superior performance amongst firms. According to Barney (1991, p. 102), ``a firm is said to have a competitive advantage when it is implementing a value-creating strategy not simultaneously being implemented by any current or potential competitors''. This competitive advantage is sustainable if ``the advantage resists erosion by competitor behaviour'' (Bharadwaj et al., 1993, p. 84). The RBV was originally developed by Wernerfelt (1984) as an attempt to build a consistent foundation for the theory of business policy. Over the ensuing decade a number of academics developed this foundation further and a substantial body of literature now exists in which ``. . . many central aspects of strategic reasoning have been reinterpreted in light of a resourcebased perspective'' (Wernerfelt, 1995, p. 172). The development is far from complete, however, and there is a need ``. . . to map the space of resources in more detail'' since ``. . . `resources' remain an amorphous heap'' (Wernerfelt, 1995, p. 172). Fahy's (2000, p. 99) model (Figure 1) demonstrates the relationship between ``. . . the firm's key
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
More so than ever in an age of rapidly evolving technologies and global expansion, sustainable competitive advantage depends foremost on a clear sense of organizational purpose (mission) and a compelling vision for success (Campbell & Alexander, 1997). Together, these two key elements define the guiding framework for the insightful creation of value (Campbell & Alexander, 1997) that differentiates an organization from its competitors (Porter, 1996). Thus, knowledge of the critical elements that comprise meaningful mission and vision statements (Aguinis, 2009) becomes essential for achieving sustainable competitive advantage. As testimony, this paper assesses the strategic guidance provided by the mission and vision statements of the
2. The resource-based model assumes that each organization is a collection of resources and capabilities, which provide the basis for a firm‘s strategy and its primary source of above-average returns. Use this this model to outline Lululemon‘s core competencies and how their capabilities will need to evolve to sustain above-average returns. Compare the resource-based model to the Industry/Organization model with respect to their ability to explain and clarify how Lululemon succeeds.
Barney, J. (2004). Firm resources and Sustained Competitive Advantage. Strategy: Process Content Context: an international perspective, de Wit & Meyer , 285-292.
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?
1. What is competitive advantage, and how does it relate to a company’s business model?
The article “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility” by Michael E. Porter and Mark E. Kramer advocates that there is a link between corporate social responsibility (CSR) and competitive advantage, and there is an opportunity for innovation that benefits both the company and society that can result in a win-win positive sum game. Ultimately if your firm does not integrate a CSR program into your business core your competitors will.
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,
The second theme of recent years is the RBV of the firm, which posits that strategy (and
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.
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).
A company achieves sustainable competitive advantage when an attractive number of buyers prefer its products or services over the offerings of competitors and when the basis for this preference is durable.
1) Barney, J., (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, vol. 17 (1991), no. 1, pp. 99–120.
convenience of location’ (Queensland government, 2016). As Resource-based view (RBV) theory holds that the competitive advantage and superior performance
exists when the firm is able to deliver the same benefits as competitors but at a