Essay on Rbv.

Concept/Theory

Main ideas of the theory/concept

Why this theory/concept is hard to understand

Resource-based view

• RBV is a theoretical framework which is an approach to achieve competitive advantage for a firm. Model assumes that resources are key to superior firm performance.
• According to this model, organizations should seek these resources inside their organization to find the sources of competitive advantage instead of looking at competitive environment for it.
• Competitive advantage means superior position of a firm in creating and implementing strategy which is not simultaneously being implemented by other competitors.
• RBV relies on resources which can be divided into tangible assets and intangible assets. These resources must be heterogeneous and immobile.

• Tangible assets mean physical things e.g. machinery, buildings, capital and equipment etc. These tangible assets offer a little competitive advantage for the firm in the long run since these can be easily acquired from the market by competitors.
• Intangible assets are everything else non-physical things which can be owned by the firm, e.g. brand reputation, intellectual property rights, trademarks, knowledge and customer satisfaction.

• Resources must fulfill the VRIN framework criteria in order to bring competitive advantage for the firm and achieve sustained competitive advantage. Resources are seen valuable if they increase the offered value to the customers. Rare resources are resources which can be acquired only by one or few firms. Imperfectly imitable and non-substitutable resources are resources that are expensive for the competitors to imitate or substitute.

• What resources in modern environment are seen rare? Most of the tangible assets can be also acquired by competitors, but could there be tangible assets which could be seen rare?
• If intangible assets are non-physical things e.g. brand reputation, then changes in reputation (scandals etc.) could affect the sustained competitive advantage and the framework doesn’t state anything about the fact that company can be affected by these factors.
• Who determines the limit for the criteria in VRIN framework? There is clearly a lack of universal measurement system in framework, so it is very hard to implement.
•  There are no guidelines in overall implementing this framework in real-life business models, and this makes it hard to understand how this model can be applied in general for different companies and that is why I think it only offers a theoretical point of view.
• There is no empirical evidence of this framework.

Dynamic capabilities

• Dynamic capabilities extend resource-based view.
• It tries to explain how valuable, rare, non-imitable resources can be created.
• Dynamic capability theory tries to explain how company can renew and reconfigure its resources and competencies in a way that they can better respond to the changes in the field they operate in
• The definition of having a dynamic capability is the possibility for a company to consciously create, extend, or modify its resource base.
• Theory of dynamic capabilities is related to RBV framework and can be seen as a sister theory in explaining how VRIN framework in RBV works in achieving or sustaining competitive advantage

• The theory seems too broad in way that by following it company’s every resource and all of its competencies can be seen as dynamic capabilities.
• The theory doesn’t describe precisely what kind of resources can be seen as dynamic capabilities.
• In the modern world companies need to adapt their resources and operations continuously and in light of that fact the theory seems too dated.
• The theory doesn’t offer implementation of the framework in business nor the tools to evaluate which resources need to be extended or regonfigured.

Resource dependency theory

• The theory is about how organizational behavior is affected by the external resources which company uses.
• The main idea is that the competence and speed in harvesting raw materials may be the key factor for a company to succeed in its field compared to its rivals.
• Having a key position in harvesting and utilizing resources such as raw materials is the basis of power and dominance over company’s rivals
• Theory assumes that companies need to utilize rare resources and they want to have control over these resources

• Not all the companies need to have a control over resources to have control in the market
• What are rare resources that can’t be imitated and subsitued?
• Having a control of certain resource can bring up synergy advantages in cooperation.
• Having the control over scarce resources doesn’t give explicitly competitive advantage in the market by itself.

Resource diversity/Resource heterogeneity

• Many theories in competitive advantage relies on the fact that heterogenous resources cannot create competitive advantage.
• If a company owns a resource that is owned by multiple other companies then it doesn’t offer any advantage over competitors.
• So in order to resource to be rare it should be homogenous and non imitable.

• Many companies own heterogenous resources but they still have sustained their competitive advantage.
• There are no homogenous resources when almost every resource can be substituted
• The concept of heterogenous resource doesn’t take in to account that some resources can be extended or developed into new resources which brings strategic advantage to the company.
• Having a homogenous resource itself doesn’t bring automatically superior position for a company in the market if the company doesn’t have the knowledge to utilize the resource.