Companies endeavor to achieve competitive advantage. One of the techniques to achieve competitive advantage is through Resource Based View of the firm. RBV enables a company to identify the strategic resources or competencies and to determine their potential towards achieving the sustainable competitive advantage.
Process of RBV
• The first step in RBV is to identify strategically important resources and competencies. Their importance is determined in comparison with the usefulness of the same resources and competencies to the competitors.
• In the second step relative strengths of the resources are determined. The strength is determined through the assessment of value over the long run. Further it is evaluated that whether the resource or competency is unique in nature and currently how many competitors are gaining from it in either way. For a strategically sound resource or competency it is important that it must be in- imitable i.e. copying the same resource or competency must require specialized knowledge or skills or financial strength which the competitors to not possess. It is also important that strategic resources and competencies are not substitutable.
• When identified and relative strengths of the strategic resources and competencies are determined it is imperative to adopt such measures to ensure safety and security of the strategic resources and competencies. These measures help in continuity of their usefulness and to improve the performance.
Resources and Competencies
Resources and competencies are often used to express same meaning but there is important distinction between the two terms. Resources referred to as tangible and intangible assets of the firm such as buildings, machinery and equipments, financial resources, human resource, reputation, and customer loyalty etc. Competencies also called capabilities are the specialized knowledge, skills, techniques, formulae, and modus operandi.
Purpose and benefits of RBV
The discussion reveals that resource based view of the firm enables it to put a barrier on the imitation of the resources and competencies. It also enables the firm to continue the process of developing future resources and capabilities which bestows to remain a market leader for indefinite period.
Criticism on RBV
Like other theories RBV theory is also under criticism by some professionals. They are of the view that RBV unnecessarily compels the management to keep focus on internal resources and role of product markets often ignored. Such focus and ignorance can not result in sustainable competitive advantage. Critics are further of the view that RBV theory has limited and narrow implications. The practicability of the theory is also criticized that it in fact impossible to find a resource which fulfill the criteria as described in the process of Resource based view.