Resourced-Base View of the Firm

A

TERM PAPER IN

RESOURCE-BASED

VIEW OF THE FIRM

TABLE OF CONTENTS

CHAPTER 1 - Definition

CHAPTER II - Rationale

CHAPTER III - Objective

CHAPTER IV - Functions

CHAPTER V - References

CHAPTER I

Definition of Resource-Based View

The resource-based view (RBV) is a business management tool used to determine

strategic resources available to a company. Its fundamental principle is that the basis for

a competitive advantage of a firm lies in the application of the available valuable

resources at the firm’s disposal (Wernerfelt, 1984, p172; Rumelt, 1984, p557-558) and

that these resources are heterogenous in nature (different resources across firms) and not

perfectly mobile (the inability of competing firms to obtain resources from other firms)

(Barney, 1991; [1]:p117).

It analyses and interprets internal resources of the organization and emphasized

resources and capabilities in formulating strategies to achieve sustaining competitive

advantages.[2]

CHAPTER II

RATIONALE

The salient points of the theory are:

1. Identificatioin of the firms’ potential strategic resources.

2. Analyze and evaluate whether these resources fulfil the following criteria

(referred to as VRIN)

• Valuable-the resource must enable the firm to employ value creating strategy or reduce its own weakness

• Rare-

• In-imitable-if a valuable resource is controlled/owned by only one firm, it can be a source of a competitive advantage

• Non-substitutable-if competitors are able to counter the firm’s value-creating strategy by substitute, prices are driven down resulting in zero economic benefit.

3. Care for and protect resources that possess these evaluation because by doing so it

can improve organizational performance. [3]

Chapter III

OBJECTIVE

The objective of resource-based view concept or theory is being used as a planning tool

in situation appraisal. Competitive analysis...