Summary
The resource-based view (RBV) is a beneficial organizational management tool that heightens the attention of a rising figure of researchers. The popularity of this significant modern theory originates from the fact that it links strategic and organizational insights (Chahal et al., 2020). It analyses and defines business resources to comprehend the process of a company towards achieving sustainable competitive advantage. RBV prescribes that businesses should be strategically located, built on their resources and aptitude instead of products and services. The RBV encourages a deep understanding of a company’s resources to select an appropriate mix of resources over the existing ones during strategic plans (Ginter et al., 2018). The study focuses on a discussion of RBV as a tool that aids in identifying the resource bundle that will align with the market for a positioned strategy and recognizes the resource gap which needs bridging. Given the complexity of RBV in business operations, understanding organizational differences and establishing practical and sustainable competitive advantage play an integral role in streamlining business operations.
Resource-Based View of Competitive Advantage
The resource-based view aids corporations in understanding the business’s aspects for lasting competitive advantage. Organizations’ resources are tangible or intangible and should be heterogeneous and immobile when aiming for a competitive advantage (Chahal et al., 2020). Intangible resources are assets competitors find difficult to recreate, such as a unique and irreplaceable company process. Tangible assets comprise physical items such as an appliance achievable by any competitor. Organizations should be heterogeneous because if businesses possess a similar mix of the resource pool, they will be incompetent to employ varied business methods to surpass one another.
Moreover, organizations must also be immobile to prevent competing companies from replicating expert resources. A company’s resources must meet VRIO (valuable, rare, imitable, and organized) attributes to fuel an influential source of competitive advantage (Chahal et al., 2020). Resources are helpful if they can yield good value to a business by aiding in exploiting market opportunities and minimizing market threats. Therefore, there is no advantage to owning a resource that does not improve a company’s value. A resource must be challenging to locate between the present and potential competitors of the company. Unlike competitors, resources capable of executing unique business techniques contribute to a healthy competitive advantage: efficient competitive advantage necessitates imperfect imitability. Bottlenecks for imperfect imitability include challenges in obtaining resources and vague relationships. Resources are the foundation of a competitive edge when companies which do not contain the resources are incapable of accessing them (Ginter et al., 2018).. Organization processes and its system require a design that enhances a resource for increased productivity. Such strategies include possessing the appropriate resource management system to guarantee the streamlined operation of the business.
Importance of Understanding Organizational Differences
Improving and leveraging competitive advantage serves as central to strategy. Businesses are persistently attempting to outperform their competitors. Responding to the demands of their conditions through a unique approach paves the way for separation from their competitors (Ginter et al., 2018). Understanding a business’s external factors is critical but offers platforms for strategic planning. Organizations’ strengths are responsible for the foundation of developing competitive advantage. Typically, threats aim at attaining a cost advantage, meaning that a detailed understanding of a business’s inner strengths and weaknesses relative to the fluctuations functioning outwardly is vital for creating a suitable strategic plan. Therefore, understanding organizational differences helps in building relationships with a business’s clients on a deeper level. Knowing what inspires a company’s target market sets the firm apart from its competitors, and business decision-making needs cultural comprehension. Making firm-wide decisions considering cultural difficulties plays an essential role in the company’s operation. Effective decision-making hinders schism in the organization, thus reinforcing a positive workplace culture that multiplies productivity.
Competitive Advantage
This attribute fuels a firm to surpass competitors by separating a surviving business from a flourishing one. As a result, a company attains higher margins, unlike its competitors, generating value for the firm and its investors. Competitive advantage can be multiple such as suitable resources inaccessible by competitors (Baah & Jin, 2019). Before initiating a competitive advantage, a company should be clear concerning the benefits its service and products produce. Additionally, the firm identifies and defines the target market by establishing who will buy from it and ways of catering to the customers. Therefore, to construct a competitive advantage, a firm should be able to detail the benefit it offers its target market by implementing infeasible strategies for its competitors. Strategies for competitive advantage include cost leadership, differentiation, and focus. The cost leadership approach aims to become the cheapest cost product.
Consequently, firms are capable of developing a selling price that is replicable to their competitors. In differentiation strategy, a firm’s operations are varied from those of its competitors (Ginter et al., 2018).. By producing high-quality services, a company successfully differentiates itself from the others. Concentrating on a slender target market segment is attainable if a firm can successfully make products that cater to these customers.
Comparison of Competitive and Sustained Competitive Advantage
Competitive advantage is a company’s better performance than its competitors, while sustained competitive advantage is a firm’s continuous benefit for decades. Explicit knowledge attracts competitive advantage, while tactic knowledge drives sustainable competitive advantage (Lee & Yoo 2019). Detailed knowledge is distributed verbally, and through visual communication methods, quality concepts spread dramatically, challenging the maintenance of a secret. Therefore, they automatically demonstrate sustained competitive advantage. Tactic knowledge is exceptionally problematic to transfer from company to company; for example, aptitudes comprising design sense, business decision-making skills, and management capabilities. When organizations possess superior tacit knowledge, competitors find it challenging to match that pace. Sustainable competitive advantage is usually founded on a business’s habits and backs up inventiveness that successfully maintains a sustained competitive advantage (de Guimarães et al., 2018). Dissimilarly, a culture that overlooks politically focused change cannot embrace competitive advantage. Superior capital symbolizes a balanced and sustained competitive advantage; for instance, if a company possesses all railways in a state, it becomes difficult to compete with such a firm.
Overall, the resource-based view is a managerial tool that influences the operation and performance of organizations. Organizations that possess strategic resources achieve an essential competitive advantage over their competitors. Resources are helpful if they contain valuable, rare, imperfect imitations and organized elements. Understanding organizational differences help in streamlining business activities that contribute to better performances, thus yielding profits. Competitive advantage promotes companies to operate more effectively than their competitors. Competitive advantage is prevalent in the existence of heterogeneity and resource immobility. Sustainable competitive advantage enables businesses and sustains them for multiple decades. Performance differences among companies rely on their possession of quality inputs and abilities.
References
Baah, C., & Jin, Z. (2019). Sustainable supply chain management and organizational performance: The intermediary role of competitive advantage. Journal of Management and Sustainability, 9(1), 119.
Chahal, H., Gupta, M., Bhan, N., & Cheng, T. (2020). Operations management research grounded in the resource-based view: A meta-analysis. International Journal of Production Economics, 230, 107805.
De Guimarães, J., Severo, E., & de Vasconcelos, C. (2018). The influence of entrepreneurial, market, knowledge management orientations on cleaner production and the sustainable competitive advantage. Journal of Cleaner Production, 174, 1653-1663.
Ginter, P. M., Duncan, J., & Swayne, L. E. (2018). The strategic management of healthcare organizations. John Wiley & Sons.
Lee, K., & Yoo, J. (2019). How does open innovation lead competitive advantage? A dynamic capability view perspective. PLOS ONE, 14(11), e0223405.