Competitive Analysis

Submitted to:

Submitted by: Pooja Seth (UB2784596)

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EXECUTIVE SUMMARY

In present assignment I had studied the competitive analysis of firm by the using the Resource

Based Theory. I had given theory of RBV and then scrutinized the three journals based on its

practical application. I had also given critique based on my studies and then concluded. I had

used various journals in order to gather theory and knowledge of the RBV approach.

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Introduction

In recent years, a new model of how firms compete, known as the resource-based approach

(RBA), has begun to emerge. To understand the prospective of resource based view of firm I had

studied the various definitions given by different authors. Based on the study I had drawn my

own point of view about Resource Based approach. I had tried to gain as much knowledge about

RBV theory as possible while making this assignment. I had referred to the various journals in

order to gain a good knowledge about this theory.

Definitions:

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Definition 1: Azzone et al. (1995, pg: 1) has defined RBV as a theory which is being used by

firms to explore competitive advantage and based on the results high performance objectives can

be achieved.

Definition 2: Clulow et al. (2007, pg:1) has described RBV as a connection between the

attainment of competitive advantage and the high performance with the buyers.

Definition 3:

According to Belkaoui (2003, pg: 3) resource based view theory is a study of identifying tangible

and intangible assets or resources in order have an edge in market over other firms.

Definition 4:

Wernerfelt (1984, p172) states that this theory is a tool which analyses the resources available to the firm

and out those which can be used by firm to improve its results.

Definition 5:

Runyan et al. (2007, pg: 2) had described RBV as a theory which focuses on the major resources

important for a survival of a small firm in present time of highly competitive market.

In My Opinion:

After analyzing the above given definitions and theories about RBV I find that:

RBV is a process in which an individual firm tries to explore and identify its unique resources in

order to gain a competitive edge over the other firms in the market.

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Scholarly Overview of RBV:

RBV is a theory which seems to be suitable for the needs of firm in present time of cut throat

competition. In current market scenario customer tastes, technological innovations, and social

and political discontinuities are the some of the factors which makes it really hard for a company

to decide on its market strategies. As a result decision makers should try to focus on critical

resources available to them in order to have an advantage over other firms. In a period of

unpredictable future of market long term competitive strategies should not be drawn on the basis

of current product’s performances, but on the basis of critical resources which a firm can identify

and explore to its full capacity and on the capabilities of firm to do so. Although the RBA is still

in the development stage, some authors have pointed out its implications for corporate and

business strategy. However, little attention has been paid, so far, to determining how to measure

critical resources. On the principle that you cannot manage what you cannot measure, a company

which is willing to adopt the RBA needs to have specific measures of resources, i.e. a resource

measurement system (RMS). The choice of the resource measures to be included should

explicitly consider the overall performance measures of a company (Clulow, 2007). In fact, it is

evident that a resource is worthwhile for a firm only if it contributes to the achievement of its

overall goals. Firm resources includes assets, capabilities of firm, process implemented by firm,

information available in market and it also includes the intellectual resources like knowledge

which are controlled by firm to achieve those strategies which will lead to improvement in its

efficiency and effectiveness (Jay Barney, 1991). It can be said that resources are tradable and

non-specific to the firm, while capabilities are firm-specific and used to utilize the resources

within the firm, such as implicit processes to transfer knowledge within the firm. This theory has

been widely adopted throughout the resource-based view literature (Amit & Schoemaker, 1993).

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A competitive advantage can be attained if the current strategy is value-creating, and not

currently being implemented by present or possible future competitors. Although a competitive

advantage has the ability to become sustained, this is not necessarily the case. A competing firm

can enter the market with a resource that has the ability to invalidate the prior firm's competitive

advantage. Furthermore, in this assignment I had tried to study these theories relating to

identifying of resources and capabilities of firm to use them

Three Contemporary Examples of Resource Based View

Article 1: Use of resource-based view in industrial cluster strategic analysis

In this journal article ‘Use of resource-based view in industrial cluster strategic analysis’ Oliveira

& Fensterseifer (2004) has tried to study the implication of RBV on not one single but on the

cluster of firms in order to study the dependency of cluster on resources shared by the firms in

the cluster. They had undertaken this research in order to find and indentify the strategic

resources and capabilities of the cluster and to understand their interactions and the conditioning

factors that will lead to competitive advantage in the market. They had used the methodology

structure to gather information. They had chosen Brazil’s Wine cluster for their study. An

important result from the analysis is that the strategic resources and capabilities of the southern

Brazil wine cluster have their own exclusive. After analyzing the journal article I found that how

resource based view theory is not only limited to one single firm. It can be used for the analysis

of whole industry in order to find that what potential that industry had to generate profits. By

analyzing the resources available to the one specific industry an individual firm can tap those

resources in order to increase its own returns. For example: like some time a special rebate is

given to some industry and without exploring that resource firm keeps on operating on its own,

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then this lead to less successful results. However, if firm recognizes that resource then it will be

of great advantage for the business.

Article 2: Organizational changes in Chinese companies: a resource-based view

In this journal article Alas & Sun (Organizational changes in Chinese companies: a resource-

based view, 2007) aim to explore the application of a resource-based view when implementing

organizational change in Chinese organizations. The problems associated with change are

explored from the perspective of human resources. For this they had conducted interviews with

top or middle managers in 160 companies in several large cities in the northern part of China:

Beijing, Tianjin, Jinan and Zibo. Randomly selected companies represented various industries

and sectors, ranging from manufacturing and technology, and banking and insurance, to those in

energy and education industries. In this article they tried to explain the reactions of Chinese

organisation to the change in the market. How they deal with their operation strategies in order to

sustain in the market with ever changing market environment. They had tried to study whether

companies change their organizational culture in these situations or they retain them in order to

achieve their goals. They found that majority of companies do not leave their organisational

culture. In this article authors had to explain that while trying to adapt to the new environment

they neglect there major resource i.e. manpower. When they neglect their emotions and needs

they face the higher resistance from them in future and companies start to loose there hold in the

market.

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Article 3: A review of outsourcing from the resource-based view of the

firm

In this journal Espino-Rodríguez1 and Padrón-Robaina (2006) has applied the resource based

theory in order to have a clear understanding of outsourcing concepts. Then they had proposed a

concept that is more in line with the theoretical framework used. Then they had reviewed the

most significant theoretical and empirical works on outsourcing that address outsourcing from

the RBV and compared it with Traditional Costs economics theory (TCE). They had studied

outsourcing decision of a firm from the perspective of both theories. They found that outsourcing

can have negative effect over the firm. In this article I found that RBV tries to focus on assets of

firm and its capabilities to use them. Based on these two things a firm should make a decision of

outsourcing. Whereas, TCE theory explains that firm losses its performance advantage due to

outsourcing. After analysing the results they believe that the empirical application of the RBV to

outsourcing is still in its early days, especially due to the complexity of considering aspects that

are difficult to measure, such as invisibles assets, organizational learning and dynamic

capabilities. The RBV helps to distinguish the core competences and provides knowledge about

which activities must be performed in-house and which must be outsourced, determining that the

possession of some resources and capabilities is what defines what the firm itself will do and

what it will obtain from third parties. However, still it is in a position to efficiently identify the

valuable resources and capabilities of firm which will help firm in taking major decision than

TCE.

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Critiques:

After analyzing the above theory and article I found that RBV is a systematic approach which

can lead a company towards achievement of Competitive edge in the market. I found this

approach very helpful tool for the business managers and owners. After studying the journals I

find that it gives clear relation of firm and its very important resources and how resources can

help a firm to out shine others. However, there is also some criticism of this theory. However

various authors had criticized this theory. They believe that RBV is not in full capacity to be

applied by a firm and on which business can rely for competitive strategies. Various changes

have to make in this theory. They believe that RBV overlooks various areas like product market,

implementation and changes in the final market. After analyzing the positive and negative points

of the RBV approach I find that RBV is in early stage of development and it is going to take

some time to be developed in to a full fledge framework theory to be perfectly applicable for

achieving the competitive advantage.

CONCLUSION

The resource-based view of the firm is an important, emerging theory of firm

heterogeneity. It is still a developing theory which focuses basically on the resources

available to the firm. However it lacks in various areas, but it is still helpful for a firm. It

simplifies the basis on which the firm can construct its future strategies taking various

external factors in to consideration. This theory can produce high value results if

successfully implemented by firm in coordination with some other competitive analysis

theories like SWOT analysis. This will give the firm a clear view of its internal as well as

external strengths. I will conclude by saying that it will develop as a Full fledge theory in

near future.

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REFERENCES

1. Measuring resources for supporting resource-based competition by Giovanni Azzone,

Umberto Bertelè and Andrea Rangone, Management Decision Journal, 1995

2. Amit, R. and Schoemaker, P.J.H., ‘Strategic assets and organizational rent’, Strategic

Management Journal, Vol. 14, 1993, pp. 33-46.

3. Wernerfelt, B., ‘From critical resources to corporate strategy’, Journal of General

Management, Vol. 14 No. 3, 1989.

4. Giovanni Azzone, Umberto Bertelè and Andrea Rangone, ‘Measuring resources for

supporting resource-based competition’,

5. A review of outsourcing from the resource-based view of the firm. By Espino-Rodríguez,

Tomás F.; Padrón-Robaina, Víctor. International Journal of Management Reviews, Mar2006, Vol.

8 Issue 1, p49-70, 22p, 4 charts, 2 diagrams; DOI: 10.1111/j.1468-2370.2006.00120.x; (AN

20387010)

6. Ruth Alas and Wei Sun, ‘Organizational changes in Chinese companies: a resource-

based view’

7. Eduardo de Oliveira Wilk and Jaime Evaldo Fensterseifer , ‘Use of Resource Based

View in Industrial Cluster strategic analysis’, International Journal of Operations

and Production Management, 2003, volume23

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8. Barney, J.B. (1986). Strategic factor markets: expectations, luck and

business strategy. Management Science, 32, 1231–1241.

9. Val Clulow, Carol Barry and Julie Gerstman, ‘The resource-based view and value: the

customer-based view of the firm’ Journal of European Industrial Training, Vol. 31 No.

1, 2007, pp. 19-35, Emerald Group Publishing Limited 0309-0590DOI

10.1108/03090590710721718

10. Rodney C. Runyan, Patricia Huddleston, Jane L. Swinney, ‘A resource-based view of the

small firm’, Qualitative Market Research: An International Journal, Volume: 10, 2007,

ISSN: 1352-2752

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