The Resource-Based School of Strategy, often referred to as the Resource-Based View (RBV), is a strategic framework that posits a firm's internal resources and capabilities are the primary drivers of competitive advantage and strategic success.
Core Idea of the Resource-Based View (RBV)
At its heart, the Resource-Based View of strategy emphasizes the importance of an organization's individual resources and capabilities in delivering competitive advantage. This perspective shifts the focus inward, arguing that what a company owns and can do internally is more crucial for long-term success than the external market structure or positioning.
Instead of primarily analyzing industry forces or market segments, RBV suggests that competitive advantage is derived from resources and capabilities that are:
- Valuable: They must enable the firm to implement strategies that improve efficiency or effectiveness.
- Rare: They must not be widely possessed by current and potential competitors.
- Inimitable: They must be difficult or costly for competitors to imitate or replicate.
- Non-substitutable: There should be no strategically equivalent substitutes for these resources and capabilities.
When resources and capabilities possess these qualities, they can form the basis of a sustainable competitive advantage, making the firm more resilient and successful than its rivals.
RBV vs. Market-Based Views
The Resource-Based View represents a significant shift in emphasis away from the market-based positioning view espoused by strategy thinkers like Michael Porter in the 1980s and early 1990s.
Market-based views (like Porter's Five Forces) tend to focus on analyzing the external environment – the industry structure, competitive rivalry, and market position – to determine strategic options. In contrast, RBV looks inside the company first, believing that unique internal strengths are the ultimate source of differentiated performance, regardless of the external conditions.
How Resources and Capabilities Create Advantage
Under the RBV, strategy formulation involves identifying, developing, and leveraging a firm's distinctive internal resources and capabilities. These can include a wide range of tangible and intangible assets:
- Tangible Resources:
- Physical assets (e.g., state-of-the-art manufacturing facilities)
- Financial resources (e.g., access to capital)
- Technological resources (e.g., proprietary patents)
- Intangible Resources:
- Brand reputation and image
- Organizational culture
- Knowledge, expertise, and skills of employees
- Relationships with customers and suppliers
- Capabilities:
- Ability to innovate effectively
- Efficient operational processes
- Strong marketing and sales expertise
- Exceptional customer service systems
Competitive advantage emerges when a firm effectively bundles and deploys these unique resources and capabilities in ways that competitors cannot easily match.
Practical Application
Companies applying the RBV approach often:
- Conduct internal audits to identify core competencies and unique resources.
- Invest in developing and nurturing valuable, rare, inimitable, and non-substitutable assets.
- Build strategies around leveraging these distinctive strengths.
- Focus on continuous learning and capability building.
In essence, the RBV guides companies to build their strategy on what they are good at and what they possess that is difficult for others to copy, ensuring a durable foundation for competing in the marketplace.
