Sustainable Growth:

Strategic Management

Resource-Based View (RBV) of Firms

Resource-based Model: Achieving Superior Returns by Best Exploiting Internal Resources and Capabilities

By: Vadim Kotelnikov, Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited, 1000ventures.com, 1000advices.com

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10 Rules for Building a Great Business

Competitive Strategies

Survival Strategies

Market Leadership Strategies

Building resources

Building distinctive capabilities

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Strategic Management: RESOURCE-BASED MODEL

Resources and Capabilities Defined

  • Resources are inputs into a firm's production process; can be classified into three categories:

    1. Physical capital

    2. Human capital

    3. Organizational capital

  • A capability is a capacity for a set of resources to integratively perform a stretch task of an activity

 

Strategic Innovation

7 Dimensions

  • Core Technologies and Competencies is the set of internal capabilities, organizational competencies and assets that could potentially be leveraged to deliver value to customers, including technologies, intellectual property, brand equity and strategic relationships... More

Smart Executive

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Creating Competitive Disruption: 7 Strategies

7-Part Competitive Strategy of Microsoft

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Strategic Management  (65 slides)

Sustainable Competitive Advantage  (40 slides)

Look At Your Company From Outside-In As Well As Inside-Out

 

By: Masaaki Imai

  • What advantages and internal capabilities do you have? What advantages and capabilities do you need to create?

  • What old competencies do you need to deemphasize?... More

New Paradigm: Resource-Based Theory

The currently dominant view of corporate strategy  resource-based theory or resource-based view (RBV) of firms is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making.2

Traditional strategy models such as Michael Porter\'s five forces model focus on the company's external competitive environment. Most of them do not attempt to look inside the company. In contrast, the resource-based perspective highlights the need for a fit between the external market context in which a company operates and its internal capabilities.

In contrast to the Input / Output Model (I/O model), the resource-based view is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic action than is the external environment. "Instead of focusing on the accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external environment (I/O model), the resource-based view suggests that a firm's unique resources and capabilities provide the basis for a strategy. The business strategy chosen should allow the firm to best exploit its core competencies relative to opportunities in the external environment."1

SWOT Analysis: Questions To Answer

  • What is your strongest business asset?

  • What unique resources do you have?... More

Building Your Sustainable Competitive Advantage

Sustainable competitive advantage is the prolonged benefit of implementing some unique value-creating strategy based on unique combination of internal organizational resources and capabilities that cannot be replicated by competitors... More

Creating Economic Rent

The resource based view of strategy emphasizes economic rent creation through distinctive capabilities. Economic rent, or Economic Value Added (EVA), is what companies earn over and above the cost  of the capital employed in their business. It is the measure of the competitive advantage, and competitive advantage is the only means by which companies in competitive markets can earn economic rent.

 

The objective of a company is to increase its economic rent, rather than its profit as such. "A company which increases its profits but not its economic rent - as through investments or acquisitions which yield less than the cost of capital - destroys value."4 The perspective of economic rent forces the question 'why can't competitors do that?' into discussion...More

Resources and Capabilities

Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and the primary source of its returns. In the 21st-century hyper-competitive landscape, a firm is a collection of evolving capabilities that is managed dynamically in pursuit of above-average returns4. Thus, differences in firm's performances across time are driven primarily by their unique resources and capabilities rather than by an industry's structural characteristics.

Resources are inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finance, and talented managers. Resources are either tangible or intangible in nature. With increasing effectiveness, the set of resources available to the firm tends to become larger.5 Individual resources may not yield to a competitive advantage. It is through the synergistic combination and integration of sets of resources that competitive advantages are formed.

A capability is the capacity for a set of resources to integratively perform a stretch task or an activity. Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. As a source of competitive advantage, a capability "should be neither so simple that it is highly imitable, nor so complex that it defies internal steering and control."6

The Growing Role of the Business Architect

Today's companies need business architects who can take a systems view of a business and build synergies.

Business architect is a person who initiates new business ventures or leads business innovation, designs a winning business model, and builds a sustainable balanced business system for a lasting success... More

 

 

Bibliography:

  1. "Strategic Management - Competitiveness and Globalization", M.A. Hint, R.D. Ireland, R.E. Hoskisson

  2. "Strategy and the Delusion of Grand Designs", John Kay

  3. "The Challenge of Managing Knowledge", Laura Empson

  4. "A Dynamic View of Strategy", C.C.Markides

  5. "Total War and Managers from Mars"

  6. "Investment in Strategic Assets: Industry and Firm-Level Perspectives", P.J.H.Schoemaker and R. Amit

 

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