Thursday, March 29, 2007

Strategy: Resource Based View

Don't know if I managed to ever understand this correctly or not, but this was my favorite strategy concept through b-school. It is very simple and powerful tool to understand if the firm has a competitive advantage because of the resources it commands. Simply put (de-jargonised) , there is competitive advantage based on the resources you command, when
1) Different levels of capability among firms lead to different returns
2) The resource has not been over utilized
3) There is a chance to earn returns before other guys get in
4) The resource should not be substituted easily ( IP etc help isolate the resource)

The resource based view (see wiki reference), is quite powerful in that it tells you how to look at what is present inside the firm. With the general focus on being macro-external (5 forces type), the resource approach helps in driving the famous competitive advantage theory of Prahlad and Hamel.

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