Achieving superior returns
by best exploiting internal resources and capabilities

 

 

 

Resource-based Model

The resource-based theory and resource-based view (RVB) of firms and corporate strategy is based on the concept of economic rent and the view of the company as a collection of both distinctive and reproducible capabilities. This systemic view of corporate strategy has a coherence and integrative role that places it well ahead of many other mechanisms of strategic decision making.

  Capability Approach to Strategic Management

 

 

 

 

Resource-based Model of Above-average Returns

 

Identify and Study

Resources

Inputs into a firm's production process

 

 

Determine

Capability

Capacity of an set of resources to integratively perform a task or an activity

 

 

Determine

Competitive Advantage

Ability of a firm to outperform its rivals

 

 

Locate

An Attractive Industry

An industry with opportunities that can be exploited by the firm's resources and capabilities

 

 

Select and Act

Strategy Formulation and Implementation

Strategic actions taken to earn above-average returns

 

 

Enjoy

 

Superior Returns

 

 

 

 

 

 

 

 

 

 

 

 

 "Effective managers live in the present ‒ but concentrate on the future."

~ James L. Hayes

 

 

 

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 stretch task or an activity.

10 Rules for Building a Great Business

❸ Build and synergize corporate capabilities that will help your business achieve its vision... More

Build Your Sustainable Competitive Advantage

Sustainable Competitive Advantage Download PowerPoint presentation, pdf e-book is the prolonged benefit of implementing some unique value-creating strategy based on unique combination of organizational resources, core competencies and capabilities that cannot be replicated by competitors... More

SWOT Analysis: Questions To Answer

What is your strongest business asset?

What unique resources do you have?... More

New Paradigm: Resource-based View of Firms

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.

10 Rules for Building a High-growth Business

"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," write M.A. Hint, R.D. Ireland, and R.E. Hoskisson in Strategic Management ‒ Competitiveness and Globalization >>>

Smart Business Architect Download PowerPoint presentation, pdf e-book

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," says C. C. Markides, the author of A Dynamic View of Strategy.

The perspective of economic rent forces the question 'why can't competitors do that?' into discussion.  >>>