Resource-Based View of Strategy in Business
Category: False, Posted on: 5/13/2016 7:43:28 AM


The Resource Based View is a business management tool which lays emphasis on the resources in the company. According to the theory, there are some rare, inimitable and valuable resources in the company which should be preserved and protected to be applied in suitable conditions for sustaining the competitive advantage of the company.

The important points of this theme are.

1. The company's /firm's potential resources are to be identified.

2. It should be then evaluated whether they meet the VRIN criteria .The VRIN (Valuable, Rare, Inimitable and Non-sustainable) criteria can be understood as mentioned below.

i.)    Valuable: The resource must enable a firm to employ a value creating strategy by either outperforming its competitors or reducing its own weakness (Barney 1991 p.99).It should however be ensured that the transaction cost associated with the investment in the resource cannot be higher than the discounted future rents that flow out of value creating strategy.

ii.)    Rare: To be of value, a resource must be by definition rare. In a perfectly competitive strategic factor market for a resource, the price of the resource will be a reflection of the expected discounted future above-average returns (Barney 1986a, p.1232-1233, Dearick and Cool 1989,p.1504).

iii.)    Inimitable : A resource which cannot be imitated. when a valuable resource is controlled by only one firm, it would be a source of competitive advantage.

iv.)   Non-sustainable: Even if a resource is rare, potentially value creating and imperfectly inimitable, it should be insubstitutable. If the competitors are able to counter the firm's value creating strategy with a substitute, prices are driven down to the point where the price is equal to the discounted future rents. (Barney 1996a ,p1233)

3. Protecting and Caring for the Resources with these evaluations so that they can contribute to the firm's competitive advantage.

Resource-based view of management is the centre of study for several management experts and journals. All of them are of the view that mere possession of these resources is not of much use unless they are coordinated in a way that they contribute to the firm's competitive advantage. They also state that the firm possessing these resources can reap competitive edge only if they can create a barrier to imitation of the same by competitors. This can be achieved by formulating isolating mechanisms, which are reflected in corporate culture, managerial capabilities, information asymmetries and property rights. It may be noted that only property rights among these enjoy support by legislative restrictions while others are achieved through managerial practices.

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Posted by: test on 6/12/2016 4:41:54 AM