A Resource-Based View (RBV) is an approach to thinking about sustained competitive advantage that takes into consideration the internal resources of an organisation rather than the external characteristics of the competitive market or other external forces. Knowing more about what makes your organisation strong internally, can then also give you an edge when decision-making and attempting to exploit external opportunities for further competitive advantage. Resource analysis through the RBV model emerged in the 1980s and 1990s though the work of various theorists, including B. Wernerfelt, C.K. Prahalad, G. Hamel and J.B. Barney.
Evaluating the resources of an organisation goes beyond assessing financial or technological resources. Analysing physical resources can provide a first idea, but stopping at that superficial level would be too limited, missing out on other resources that are not visible in an organisation’s financial statements. The RBV model explains that resources are either tangible or intangible and that these two types of resources must be both heterogeneous, immobile and have VRIO properties (refer to Edition 14 of Empowerment Through Knowledge) to result in the competitive advantage offered by VRIO resources.
Tangible resources must exist physically. These include assets such as, land, premises, tools and equipment. Tangible resources can offer a temporary competitive advantage but rarely lead to sustained competitive advantage due to their ability to be purchased by other organisations which would then result in competitive parity.
These resources are more abstract and more difficult to identify, measure and analyse. Although they are not physical, these assets can be owned and could include trademarks, brand image, reputation and intellectual property, such as methodologies and techniques. Intangible resources take much longer to form than the acquisition of tangible resources, however, they cannot be bought or easily replicated by competitors, many times offering the greatest contribution of sustained competitive advantage.
Heterogeneous means different. It is assumed that the mix of resources, skills and capabilities are different from one organisation to another. This is also true in organisations that operate within the same industry, and who have the same external challenges and competitive environment, meaning that a strategy tends to work well in one organisation but not in another. It is the variation in strategy between different organisations that often creates the competiveness in the market and allows one organization to outcompete another.
Immobile means fixed or stationary. This assumption explains that resources cannot (easily) move from one organisation to another. Such resources cannot be copied immediately or in a short time frame. Intangible resources, such as the reputation, brand, and image of the organisation, the processes, culture, IP, decision-making and reasoning abilities of the organisation are usually immobile. In some cases, they can be moved if an individual takes knowledge with them to a competitor. However, reproducing and executing the same strategies will not give the same results from one organisation to another.
After implementing anaylsis based on the above elements of the RBV model, you can further analyse your organisation’s internal resources through the VRIO framework. To refresh your memory, head back to Edition 14 of Empowerment Through Knowledge. This way, you can verify whether the resources in question are a source of sustained competitive advantage if they possess the four VRIO characteristics.