Two Sides Of The Same Coin Commerce Essay

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For the firm, resources and products are two sides of the same coin. Most products require the services of several resources and most resources can be used in several products. By specifying the size of the firm's activity in different product markets, it is possible to infer the minimum necessary resource commitments. Conversely, by specifying a resource profile for a firm, it is possible to find the optimal product-market activities.

The resource based view of the firm (RBV) deals with the concept that by understanding the internal resource base and core competences, the management of a business will be able to employ this specific knowledge to create and sustain a competitive advantage. The RBV promotes the idea of firm heterogeneity and the notion that the conscious and tacit development of idiosyncratic bundles of resources and competences will provide competitive advantage. This is in contrast to the traditional analysis and strategy formulation that considered, in a neo-classical light, each firm to be a representative entity whose strategy was guided by the selection of a profitable industry followed by the pursuit of a generic strategy.

The RBV is essentially an 'inside-out' approach to developing successful strategy. The firm is not the reactor of the positioning school but can find strategic success through the acquisition, development and deployment over time of scarce resources and skills which are either unique in themselves or in the way they are combined with other assets.

The RBV claims its inspiration from classical microeconomics. It is the acumen and experience of managers and their ability to create unique advantages in the marketplace which are difficult, if not impossible, for other firms to emulate or compete away, which lay the foundations for value creation and sustained competitive advantage.

The Resource-based View

Although, a resource-based perspective has long been central to strategy researchers (Conner, 1991), the resource-based view (RBV) received a fresh impetus only during the 1980s. It emerged as opponent to the until then prevalent environmental model, or positioning-based view (PBV). Strategists with this classical view regard the external environment as the primary determinant of strategy. That is, strategy is formulated with a view to a as advantageous perceived position in the market. Grant (1991) argues that firms start the formulation of their strategy generally with a mission statement which is usually related to the market or the customers a firm wants to serve. "But in a world where customer preferences are volatile, the 1 Except charity or most governmental organisations. identity of customers is changing, and the technologies for serving customer requirements are continually evolving, an externally focused orientation does not provide a secure foundation for formulating long-term strategy. " (Grant, 1991: 116)

Whereas in positioning models firms are seen as systems "of discrete but interrelated socio-economic activities" (Oosthuizen, 2003: 3) and a strategy should create a fit between a firm's activities and its environment within an industry, the RBV thinks of the firm as a unique bundle of resources. Firm resources are defined as "all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness" (Barney, 1991: 101). The RBV makes two assumptions: That means, firms in different industries as well as within one industry differ in their supply with resources and should, to achieve a competitive advantage, exploit those differences. A competitive advantage can be sustained if those resources are valuable, rare, imperfectly imitable, and not substitutable. (Barney 1991) Because strategic resources as reputation, organisational knowledge, and staff motivation for example are not mobile, they can not be bought in factor markets, they can be valuable and hard to imitate. In general the resource-based theory of competitive advantage is about exploiting differences in the resource base of the firms.

The Resource based view of Strategy

The resource based view emphasizes the internal capabilities of the organization in formulating strategy to achieve a sustainable competitive advantage in its markets and industries. If we see the organization as made of resources and capabilities which can be configured (and reconfigured) to provide it with competitive advantage, then its perspective does indeed become inside-out. In other words, its internal capabilities determine the strategic choices it makes in competing in its external environment. In some cases an organization's capabilities may actually allow it to create new markets and add value for the consumer, such as Apple's i-pod and Toyota's hybrid cars. Clearly, where an organization's capabilities are seen to be paramount in the creation of competitive advantage it will pay attention to the configuration of its value chain activities. This is because it will need to identify the capabilities within its value chain activities which provide it with competitive advantage.

For example, Toyota's much admired manufacturing system manages inbound logistics in the form of excellent material and inventory control systems. This ensures that inventory levels are sufficient to meet customer demand by having parts delivered prior to their assembly. If we look at other primary activities in the value chain, such as operations, we find automated and efficient plants with embedded quality control systems. This is backed by marketing and sales through advertising and dealership networks, and service through the use of guarantees and warranties. Toyota's value chain activities, its linkages across them, and its linkages with the values chain of its suppliers are configured in such a way that they provide the Japanese competitor with a core competence or distinctive capability. It is this capability which provides it with competitive advantage and which its competitors have found difficult to match. Toyota is also able to appropriate the added value that is derived from these activities. For instance, Toyota makes more profit than the largest automobile companies in the USA combined.

Criticisms of the Resource based view

Most would agree that the resource based view of the firm represents a leap forward in strategic management. There are clear links and complementarity with the work of Michael Porter and the positioning school, and equally sharp departures. Whether one would go so far as classifying the resource based view as a new paradigm within strategic management is a matter of debate. Furthermore, although there are benefits to the resource based view is that it says very little on the important issues of how resources can develop and change over time. Similarly, the dynamic role played by individuals within organizations is often assumed to be self-evident and therefore seldom addressed. Others have argued that the resource based view of strategy lacks detail and is therefore difficult for organizations to implement (Priem and Butler 2001). A more detailed road map is required if it is to prove useful to organizations. Lastly, we are back in the realm of deliberate strategies with no formal recognition of emergent strategies and the role that these might play.


The Resource Based View (RBV) described that the resources in every firms have the ability to make the firm be able to have the sustainable competitive advantage. However, those resources must be i) Valuable; ii) Rare; iii) Inimitable; and iv) Non substitutable, which is sometime known as VRIN (Barney 1991). Some previous studies had developed the concept of the RBV and suggested more characteristics of the resources. Rungtusanatham et al. (2003) have included that the resource must be imperfectly mobile to discourage the ex-post competition for the resource that would offset the advantages of maintaining control of the resource. It was then abbreviated as VRINN (valuable, rare, imperfectly mobile, not imitable and not substitutable).

From the resource-based view theory, technologies are considered as the resources in the operations management that help the firms to gain the competitive advantages. The study of Grant (1991) shows how RBV theory was implemented by looking at what resources the firm possesses. Then, assess their potential for value generation and end up by defining a strategy that will allow us to capture the maximum of value in a sustainable way. Barratt and Oke (2007) introduced the concept of distinctive visibility which follows the work of Rungtusanatham et al. (2003). Their study also suggested that the deployment of certain resources in supply chain linkage enables information to be shared which could provide an improved performance for the linkage and has the potential to improve the operational performance of the supply chain and lead to a sustainable competitive advantage. Zhang and Dhaliwal (2009) presented the benefit from both external and internal technology adoption to improve the operational performance of the firm. Their study show that RBV contributed as a solid theoretical backbone in pertaining to technology adoption for operational supply chain excellence.

For the RBV perspective, resources are including the capital, technology, physical assets, and human resources, used by the firm in their production process. The resource based perspective of the SMEs is normally different from those of LEs due to their characteristics. LEs seem to have more advantages in term of more efficient resources due to the larger capital. Recent study shows that there are a number of tangible and intangible resources known to be usually scarce or underdeveloped among SMEs such as financial resources, human resources, physical resources, technological resources, or organizational management resources (Buratti, 2001). In this study, try to point out the different of the organizational management especially the global operations strategy among the SMEs and LEs. The lean supply chain management was selected as the scope of this comparative analysis.

The RBV and managers

The theory appears in many respects to be a means only of providing ex post facto analysis and assessment of successful firms. The literature seems to offer little in the way of guidance to managers seeking to create strategic assets. The theory says little about how strategic assets are created or where they come from within an organization. It is not possible from the argument of the RBV to look at a particular asset of a firm and to know a priori whether that asset will prove in the future to be a strategic asset.

The insights of the RBV would appear to require the endorsement of history for their validation. The discussion of strategic assets within the literature takes them as a starting point and to this extent the RBV, as an explanation of strategic success, would appear to be essentially tautological, proffering the idea, in essence, that successful firms deploy assets superior to those of less successful firms. The theory does little to advance us from the position of seeing strategic assets as accidents of

history, which can be subsequently shown to have been the result of certain resource strengths in combination with certain benign environmental conditions. Thus success is a path-dependent phenomenon, the product of human imagination, creativity, luck and adventitious environmental events. Thus, we are driven to the conclusion that the usefulness of the RBV is of a descriptive rather than explanatory nature and as such does not equip strategists with practical competitive advantage-building propositions.

Furthermore, the theory describes successful organizations with market power that, by definition, are likely to be a small proportion of the corporate population. Managers in smaller businesses that are not 'big names' or industry leaders normally operate in a fashion that is typically:

• Operations and cost focused

• Customer driven

• Reactive

• Concerned with short-term results

• Planned within a steady-state industry model

(See, for example, Beaver and Jennings 2000).

In these circumstances the stimulus for management decision making is usually provided by external pressure which, in combination with a probably price-elastic demand function, would suggest that for small businesses the idea of strategic assets with their concomitant of market power is inappropriate. In the absence of market power and facing a demand curve of dominant buyers there appears little, if any, scope for such managers to pursue the creation of strategic assets as envisaged by the RBV - even if the RBV were capable of providing specific guidance in this respect. Our knowledge of the business world tells us that there is a large class of firms that are successful in a modest way but with no sustainable long-term advantage in the form

of strategic assets.

In a general sense the thrust of the RBV is to stress the importance of diversity for potential strategic success. In effect it strongly suggests the reality of equifinality. Thus if managers can learn from the theory that there is no one best way to success then this might prove to be a benefit. However, it must be said that good managers have probably always known this anyway. It is this point that probably encapsulates the essential paradox that appears to lie at the heart of the RBV. The theory describes successful organizations. Unsuccessful organizations are, by definition, unequipped with strategic assets and managers in them would probably not know how to use the descriptive insights of the RBV in a creative manner.


In considering the RBV as a means of improving corporate performance and understanding the sources of corporate success it would probably be appropriate to conclude that it is ill-advised to bifurcate into environment positioning- based and resource-based theories. Each of these approaches combines with the other to provide an integrated understanding of the process of seeking the highest probability of strategic success. In fact to use a concept from the RBV, 'metaphysical insight' as a strategic asset is the ability to understand in a special way the nature of the environment and the future it potentially holds. Spanos and Lioukas (2001) sensibly suggest that successful company performance is better explained by linking industry and resource perspectives in combination rather than promoting one or the other approach as the superior and complete explanation. McGuinness and Morgan (2000) have also cast doubt on the capacity of the RBV (or dynamic capabilities approach as they prefer) to provide prescriptive help to managers. They suggest a more fruitful theory of strategy formulation may emerge from complexity science. It must be said that further research is needed if we are to be able to define the contexts within which the RBV as a partial theory, is applicable. Without this it will not be possible to use the RBV systematically as a means of synthesis or a source of competitive prescriptions. Generally the RBV literature seems to raise more questions about the nature of competitiveness and strategic success than it The RBV literature seems to raise more questions than it answers. In particular, we are faced with the problem of an absence of any firm definition of the concept of competitiveness. To be of use, a definition must be expressed in terms of identifiable and measurable properties. If this is not the case, the definition, such as it is, will merely be an imprecise assertion susceptible of a range of interpretations. Its imprecision will render it of little, if any value, in purposeful management discourse. In conclusion, the RBV appears to leave unaddressed a number of key questions that may render it ineffective as a rubric for practising managers. Such questions are:

• What determines strategic assets?

• How do we recognize a strategic asset?

• How do we plan to develop intangible strategic assets?

• How dowe assess the life span of a strategic asset?

For managers these are key questions relating to the fundamental issues of business performance and exemplify Tampoe's (1994) observation of the lack of detailed guidance in the literature about the creation of strategic assets. It is facile to expect academic theoreticians to provide managers with clear prescriptions for successful business initiatives. The contribution of the academic should be to help managers:

• Clarify issues

• Provide analytical constructs and

• Help improve managerial productivity and effectiveness.

If achieved, these are concrete outcomes and are the measures of the value of the academic contribution. These are the criteria against which the RBV needs to be evaluated. In the view of this observer the RBV fails to meet them.