The Analysis of the Resource-Based View - Research Paper Example

? Resource Based View This paper is based on different sources that explain how resource based view plays an important role in development strategy of an organization. According to different authors resource based view is an important approach that emphasizes that the organization’s internal resources plays a vital part in its success. According to Barney if the company shifts its focus from products to its internal resources this can lead the company towards greater benefits. This paper presents some different models too and explains their different aspects as compared with the resource based review. It defines the factors that are a part of internal resources and the factors that prove to be more beneficial. Moreover, this paper explains why internal resources or factors held more importance than the external factors as compared with the Porter’s (1980) five forces model. It describes how the SWOT analysis complements the resource based view. The Mokulele Airlines Hawaii Company is used as an example. Resource Based View In this competitive world, organizations are always in search of some mechanism that can help them succeed competitively. Hence it is necessary for them to maintain a good quality standard. In such era of technological advancements, organizations are trying hard to get at the top and trying to produce a product that can outshine products made by their rival organizations. This has lead to many new approaches, some of which have been successful and some not. Both external and internal factors affect the organizational performance. The resource-based view was got attention in a book written by Hamel and Prahalad named “Competing for the Future” (1994). Basically, this view portrays a firm as a bundle of resources. Right type and mix of these resources enable the firm to gain sustainable competitive advantage. Resource based view emphasize on the fact that the strength of organization’s internal resources determine its success. In recent times organizations have shifted their focus from products to its internal resources and capabilities (Barney, 1991). Porter (1980) five forces model with regards to external environment used to hold importance at first but the drawback in that model was that it didn’t provide the answer to whether the firm has the ability and competencies to compete in the market and exploit the opportunities or not? So with changing times organizations are finding resource based view as more suitable (Jim Anderson, 2007) Although firms are different from each other as their resources differ but according to Porter’s five forces model (market based view), all firms are homogeneous and compete via their positioning in the markets. In market based view, the competitive advantage depends upon firm’s ability to find attractive markets having most favorable characteristics identified through analysis of five forces provided by Porter (Tamanpowell,2007). The difference in both internal and external approaches to strategic decision making was highlighted in Harvard business article “Marketing Myopia” by Theodore Levitt (1960). The article identifies common organizational problem of defining their markets too narrowly. Richard Rumelt (1991) conducted a research in resource-based view. His research has contributed a lot in the fame gained by this strategy. Rumelt’s worked on the firm profit differentials within and across the organization. His findings showed that the differentials within the industry were far greater than across the organization. This applies that the industry specific differences should be contributing to these differences. These internal resources can be grouped into three broader categories, physical resources, human resources and organizational resources. Physical resources can be organizations plants, its equipments, its technological assets or raw material it holds. Human resources primarily include employees of the organization with all their experience, skill and knowledge. Organizational resources include information systems, copyrights, databases etc. (Fred R. David (2012) Strategic Management: concepts and cases). In case of Mokulele airlines, their aircrafts and equipment can be termed as Physical resources, their employees having services and operational skills as human resources and new technology used in the aircrafts as organizational resources (Berry, 2013) One of the core premises of resource based view is that organization should consider the type and proper mix of internal resources before finalizing strategic direction of the organization. If the firm is able to devise a strategy which is hard to duplicate by other firms then it could lead to strategic competitive advantage for the firm. SWOT Analysis helps in understanding the internal dimensions of the organization as well. It can be considered as a benchmark to measure the strength of a company. SWOT is an acronym for Strength, Weakness, Opportunity and Threats and it can scale a true image about the weaknesses of a company that can be responsible for its downfall, what its strengths are, what can be the opportunity and what threats the company has to face. SWOT analysis works as a tool to find relations of internal resources with external opportunities and enable managers to determine valuable resources. (MGS Experts, managementstudyguide.com) There are certain characteristics that strategically define a resource. A brief overview of the characteristics of a resource is as follows. Strength of internal resources of a firm depends on four key factors. The resources must be valuable, rare, hard to imitate and non substitutable. The more the resources are valuable, rare, non imitable and non substitutable, the more the chances of an organization to gain sustainable competitive advantage.( Fred R. David (2012) Strategic Management: concepts and cases) Rare resources constitute those resources which others firms do not possess. If resources are not rare then every firm will be implementing the same type of strategies which would not result in competitive advantage. A very favorable location or highly motivated workforce can be examples of rare resources. (Kazmi A., Strategic Management and Business Policy, 2008) Valuable resources tend to add organizations capability to generate revenue through capitalizing opportunities in the environment or it help neutralizing threat by competitors or other forces. Valuable resources could be higher quality of firm’s after sale services or good relationships with government agencies. (Kazmi A., Strategic Management and Business Policy, 2008) Non imitable resources are firm’s capabilities which are either inimitable or not feasible for other organization’s to duplicate. Non imitable resources could be good corporate image of a firm or its ability to integrate new businesses. If a firm’s resources are rare but can be imitated quickly then the firm would lose its competitive edge. A non substitutable resource, for example a creative manager or visionary CEO, is hard to be substituted. Taking the case of Mokulele Airlines, which is a commuter airline having base in Hawaii with a goal of providing low cost and high quality interisland service. Mokulele airlines have taken number of initiatives over the years to strengthen them internally and making their resources valuable. Recently Mokulele airlines have started focusing internally as they have increased their fleet to upscale their flights per day from 80 to 100. The new aircrafts will be equipped with latest Garvin avionics equipment. With the increased fleet, there routes are expanding, making them a very competitive interisland service. The airline has started focusing more on comforting its customers and providing them better services. Each passenger receives a free bottle of water and locally produced Kona coffee flavored cookie during travel. The airline has plans to offer highest frequency of trips with most convenient style of interisland travel. (Berry, 2013) With reference to SWOT analysis, the company has recently purchased two new technologically advanced aircrafts, which has added to the strength of the company’s resources. Its strengths also include low cost air travel with comfort and safety. The airline also maintains an enjoyable experience which customers enjoy. The airlines have highly trained and experienced staff to take care of customer needs and operational requirements. On the other side, Mokulele airlines face tight capital budget which makes to difficult to expand on greater pace. It faces certain difficulties in scheduling in case of varied weather conditions. With additional aircrafts, the company is aiming to exploit the opportunity existing in market in terms of capturing more customer base along with increasing the frequency of their air travel. There is a growing customer need for interisland air travel and Mokulele airlines are doing their best to serve this growing market. Environmental threats always remain in airlines industry. Recent global recession contributed to capital restraints of the organization. With that, the fuel prices are continuously increasing making it difficult for the airlines to keep the cost low at the desired level. (Berry, 2013) Thus SWOT analysis has enabled Mokulele airlines to synchronize its internal resources (Resource based view) with the opportunities and threats prevailing in the environment. As compared to buying resources, it is often preferable to develop a resource internally to achieve strategic advantage from it. As it is said “the deployment of such tradable assets does not entail a sustainable competitive advantage because they are freely tradable” (Dierickx & Cool, 1989). However, the development of internal resources can take quite long periods of time and most of the time it’s unclear how to proceed. In fact the potential sustainability and the value of a resource are a result of this uncertainty and development duration. This makes it a true valuable resource. As an example knowledge is increasingly viewed as an important strategic resource. ( Taman Powell,2007) Here another point to be noted is to recognize the fact that not all the firms are same. There are a lot of firms that have different resources and they have different target markets. The real challenge is to identify the right opportunities from the target market that are relevant or beneficial to the resource base of the firm. For the resources to be of some competitive advantage it is necessary for them to fit in their environment. Otherwise the firm cannot get the full benefit or advantage of its resources. It is seen that those resources can perform best that are perfectly suited to their environment. However the markets change with the passage of time. So the resources have to change over time in order to make relevance to their target market. Hence this dynamic capability perspective is the basic principal of resource-based view strategy (Teece, Pisano, & Shuen, 1997). In short the market based view, resource based view and dynamic capabilities perspective they all highlight different angles of strategy and competitive advantage. The focus here is not to give consider once approach superior over the other but to realize the fact that each approach provides important insights that can lead to better strategy development (Taman Powell,2007). References Hamel, G., & Prahalad, C. K. 1994. Competing for the future. Harvard Business Review, 72(4): 122-129. Barney, J.B. (1991), Firm resources and sustained competitive advantages, Journal of Management, Vol. 17 No. 1, pp. 99-120. Porter, M.E. (1980), Competitive Strategy, Free Press, New York, NY. Anderse?n, J. (2007a), ‘A holistic approach to acquisition of strategic resources, Journal of European Industrial Training, Vol. 31 No. 8, pp. 660-77. Taman Powell, Encyclopaedic Dictionary of Strategic Management, tamanpowell,com, 2007 Levitt, T. 1960. Marketing myopia. Harvard Business Review, 38(4): 45-56. Rumelt, R. P. 1991. How much does industry matter? Strategic Management Journal, 12(3): 167-185. Fred, R. D. (2012) Strategic Management: concepts and cases (Thirteen Edition) Kazmi, A. (2008) Strategic Management and Business Policy (Third Edition), Tata McGraw-Hill Publishing Company Limited Dierickx, I., & Cool, K. 1989. Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12): 1504-1512. Teece, D. J., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-534. Berry, D. (2013, March 8). Mokulele Airlines Expands Fleet To Meet Growing Passenger Demand. Reuters. Retrieved from http://www.reuters.com MGS Experts. SWOT Analysis. managementstudyguide. Retrieved from http://www.managementstudyguide.com Read More