Resource-Based View of Strategy and the Competitive Positioning Based View of Strategy - Case Study Example

Running Head: Resource based view of strategy and the competitive positioning based view of strategy Student’s Name: Instructor’s Name: Course Code and Name: University: Date of Submission: Resource based view of strategy and the competitive positioning based view of strategy A number of subsequent studies have attempted to compare resource based view and competitive based view of strategy; with some suggesting the use of both strategies in order to minimize risk emanating from each while maximizing the benefits. This paper seeks to study the two perspectives on strategy with a view of gaining better understanding of the same. 1. Review of literature This section includes review of journals discussing the strengths and weaknesses of each school of thought. Resource-based view of strategy (RBV) Gallaugher (2007) in an attempt to establish the best strategy for internet business notes that the use of resource-based view strategy is bound to be highly effective. In his research, Gallaugher (2007) starts by identifying that firms using resource-based view can only be seen to earn more potential returns only if they have superior resources and if these resources are protected from diffusing throughout the industry. This is possible in online business where assests such as scale, network effects, distribution channels, switching costs and data are not easily transferable. In Fahy and Smithee (1999) however, competitors’ inability to duplicate resource endowment is also questioned due to uncertainty inimitability and causal ambiguity in the use of terminology in RBV literature. Another advantage identified by Gallaugher (2007) is that RBV helps in shaping the managers’ thinking about strategic positioning through evaluating the firm’s resources. Despite praising RBV, Gallaugher notes that RBV limits the firms’ ability because it does not clearly identify the kind of differences that firms need to pursue to gain competitive advantage. In the article by Connor (2002), it is established that many studies have portrayed the importance of firm-level factors emphasized in the resource-based view as opposed to industry factors exemplified in competitive positioning view. In essence, the success of the firm is mostly possible through the company perspective as opposed to industry perspective because eventual success is determined by how a firm uses the resources available to it in succeeding in the industry setting. This view is seconded by Rivard, Raymond and Verreault (2005) who note that companies should create competitive advantage by exploiting resources that are available to them. On the other hand however, business survival lies in the understanding of the market and changes that are likely to emerge (Connor, 2002). It is therefore established that the RBV strategy may not provide for such information in a manner that CPR is likely to do. Further, RBV does not provide the ability to scan the environment in order to learn possibilities of developing new products and capabilities. The RBV is considered as a strategy that is highly dependent on the management and therefore failure by the management may result in poor strategies. Fahy and Smithee (1999) note that since strategic assets and resources are essentially intangible, it raises a question on how managers can define, recognize and shape these resources. RBV is therefore ineffective in strategy. Rommen (2009) establishes a weakness in the resource-based view in that it consists of many assumption and definition which often cause ambiguity or difficulty in adoption. An example of an assumption is that firms can differ in terms of resources that they control and that they may not be transferred between organizations. This however can be disapproved by the fact that resources cannot be said to be immobile or heterogeneous. Rommen (2009) identifies another weakness in that the resource-based view ignores the external environment by focusing on organizational attributes or an inside-out perspective. Further, the resource-based view is seen as viewing things from a static perspective and having limited applicability since it sustainable competitiveness can only be achieved where there are available finances to enhance possession of unique resources. Competitive positioning view of strategy (CPV) The use of competitive positioning view of strategy calls for a significant level of knowledge, market, innovation, the product and the market according to McDonough, Zach, Lin and Berdrow (2008). This is very demanding for a company and may be expensive. Competitive positioning however is an effective way of enhancing profitability through the acquisition of market share. According to McDonough, Zach, Lin and Berdrow (2008), CPV is essential in helping the company deliver customer-specific products and services; which in turn improves customer relationships. Through competitive positioning, a company establishes a niche in the market through making itself known and this promotes customer loyalty and popularity of the brand name (Fei, Bu, Gao & Xiang, 2009). They note that in enhancing the competitive advantage positioning is the best way to approach the ever changing market environment. A disadvantage that Fei, Bu, Gao and Xiang (2009) note is the fact that finding an accurate positioning for the firm’s products is usually difficult and that this is based on chance and random positioning. Sujan and Bettman (1989), note that competitive positioning can be disadvantageous especially where some aspects of the brand itself limit situational factors such as selection of target market. The article by Sujan and Bettman (1989) also identifies the level of expense that characterizes competitive positioning. This is because the firm must continually provide what the customers want and still accompany this with advertising so as to create a brand position. The fact that many firms tend to use CPV as opposed to RBV makes it more appealing and effective as opposed to RBV. This is exhibited by Williams (1992) and Toften and Hammervoll (2009), who note that CPV is more likely to promote profitability since positioning helps the company in reaching out to customers. Toften and Hammervoll (2009) however notes a disadvantage in that competitive positioning may not necessarily bring desired results unless it is accompanied by other strategies such as product differentiation and extensive marketing. Common and differing themes between the two schools Common themes Planning and management The management must be actively involved for the strategies to be implemented. This is because resources to be used need to be mobilized and so are the plans to implement the strategy. Planning and management are therefore essential in both schools. Innovation Both of these strategy views are significantly influenced by the level of innovation within a firm. This denotes the need for a firm to come up with unique resources that are cannot be imitated by competitors in order to enhance the success of RBV and also have unique products so as to position itself in the market. Innovation is therefore imperative. Orientation towards competitive advantage The implementation of strategies pegged to each of these school work towards enhancing the company’s competitive advantage. This is because in each strategy, the firm aims at outdoing competitors in the market. Differing themes Business environment focus The difference between the two schools is that while the resource-based view focuses on the internal environment through utilizing available unique resources, the market positioning view depends on the current state of the market to determine how the strategy will be implemented and thus position its products strategically. Perspective There is a difference between the two schools based on perspective in that while the resource-based view conceptualizes the enterprise in terms of the possession of a bundle of unique resources, the competitive positioning view emphasizes a positioning perspective whereby market power is imperative. Aspects of resource-based and competitive positioning views which are relevant to the management of for-profit organizations in developed economies in the 21st century The management of for-profit organizations requires the use of proactive strategies to enhance their success and continuity in the contemporary business world. Various aspects coined from the resource-based and competitive positioning views of strategy are applicable in enhancing competitive advantage. Firstly, it is important to assess the resources available to the firm even before trying to compete with others in the market. As noted by Connor (2002), resources within the firm form the basis for its success and survival even as environmental conditions keep changing. The resource-based view ensures that a firm does not base its strategic management decisions on ensuring a perfect fit in the business environment but on the strategic capability of the firm. This is expected to work well and as illustrated by Gallaugher (2007), the firm only needs to ensure that its resources are not imitated, which is possible as in the case of online businesses such as Google and Yahoo which have managed to make billions of dollars through unique strategies based on resources available to them. Stalk, Evans and Schulman (1992) notes that competitive-based view of strategy enhances innovation as a firm seeks to ensure that its products are preferred by customers; which creates better competitive advantage for organizations. An example of Buckman Laboratories is given by Moran and Meso (2008) who note that their strategy which is mostly based on innovation and producing goods that are valuable to customers helped the business in succeeding in a highly competitive environment. Innovation leads to increased profitability and CPV is therefore imperative in for-profit organizations in developed economies. Secondly, CPV ensures that the firm is well informed regarding the external market and that workable strategies are implemented to cope with changes in the market (Mills and Gregory, 1994). This ensures that the firm is not outdone by competitors in the market and hence remains competitive. It has been suggested that resource-based view and the competitive positioning should actually be used together to enhance efficiency. This is notable in Lucas and Kirillova (2011) who note that the two should be reconciled. Furthermore, RBV is a complement to CPV since for competitive strategy to be utilized; there must be effective planning of resources within the firm. Discussion on similarities and differences between the resourced based view of strategy and the competitive positioning based view of strategy The adoption of the right strategy within the firm remains an imperative undertaking within the firm but is often challenged by the dilemma of managers on whether to adopt the resource-based view strategy or the competitive positioning view of strategy. Notably there exists a significant level of similarities and differences exist between the two approaches. To begin with, each of these strategic views aims at enhancing competitive advantage for the firm. In using the RBV, a firm aims at using its unique resource endowment to outdo its rivals in the market. On the other hand, CPV seeks to position the business in such a way that it stays ahead of competition The implementation of each strategy requires the use of financial resources and adequate planning. This is because a strategy cannot be implemented if it has not been efficiently planned for or when there are no financial resources to execute the strategy designed (Li & Liu, 2004). In this relation, it has been suggested that competitive positioning cannot work without the resource-based view because implementing the CPV requires the management to effectively examine the resources available to the firm in order to implement the strategy (Lucas & Kirillova, 2011). One of the most significant differences between resource-based view of strategy and competitive positioning view of strategy is that while RBV considers the internal environment in making decisions regarding the firm, the competitive position tends to take an external environment approach (Wernerfelt, 1995). A HBV led strategy will aim at maximizing the resources available within the firm to create competitive advantage while a CPV led strategy will seek to position the company’s brands and products in the market in such a way that a significant level of market share is preserved. The other difference lies in the implementation of the strategy, such that while the HBV is significantly controlled by the management, the use of CPV requires the firm to implement strategies that are consistent with the market trends. The company therefore has limited control during implementation of the strategy. References Connor, T. (2002). The resource-based view of strategy and its value to practicing managers. Strategic Change, 11(1), 307-316. Fahy, J. & Smithee, A. (1999). Strategic marketing and the resource based view of the firm. Academy of the marketing Science Review, 10(1), 1-20f. Fei, L., Bu, M., Gao, W. & Xiang, L. (2009). 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