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Three Ways That Create Value for a Firm - Essay Example

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In the paper “Three Ways That Create Value for a Firm” the author discusses three ways that create value for a firm and positional and resource-based advantages. While the first approach is based on the strategic positioning of the product, the second is based resource-based theory…
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Three Ways That Create Value for a Firm
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Download file to see previous pages It is not merely identifying a product but as Durkin (1997) states innovative firms make investments in knowledge to develop new products which give them a monopoly in the international market. The second contention is on the resource-based theory (RBT) of the firm where rare and valuable resources give it a sustainable competitive advantage (Peteraf & Wernerfelt cited by Bowman & Ambrosini, 2000) while the third approach states that firms should be able to seize opportunities faster than other firms and gain value. The first approach pertains to product and industry innovation while the third concentrates on strategy innovation. The knowledge development in the first approach again would imply investments in resources – technical or human. Hence, all three approaches are not independent of each other although each has its own distinctive features.
The positional approach is also based on Porter’s theory of five competitive forces which determine the firm’s profitability and attractiveness (Porter, 1985). The journal does not specify whether the industry and value of such firms relate to competitiveness in their own nation or the nation where products have been marketed. Pharmaceutical industries operate globally and hence this aspect is not clear whereas Porter insists that competitiveness and productivity pertain to national productivity, which should enhance the value of the firm in the nation in which it operates (Davies & Ellis, 2000).
Resources can be defined as anything that gives advantage or disadvantage to the firm. (Mills et al, 2003). The support theory of Johnson et al (2005) divides the resources as threshold resources and unique resources, where threshold resource satisfies customer’s minimum requirements and unique resources contribute to competitive advantage and make it difficult for the competitor to copy the value. A successful business needs to secure the resources according to Scott et al (2005) which the journal specifies ...Download file to see next pagesRead More
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