Competing on Resources

4 02 2010

Companies need to identify their competitive resources and use them to their full potential.

→ A Resource Based View (RBV)

Combines internal analysis of company with external analysis of the industry

There are two valuable resources in a company.  Tangible resources are resources like wiring, paper, tools, etc.  Intangible resources are brand names, warranties, and knowledge.

→ Competitively Valuable Resources

Resources cannot be evaluated on an individual basis.  One company may use a resource more efficiently and effectively than another.  Just like money is amoral (morality of money is based on how it is used) resources receive their value when the company uses them to the best of their ability.

So, to evaluate resources, there are five tests they must undergo:

  1. The test of inimitability.  It is important to have a resource that is not easily recreated.  Although competitors will eventually be able to do so, companies need to stall that process as much as they can.
  2. The test of durability.  How long will the resource last until it starts to depreciate?
  3. The test of appropriability.  Who ultimately captures the value of the resources?
  4. The test of substitutability.  Can the resource be traded off for another valuable resource?
  5. The test of competitive superiority.  Whose resource is truly better?  This will be an assessment of what your resource does that makes it unique.

→ Strategic Implication

Since businesses and competition is always changing, companies need to do the same with their resources.  They can take any of three approaches to their resources:

  1. Investing in resources. Make sure you will always have resources available.  However, do so while studying critically the dynamics of those resources.
  2. Upgrading resources.
  3. Leveraging resources.
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