one page summary

The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.

As noted earlier (in Strategy Spotlight 3.1), a firm’s strengths and capabilities—no matter how unique or impressive—do not necessarily lead to competitive advantages in the marketplace. The criteria for whether advantages are created and whether or not they can be sustained over time will be addressed later in this section. Thus, the RBV is a very useful framework for gaining insights as to why some competitors are more profitable than others. As we will see later in the book, the RBV is also helpful in developing strategies for individual businesses and diversified firms by revealing how core competencies embedded in a firm can help it exploit new product and market opportunities.

Page 83In the two sections that follow, we will discuss the three key types of resources that firms possess (summarized in Exhibit 3.5): tangible resources, intangible resources, and organizational capabilities. Then we will address the conditions under which such assets and capabilities can enable a firm to attain a sustainable competitive advantage.33

Types of Firm Resources

Firm resources are all assets, capabilities, organizational processes, information, knowledge, and so forth, controlled by a firm that enable it to develop and implement value-creating strategies.

Tangible Resources   These are assets that are relatively easy to identify. They include the physical and financial assets that an organization uses to create value for its customers. Among them are financial resources (e.g., a firm’s cash, accounts receivables, and its ability to borrow funds); physical resources (e.g., the company’s plant, equipment, and machinery as well as its proximity to customers and suppliers); organizational resources (e.g., the company’s strategic planning process and its employee development, evaluation, and reward systems); and technological resources (e.g., trade secrets, patents, and copyrights).

tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources.

EXHIBIT 3.5 The Resource-Based View of the Firm: Resources and Capabilities

_______________ Source: Adapted from Barney, J. B. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management: 17: 101; Grant, R. M. 1991. Contemporary Strategy Analysis: 100–102. Cambridge England: Blackwell Business and Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. 2001. Strategic Management: Competitiveness and Globalization (4th ed.). Cincinnati: South-Western College Publishing.

Page 84Many firms are finding that high-tech, computerized training has dual benefits: It develops more effective employees and reduces costs at the same time. Employees at FedEx take computer-based job competency tests every 6 to 12 months.34 The 90-minute computer-based tests identify areas of individual weakness and provide input to a computer database of employee skills—information the firm uses in promotion decisions.

Intangible Resources   Much more difficult for competitors (and, for that matter, a firm’s own managers) to account for or imitate are intangible resources, which are typically embedded in unique routines and practices that have evolved and accumulated over time. These include human resources (e.g., experience and capability of employees, trust, effectiveness of work teams, managerial skills), innovation resources (e.g., technical and scientific expertise, ideas), and reputation resources (e.g., brand name, reputation with suppliers for fairness and with customers for reliability and product quality).35 A firm’s culture may also be a resource that provides competitive advantage.36

intangible resources organizational assets that are difficult to identify and account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

For example, you might not think that motorcycles, clothes, toys, and restaurants have much in common. Yet Harley-Davidson has entered all of these product and service markets by capitalizing on its strong brand image—a valuable intangible resource.37 It has used that image to sell accessories, clothing, and toys, and it has licensed the Harley-Davidson Café in New York City to provide further exposure for its brand name and products.

Social networking sites have the potential to play havoc with a firm’s reputation. Consider the unfortunate situation Comcast faced when one of its repairmen fell asleep on the job—and it went viral:

Ben Finkelstein, a law student, had trouble with the cable modem in his home. A Comcast cable repairman arrived to fix the problem. However, when the technician had to call the home office for a key piece of information, he was put on hold for so long that he fell asleep on Finkelstein’s couch. Outraged, Finkelstein made a video of the sleeping technician and posted it on YouTube. The clip became a hit—with more than a million viewings. And, for a long time, it undermined Comcast’s efforts to improve its reputation for customer service.38

Organizational Capabilities   Organizational capabilities are not specific tangible or intangible assets, but rather the competencies or skills that a firm employs to transform inputs into outputs.39 In short, they refer to an organization’s capacity to deploy tangible and intangible resources over time and generally in combination, and to leverage those capabilities to bring about a desired end.40 Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.41

organizational capabilities the competencies and skills that a firm employs to transform inputs into outputs.

In the case of Apple, the majority of components used in their products can be characterized as proven technology, such as touch screen and MP3 player functionality.42 However, Apple combines and packages these in new and innovative ways while also seeking to integrate the value chain. This is the case with iTunes, for example, where suppliers of downloadable music are a vital component of the success Apple has enjoyed with their iPod series of MP3 players. Thus, Apple draws on proven technologies and their ability to offer innovative combinations of these.

Page 85Firm Resources and Sustainable Competitive Advantages

As we have mentioned, resources alone are not a basis for competitive advantages, nor are advantages sustainable over time.43 In some cases, a resource or capability helps a firm to increase its revenues or to lower costs but the firm derives only a temporary advantage because competitors quickly imitate or substitute for it.44