Resource Based Sources of Competitive Advantage
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Critically discuss the importance of resource-based sources of competitive advantage in one of the industries studied on this module. You should discuss a range of companies.
‘Competitive advantage’ is when a firm sustains profits that exceed the average for its industry. The goal of much of business strategy is to achieve a sustainable competitive advantage. Porter identified two basic types of competitive advantage; cost and differentiation. These two advantages are known as ‘positional advantages’ as they describe the firm’s position in the industry as a leader in either cost or differentiation. However, in this assignment I will discuss and analyse the importance of the resource based view, (which is also known as the ‘inside out’ approach) to gaining competitive advantage in the civil aero-engine industry.
The civil aero engineering industry is an oligopolistic global industry in which no single organisation dominates the market. There are three main market competitors who are Rolls Royce, General Electric and Pratt & Whitney.
The resource based view (RBV) approach to strategy represents a substantial shift in emphasis towards the individual resources of an organisation and away from the market-based view that strategists such as Professor Michael Porter favoured during the 1980s and early 1990s.
The fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm’s disposal (Wernerfelt, 1984; Rumelt, 1984).
In order to discuss the importance of resources, we must first define and understand what a resource is. A resource can be tangible, examples of these are buildings, plant, machinery and stock. Resources can also be intangible or human resources, examples of these intangibles can be items such as good will and reputation, core competencies and also core staff.
Pralahad and Hamel (1990) identified seven core competencies of
Critically discuss the importance of resource-based sources of competitive advantage in one of the industries studied on this module. You should discuss a range of companies.
‘Competitive advantage’ is when a firm sustains profits that exceed the average for its industry. The goal of much of business strategy is to achieve a sustainable competitive advantage. Porter identified two basic types of competitive advantage; cost and differentiation. These two advantages are known as ‘positional advantages’ as they describe the firm’s position in the industry as a leader in either cost or differentiation. However, in this assignment I will discuss and analyse the importance of the resource based view, (which is also known as the ‘inside out’ approach) to gaining competitive advantage in the civil aero-engine industry.
The civil aero engineering industry is an oligopolistic global industry in which no single organisation dominates the market. There are three main market competitors who are Rolls Royce, General Electric and Pratt & Whitney.
The resource based view (RBV) approach to strategy represents a substantial shift in emphasis towards the individual resources of an organisation and away from the market-based view that strategists such as Professor Michael Porter favoured during the 1980s and early 1990s.
The fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm’s disposal (Wernerfelt, 1984; Rumelt, 1984).
In order to discuss the importance of resources, we must first define and understand what a resource is. A resource can be tangible, examples of these are buildings, plant, machinery and stock. Resources can also be intangible or human resources, examples of these intangibles can be items such as good will and reputation, core competencies and also core staff.
Pralahad and Hamel (1990) identified seven core competencies of
References: Johnson, J., & Scholes (1993). Exploring Corporate Strategy (3rd ed). Hemel Hempstead: Prentice Hall International Lynch, R (2003). Corporate Strategy. Essex: Prentice Hall Mazzucato, M (2002). Strategy for Business, A Reader. London: SAGE Publications Mintzberg, Ahlstrand & Lampel. Strategy Safari. Essex; Prentice Hall