Resource Based View Flashcards, test questions and answers
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What is Resource Based View?
The Resource Based View (RBV) is a strategic management theory which states that the resources of a business should be actively managed in order to provide competitive advantage and long-term sustainability. The foundation of this strategy is based on the belief that competitive advantage lies in the development and effective management of an organization’s unique resources. RBV stresses the importance of managing tangible and intangible resources, such as human capital, market knowledge, technology, information systems, organizational culture and customer relationships. First introduced by Prahalad and Hamel in 1990, Resource Based View theory has grown in popularity among research institutions and become a popular tool for strategic planners. The RBV emphasizes the need to identify an organization’s core competencies and build upon them to secure competitive advantage. According to this view, success can only be achieved when organizations identify their key resources both tangible (e.g., capital investments) and intangible (e.g., brand recognition), which are valuable, rare and difficult for competitors to imitate or substitute then develop strategies to maximize these resources through active management processes such as internal restructuring or external partnerships/alliances with other organizations or individuals who have complementary expertise or resources. The RBV considers five key factors when assessing an organization’s competitive position: its organizational capabilities; its resource availability; its resource scarcity; its resource immobility; and its resource substitution potential. Organizational capabilities refer to how well an organization can harness its existing resources for maximum benefit while resource availability looks at factors such as access to markets or raw materials needed for growth. Resource scarcity looks at whether there is enough of a given resource available within the industry while immobility refers to whether those resources are fixed assets which cannot be easily transferred from one context/location to another without significant cost implications for either party involved in the transaction process Lastly, substitution potential measures how easy it would be for competitors to acquire similar substitutes if they were unable replicate any given firms’ particular set of distinctive competencies due to strict legal regulations or intellectual property constraints etc).