The Resource Based View (RBV) of the Firm
Barney& Hesterly 2006Pearson Prentice Hall
The Resource Based View or RBV is a model of firm performance that focuses on ‘resources’ and
‘capabilities’ controlled by a firm as sources of competitive advantage. (Barney, 2006, p 76)
RBV is a different view than the SWOT proposed by Michael Porter and others. From my perspective,
having taught Strategy and policy, for a number of years, there is wisdom in blending the two, as we
analyze a firm’s position in the competitive arena.
Whereas, SWOT looks at the internal and external environments in separate and distinct ways, RBV uses
Porter’s (1980) 5 forces model to address the external environment. RBV does go into depth with the
model to flesh out the rivalry and relative strength of the various forces facing any single competitor.
From such an analysis the attractive of the environment can be determined. In the RBV model more
emphasis is placed on the competitive position of the firm as determined by the internal environmental
analysis. Barney uses a series of four questions about the internal environment to determine the
internal strengths and weaknesses of the firm relative to its competitors.
Strengths and Weaknesses are conceptualized, evaluated, and determined via the application of four (4)
critical questions formulated in the RBV model and referred to by the acronym, VRIO,
as in The VRIO Framework:
1. The Question of Value: Does a resource enable a firm to exploit an environmental opportunity
and/or neutralize an environmental threat?
2. The Question of Rarity: Is a resource currently controlled by only a small number of competing
firms?
3. The Question of Imitability: Do firms without a resource face a cost disadvantage in developing
it?
4. The Question of Organization: Are a firm’s other policies and procedures organized to support
the exploitation of its valuable, rare, and costly-to-imitate resources?
If the answer to a question is yes, then the resource or capability is a “Strength”. If not, it is a
“Weakness”.
Two additional ways of conceptionalizing the process and utilizing its output along with the SWOT
analysis are:
1.
The VRIO Framework
Is the resource or capability:
Costly
Valuable?
Rare? to Imitate?
No
--------Yes
No
----Yes
Yes
No
Yes
Yes
Yes
Exploited by
Organization?
No
No
No
Yes
Competitive
Implications
Competitive disadvantage
Competitive parity
Temporary competitive advantage
Sustained competitive advantage
2. The Relationship Between The VRIO Framework and Organizational Strengths and Weaknesses
Is the resource or capability:
Costly
Exploited by
Strength or
Valuable?
Rare? to imitate?
organization? weakness
No
---------No
Weakness
Yes
No
-----No
Strength
Yes
Yes
No
No
Strength and distinctive competence
Yes
Yes
Yes
Yes
Strength and sustainable
distinctive competence
Distinctive competence(s) derived from a resource or capability that is sustainable and exploited by an
organization’s strategic and tactical policies and procedures can and will generate sustained competitive
advantage.
There are several additional components to this process dealing with Benchmarking, Value Chain
Analysis, Competitive Parity, but these go past the boundaries of the SWOT analysis process and thus
are not comparable.
I use the Five Forces and RBV approaches to flesh out the SWOT which is more commonly understood by
most practitioners. I do add Benchmarking and Comparative Value Chain Analysis to arrive at a
Competitive Strength Assessment Matrix. The left side of the matrix is comprised of the “Key Success
Factors” (KSFs) in an Industry or niche. Across the top are the firm and its competitors/rivals. Weights
are given to the KSF (actors) and the columns are totaled. Each firm receives a score that is comparable
to its competitors.
An ancillary gain from the Competitive Strength Assessment is that a firm can quickly see where they
stand on each factor relative to their competitors. This knowledge may suggest how best to compete in
the environment as well as point out the areas that are in need of improvement.
Please note that this attempt to give you an explanation of how the SWOT can be enhanced through the
use of Barney and Hesterly’s RBV approach to strategic competitive analysis is limited in scope and much
simplified. However, in all fairness, my efforts to simply and clearly explain how value can be added to a
typical SWOT analysis by integrating that analysis with a RBV analysis is quite accurate.
We all agree that this may all be over-kill, but we did say that we needed to have at least one layer more
of subject matter depth than those we are teaching. RBV is a really valuable and accepted approach to
strategic analysis. As such, we need to understand it enough to not be caught short should a bright
student or a western-trained, King Saud colleague raise a question relating to the Resource Based View
(RBV) of Strategy and Business Policy relative to Entrepreneurship.