What Is the Relevance of the Research-Based View of the Firm to Strategic Management in a Global Environment?

What is the relevance of the resource-based view of the firm to strategic management in a global environment?

The relevance of the resource-based view of the firm to strategic management in a global environment is the idea that it permits the organization to be seen as a whole. In doing so, the strengths and weaknesses within the firm can be examined. This is done because as stated in the Hunger & Wheelen (2006, 106) text, "scanning and analyzing the external environment for opportunities and threats is not enough to provide an organization a competitive advantage." This procedure is referred to as an organizational analysis, and its primary concerns are the identification and development of an organization's resources and competencies. (Hunger & Wheelen, 2006)

As stated in the Hunger & Wheelen (2006, 107) text, Grant had proposed a five-step, resource-based approach to strategy analysis:

1) Identify and classify the firm's resources in terms of strengths and weaknesses.

2) Combine the firm's strengths into specific capabilities and core competencies.

3) Appraise the profit potential of these capabilities and competencies in terms of their potential for sustainable competitive advantage and the ability to harvest the profits resulting from their use.

4) Select the strategy that best exploits the firm's capabilities and competencies relative to external opportunities.

5) Identify resource gaps and invest in upgrading weaknesses. (Grant, 1991)

The next obvious question at hand would be where these competencies come from, and there are four different ways that a corporation can acquire these distinctive competencies. According to the Hunger & Wheelen (2006, 107) text; distinctive competencies may be a beginning asset upon the start of the business or something that one possessed from someone else. Distinctive competencies could also be shared with some other company or partner, or a company could actually slowly develop the competency themselves over a period of time. (Verdin & Williamson, 1994) Durability and imitability are the two different characteristics that will determine the sustainability of a firm's distinctive competencies.