What Is the Relevance of the Resource-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 resource-based theory or resource-based view (RBV) of firms is a concept of business strategy highlights the need for a fit between the external market context in which a company operates and its internal capabilities. This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making. RBV is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic action than the external environment (Kotelnikov, n.d.).

RBV suggests that organizations are packages of tangible and intangible resources. Thus, it can be assumed that intangible resources, like employees and the reputations of organizations are becoming equally as important as the fixed assets that businesses actually own (Wheelen & Hunger, 2006, p. 106). RBV suggests that a firm's unique resources and capabilities provide the basis for a strategy. The strategy chosen should allow firms to best exploit core competencies relative to opportunities in the external environment.

According to RBV, competitive advantage is derived from the ability to combine and exploit combinations of resources and capabilities. Sustainable competitive advantage is then a continuous process of developing existing and creating new resources and capabilities to respond to rapidly changing market conditions.

Given this situation, an organization that understands these forces and is best able to determine what is needed, where it is needed, and for what length of time, while doing it at relatively lower cost, should be able to create a competitive advantage. Finally, the resource-based view of the firm suggests that resource management is no longer about controlling products or services, but also about controlling functions and processes.

References:

Wheelen, T. J., & Hunger, J. D. (Eds.). (2006). Strategic Management and Business Policy (10th ed.). Upper SAddle River, New Jersey: Pearson Inc.

Kotelnikov, V. (n.d.). Resource-Based View (RBV) of Firms. Retrieved January 11,