NATIONAL INSTITUTE OF TRANSPORT

DEPARTMENT OF BUSINESS AND ENTERPRENUERSHIP STUDIES

BACHELOR DEGREE IN HUMAN RESOURCE MANAGEMENT
MODULE NAME : STRATEGIC HUMAN RESOURCE MANAGEMENT

MODULE CODE : BHU 08105

LECTURER NAME : ARNOLD BINAGWA

TASK : GROUP ASSIGNMENT

PARTICIPANTS

Students Name Registration No: Signature

FREDY, Ruge M. NIT/BHRM/2015/125
MAUKI, Stephania L. NIT/BHRM/2015/155
MAFFA, Karoli NIT/BHRM/2015/220
PETER, Oliver NIT/BHRM/2015/174
MOHAMED, Swaumu NIT/BHRM/2015/139
OBERT, Dennis NIT/BHRM/2015/199
MATIKO, Bhoke NIT/BHRM/2015/156
MWACHIKO, Shaban NIT/BHRM/2015/

SUBMISSION DATE: 12th December, 2017

QUESTION: Explain the Concept of Resources based view approach, its

significance and its implications to the managers
Table of Contents
1.1 Introduction to Resource Based View Approach................................................................. 2
1.2 Framework of Resource Based View Approach (RBV) ...................................................... 2
1.3 The resource Based View Approach to Strategy Analysis .................................................. 2
1.4 Role/ Significance of Resource Based View in Organizations ............................................ 4
1.5 Implication of Resource Based view Approach to Managers .............................................. 5
1.6 Achieving Competitive Advantage ...................................................................................... 6
References ....................................................................................................................................... 7

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1.1 Introduction to Resource Based View Approach

Company operates with two components i.e. resources and products or service which in turn are
derived from resources only (Alvarez & Busenitz 2007). As per the resource based view, firms
resources can be considered determinant of competitive advantage and performance within the
firm (Barney et al. 2001; Barney & Mackey 2005). The Resource based theory was introduced
by Birger Wernerfelt in his article A Resource-Based View of the Firm in the year 1984 as to
bring into consideration the importance of resources in the firm and the management of the
resources as well. As per the model, the first assumption assumes that the heterogeneity of the
firm operational in market is dependent on the heterogeneity of the resources they control and
secondly, it assumes that heterogeneity in terms of resources persists within a firm as strategies
are not mobile across firms. Researcher therefore concludes that resource heterogeneity is
important for the firm to gain competitive advantage (Barney, 2001).
1.2 Framework of Resource Based View Approach (RBV)

Like the frameworks of core competence and capabilities, firms have very different collections
of physical and intangible assets and capabilities, which RBV calls resources. Competitive
advantage is ultimately attributed to the ownership of a valuable resource. Resources are more
broadly defined to be physical (e.g. property rights, capital), intangible (e.g. brand names,
technological knowhow), or organizational (e.g. routines or processes like lean manufacturing).
No two companies have the same resources because no two companies have had the same set of
experience, acquired the same assets and skills, or built the same organizational culture. And
unlike the core competence and capabilities frameworks, though, the value of the broadly-
defined resources is determined in the interplay with market forces. Enter Porter's 5 Forces. For
a resource to be the basis of an effective strategy, it must pass a number of external market tests
of its value.

1.3 The resource Based View Approach to Strategy Analysis

The resource based theory or resource based view helps in determining the resources available
within the firm and relates them with the capabilities of the firm in a silent manner. This brings

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into consideration, the profitability and the value factor associated with the firm (Colbert 2004).
As per this theory, the competitive advantage can be delivered to an organization when the
organization is able to utilize its resources in unique and valuable manner than the competitors of
the firm (Colbert 2004). This theory clarifies that all the firm that have gained excellent
capability is due to the extraordinary and non-substitutable slot of resources available to the firm.
This brings the firm more success in the emerging economy of the world (Das & Teng 2000).
Resource based theory, in other words regarded as one of the process which is based on inside-
out strategy. The strategy focuses on the methods through which the firm collects resources (Das
& Bing-Sheng 2000). The following diagram given below describes the formulation process of
the resource based theory:

A Resource-Based Approach to Strategy Analysis: A Practical framework

(Source : Barney, 2001)
As per the Figure 1 there are two factors that are inter-dependent terms i.e. resource and
capability and are integrated simultaneously (Das & Bing-Sheng 2000). The definition of the
factors is given below:
Resources are the inputs without which the production process will end up to a limit. As per the
current situation, the major resources used in an organization are technology capacity, human

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resources, raw materials, the loyalty of the customers, financial supports etc (Hart 2005). Along
with this, brands and patents can also be considered important resources.
Capabilities are regarded as the capacity of the available resources with the firm and the
techniques through which tasks of the firm are performed (Kozlenkova et al. 2014).
Both the factors are responsible for deciding the competitive advantages availed by the firm from
the market.
1.4 Role/ Significance of Resource Based View in Organizations
Resources can be sub-categorized into tangible and intangible resources and both the resources
are important for the proper functioning of the organization (Wu 2010). This theory is is
considered to be one of the substantial theories of strategic management (Oliver 2007). This
theory formulates the blue print and accordingly the utilization of the resources are planned for
every capability of the firm. The diagram below supports the perception described above about
this theorys role in organization.

Role of Resource Based View

(Source : Akio 2005)

The theory supports the view that if the resource is valuable then it can act as a source of
competitive advantage for the organization. At the same time, the firm is also able to evaluate the

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potential resources which provide more benefit to the firm and enable success in the emerging
markets (Kozlenkova et al. 2014).

The resource based theory also initiates the firm to examine whether the resources of the firm are
valuable to the expected level. Along with this, the availability of the resources is also checked
within the firm through this theory (Barney et al. 2001). The competitive advantages attached to
the resources are evaluated so that the firm can understand which resource is unique in nature
and is not available to the competitors of the firm. The resources that are non substitutable in
nature can provide more benefit to the firm as the competitors wont be able to match the same
expectation that the firm adopt in the market (Wernerfelt 2005). Gimeno (2001) argues that
resource based operation within the organization enables the organization to innovate products as
per the demand of the customers and also enables sustainable growth within the organization.

1.5 Implication of Resource Based view Approach to Managers

Managers should build their strategies on resources that pass the above tests. In determining
what valuable resources are, firms should look both at external industry conditions and at
their internal capabilities. Resources can come from anywhere in the value chain and can be
physical assets, intangibles, or routines.
Continuous improvement and upgrading of the resources is essential to prospering in a
constantly changing environment. Firms should consider industry structure and dynamics
when deciding which resources to invest in.
In corporations with a divisional structure, it's easy to make the mistake of optimizing
divisional profits and letting investment in resources take a back seat.
Good strategy requires continual rethinking of the company's scope, to make sure it's making
the most of its resources and not getting into markets where it does not have a resource
advantage. RBV can inform about the risks and benefits of diversification strategies.

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1.6 Achieving Competitive Advantage

In conclusion, it has been established that resources and competitive environment within the
organization is beneficial for acceleration of performance and achievement of competitive
advantage within the firm and at the same time also helps in management of resources
effectively. This paper sketches the connections between resources and competition when it
discussed how resources are used to compete in the market and may even be used as a leverage
to hurt competitors. In present scenario, for strategic managers resource management should be
part of competitive advantage where they would analyze the importance of internal and external
resources in order to bring opportunities and innovations within the firm. Therefore, one can
conclude that, resource based view is a dynamic concept which enables the firm to act, enact and
operate as per its internal and external ressources in order to gain competitive advantage.

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References

Akio, T., (2005). The Critical Assessment of Resource Based View of Strategic Management:
The Source of Heterogeneity of the Firm. RITSUMEIKAN INTERNATIONAL
AFFAIRS, 3, pp.125150.
Alvarez, S.A. & Busenitz, L.W., (2007). The entrepreneurship of resource-based theory. In
Entrepreneurship: Concepts, Theory and Perspective. pp. 207227.
Barney, J. & Mackey, T., (2005). Testing resource-based theory. In Research Methodology in
Strategy and Management. pp. 113.
Barney, J., Wright, M. & Ketchen, D.J., 2001. The resource-based view of the firm: Ten years
after 1991. Journal of Management, 27, pp.625641.
Colbert, B.A., (2004). The Complex Resource-Based View: Implications for Theory And
Practice in Strategic Human Resource Management. Academy of Management
Review, 29, pp.341358.
Das, T.K. & Bing-Sheng, T., (2000). A Resource-Based Theory of Strategic Alliances. Journal
of Management, 26, pp.3162.
Hart, S.L., (2005). A Natural-Resource-Based View of The Firm. Academy of Management
Review, 20, pp.9861014.
Kozlenkova, I. V., Samaha, S.A. & Palmatier, R.W., (2014). Resource-based theory in
marketing. Journal of the Academy of Marketing Science, 42, pp.121.
Oliver, C., (2007). Sustainable Competitive Advantage: Combining Institutional and Resource-
Based Views. Strategic Management Journal, 18, pp.697713.
Wernerfelt, B., (2005). The Resource-Based View of the Firm: Ten Years After. Strategic
Management Journal, 16, pp.171174.
Wu, L.Y., (2010). Applicability of the resource-based and dynamic-capability views under
environmental volatility. Journal of Business Research, 63, pp.2731.