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The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its
competitive environment.32 It goes beyond the traditional SWOT (strengths, weaknesses,
opportunities, threats) analysis by integrating internal and external perspectives. The ability of a firm’s resources to confer competitive advantage(s) cannot be determined without taking into consideration the broader competitive context. A firm’s resources must be
evaluated in terms of how valuable, rare, and hard they are for competitors to duplicate.
Otherwise, the firm attains only competitive parity.
A firm’s strengths and capabilities—no matter how unique or impressive—do not necessarily lead to competitive advantages in the marketplace. The criteria for whether advantages are created and whether or not they can be sustained over time will be addressed later
in this section. Thus, the RBV is a very useful framework for gaining insights as to why some
competitors are more profitable than others. As we will see later in the book, the RBV is
also helpful in developing strategies for individual businesses and diversified firms by revealing how core competencies embedded in a firm can help it exploit new product and market
In the two sections that follow, we will discuss the three key types of resources that firms
possess (summarized in Exhibit 3.5): tangible resources, intangible resources, and organizational capabilities. Then we will address the conditions under which such assets and
capabilities can enable a firm to attain a sustainable competitive advantage.

Types of Firm Resources

Firm resources are all assets, capabilities, organizational processes, information, knowledge,
and so forth, controlled by a firm that enable it to develop and implement value-creating

Tangible Resources Tangible resources are assets that are relatively easy to identify. They
include the physical and financial assets that an organization uses to create value for its
customers. Among them are financial resource (e.g., a firm’s cash, accounts receivable, and
its ability to borrow funds); physical resources (e.g., the company’s plant, equipment, and
machinery as well as its proximity to customers and suppliers); organizational resources
(e.g., the company’s strategic planning process and its employee development, evaluation, and reward systems); and technological resources (e.g., trade secrets, patents, and

Intangible Resources Much more difficult for competitors (and, for that matter, a firm’s
own managers) to account for or imitate are intangible resources, which are typically embedded in unique routines and practices that have evolved and accumulated over time. These
include human resources (e.g., experience and capability of employees, trust, effectiveness of work teams, managerial skills), innovation resources (e.g., technical and scientific expertise, ideas), and reputation resources (e.g., brand name, reputation with suppliers for fairness and with customers for reliability and product quality).35 A firm’s culture may also be
a resource that provides competitive advantage.

Organizational Capabilities Organizational capabilities are not specific tangible or intangible assets, but rather the competencies or skills that a firm employs to transform inputs into
outputs.39 In short, they refer to an organization’s capacity to deploy tangible and intangible
resources over time and generally in combination and to leverage those capabilities to bring
about a desired end.40 Examples of organizational capabilities are outstanding customer
service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.41
In the case of Apple, the majority of components used in its products can be characterized as
proven technology, such as touch-screen and MP3-player functionality.42 However, Apple combines and packages these in new and innovative ways while also seeking to integrate the value
chain. This is the case with iTunes, for example, where suppliers of downloadable music are a
vital component of the success Apple has enjoyed with its iPod series of MP3 players. Thus,
Apple draws on proven technologies and its ability to offer innovative combinations of them.

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