Monday, March 7, 2011

Critical Evaluation Market Based and Resource Based View of Strategy

In our previous posts, we discussed about strategy market based and research based view of strategy. Basically, Market based strategic view concerns the position of a company in the industry and emphasizes over the strategy of the company by strongly focusing over the environment in which company operates. In market based view of strategy is based over the external factors (Baier, 2008). On the other hand, resources based view concerns the capability of a company’s resources and internal factor for the purpose of maximum utilization. The strategies based over the resource views generally based over the internal factors. This blog will critically evaluate the Market based and Resource based view of strategy.

Critical Evaluation of Market based View

According to Poser (2003), market based view of strategy helps the organizations to identify and select competitive dimensions and promote the management to meet the appropriate winners. In the market based view of strategy, the main focus of strategy is to gain attractive position in the industry. Market based view is helpful in selecting the product market combination in which a company uses its strategy. With the help of market based view, a company analyzes the industry structure and according to the structure it creates its structure and strategy for effective positioning in the industry. For making effective and suitable strategy, company uses external resources in market based view that is quite effective to analyze the impact of external environment over the business operations (Poser, 2003). Market based view of strategy is also helpful in expansion plan for company and for this purpose, it considers political factors, customers, market condition, technology, social etc. factors for making strategy.

At the same time, the market based view of strategy also has some limitations. According to Poser (2003), market based view is a time consuming and costly process that may affect the decision making effectiveness of the businesses. This process takes lot of time in industry analysis. Market based view concern only external factors rather than internal factor of the company in order to explain competitive advantage that also limits the success of a business over external factors only. Market based view identify only competitive advantage that are based on the positioning advantage d doesn’t consider other areas that are also equally important.

Critical Evaluation of Resources based View

According to Connor (2002), resources based view is an important, essential and an inside-out management concept that is useful in developing successful strategy. Resources based view strategy identifies and emphasizes on the important of resources in achieving competitive advantage. It concerns the capability and effectiveness of internal resources. Both tangible and intangible resources are included in resources based view. The resources based view of strategy also creates a frame work for the executives to think about their strength and weakness, understand marketing issue that helps to improve corporate performance (Falkenreck, 2010).. This strategies based over this view are also helpful in understand the nature of internal resources ad their optimal utilization.

Resources based view suggests that a company should use the internal resources for gaining market advantages (Poser, 2003). Resources based view is a long term view and it satisfies the key characteristics of the strategy. Effective resources based view requires external environment knowledge for the purpose of effective resource utilization. Resources based view is also helpful in formulating mission statement and the company goal as different companies have different type of resources and can get market opportunity through its effective utilization.

Resources based view has a lot of advantage but at the same time, it also has a lot of loops and limitation. Resources based view of strategy concern only internal factors and on the basis of internal resources it determined the key characteristic of the resources. In resources based view, company determines the value of resources based on the characteristics of product markets (Priem, & Butler, 2001). It concern only individual company resources and explain how to exploit the resources, while the resource of competitors and changes in environment are also essential to determine the competitive advantages (Falkenreck, 2010). Thus, the resource based view is also not beneficial for a business individually. To increase the effectiveness of decision making, an organization should use combined views of strategy will be beneficial.

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Baier, C. (2008). The Alignment Performance Link in Purchasing and Supply Management. Germany: Gabler Verlag.
Connor, T. (2002).The resource-based view of strategy and its value to practising managers. strategic change,11 (2002), 307-316.
Falkenreck, C. (2010). Reputation Transfer to Enter New B-to-B Markets: Measuring and Modelling Approaches. New York: Springer.
Priem, R. L. & Butler, J. E.(2001). Is the Resource-Based "View" a Useful Perspective for Strategic Management Research? .The Academy of Management Review, 26 (1), 22-40.
Poser,T. B.(2003). The Impact of Corporate Venture Capital: Potentials of Competitive Advantages for the Investing Company. Germany: DUV.