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Strategic management has been largely dominated by two contradictory paradigms for the past couple of years. Resource-based view of strategic management aims at finding sustainable competitive edge of an organization through rent generation capability of internal assets, while competitive positioning approach focuses on the outside market’s point of reference, in order to attain viable success. Both schools of thoughts have their own strengths and weaknesses. They also have similarities and differences. This paper focuses on the similarities and differences between the two different points of view in strategic management.
Resource-Based view of strategic management
This school of thought employs an idea that for a strategy to be sustainable within an organization, it has to correspond to the available resources and capabilities. Company assets and resources refer to the materials that a business accumulates over time such as premises, operational assets, financial asset, location and the company’s equity (Jay, 2001). On the other hand, capabilities refer to the collective efforts from all assets that can be directed towards a company’s advantage.
Major themes in Resource based view
First, management of a company identifies and classifies its pool of resources. Strengths and weaknesses are then highlighted in relation to their competitors so as to find out opportunities that will facilitate efficient usage of the available resources. Categorization of resources allows for identification of capabilities within a firm. Furthermore, a collection of resources and assets constitutes a firm’s capability, which helps to define its competitive edge over its rivals. These resources are also evaluated to find out their potential in wealth generation.
Managers who employ this kind of approach also look at the possibility of having sustainable competitive advantage from the resources. It is an approach that gives way to selection of an effective strategy which makes best use of the company’s capabilities and at the same time, exploits the available opportunities. Finally, areas with gaps are identified so that they can be filled, and consequently, improvement of the organization’s asset base be realized. This strategy rests on the basic principle that resources and capabilities of a company form its fundamental sources of profit.
Strengths and weaknesses of Resource-Based approach
Resource-Based view of strategic management has major strengths such as exclusive availability of resources to a company, which give it an edge over its competitors. Since other players in the market do not have access to these resources, an organization utilizes this chance for its own strategic benefit. Hooley and Broderick, in their work on “competitive positioning and resource-based view of the firm”, from the journal of strategic marketing provides additional information on this. They suggest that the approach further gives a strong basis for evaluating strengths and weaknesses in an organization while carrying out a SWOT analysis. Adoption of this method helps organizational management to direct attention on the provision of value and stability of the consequential benefits. It allows the manager to evaluate the reliability and credibility of claimed strengths.
Another scholar named Grant in his work on The Responce-based Theory of Competitive Advantage suggests that this approach provides a framework which directs managers to evaluate the examples of strengths that cannot be replicated by competitors. This way, they are able to categorize resources according to their level of imitation by competitors. Generally, intangible assets, resources and capabilities are usually hard to imitate and they usually give a more sensible basis for development of a marketing strategy. Consequently, better and more informed decisions can be made concerning the type of assets to invest highly in. For instance, human resource and intellectual property which generates and develops innovative ideas are hard to imitate even when exchange of technical knowhow occurs. Such resources are intangible and are quit hard to imitate. Additionally, Ray, Barney and Muhanna argues that the resource-based view approach promotes proper understanding of resources that strengthen the substitute positioning options used by a company. For instance, use of a low price approach is taken to dictate cost management systems.
Newbert gives additional claims on the applicability of this approach as expressed in their work from the journal of strategic management. He argued that most of the firms applied resource-based view in a modest point of view. This is mainly as a result of limitation on access to resources. Additionally, Jörg in his work on “RBV and the Road to the Control of External Organizations”, suggests that firms need to currently focus on its competitive advantage in the external market rather than focusing on internal resources only.
Nevertheless, the resource based approach of strategic management in an organization presents various importances. This theory is well affirmed in industrial financial structures and has gained a lot in its progress from a wealth of contributions by administrative personnel.
Competitive positioning management strategy
Competitive positioning management strategy is a method that looks at a company’s position in the economic market scene. It focuses on how a company can attain a competitive position in the market and be able to protect itself against competitors. Competitive positioning strategy also aims at maximizing profits in an organization over its competitors (Hooley & B. It makes use of the assessment tools to find out the position of the company in the market. Furthermore, it assumes that the market is competitive and that the firm’s position in the market can be managed through making strategic decisions. Additionally, the approach assumes that the market structure is the one that propels strategic position of the organization as well as its managerial structure.
Major Themes in Competitive Positioning
One of the themes that are evident in this approach is product differentiation. It forms one of the factors that managers should consider while coming up with a positioning strategy. This is to ensure that their products or services are always different and rates higher than all other competitors. Apart from provision of high quality products and service through product differentiation, a firm should make its product brand unique such that it becomes outstanding among those of competitors.
Competitive positioning helps to create the identity of a certain product or a service to make a good impression to the buyer. The kind of positioning strategy that an organization can employ is pegged on various factors such as customer needs and motivations in addition to the competitor’s aggressiveness. A positioning strategy should integrate the added value that a customer gets from purchasing products or services belonging to the company.
If there is no precise and strong positioning strategy, a lot of resources and time can be wasted. The organization management should develop strong positioning strategy since it is the one that makes the company to be in business. Chances of firm’s success in the competitive marketplace can be very minimal incase a good positioning strategy is not well articulated. It gives the reason for existence of a firm in the market by giving the true illustration and representation of the company within the marketplace. As a matter of fact, choosing a business positioning strategy automatically provides the marketing strategy that will be applied in the business. The manner in which a company relates with suppliers, customers and other stakeholders is all pegged on the competitive positioning strategy used.
Competitive Positioning the Most Suitable Approach in 21st Century
Competitive approach is the most suitable for businesses in the twenty first century and new start ups or during the launch of a new brand. The focus is now turning form manufacturing industries to service provision. Also as competition continues to increase in the marketplace, companies are required to remain abreast with innovative methods that will allow them maintain a competitive position. In addition, since new start up businesses intends to identify their target market, their products and services should be uniquely and innovatively designed. They should also be packaged and brought to the market in the best marketing methods possible. Therefore, the management should establish the reason that would make customers choose their products amidst those of other competitors. When this reason is genuinely obtained, it forms the competitive positioning strategy for the firm and should be maintained always. It also becomes the most suitable strategy for profit organizations in developed economies.
Strengths and weaknesses of Competitive Positioning
Since competitive positioning is a dynamic process, factors keep on varying and the priorities attached to the company might require limited or total modification. Form his work on “resource based theories of competitive advantage, from the journal of management”, Jay suggests that currently, businesses comprise a lot of trading and therefore, competitive positioning is the best strategy for them. Furthermore, due to current market dynamism, competitive positioning is the most preferred approach so that a company can position itself well in the market.
Various works have been done by different authors to support this approach. For instance, a journal of strategic marketing by Attia, Samaa and Graham suggests that competitive positioning has formed a crucial part of the current marketing management. They argue that having a competitive position in the market helps a company to define its market segment and its product portfolio. The same idea is further hammered by James, Ennew and Christine in their article on organizational positioning in retail financial services from the journal of marketing management. Another scholar, Jewell, in his work on establishing effective repositioning communications in a competitive world, suggests that the importance of having competitive positioning of a firm is create the correct perception of a product in the customer’s minds These scholars suggest that positioning in the market is analyzed in relation to the products offered by the company.
Moreover, a competitive positioning approach as viewed by Hooley and Broderick is based on higher quality which is believed to be a quite different resource set such as market sensing, supply chain management, quality control and assurance in addition to brand image and impression. On the same note, a positioning approach employed by a company is usually based on quick innovation and depends on skills in the new product development. Therefore, when a company chooses to pursue a certain positioning strategy in the marketplace, it becomes possible for it to discover resource gaps that require to be filled. However, due to the current shift of business orientation from manufacturing to provision of services, this approach faces limited applicability.
Similarities and differences between the two schools of thought
When a company employs resource-based approach in strategic management, its management makes use of the available resources for its own advantage. It allows accessing available resources in a firm and how they can be harmonized towards the company’s advantage. Institutions make use of the available assets as their source of strength. This is the reason why most of the manufacturing companies use this approach in their strategic management. Most of these organizations have been in operation for a long time and they have important resources that are hardly accessible by other new entrants into the market. Therefore, they utilize them for their own competitive advantage. On the other hand, competitive positioning makes use of various tools of evaluation to find a company’s position in the market place.
It is worth noting that, both approaches can be collectively used to attain competitive advantage for the firm. An organization is said to have competitive advantage if it maintains profits that are higher than the average value in the market. Since the main objective of a business strategy is to attain continued competitive advantage, the two paradigms can be combined to realize better results. According to the resource based view, competitive advantage in a company is attained when the resources and capabilities are superior to those of business rivals. Superiority is gained through the use of resources that are just exclusively available to the firm such that competitors cannot replicate them.
Furthermore, capabilities within a firm allow it to use its resources effectively for its own competitive advantage. For instance, if a company can manage to bring superior products into the market faster than its competitors, then it is said to have a competitive edge. Therefore, this is an indication that resources and capabilities of an organization form unique competencies. Maintenance of these competences fosters innovativeness in product and service provision to customers. This is what gives forth to competitive advantage in a company over its competitors.
This paper has established that both management paradigms can be employed together to achieve competitive advantage. Competitive advantage is gained using available resources and capabilities to attain a lower cost plan or product differentiation. Both approaches complement each other towards overall corporate profitability. For instance, the potential of a firm to earn higher profits than its competitors is dependant upon the position that it holds within the industry in addition to its competitive advantage. It makes use of its resources to gain a competitive edge over its rivals and therefore positions itself better than its competitors in the industry. This strategy allows a company to gain competitiveness and assume a leading role among its competitors.