Resource Based View of the Firm and SWOT

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Resource Based View of the Firm and SWOT
Resource-based view of the firm is a bit like a SWOT analysis. You analyze all the available resources of the business to further achieve its business goals. After that, evaluate and assess where you can improve and innovate on the available resources.

Warren Miller, CFA, CPA, Member
I don't disagree 100%, Leah Lynda, but I do disagree mostly:
- For one thing, "SWOT" includes "Opportunities and Threats," which are external to the firm. The RBV is internal.
- For another, I believe that Jay Barney's typology of resources--as four types of capital--is a great way to begin the analysis of them. At the end of the day, though, we still need his VRINO (valuable, rare, inimitable, non-substitutable, organizationally aligned) framework to determine the durability and contribution to value that any capabilities (which are made of one or more 'routines,' which themselves comprise bundles of resources) may offer.
Hope this helps.

According to the seminal article firm resources and sustained competitive advantage by Barney (1991, Journal of Management) strengths and weaknesses are more regarding RBV theory, but opportunities and threats are more regarding Porter theory.

RBV, SWOT and Risk Management (RM)
Thank you for your comment Warren and Francisco, I did forgot that opportunities and strengths are external to the firm. However, another thought entered my mind about RBV and Risk Management. Can RM help in RBV?

Sam Hwambo. BA Hons. Bus Stud (Open), Member
Point of correction, strengths are internal while opportunities are external as you rightfully put it.
My view on Risk Management is that it is mostly linked to threats, which are external to the company, so would not have much bearing on RBV.
However, it would also appear that there are internal threats, like industrial action by the employees which the organization needs to mitigate against where possible. The RM approach would be to keep communication doors open, maintain high levels of collaboration and be highly conversant with labour laws, etc. Here I am assuming employees (both shopfloor and managerial) as internal resources.

RBV and SWOT and Risk Management
Warren Miller, CFA, CPA, Member
In my view, RM deals with all four SWOT elements and for a simple reason: when risk goes down, value goes up. We see it everyday in bond markets: when risk (interest rates) goes down (up), value (bond prices) goes up (down).
Risk management in the SWOT context requires a focus on hedging weaknesses, avoiding threats, seizing opportunities, and fortifying strengths. To that extent, RM is entirely relevant in the RBV context.

Heunes, Member
I can not agree with the approach...
Let's get back to the basics.
- SWOT is more than only resources, much deeper and more intense on the strengths etc... Doing this on a regular basis consulting businesses you have to get to the core of each quadrant.
- With RBV I look at my resources... Those resources that I need as my input, those resources that I need to transform the inputs and the resources needed to get the desired outputs. We are living in a environment where systems are prevailing etc...
Maybe the mixing and non-understanding of these two concepts are leading to companies not really knowing where-to from now!

Warren Miller, CFA, CPA, Member
Ben, I disagree. I believe you're missing a key aspect of resources--the services that can be gotten from them, either singly or in combination. Penrose (1959) made the penetrating observation. Anyone who is reading this who hasn't read her seminal book, 'The Theory of the Growth of the Firm,' is missing one of the two or three most important strategy books every written. It is stunning in its insights.
Truth be told, the RBV really originated with her. The third edition came out in 1995, the year before she died, and a fiftieth anniversary edition was published in 2009.
Any number of competitors can have a given resource. That is why it is the service that savvy managers can derive from the resource (singly or in combination) that tells the story.


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