Comparison of the Resource-Based vs Market-Based View Approaches to Competitive Strategy

1469 Words Dec 29th, 2013 6 Pages
Compare and contrast the market-based approach and the resource-based view as approaches to competitive strategy. To what extent are they rival or complementary views?

Competitive strategy, after Porter, came to be defined as the strategy of a business unit which seeks to achieve sustainable Competitive Advantage (SCA). The literature on strategy deems the market-based view (MBV) and the resource –based view (RBV) as two approaches to giving businesses the competitive edge they need to compete in their industries. Aside from having competitive advantage as their ultimate goal, the two approaches are also similar in the sense that they both make use of particular tools and models in their undertakings. They also differ in numerous ways,
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In order to be a low cost carrier airline, Southwest would have used the Value chain analysis which is a tool categorized under the RBV approach. By analyzing its value chain, the airline is able to identify the areas in its operations systems that can do with less resources and those which are crucial to adding value to the end service; all in the attempt to bring down its total costs and be able to pass on some of the benefits to its customers through low fares.

Furthermore, the fact that Southwest’s competitors Continental and United Airlines managed to rival its low cost strategy and not its differentiation strategy, comes down to the RBV concept of key competence. For in pursuing the differentiation route of Porter’s Generic strategy of the MBV approach, a firm need to first and foremost have as Kay (1993) suggests, the internal technological innovation, structure of relationships with or between its suppliers or customers; reputation or strategic assets which are unique to the firm. In other words, in order to be different, firms must have something different to customers, or must be able to do something differently that their competitors are unable to.

In addition to that, although Porter (1980) advocates either a low-cost or differentiation strategy to competitive advantage, vital to that is the resources available to the firm upon choosing either strategy. For example, the ability to

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