In the practical application of the resource-based view of the firm Essay

In the practical application of the resource-based view of the firm (the RBV) there is usually less emphasis placed on the management of resources than on the - Essay Example Jay Barney’s Resource Based View (RBV) is one such interesting tool. Because of its simplicity, engineers find it easy to understand the management perspective behind enterprises. This essay explains the concept of RBV, examples of key resources in well-known companies, managements’ approach in using the tool together with opinions on its utility and limitations. All firms are built on certain resources. In common parlance, we hear of money, materials and men as the resources of any business in a very broad sense. If all firms collect these resources and start operations to produce and market the same goods or services, then there will be intense competition and few would survive. In order to survive with normal profits and grow with supra-normal profits, a firm has to distinguish itself in some ways from the others competing with it. One way of looking at such distinguishing features of a firm is the so-called ‘resource-based view’, conceived and named as such by Jay Barney in the early 1990s. Barney1 postulated that a firm has to identify the resources it has in its command, evaluate them to identify the ‘key resources’ which give the firm its competitive advantage and guard them jealously to maintain the strategic advantage. In order to identify whether a resource can be treated as a key resource or not, Barney developed a four point criterion of resource evaluation, VRIN, that stands for: As can be seen, the emphasis is on resources as internal to a firm. From the simplest Mom & Dad stores, requiring no more than a couple of people, a few consumer items and a place to store and sell, to the very complex commercial or industrial firms of today with properties, unique products, patents and trained staff, we have a plethora of resources. Many of them are quite visible for all to see; but many more are what are known as intangibles, which are not seen or easily understood; for instance,