The Resource-Based Model of Above-Average Returns

• The resource-based model of above-average returns assumes that each organization is a collection of unique resources and capabilities.
• The uniqueness of its resources and capabilities is the basis of a firm’s strategy and its ability to earn above-average returns.


  The resource-based model of above-average returns
• are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers

  resources
• a firm’s resources are classified into three categories:

  physical

  human

  organizational capital
• Resources are either tangible or intangible in nature.
• Individual resources alone may not yield a competitive advantage.
• resources have a greater likelihood of being a source of competitive advantage when they are formed into a capability
• is the capacity for a set of resources to perform a task or an activity in an integrative manner

  capability
• are capabilities that serve as a source of competitive advantage for a firm over its rivals

  core competencies
• Core competencies are often visible in the form of organizational functions. 


  eg: Apple's R&D function is one of their core competencies
• According to the resource-based model, differences in firms’ performances across time are due primarily to their unique resources and capabilities rather than the industry’s structural characteristics.
• This model assumes that firms acquire different resources and develop unique capabilities based on how they combine and use the resources; that resources and certainly capabilities are not highly mobile across firms; and that the differences in resources and capabilities are the basis of competitive advantage.


  resource-based model
• Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate.
• As a source of competitive advantage, a capability must not be easily imitated but also not too complex to understand and manage.