Competitive positioning and the resource-based theory are just different versions of the same theory. PDF

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Competitive positioning and the resource-based theory are just different versions of the same theory. Sam Galvin St Hugh’s College Strategic Management Michaelmas Term 2020 The resource-based view (RBV) of the firm is a model that describes resources as key to superior firm performance; if a resource exhibits beneficial attributes then it enables the firm to gain and sustain competitive advantage. The competitive positioning view, however, emphasises differentiation and therefore the positioning of firms within their industry. Crudely, the RBV of the firm is an inward-looking perspective concentrating on core competencies and efficiency, whilst the competitive positioning view is an outward-looking, environmental one, mainly focusing on competitive advantage and market positioning. For the purpose of this essay, I will define theory as any particular system of ideas that seeks to enhance or explain business performance and thus seek to provide evidence for the fact that competitive positioning and RBV are subtly but fundamentally distinct from one another. Whilst Porter’s (1979) five forces offer clear guidance towards a competitive positioning view, Prahalad and Hamel (1990) put forward the core competencies model as the ‘wellspring of new business development’ - generally meaning that the success of firms relies on the strength of their inner workings and efficiency. Wernerfelt (1984) also stresses the importance of a resource-centric competitive strategy and questions why so many would dispute the importance of the strength of internal resources stating that ‘resources and products are two sides of the same coin’. It is not clear, though, which theory trumps the other, or in fact whether they are entirely separate at all. Porter’s five forces are rather clear cut and leave little room for misinterpretation. The success of a firm is almost exclusively dictated by its market position and thus relative performance compared to competitors. Porter (1981) also argues that the LCAG framework ‘defined strategy as how a firm attempts to compete in its environment, encompassing key choices about goals, products, markets, marketing, manufacturing, and so on.’ This definition of strategy would fit with his earlier work and is somewhat indicative of the fact that the strategy’s main goal is almost solely to secure competitive positioning. Porter then reinforces this point, noting that the concept of strategy emerged from the need to help the practitioner transform the daily chaos of events and decisions into an orderly way of sizing up firm’s position in its environment. Clearly, environmental fit and competitive positioning is something that Porter distinguishes from the RBV and prioritises as part of his work. The view of Porter could perhaps be summarised in a way that suggests ultimately competitive positioning is the most important thing to prioritise given that an efficient firm still wouldn’t be profitable if it were in an unfavourable competitive position. Thus, competitive positioning and RBV are two separate entities. In spite of this, it is also important to note that whilst Porter is defining ‘performance’ of the firm, he uses criteria such as profitability, cost-minimisation and innovativeness. Costminimisation and innovativeness are both measures that would typically be encompassed by the RBV. This opens the possibility of competitive position and RBV being some kind of feedback loop where in fact it is the utilisation and efficiency of the firm’s resources that ultimately lead to favourable competitive positioning. In fact, this could even be taken a step 1

further as one could argue that as a result of strong competitive positioning and thus potentially elevated profitability, new and more experienced managers could be hired to help strengthen core competencies. This would suggest that the RBV and competitive positioning are not in fact independent of one another. It is unclear whether two things that have a causational effect on one another can, by definition, be separate theories. Moreover, it may well be the case that not only are the RBV and competitive positioning part of a feedback loop, they are in fact mutually inclusive of one another. It is unclear as to whether a firm can feasibly secure strong market positioning without strong core competencies, or in fact whether resources can be fully optimised without a strong competitive position bringing about profitability. Andrews (1971) and Thompson and Strickland (1990) summarised this well, stating that the classic approach to strategy formulation begins with an appraisal of organisational competencies and resources. Those which are distinctive or superior relative to those of rivals, may become the basis for competitive advantage if they are matched appropriately to environmental opportunities. This neatly encapsulates the idea that the two ideas are not separate, but they are slightly different and being made to draw distinctions between the two is somewhat of a false dichotomy. In conclusion, it would seem just to suggest that the RBV and competitive positioning are positively separate in certain ways, particularly the angle from which the firm is viewed, though the two are closely related when it comes to cause and effect. It is unclear which causes the other and quite how much influence they have on one another, but they cannot exist autonomously from one another. However, being mutually inclusive of something does not mean being the same as it. Even if one were to claim that they are different perspectives of the same theory, it is difficult to argue that they do not offer unique insight and thus must be subtly different from one another. It could be argued that competitive positioning is an ultimate goal, and the RBV is a tool used to reach it. Word count: 883

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