Theory of Competitive Advantage

Robert Grant’s “The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation” is about exploiting an organization’s internal resources to propel its business model. The author explores the concept of how by simply assessing and becoming aware of a company’s resources, organizations can use that material to optimize their competitive advantage. The author details this information from a scholarly perspective in which he reveals that this approach was a long neglected one for strategy. Originally, organizations simply focused on the external environment and how best to adapt to it as the core of their strategic endeavors. He alludes to the fact that this tendency was partially due to the dearth of a proper framework for implementing strategic measures based on internal resources. Thus, he spends the duration of the article elucidating a framework which he believes effectively fulfills this void. In doing so he places equal emphasis on the capabilities a firm has (which are linked to their internal resources) for spearheading their strategy. He utilizes several examples of real businesses to illustrate the various aspects of the framework he proposes. The article concludes with a renewed understanding of how comprehending relationships between external forces and internal ones is crucial for effecting competitive advantage within the business landscape.

The primary issues in this particular case are the particulars of the very framework the author discusses. There are five specific elements of the framework. The first involves organizations evaluating what capabilities and internal resources they actually have at their disposal. This is the quite possibly the most pivotal of the five steps because it is the foundation upon which the other four are underpinned. The author makes it clear that it is not possible to exploit those capabilities without adequate evaluation of what they fully entail. Thus, this step is actually comprised of two: one which focuses on the resources and a second which is based on an organization’s examination of its capabilities. The third facet of this framework is to quantify this information in terms of profit. Organizations must understand how lucrative these advantages are, as well as how they can translate them into profit. Once this information is ascertained the next procedure identified in the framework is to actually select a strategy. This step is vitally important because of what the author identifies strategy as: a long term trajectory for which to achieve business objectives. Moreover, it is largely predicated on the internal assets and abilities of an organization. The final step of the framework is to continually maintain and actually advance those assets and abilities.

I learned a lot from reading this article. What I learned the most, however, is the nearly pervasive applicability of Grant’s framework and stance on strategy. Internal resources do form the basis for the capabilities that one has—whether or not one is a competitive organization or just a person. Thus, myself or any other reader can apply Grant’s theory on strategy to our own lives, regardless of the objective. If I want to become a better student, for instance, I would simply have to evaluate what resources I have at my disposal, how they influence my capabilities, and develop a strategy around them. Otherwise, people (as well as companies) are merely allowing external forces to dictate their capacity to fulfill their objectives.