 RBV’s basic premise is that each firm possesses a unique bundle of resources— tangible & intangible assets & organizational capabilities to make use of those assets  Each firm develops competencies from those resources & when put to use effectively, these become the sources of the firm’s competitive advantages

 [Tangible Assets + Intangible Assets] X Capabilities = Competencies--  Competitive Advantages  The term resource may be defined as the stock of assets & skills that belong to an organization at a point of time  Assets includes tangible & intangible assets

 Tangible Assets:  They have a physical presence  They are visible & hence easy to identify & evaluate  Example----Plant, Equipment, Land, Building

 Intangible Assets:  Mostly invisible & difficult to quantify  Example----Knowledge, skill sets, expertise of employees, commitment & loyalty of employees, trade secrets, organizational culture, creativity, team work etc.

 Scarcity : Is the resource widely available?  Superiority: Does the resource help fulfill a customer’s need better than the competitors?  Inimitability: Can the resource be easily copied or acquired?

 Appropriability: Who actually gets the profit created by a resource?  Durability: How quickly will the resource depreciate?  Substitutability: Are there viable alternatives?

 RBV defines capability as the ability of a bundle of resources to perform an activity  It is a way of combining assets, people & processes to transform inputs into outputs

 Physical assets, financial resources & human skills are of no use, unless these are put to good use, in order to produce results  C= F(TA, IA, S), where C=Capability, TA = Tangible Assets, IA= Intangible Assets & S= Skills

 Capabilities reflect a firm’s capacity to deploy resources that have been purposefully integrated to achieve a desired end state  The whole purpose is to create & exploit external opportunities & develop sustained advantages over rivals in the field

 Through repetition & constant practice capabilities become stronger & more valuable strategically  The term competency refers to the ability of an organization to achieve its purpose

 It is the ability to perform exceptionally well & increase the stock of targeted resources of an organization  Core competencies are the activities that the firm performs especially well & through which the firm adds value to its goods & services over a long period of time

 Core competencies serve as a source of competitive advantage for a firm over its rivals