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Summary of the article: Grant, R. M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California management review, 33(3), 114-135. $3.87
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Summary of the article: Grant, R. M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California management review, 33(3), 114-135.
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  • Strategy consulting
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  • Universiteit Van Amsterdam (UvA)

Summary of the article: Grant, R. M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California management review, 33(3), 114-135.

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  • April 28, 2020
  • 7
  • 2019/2020
  • Summary

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  • Universiteit van Amsterdam (UvA)
  • Business Administration
  • Strategy consulting
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Summary of the article
“The Resource-Based Theory of Competitive Advantage:
Implications for Strategy Formulation”
By R.M. Grant (1991)

Strategy = the match an organization makes between its internal resources and skills and
the opportunities and risks created by its external environment
 Previously focus on link between strategy and external environment (e.g. Porter),
but no focus on link between strategy and the firm's resources & skills
 Recently more attention towards the resources as foundation for strategy

Implications of the resource-based theory unclear for 2 reasons
1. The various contributions lack a single integrating framework
2. Little effort has been made to develop the practical implications of this theory

Purpose of this article
To make progress on the 2 points above by proposing a framework for a resource-based
approach to strategy formulation which integrates a number of the key themes arising from
this stream of literature

The framework is a 5 stage procedure for strategy formulation
1. Analyzing the firm’s resource base
2. Appraising the firm’s capabilities
3. Analyzing the profit-earning potential of firm’s resources and capabilities
4. Selecting a strategy
5. Extending and upgrading the firm’s pool of resources and capabilities

, Making the resources and capabilities of the firm the foundation of long-term strategy
because:
- Internal resources and capabilities provide the basic direction for a firm’s strategy
o Starting point of strategy formulation must be a statement that answers
“what is our business?”
o Don’t focus the strategy on customers because they are constantly changing:
firm’s own resources/ capabilities are much more stable
o Companies should define served markets broadly instead of narrowly (e.g.
transportation instead of railroad)
o Serving broadly defined customer needs is difficult
- Resources and capabilities are the primary source of profit for the firm
o A firm’s ability to earn profit depends on 2 factors (see model below)
 The attractiveness of the industry in which it’s located
 Its establishment of competitive advantage over rivals
o Research states first factor is primary basis, but research has failed to support
link between industry structure and profitability
o The 2nd factor more likely and shows that resources are most important

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