The theory of value chain model and the resource-based model are both frameworks used in strategic management to understand competitive advantage and make strategic choices.
The value chain model, developed by Michael Porter, divides a firm's activities into primary and support activities. Primary activities include inbound and outbound logistics, operations, marketing and sales, and service. Support activities include procurement, technology development, human resource management, and firm infrastructure. This model helps identify where value is added within the organization and how each activity contributes to the firm's competitive advantage. By analyzing the value chain, firms can determine which activities they should focus on to create a sustainable competitive advantage. Strategic choices related to the value chain model involve deciding which activities to perform in-house and which to outsource, as well as identifying areas where efficiencies can be improved or cost reductions can be made.
The resource-based model, on the other hand, focuses on a firm's internal resources and capabilities as sources of competitive advantage. It suggests that if a firm possesses unique, valuable, and difficult-to-imitate resources and capabilities, it will have a sustainable competitive advantage. Resources can be tangible (such as physical assets and financial resources) or intangible (such as knowledge, patents, and brand reputation). Capabilities refer to a firm's ability to utilize its resources effectively to create value. According to the resource-based model, strategic choice involves identifying and leveraging the firm's unique resources and capabilities to create a competitive advantage. This may involve developing or acquiring new resources, improving existing capabilities, or reconfiguring the firm's resource base.
Both models play a crucial role in strategic choice and selection. The value chain model helps firms understand their internal activities and the ways in which they create value. It facilitates making decisions regarding which activities to prioritize and how to link them to obtain a competitive advantage. The resource-based model allows firms to assess their internal strengths and weaknesses and identify their unique resources and capabilities. By leveraging these distinctive resources and capabilities, firms can differentiate themselves from competitors and create value for customers. Strategic choices and selection are based on an analysis of both models in order to develop a holistic understanding of the organization's competitive advantage and identify the most effective strategic options to pursue.
c) Discuss the theory of value chain model and resource based model in relation to strategic choice and selection
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