The theory of value chain model and resource-based model are two strategic frameworks that are used to guide organizations in making choices and selecting strategies to achieve a competitive advantage.
The value chain model, developed by Michael Porter, views the organization as a series of activities that add value to a product or service. These activities can be categorized into primary activities (such as inbound logistics, operations, marketing and sales, and customer service) and support activities (such as procurement, human resource management, technology development, and firm infrastructure). According to this model, competitive advantage can be achieved by optimizing and integrating these activities to create value for customers at a lower cost or in a unique way.
Strategic choices and selection using the value chain model involve identifying areas of the chain where the organization can differentiate itself or reduce costs. For example, a company may choose to invest in advanced technology to improve its operations or develop a strong customer service team to enhance its post-sales support. By selecting these strategies and aligning them with the overall business strategy, the organization can gain a competitive advantage over rivals.
On the other hand, the resource-based model focuses on the internal resources and capabilities of the organization as sources of competitive advantage. It emphasizes that resources such as physical assets, human capital, technology, brand reputation, and organizational culture can provide a sustainable advantage if they are valuable, rare, difficult to imitate, and non-substitutable (VRIN criteria). According to this model, organizations should exploit their unique resources and develop capabilities that are difficult for competitors to replicate.
Strategic choice and selection using the resource-based model involve identifying and leveraging the organization's key resources and capabilities to create a competitive advantage. For example, a company may have a highly skilled workforce that enables it to develop innovative products or a unique patented technology that gives it a competitive edge. By selecting strategies that capitalize on these resources and capabilities, the organization can establish a unique market position.
In summary, the value chain model and resource-based model offer two different perspectives on strategic choice and selection. The value chain model focuses on optimizing and integrating activities along the value chain to create value for customers, while the resource-based model emphasizes leveraging internal resources and capabilities to gain a competitive advantage. Both frameworks provide valuable insights for organizations to make strategic decisions that align with their unique strengths and market opportunities. Ultimately, successful strategic choice and selection require a combination of understanding the organization's value chain and leveraging its key resources and capabilities.
Discuss the theory of value chain model and resource-based model in relation to strategic choice and selection
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