Management Strategy/Sustainable Competitive Advantage
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In 1991, Jay Barney developed the Resource Based View of the firm. This view established four criteria that determine a firm's competitive capabilities in the marketplace.
These four criteria for judging a firm's resources are:
- Are they Valuable? (do they enable a firm to devise strategies that improve efficiency or effectiveness?)
- Are they Rare? (if many other firms possess it, then it is not rare)
- Are they Imperfectly Imitable? (because of unique historical conditions, causally ambiguous, and/or are socially complex)
- Are they Non-Substitutable? (if a ready substitute can be found, then this condition is not met)
When all four of these criteria are met, then a firm can be said to have a sustainable competitive advantage. In other words, the firm will have an advantage in the marketplace which will last until the criteria are no longer met completely. As a result, the firm will be able to earn higher profits than other firms with which it competes.