| Strategic Resources | Expansion |
| VALUABLE resources aid in improving the organization’s effectiveness and efficiency while neutralizing the opportunities and threats of competitors. | Although the airline industry is extremely competitive, Southwest Airlines’ turns a profit virtually every year. One key reason why is a legendary organizational culture that inspires employees to do their very best. |
| RARE resources are those held by few or no other competitors. | Southwest Airlines’ culture provides the firm with uniquely strong employee relations in an industry where strikes, layoffs, and poor morale are common. |
| DIFFICULT-TO-IMITATE resources often involve legally protected intellectual property such as trademarks, patents, or copyrights. Other difficult-to-imitate resources, such as brand names, usually need time to develop fully. | Southwest’s culture arose from its very humble beginnings and has evolved across hour decades. Because of this unusual history, other airlines could not replicate Southwest’s culture, regardless of how hard they might try. |
| NONSUBSTITUTABLE resources exist when the resource combinations of other firms cannot duplicate the strategy provided by the resource bundle of a particular firm. | The influence of Southwest’s organizational culture extends to how customers are treated by employees. Executives at other airlines would love to attract the customer loyalty that Southwest enjoys, but they have yet to find ways to inspire the kind of customer service that the Southwest culture encourages. |
Table 1 Resource-Based Theory: The Basics. According to resource-based theory, organizations that own “strategic resources” have important competitive advantages over organizations that do not. Some resources, such as cash and trucks, are not considered to be strategic resources because an organization’s competitors can readily acquire them. Instead, a resource is strategic to the extent that it is valuable, rare, difficult to imitate, and nonsubstitutable.
Important Points to Remember:
- Resources such as Southwest’s culture reflect four qualities of competitive advantage–valuable, rare, difficult to imitate, and nonsubstitutable–are ideal because they can create sustained competitive advantages. A resource that has three or less of the qualities can provide an edge in the short term, but competitors can overcome such an advantage eventually.
- Firms often bundle together multiple resources and strategies (that may not be unique in and of themselves) to create uniquely powerful combinations. Southwest’s culture is complemented by approaches that individually could be copied–the airline’s emphasis on direct flights, its reliance on one type of plane, and its unique system for passenger boarding–in order to create a unique business model in which effectiveness and efficiency is the envy of competitors.
- Satisfying only one or two of the valuable, rare, difficult to imitate, nonsubstitutable criteria will likely only l