The resource based view (RBV) competitive advantage of firms in the context of industry 4 0

The Resource-Based View RBV Competitive Advantage ofFirms in The Context of Industry 4.0 Manh Dinh Phan Matsui Yoshiki Department of Business Administration, Yokohama National University

The Resource-Based View (RBV) Competitive Advantage of

Firms in The Context of Industry 4.0

Manh Dinh Phan Matsui Yoshiki

Department of Business Administration, Yokohama National University

Abstract

Resource-based view strategies have attracted the attention of many academicians,

however, under the

new context of Industrial Revolution 4.0, the factors, namely the resources and capacities of firms, should be

audited in order that the updated characteristics will be clarified in this new context The qualitative method

with the emphasis on analyzing the current available online sources is the key data of this paper The findings

show that there have been many changes in the way the functions in the value chain of the company operate,

including marketing, human resource management, supply chain management and finance

1.1 Strategic Management In The World Of Business

Strategic management has long been the traditional activities in many areas, especially inbusiness fields throughout the World, of which the Asian references of Japan, South Korea,Taiwan and later China seem to be very interesting cases Normally, as firms from the earlierplayers of more advanced economies, strategic management is sometimes considered not verynecessary for them to pay attention to; however, with the rigorous competition from the newplayers in the markets, especially from emerging economies, the process of strategicmanagement has received the notification from these firms For the companies from late-comer economies, especially the startups and SMEs, the strategic management is even morevital to stay alive and catch up with the big players in the markets Accordingly, the process ofdevelopment of the companies from late-comer economies has seen the role of the strategicmanagement activity when they must catch up with the early birds from advanced economies

of the US and EU with the market assertion and technological advancements by the intensivestrategies

1.2 Strategic Management In The Industry 4.0 And The Role Of Internal

Resources And Capacities

The Industry 4.0 will bring a great number of changes in terms of structure and methods ofoperation and doing business of firms For instance, under the development of Internet andplatforms, the firms that is small but strong in terms of Internet-based technology can competewithout the possession of the abundant of human resources or the location advantage as thetraditional firms Booking.com and Skyscanner.com are the

704

examples for this case Thus, the strategies of new firms need to be oriented to this fashionwhile those from the traditional companies are also required to redirect their businessoperations and strategies to this trend to take the advantage of current and future markets.However, to have the competitive capacity, companies must accumulate the internalresources, especially the ones relevant to technological and digital economy, to develop inthese more competitive markets From this trend, this paper will try to clarify factors related tointernal capacity, or resource-based view of the firms, which can help companies emerge anddevelop in the context of IR 4.0.

2 Literature Review

2.1 Resource Based View And Framework For Analysis

The process of strategy management has been prevalent with the two viewpoints of based view and Market-based view While Market-based view school is popular with the analysis ofexternal environments to create the competitive advantage for the firms, the resource-based viewschool focuses on employing and leveraging the internal possessions to stay competitive in themarket The key authors of MBV school can be mentioned as Michael Porter, Andrews, Ghemawatwhile the representatives from RBV can be attributable to Grant and Barley and then Hamel andPrahalad in their book ‘Competing for the Future’ (1996) According to RBV school, firms hold abundle of resources, which can be combined, thus differentiating them from others and helpingthese firms gain competitive advantage over the competitors in the market

Resource-To analyze and update the application of RBV thoughts into the present trend in businessanalysis of Industry 4.0, the framework for the traditional RBV school will be analyzed as thefoundation for the finding stage of this paper The resources, capacities and competencies arethe key terminologies need clarified as the foundation for the analysis of Resource-based viewstrategies of the companies All factors relevant to competitive advantage and sustainablecompetitive advantage of firms will be based on their potential to create the internal resourcesand capacities of firms

Firstly, according to RBV school, resources are a firm’s assets that formulate the basicconditions for the development of firms They compose tangible assets, such as its factory,equipment, finances, and location, human assets, namely number of employees, their relevantskills, and motivation, and intangible assets such as its technology (patents and copyrights),culture, and reputation

Capacities are defined as the capacity of firm to exploit its resources They can be businessprocesses and methods that coordinate the interactions among these resources to transformthem into products/outputs A capacity is dependent on a certain function Therefore, there aremarketing capacities, manufacturing capacities, and resource management capacities and thelike

A competency is a cross-functional integration and coordination of capacities A corecompetency can be created via the accumulation of competencies that can be traced backthrough the widespread of corporation and is considered as the factor that can help companiesoutperform over other companies in the market Thus, the company must find the way tomaintain the competitive advantage in the market to avoid the risks of becoming inefficient inthe markets, or the situation of the products and technologies becoming obsolete that can turnthe strengths into the weaknesses When core competencies are outstanding in comparisonwith the current players, they are called distinctive competencies

2.2 Competitive Advantage And Sustainable Competitive Advantage

Competitive advantage based on resource-based view has attracted the attention of manyacademicians For instance, Lippman and Rumelt’s (1982) defined that a sustained competitiveadvantage is an advantage that continues to stay stable after efforts of others to duplicate theadvantage have ceased Followingly, Barney

705

(1991) generalizes sustained competitive advantage as a non-duplicatable advantage

According to Barney

(1991), a resource must fulfill ‘VRIN’ criteria to provide competitive advantage and achievesustainable performance

Valuable (V): A resource becomes valuable if it can create strategic value for the

company Specifically, this means that it can assist the firms with taking advantage of the

market opportunities or avoiding the negative effects from the threats If it does notcomplement any value for the company, then there is no value and motivation to own theseresources

Rare (R): The resource is rare when it must be hard to be identified by the current and

potential rivals of the firm and thus, resources will be able to become precious or unique to

provide competitive advantages for firms holding them Accordingly, resources which areowned by many firms in the market cannot offer the competitive advantage since they cannotlead to the formulation of unique and effective business strategies when compared to otherplayers in the market

Imperfect Imitability (I): This is to clarify that making a copy or imitation of the resources

will not be feasible The barriers can be very various such as the difficulties in accessing the

resources, ambiguous relationship between capacity and competitive advantage or thesophistication of the resources Resources are considered as sustained competitive advantageonly when other firms that do not possess them are not able to get access to them

Non-substitutability (N): This characteristic can be achieved when the resources cannot

be replaced by another resource This means that the competitors cannot gain the same

outcome by substituting this resource with the alternative ones

In general, it is generally easy to catch up with and imitate another company’s corecompetencies or capabilities if they originate from explicit knowledge, or in another word,knowledge that can be easily communicated This is the type of knowledge that competitiveintelligence activities can quickly be approached and leaked Tacit knowledge, in contrast, isknowledge that is difficult to be communicated since it is deeply imprinted in employeeexperience or in an organization’s culture Tacit knowledge is more valuable and more likely tolead to a sustained competitive advantage than the explicit knowledge because it is muchmore difficult for competitors to imitate

2.3 How can we analyze the resources and capacities?

From the above analysis, as can be seen that the resources and capacities can be analyzedand dug out via analysis of functions of value chain of the companies including the marketing,finance, human resources, operations and the like Therefore, resource-based view analysis isvery relevant to analysis of these functions and strategies related to internal resources are alsodependent on strategies of these functions

2.4 Introduction To Industry 4.0

Industrial revolution 4.0 has emerged as the key terminology in many industries They aresupposed to have a great impact on many areas and will be able to bring both the challengesand opportunities to business as well as people illustrated by Professor Klaus Schwab, Founderand Executive Chairman, in the World Economic Forum (2016) According to Professor Schwab(2016), for the supply side, many areas will witness the development of innovations andadvanced technologies that will lead to the new ways of satisfying the present customerdemands The new way of organizing the value chains can come from agile and innovativesystems with new competitors when firms can get access to global Internet-based platforms viathe whole functions of business such as R&D, marketing, and so on On the demand side, thetransparency, consumer participation, and new trend of consumer behavior also create the newthoughts of designing, marketing as well as delivering products to customers Thus IR 4.0 will

be expected have a great influence on business operation and enterprises

706

2.5 The Gap On The Literature

Although RBV school still plays an important role in business analysis in terms of academicand real business practices and IR 4.0 is also one of the most reminded terminologies when itcome to the analysis of business, there is a limitation of researches that link these two ideastogether Specifically, there is a lack of papers updating the characteristics of the resourcesand capacities (from RBV school) in the context of IR 4.0 What are they? Why should we havethem? and how can we achieve them? These are the questions that are raised and are in anattempt of the paper to answer

3 Methodology

The paper will employ the qualitative study method with the focus on analyzing the presentliterature and study cases on RBV and Industry 4.0 The research described in this paper has largelybeen carried out via a desk-based study utilizing various types of literature as primary data sources,ranging from scientific papers, journals, articles, magazines, newspapers, business reports fromcompanies, consultants’ reports, Social media to YouTube videos Throughout the development ofthis paper, the current state of scientific publications is regularly reviewed to identify any workbeing undertaken in a similar focus area Specifically, this paper aims at analyzing the presentapplication of internal analysis of firms` resources and capacities to compete in the businessenvironment in the context of Industry 4.0 Many questions on how to take advantage and leveragethe present RBV resources and capacities in order that firms, especially the SMEs and startups fromemerging economies, can survive and develop in the context of Industry 4.0 are raised Additionally,other questions on how to build and develop new resources and capacities in order that these firmscan outperform in the markets in the future context of competition are mentioned The paper willthen give the practical and, to some extent, theoretical implications in the niche of Resource basedview and Industry 4.0

4 Results And Findings

4.1 What are the latest foundation technologies in the industry 4.0?

The Industry 4.0 have the critical impacts on many industries from service sectors tomanufacturing one with the four specific foundations as described by Capgemini Consulting in anannual report (2014) These foundations comprise mobile, cloud computing, advanced analytics andmachine-to-machine communication

Mobile Foundation: According to the report, mobile technologies include all wireless

communication platforms and systems that can help mobile gadgets connected to the Wi-Fi or

Internet systems and technologies In the age of digitization and mobility, mobile gadgets willbecome the platforms for many business transactions

Cloud Computing: As the report described, cloud computing will help business activity

accessible by stakeholders when there is the data available everywhere and the easy access to

the Internet A great amount of data and information will be stored and analyzed and appliedbased on this technology

Advanced Analytics: This technology will operate based on the analysis of the data and information accumulated via the computer systems As the businessmen comment possessing data

mean possessing golds

Machine-to-Machine Communication: This is the achievement of Internet of Things

technology Accordingly, all machine can communicate with each other via the internet-based

and automatic systems This technology has the great application potentials in the fields oflogistics and manufacturing

4.2 Specific Strategies For The Functions (Resources And Capacities) Of The Company

In The Industry 4.0

707

The Industrial Revolution 4.0 with the new technologies and advancements have broughtmany changes throughout all functions of value chain of the companies In general, most of theindustries from the digital based ones like online shopping websites and services in cases ofhotel or airline booking to the highly raw material based and manufacturing industries likecrude oil or coal see the impacts from Industrial Revolution 4.0 albeit with the different extent.

4.3 Impacts of IR 4.0 on Marketing Strategies

As Philip Kotler (2017) mentions in his book of Marketing 4.0, marketing function isconsidered among the areas strongly impacted by Industry 4.0 Marketing managers of thefirms thus need to understand that there is a shift of market trend in marketing from vertical tohorizontal, from exclusive to inclusive and from individual to social Especially social media willleverage the connection and communication between people and companies to create andinnovate via coordination and cooperation In a traditional way, marketing functions alwaysfollow the activity of segmentation, dividing the market into homogeneous groups withreference to geography, demography, psychography and behavior In the digital age,customers are linked to each other in the forms of society and community Thus, communitiesbecome the new business segments and the companies need the permission to thesesegments if they want to involve in them And the companies with relevant brands mustinteract with these communities as friends in a harmonious style not just the one-wayadvertising campaigns as usual

For the way of doing business, even for the firms operating under the Business-to-Business (B2B)

or Business-to-Consumer (B2C) forms, customization capacity is an indispensable asset of thisIndustrial Revolution that will bring together the B2B and B2C perspectives Firms are required to becloser to their customers and even more reactive in identifying and translating their needs, throughdeeper customer’s interaction and participation at the value chain level - in designing and theaccelerating processes of products In this way, the latest technologies are making thetransformation of the buyer-seller relationship, both under the forms of the B2B and the B2C,weighing the firm’s readiness to quickly respond to the customer desires

In general, under the context of Industry 4.0:

“Marketing 4.0 is a marketing approach that combines online and offline interactionbetween companies and customers In the digital economy, digital interaction alone is notsufficient In fact, in an increasingly online world, offline touch represents a strongdifferentiation Marketing 4.0 also blends style with substance While it is imperative for brands

to be more flexible and adaptive due to rapid technological trends, their authentic charactersare more important than ever.” — Kotler describes his approach

As can be seen that, the traditional characteristics of marketing of offline and differentiationare not obsolete, instead they need to be leveraged in parallel with the accumulation anddevelopment of new characteristics and capacities of rapid adaptation to the customization andonline and digital presentation of the firms in the market to meet the requirements of new age

4.4 Impacts of IR 4.0 on Human Resource Strategies

In the new context of IR 4.0, human resource management is not only required in terms ofthe new skills and abilities of talent but also in forms of other aspects of workforcemanagement including recruitment, training and the using these talents

Accessing and Recruiting the Potential Talent: Under the co context of digital age of social media, the companies get access to the potential candidates via means of media like Social media

profiles, videos uploaded and the like to triangulate with the hard papers like CV sent to therecruiters Artificial Intelligence is on the way to renovate how resumes are approached, or on theway of searching the same number of resume pools With neuro-linguistic programming technologythat is used to make predictive analytics, recruiters can get insight into the analysis of the successhistory of an individual candidate in a certain job position and then

708

evaluate the sources of available candidates to recognize the most appropriate people with thesuitable skills and experience With video-based interviewing, the records of appearance, facialexpressions, reactions to the questions and so on could be checked and evaluated to confirmthe personal creativity, teamwork, knowledge, and intelligence of that talent.

The Assistance of Virtual Reality: Onboarding of human resource management activity

will be enhanced in terms of the effectiveness and consistency with the assistance of Virtual

Reality Employees could join the office tour via their mobile gadgets individually; they couldsay hello to their coworkers, participating in the meeting or conference hosted by leaders viathis mobile gadget The time for reviewing PowerPoint presentations or following speakers willnot be the problems for the employees

Replacing Some Tasks by Implemented by Workforce: With the help of the robotics

and machine-to-machine learning, many repetitive activities by the human can be conducted

by the robotics or machine These activities may include chasing the account receivable orinventories or making invoices This goal can be achieved with the development of RoboticProcess Automation when this new technology can learn how to implement the same repetitivejobs of the human without mistakes but in a more productive way Besides, the programmedsoftware can also conduct the activities of answering the phone calls or email messages withthe speed and an accuracy level like that of the real human resource

Personalization of Training System: With the development of Artificial Intelligence,

many training and learning activities of each employee will be programmed and adapted to the

suitable speed, productivity and work schedule of that person in order that he/she can organizehis/her study/work schedule personally and effectively (This cannot be achieved with thetraditional training and learning system because the trainees and learners must follow thecommon courses or programs designed for all people with fixed schedules and progresses).Coursera.com or Ted Talk on YouTube are good examples of facilitating the customizedservices for employees

Measurement of HR Performance via Intelligent Machines: The Internet-based and

advanced technologies can transform people progress, assisting supervisors to evaluate the

contributions from the workforce in terms of individual job or teamwork with the appropriateaccuracy and the data variety They can also enable supervisors to follow the performance ofemployees with a more transparent and impactful manner because measurement activity can

be more closely interconnected in time to the certain outcome being assessed objectively bymachines

4.5 Impacts of IR 4.0 on Finance Strategies

According to a report by Ernst & Young (EY) Consulting firm (2017) the context of IR 4.0, thefinance activity is also impacted and thus needs the adaptation to create new capacities andprocesses in order that this function can be well prepared for this new age Internet-basedachievements, such as analytics, cloud and robotic process advancements are on the way toenable the finance and accounting function to contribute much more value to the businessoperation in a faster way than the current capacity of firms can perform This can be seenunder the achievements of increasing in real time, at a huge reduction of cost, with higherdegrees of automatic coordination and lower probability of risk

Generally, specific technologies have the certain roles in the accounting and financing function.Artificial Intelligence can help managers exploit large structured and unstructured data sets It ispossible to master the patterns of financial activity and has the ability of learning and adapting tonew accounting or tax rules Artificial Intelligence is also likely to generate detailed discoveries intothe financial numbers while blockchain and cryptocurrency technology is in its initial lifecycle andtherefore it is also likely to threaten much of today’s common fashion of how we operate ourbusiness These advancements may influence the scale of finance-relevant activities, as well asassisting a shift to its position in the business and the value it offers Analytics based on a hugeamount of data can facilitate the financial function by offering the tools to get insight into the

709