A company's resource strengths symbolize its competitive advantages and are significant in establishing of its competitiveness and aptitude in thriving within the marketplace. Four major tests can be used to assess the competitive power of a company's resource strengths (Dyer et al., 2017).
The Test of Competitive Value
To achieve a competitive advantage in the marketplace, a company should implement a value-generating strategy that is different from the strategies of its competitors. It should provide enhanced customer value for a similar cost or equal customer value for a reduced cost. Where possible, a company can accomplish both by providing enhanced customer value at a reduced cost. To achieve this, the managers should understand the entire value delivery system and not just the section of the value chain in which it takes part (Bharadwaj et al., 2013) .
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The Test of Inimitability
Ensuring that resources are inimitable reduces competition to a company. If a resource is inimitable, then it is likely to ensure the sustainability of profit. Having a resource that can be easily copied by competitors can only generate short-term value. Therefore, managers should rigorously apply this test to their company's long-term strategies to ensure that their resources are inimitable. Even though inimitability is challenging to maintain, as competitors are likely to find ways to copy the valuable resources, managers can forestall replication and prolong profits for some time. This can be achieved through path dependency, which refers to the complicated process taken in creating a product making it hard for competitors to imitate resources instantly. Inimitability can also be achieved by taking time to create brand loyalty through rigorous marketing, creating ambiguity in the production process, and ensuring a sizeable investment into the creation of a resource. Companies should also ensure that research is continuous in an attempt to improve their resources.
The Test of Substitutability
A company should have the ability to deliver goods or services which cannot be replicated. Company managers should always be on the lookout for the potential impact of substitute resources. This will help to maintain relevance within the market and protect the company from losing market to its competitors ( Hitt, Ireland & Hoskisson, 2012) .
The Test of Rareness
Company managers should ensure distinctive competence in their resources and consumer marketing skills (Dyer et al., 2017). Resources that are accessible to all competitors hardly ever offer any substantial competitive advantage. When evaluating their companies' resources, managers ought to assess them relative to their competitors'. Every company should perform a harsh external assessment to demonstrate its core competence by identifying one activity that it does relatively better than any other company while ensuring that its resources are unique.
References
Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. (2013). Digital business strategy: toward the next generation of insights. MIS quarterly , 471-482.
Dyer, J. H., Godfrey, P., Jensen, R., & Bryce, D. (2017). Strategic management: Concepts and cases . John Wiley & Sons.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases: competitiveness and globalization . Cengage Learning.
Pearce, J. A., Robinson, R. B., & Subramanian, R. (2000). Strategic management: Formulation, implementation, and control . Columbus, OH: Irwin/McGraw-Hill.
