Management Strategy/Sustainable Competitive Advantage

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:

1. Are they Valuable? (do they enable a firm to devise strategies that improve efficiency or effectiveness?)
2. Are they Rare? (if many other firms possess it, then it is not rare)
3. Are they Imperfectly Imitable? (because of unique historical conditions, causally ambiguous, and/or are socially complex)
4. 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.