The resource-based approach is an emerging framework to strategy definition (Mahoney and Pandian 1992). The key proposition underlying the resource-based framework is that a firm's strategy should focus on the assortment of heterogeneous and imperfectly mobile resources (tangible and intangible) that are unique to the firm in order to create and sustain positions of competitive advantage (Panayides and Gray 1999). For a resource to be relevant to competitive advantage or to lead to superior
performance and high returns over a long period of time it needs to be valuable, rare, imperfectly imitable and difficult to substitute. In other words, it must constitute a barrier to rivals' attempts at resource acquisition, imitation or substitution (Barney 1991). The view is supported by empirical evidence which suggests that idiosyncratic firm factors, not industry factors, explain most of the variance in firm performance (Persoon and Virum 2001; Sanchez et al. 1996; Rumelt 1991; Mauri and Michaels 1998); or in Hunt's (2000) words, industry is the 'tail'; and the firm the 'dog' which wags the tail.
In practice, resources and not factor endowments are never by themselves inputs to the production process; the real inputs are the services they render (Penrose 1959; Gregori 1987). It follows from this observation that the growth of a firm is largely determined by the opportunities that exist for the firm to use the productive services of its resources to create a market offering that is valuable to specific market segments and it is profitable to sustain.
What are the implications of this view for regional ports? The resource-based approach suggests that the strategies which a regional port can pursue and are more likely to be successful should focus on the use of resources (such as better logistics, good transport network and intermodal arrangements, vacant land, skilled labour, efficient cargo handling and storage facilities, effective configuration of supply chains, and managerial talent which are unique to the regional port and valuable to port customers) to seek marketplace positions of competitive superiority and to contest for growth. An effective approach to competing on resources should then incorporate the identification and classification of port resources, the identification of port capabilities in terms of what the port can do more efficiently and effectively than its rivals. This should also include the appraisal of the rent-generating potential of resources and capabilities in terms of their potential for sustainable competitive advantage and the appropriateness of their returns. Only after this assessment has been made should port managers select a strategy that enables them to exploit effectively the resources of the port relative to external opportunities and competition.
A useful tool that can assist port managers to determine the competitive position that the port's unique resources can provide to the regional port is the competitive position matrix proposed by Hunt (2000) and presented in Figure 2.1.
Relative Resource-Produced Value
Lower Parity Superior Intermediate Position Competitive Advantage (Efficiency Advantage) Competitive Advantage (Relative Advantage) Competitive
Disadvantage Parity Position
Competitive Advantage (Effectiveness Advantage) Competitive Disadvantage Competitive Disadvantage Intermediate Position
Source: Adapted with from Hunt, S.D. (2000: 137) A general theory of competition, Sage.
Figure 2.1 Competitive position matrix
The matrix suggests that the potential of port resources to create competitive advantage can be assessed against the net relative value the resource is capable of generating which is based on the judgment of the two key dimensions – the relative cost of the resources and the relative value that the resources can produce. In this framework, competitive advantage is possible in three ways. First, a port can have an efficiency advantage, which arises when its lower resource costs produce a market offering of similar value as that provided by the competing ports. Second, a port can attain an effectiveness advantage because its resource parity costs produce superior value relative to competing alternatives. A relative competitive advantage which is associated with superior financial returns is achievable when both the efficiency and effectiveness advantages are materialised; a goal never easy to accomplish; nevertheless worth pursuing because the potential benefits are additive.
Lower Parity Costs High Relativ e Res o u rces Co sts
When a port has no advantage in either dimension relative to rivals the likely outcome is competitive inferiority. Likewise, when a port has neither disadvantage nor advantage in either dimension, competitive parity may occur. A more complex situation occurs when a port has advantage in one dimension but inferiority in another dimension. In this case the competitive outcome is contextual and hard to define. Depending on the perception of the relative importance of each dimension, a port can temporarily enjoy a position of competitive advantage, competitive parity or competitive disadvantage.
However, as with any competitive advantage that is created, sustaining it requires the ability of the port to continually erect barriers to competition to avoid the loss of advantage created over time. Heterogeneous and immobile resources alone will not guarantee a sustainable competitive advantage. Sustainability will occur only when rivals find it difficult to both imitate the competitive advantage-generating resources and develop or acquire strategic substitutes for them. More importantly it is the ability of the port to upgrade its resources and enhance its position by finding new and better ways to produce more efficiently what is most desired by the shippers.