Characteristics of resource and capabilities that decides the sustainability of competitive advantages to earn profit

There are four major Characteristics of resource and capabilities that decides the sustainability of competitive advantages to earn profit:

Durability: The period over which a competitive advantage is sustained depends in part on the rate at which a firm’s resources and capabilities deteriorate. In industries where the rate of production novation infests, product patents are likely to become obsolete. Similarly, capabilities which are the result of the management expertise of the CEO are also vulnerable to his or her retirement or departure. On the other hand, many consumer brand names have a highly durable appeal.

Appropriability: This speaks of return on resources. Appropriability refers to the ability of the firm’s owners to maximize appropriateness of the returns on resource. Even where resources and capabilities are capable of offering sustainable advantage, management must be careful about possible threats.

Example-King Fisher Failure Because of Not Understanding the ROI

Transferability: The ability   of rivals to attack position of competitive advantage relies on their gaining access to the necessary resources and capabilities. It is easier to transfer resources and capabilities between companies.

Imitability: True test of imitability is how easily and quickly can the competitors build the resources and capabilities on which a firm’s competitive advantage is based?

For Example: In financial services, innovations lack legal protection and are easily copied. Here again the complexity of many organizational capabilities can provide a degree of competitive defence. Where capabilities require networks of organizational routines, whose effectiveness depends on the corporate culture, imitation is difficult.