To understand why certain competitive strategies are more effective than others one must consider the distribution of resources in competing firms. Although a given firm may possess more or less of any particular resource, only those resources that are rare, valuable
and difficult to imitate provide a sustainable competitive advantage When the strategies employed are successful in leveraging the firm’s rare valuable, and difficult-to-imitate resources, that firm is likely to gain an advantage over its competitor in the marketplace and thus earn higher returns. Competitive advantages that are sustained over time lead to higher performance.
These arguments are somewhat clear when we consider tangible resources such as building, machinery, or access to capital. And in the more traditional competitive landscape, these tangible resources were the most important potential sources of competitive advantage. Thus if a firm could modernize its plant, or develop a more efficient distribution process, or access cheaper credit, it could compete successfully and prosper. But firms employ both tangible and intangible resources in the development and implementation of strategies, and as the nature of work and competition changes, intangible resources are becoming more important. Examples of intangible resources are reputation, brand equity, and excellent quality management. In fact, in any competitive landscape it has been argued that intangible resources are more likely to produce a competitive advantage because they often are truly rare and can be more difficult for competitors to imitate.