Four conditions must be met if a firm’s resources are to be used to achieve a sustainable competitive advantage. The resources must be valuable, rare, imperfectly imitable, and nonsubstitutable.
Valuable resources allow companies to improve their efficiency and effectiveness. Unfortunately, changes in customer demand and preferences, competitors’ actions, and technology can make once-valuable resources much less valuable. For sustained competitive advantage, valuable resources must also be rare resources. Think about it. How can a company sustain a competitive advantage if all of its competitors have similar resources and capabilities? Consequently, rare resources, resources that are not controlled or possessed by many competing firms, are necessary to sustain a competitive advantage. However, for sustained competitive advantage, other firms must be unable to imitate or find substitutes for those valuable, rare resources. Imperfectly imitable resources are impossible or extremely costly or difficult to duplicate. Valuable, rare, imperfectly imitable resources can produce sustainable competitive advantage only if they are also nonsubstitutable resources, meaning that no other resources can replace them and produce similar value or competitive advantage.