Bahraini Commercial Banks & RBV Adoption

Introduction to Resource Based View & Strategic Competitive Advantage

The sustainability and strategic competitive advantage of commercial banks hinge on their capabilities to deploy and manage differentiated resources. These facilitate the development and delivery of distinct services, which enable such banks to retain their competitiveness in a market. This signifies their capabilities to deliver value to the stakeholders. The failure of the Bahraini commercial banks to retain competitive advantage vis a vis the multinational commercial banks, such as Citi Bank, HSBC, Standard Chartered etc, can be attributed to their failure to optimize differentiated resource deployment, hindering the innovation of services. This fails to motivate the local firms, investors and depositors to rely singularly on the commercial banking services of the local banks, like National Bank of Bahrain (NBB), Bank of Bahrain & Kuwait (BBK) etc, demonstrating their weaknesses to manage creative strategic initiatives effectively. These weaken the banks’ profitability, which calls for a thorough transformation. Change hinges on their competence to deploy hard to copy inputs, such as human capital, learning, knowledge and intellectual capital; low-cost fund; technology; and physical assets, developing differentiated strategies. These are the sources of their performance improvement, represented by competence to manage the banks’ assets and liabilities, and ensure the retention of sustainable competitive lead in Bahrain.

Resource Based View & Bahraini Commercial Banks

In view of the above, the article explains critically how the Bahraini commercial banks’ resource-based strategy (RBV) adoption, involving human capital, fund, technology, and physical assets, facilitates the development of differentiated strategies, improving their performance and retention of sustainable competitive advantage in Bahrain.

The failure of Bahraini commercial banks to adopt RBV impairs their retention of competitive advantage, signifying incompetence to employ distinct and hard to copy tangible and intangible resources. Their actions defy the views of noted researchers like Barney, Foss and Foss, Grindley and Teece etc, diminish their capabilities to use hard to copy resources to develop inimitable services. Such weaknesses hinder their skill, competence and capabilities to retain competitive advantage. It is relevant to note that a firm can develop inimitable services only when it uses distinctive resources, involving knowledge, skill, competence, capability, technology, capital etc. They help to elevate performance and deliver benefits to the customers, facilitating the retention of competitive advantage. RBV enables a firm to find a fit between what it is able to do and what it has the ability to do. It explains how a firm’s resources drive its performance in a competitive environment, facilitated by internal corporate analysis and external environmental analysis. These enable the managers and executives in a firm to realize why some firms are superior to others. A comparative analysis of firms helps to understand how successful firms utilize core competencies and diversification strategies to retain competitive advantage in a market.

Moreover, the failure of the Bahraini commercial banks to retain competitive advantage can be attributed to their inability to strengthen strategic management and services marketing initiatives. Their actions appear to contradict the views of Fahy and Smithee, who explain that the pursuit of sustainable competitive advantage is at the heart of strategic management and marketing of services. Their ideas suggest that gaining a competitive advantage through the provision of greater value to customers can be expected to lead to superior performance. This is measured in conventional terms such as market-based performances (e.g., market share, customer satisfaction) and financial-based performances (e.g., return on investment, shareholder wealth creation). It can be said from an analysis of their argument that a firm’s market-share and profitability are the outcomes of the efforts to secure cost and differentiation advantages. In this respect it may be relevant to note the ideas of Kotler. He notes a link between the delivery of value to customers and levels of customer satisfaction. These result into the elevation of market share and profitability gains. From the point of view of Barney, such gains are not automatic. He states that competitive advantage and profitability are the outcomes of the application of a number of resources. According to Grant, not all resources are of equal importance or possess the potential to be sources of sustainable competitive advantage. He recommends firms to focus on the characteristics of advantage-creating resources. It reveals from Barney’s work that the advantage-creating resources must meet four conditions, namely, value, rareness, inimitability and non-substitutability. He argues that the levels of durability, transparency, transferability and replicability are important determinants. In their explanation, Collis and Montgomery observe that resources must meet five tests namely inimitability, durability, appropriability, substitutability and competitive superiority.

Strategic Practices of Bahraini Commercial Banks

The strategic practices of the Bahraini commercial banks fail the eight tests,? involving complementarity, scarcity, low tradability, inimitability, limited substitutability, appropriability, durability and overlap with strategic industry factors, recommended by Amit and Schoemaker. The attainment of these may enable the banks to deliver value to customers, which is the source of their competitive advantage. Therefore, for the banks’ resources to be potential sources of competitive advantage, they must be valuable or facilitate the creation of value. The strategic management teams may do well to note the views of Barney, who explains that a strategic value development initiative must permit a bank to conceive of or implement strategies that improve its efficiency and effectiveness in meeting the needs of customers. They need to know that if resources do not enable the creation of value, they are not potential sources of advantage.

Bahraini Commercial Banks & Services Management Excellence

Bahraini commercial banks and their RBV adoption facilitate services management excellence, helping to sustain competitive advantage and profit. According to Lockett and Thompson profit is the outcome of an effective usage of differentiated resources. It is the source of a firm’s growth that can be strengthened by attaining competitive advantage. In their work Pladino, Widing and Whitwell explain the relationship between resources inimitability and their effective usage to develop differentiated services, attaining competitive advantage and profitability. They attempt to explain that a commercial bank’s competitive advantage solely depends on its resource deployment capabilities, facilitating unique services development. Such an outcome represents their differentiation, strengthening their market access, scale expansion, cost reduction and profitability. It is important to note that differentiation does not automatically lead to profitability. This hinges on a firm’s ability to manage productive opportunities, enabling the application of a unique bundle of tangible and intangible resources. These are the sources of a firm’s competitive advantage in a market. In her work Peteraf also notes a relationship between a firm’s differentiated resource usage competence, innovation and performance in a competitive market. An analysis of her argument signifies the importance of managerial and executive competence, processing and transforming firm resources into profitable services. This conforms to the ideas of Penrose, mentioned in Kor and Mahoney. She attaches priority to the transformation of firm resources into firm capabilities, explaining the role of knowledge management, innovative and creative abilitiesin generating value or profit. An interpretation of her work indicates that RBV facilitates the efficient utilisation of knowledge, converting the inputs into differentiated outputs to attain competitive advantage in a market. This can be attributed to the utility of RBV to develop and deliver value added services. This is the outcome of a firm’s access to rare and inimitable resources, explaining the linkage between non-substitutable resource usage; and differentiated services value building. Such value building culminates in a firm’s competitive advantage, retaining its market share and profitability.