In the Resource-Based Model of Above-Average Returns, which sequence correctly lists the key steps from first to last?

• A. Resources, Capability, Competitive Advantage, An Attractive Industry, Strategy Formulation and Implementation, Above-Average Returns
• B. Resources, Capability, Competitive Advantage, Strategy Formulation and Implementation, An Attractive Industry, Above-Average Returns
• C. Resources, Capability, An Attractive Industry, Competitive Advantage, Strategy Formulation and Implementation, Above-Average Returns
• D. Resources, An Attractive Industry, Capability, Competitive Advantage, Strategy Formulation and Implementation, Above-Average Returns

Answer: (A)

The sequence begins with identifying what the firm owns internally—its resources—and then how those resources are combined into capabilities. From there, those capabilities can yield a competitive advantage when they create unique value that rivals can’t easily imitate or substitute. Once you’ve established that internal strength, you assess the external environment to see if the industry is attractive enough to sustain above-average returns. With a favorable external context, you then formulate and implement a strategy that leverages the firm’s unique resources and capabilities to exploit the opportunity. The expected outcome is above-average returns.

If you place the industry’s attractiveness before developing capabilities and a competitive advantage, you’d be prioritizing external conditions over internal strength, which doesn’t align with the resource-based view. Likewise, moving strategy formulation before confirming industry attractiveness or before building the internal strengths would risk pursuing a plan that can’t be effectively executed or won’t yield superior performance.