The resource-based approach (also known as the resource-based view or RBV) is a strategic framework that emphasizes the importance of a firm’s internal resources and capabilities as the key source of sustainable competitive advantage.

It argues that resources that are valuable, rare, inimitable, and Organization effectiveness (VRIO) can help firms achieve and maintain superior performance over time.

Rather than focusing on external market conditions, the RBV directs attention to what the firm already possesses—such as human capital, intellectual property, brand equity, and operational efficiencies—as the foundation of strategy.

The Resource-Based Approach to Strategy Analysis was proposed by Robert M. Grant. He outlined a logical, sequential process that starts from identifying internal resources and ends with addressing gaps after strategy selection.

The correct sequence is:

1. E. Identify and classify the firm’s resources in terms of strengths and weaknesses
   → This is the starting point, focusing on what the firm owns or controls.

2. D. Combine the firm’s strengths into specific capabilities
   → Resources are integrated to form organizational capabilities.

3. C. Appraise the profit potential of these capabilities in terms of their potential for sustainable competitive advantage
   → Capabilities are evaluated using criteria like durability, imitability, and appropriability.

4. B. Select the strategy that best exploits the firm’s capabilities relative to external opportunities
   → Strategy is chosen by aligning internal strengths with external environment.

5. A. Identify resource gaps and invest in upgrading weaknesses
   → Finally, the firm addresses deficiencies to support the chosen strategy.