Applying the VRIO Framework Essay

1Barney and Hesterly (2006), describe the VRIO framework as a penny-pinching tool to examine the internal environment of a tighten. They state that VRIO stands for quad questions one moldiness ask about a imagery or cap efficiency to determine its competitive potential1. The interrogative mood of Value Does a resource enable a impregnable to exploit an environmental opportunity, and/or neutralize an environmental threat? 2. The Question of Rarity Is a resource currently controlled by only a small number of competing firms? atomic number 18 the resources employ to make the products/services or the products/services themselves rare? 3. The Question of Imitability do firms without a resource face a cost disadvantage in obtaining or developing it? is what a firm is doing difficult to imitate? 4. The Question of Organization Are a firms other policies and procedures nonionic to support the exploitation of its blue-chip, rare, and expensive-to-imitate resources?What types of res ources should we evaluate (e.g., what types of resources lead to a competitive advantage)? 1) actual resources, 2) in substantial resources, 3) organizational capabilities.Reputation with guests for quality and reliabilityReputation with suppliers for fairness, non-zero-sum relationships organizational CapabilitiesFirm competences or skills the firm employs to transfer inputs to outputs Capacity to combine tangible and intangible resources, using firm processes to attain desired end. ExamplesOutstanding customer serviceExcellent product development capabilitiesInnovativeness or products and services dexterity to hire, motivate, and retain human capitalApplying the VRIO framework. According to the VRIO framework, a supportive manage to each questions relative to the firm being analyzed would indicate that the firm can sustain a competitive advantage. Below is an example of how to keep back the VRIO framework and the likely outcome for the firm under varying circumstances.Applyin g the VRIO exemplarthe value and rarity of a firms resources If a firms resources areThe firm can expectNot valuableCompetitive DisadvantageValuable, unless non rareCompetitive parity bit (equality)Valuable and rareCompetitive advantage (At least temporarily)Then, if there are high costs of imitation, the firm may enjoy a closure of sustained competitive advantage. Costs of imitation increase due to approximately combination of the following 1) Unique Historical Conditions (path dependence first performer advantages), 2) Causal Ambiguity (links between resources and advantage foggy), 3) Social Complexity (social relationships not replicable), 4) Patents (double-edged sword since period of protection eventually runs out).Applying the VRIO Framework, integrating the notion of Inimitability If a firms resources areThe firm can expectValuable, rare, but not costly to imitateTemporary competitive advantageValuable, rare, and costly to imitateSustained competitive advantage (if org anized aright)Organized properly deals with the firms structure and control (governance mechanismscompensation, reporting structures, management controls, relationships, etc).These must be aligned so as to give people ability and incentive to exploit the firms resources.Summary of VRIO, Competitive Implications, and frugal Implications Valuable?