Strategy Assignment 2 Internal Analysis - VRIO
Shai Zamir Dan Saguy
, Inc. is an American multinational electronic commerce company in the online retail market. Its’ headquarters is in Seattle, Washington, United States. It is the world's largest online retailer, with different websites for large countries. Amazon was founded by Jeff Bezos in 1994 (the site went online in 1995). It started as an online bookstore, but soon diversified, selling DVDs, Music, software, games, electronics, apparel, furniture, food, and toys.
From a papermill company founded almost 150 years ago, Nokia is a multinational communications corporation that is headquartered in Finland and engaged in the market of manufacturing of mobile devices and in converging Internet and communications industries, with over 132,000 employees in 120 countries, sales in more than 150 countries and global annual revenue of over €42 billion and operating profit of €2 billion as of 2010. Nokia produces a wide range of mobile devices and offers Internet services such as applications, games, music, maps, media and messaging through its OVI platform. Its global device market share was 23% in the second quarter 2011.
The VRIO framework is the foundation for internal analysis and it begins with the identification of resources and capabilities. Resources can be tangible and intangible; capabilities may have such characteristics as well. VRIO analysis is a way to distinguish resources and capabilities from core competencies. Specifically, VRIO analysis should show the importance of value, rarity, inimitability, and organization as building blocks of competitive advantage. In our assignment we will try to analyze 4 resources and one capability for each of the companies which we choose previously: Amazon and Nokia.
VRIO analysis for Amazon and Nokia comparing 5 resources Resource 1: Brand name Value Amazon.com is a strong brand name (rated #14 in 2011 most valuable brands). Amazon is well known for their low prices and excellent service what leads to a significant advantage over the competitors. The experience that Amazon has in the arena makes its brand name valuable to the firm.
Rarity Most of Amazon's competitors are relatively small and their brand names are not worldwide recognized. There are few competitors which possess a highly recognized brand name. Ebay is the most significant player (and also the market leader). By strengthening their customer service and distribution resources, Amazon is constantly nurturing their brand name and it is continuously eating away its’ competitors market share (see graph eBay vs. Amazon). Amazon's brand name is a rare resource.
Inimitability Amazon's brand name is one of the strong resources of the company. Internet buyers will probably visit Amazon.com during the shopping process. The firm's reputation speaks for itself and it is hard for smaller competitors to position themselves anywhere close to the brand name of Amazon due to the cost disadvantage that they will face in acquiring or substituting this resource (mostly advertising and marketing costs). EBay is the only competitor who possesses strong brand name that competes with Amazon which its brand name is inimitable in the arena of online selling.
Organization Amazon has the organizational capability to exploit their solid brand name. The firm identified that this resource is a competitive advantage and use it (under the famous logo) to attract suppliers, buyers, publishers and partners. Amazon produces value from its brand name which its performance is above normal.
Value Nokia’s brand name value has decreased in the last years (from #5 in 2007 to #81 in 2011 most valuable brands); especially due to the bad performance demonstrated in the Smartphone market. Nevertheless, it is still a strong brand in the world. Nokia is a highly trusted brand, especially in terms of low cost efficient mobile phones, thus ensuring...
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