Applying a Vrio Frameswork

Topics: Strategic management, Resource, Organization Pages: 3 (705 words) Published: January 8, 2011
Barney and Hesterly (2006), describe the VRIO framework as a good tool to examine the internal environment of a firm. They state that VRIO “stands for four questions one must ask about a resource or capability to determine its competitive potential:

1. The Question of Value: Does a resource enable a firm 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? [are the resources used 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 firm’s other policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources?”

What types of resources should we evaluate (e.g., what types of resources lead to a competitive advantage)? 1) tangible resources, 2) intangible resources, 3) organizational capabilities.

Tangible Resources|
Financial| * Firm’s cash and cash equivalents * Firm’s capacity to raise equity * Firm’s borrowing capacity| Physical| * Modern plant and facilities * Favorable manufacturing locations * State-of-the-art machinery and equipment| Technological| * Trade secrets * Innovative production processes * Patents, copyrights, trademarks| Organizational| * Effective strategic planning process * Excellent evaluation and control systems| Intangible Resources|

Human| * Experience and capabilities of employees * Trust * Managerial skills * Firm-specific practices and procedures| Innovation and Creativity| * Technical and scientific skills * Innovation capacities| Reputation| * Brand name * Reputation with customers for quality and reliability...
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