VRIO framework Flashcards
The question of value
Do resources and capabilities enable a firm to exploit an external opportunity or neutralize an external threat?
VRIO framework
The primary tool for completing the internal analysis is the VRIO framework and stands for four questions one must ask about a resource or capability to determine its competitive potential.
I. The question of Value
II. The question of Rarity
III. The question of Imitability
IV. The question of Organization
The question of rarity
Is a resource currently controlled by only a small number of competing firms?
The question of imitability
Do firms without a resource face a cost disadvantage in obtaining or developing it?
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?
Sources of costly imitation
- Unique historical conditions
- Casual ambiguity
- Social complexity
- Patents
Unique historical conditions
When a firm gains low-cost access to resources because of its place in time and space, other firms may find these resources to be costly to imitate. Both first-mover advantages and path dependence can create unique historical conditions.
Casual ambiguity
When competitors cannot tell for sure what enable a firm to gain an advantage, that advantage may be costly to imitate. Sources of causal ambiguity include when competitive advantage are based on “taken-for-granted” resources and capabilities, when multiple non-testable hypotheses exist about why a firm has a competitive advantage, and when a firm’s advantages are based on complex sets of interrelated capabilities.
Social complexity
When the resources and capabilities a firm uses to gain a competitive advantage involve interpersonal relationships, trust, culture, and other social resources that are costly to imitate in the short term.
Patents
Only a source of sustained competitive advantage in a few industries, including pharmaceuticals and speciality chemicals.
