When you are running a business or you’re one of the business heads in the organization, assessing from time to time as to where your resources stand is of utmost importance. This is achieved by the VRIO framework. VRIO analysis allows a company to assess its resources at the microlevel.
According to developer Barney, J.B (1991),
- Resources must be rare
- They must be valuable
- Non- substitutable
- Imperfectly imitable
How does the VRIO model work?
After carrying out the VRIO analysis, the evaluation process begins. The outcome of the analysis and evaluation is used to work out strategies and make decisions for the company keeping long-term goals in mind.
Aside from assessing the company’s competitive advantage, the result of the analysis also helps in making changes to the extent that sometimes certain “components can be outsourced” as well.
Few other factors that might work in conjunction with the VRIO analysis components are-
Analysis techniques employed
With the help of data obtained from the above parameters, a company can access a wealth of information pertaining to a company’s resources and competitive advantage.
4 VRIO resources:
The main question that “V” in the VRIO framework asks is, are the resources of any value to the company?
The resource needs to have an abundant supply to assess a company’s capabilities.
If a firm does not have the resources do they suffer due to cost disadvantage?
Once the individual carrying out the VRIO analysis understands the nuances of value, rarity, imitability, this is usually followed by the company’s organization process.