Please explain vrio framework

Ketan kiran naik Best Answer

The VRIO framework is a strategic analysis tool designed to help organizations uncover and protect the resources and capabilities that give them a long-term competitive advantage. The framework should be put into play after the creation of a vision statement, but before the strategic planning process. Why? The differentiators and advantages you identify will determine how to approach the marketplace and inform strategic decisions that shape the fate of your company. VRIO is an acronym for a four-question framework of value, rarity, imitability, and organization. It is used to uncover "sustained competitive advantage." The four components of VRIO analysis are typically approached in the style of a decision tree: Value: Do you offer a resource that adds value for customers? Are you able to exploit an opportunity or neutralize competition with an internal capability? No: You are at a competitive disadvantage and need to reassess your resources and capabilities to uncover value. Yes: If value is established, move on in your VRIO analysis to rarity. Rarity: Do you control scarce resources or capabilities? Do you own something that’s hard to find yet in demand? No: You have value but lack rarity, putting your company in a position of competitive parity.Your resources are valuable but common, which makes competing in the marketplace more challenging (but not impossible). It’s recommended to go back one step and reassess. Yes: With value and rarity identified, your next hurdle is imitability. Imitability: Is it expensive to duplicate your organization’s resource or capability? Is it difficult to find an equivalent substitute to compete with your offerings? No: If your resource has value and rarity, but is affordable or easy to copy, you have a temporary competitive advantage. It will require considerable effort to stay ahead of competitors and differentiate your services—go back one step and reassess. Yes: You offer something that’s valuable, rare, and hard to imitate—now the focus is on your organization. Organization: Does your company have organized management systems, processes, structures, and culture to capitalize on resources and capabilities? No: Without the internal organization and support, it will be difficult to fully realize the potential of your valuable, rare, and costly-to-imitate resources. Your company will have a unused competitive advantage and will need to reassess how to attain the needed organization. Yes: Your company has achieved the ultimate goal of sustained competitive advantagewhen it has successfully identified all four components of the VRIO framework.