What Is The Vrio Framework?

If a firm’s resources are both valuable and rare, a firm may achieve a competitive advantage (Newbert, 2008). A resource is considered valuable when it improves the efficiency and effectiveness of a strategy, and when it exploits external opportunities or neutralises external threats (Barney, 1991). This wording is somewhat confusing as it draws a direct connection with the environmental model, i.e. Porter’s (1985) five forces. The ‘value’ variable could therefore be rendered exogenous to the RBV (Priem and Butler, 2001). On the other hand, Peteraf (1993) praises the model for its internal focus and ability to uncover potential sources of competitive advantage which cannot be attributed to the external environment, notably because areas of value are often so difficult to identify (Newbert, 2008). The term ‘potential’ is used because not all resources have the ability to create a SCA

The VRIO Frameworks permits to see which tangible and intangible resources give Amazon its superior performance. The company has a competitive advantage over its rivals as Amazon focuses on its customers. Amazon offers a wide array of selection of goods at various prices to its millions of customers. Amazon has been able to keep this competitive advantage by leveraging its resources. For the resources to attribute to competitive advantage they must pass the VRIO framework. The VRIO framework states that a resource must be valuable, rare, costly to imitate, and organized to captured value. Each of Amazon’s tangible and intangible resources are evaluated to see which meet the above criteria.

1. (TCO 1) _____ refer to a resource or capability a company must have before it can start competing in a given market. (Points : 5)

The VRIO framework evaluates resources and capabilities of a firm. Below is the evaluation of Targets VRIO framework.

Valuation is the estimation of an asset’s value, whether real or financial, based on variables perceived to be related to future investment returns, on comparison with similar assets, or, when relevant, on estimates of immediate liquidation proceeds (Pinto, Henry, Robinson, Stowe; 2010).

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:

| Valuable resources which are also rare convey a competitive advantage, but its relative permanence is not assured. The

For a business to be successful and have a competitive advantage, it is important to evaluate the company’s resources and capabilities (Pitt & Koufopoulos, 2012). Resources in a company are the productive assets owned (tangible or intangible) whereas capabilities are what the company can do with this (Grant, 2010). “Establishing competitive

VRIN framework is the four criteria of sustainable competitive advantage. To identify a company’s competitive advantage, they must consider if their capabilities are valuable, rare, costly to imitate and nonsubstitutable.

Zappos, as the first and the world’s largest online shoes retailer, has developed a high quality experience and delivered “wow” to customers. It has established a strong relationship with customer and stick to bring the store to the customer’s home. It has used less twenty yeas to become a profitable company holding an outstanding reputation for customer service and its employee are passionately engage in their works. In this paper, I aimed to analyze the relationship between strategic capabilities and performance in Zappos’s success. The business environment is not constant rather than changeable, so how Zappos goes ahead of revival and forms its unique competency advantages. I will utilize VRIO test to detect the company’s level of competitive advantage. In addition, I will continually combine Barney’ theory of resource based view(RBV) with Zappos to identified which resources it processes and how Zappos used those to form its core competency.

In addition, the widespread financial gap between the costs of production of originals and knockoffs causes design piracy to have some economic ramifications. Because the knockoff designs are manufactured at lower costs, they tend to sell for much less; for example, a replicate might sell for up to one-third the price of the original design (Wilson). This lowered price, combined with the fact that the copied design would hit store shelves first, causes consumers to deviate more

The VRINE analysis is used for Zespri to determine which resources, activities, and capabilities the company is using well to their advantage, and where the company could focus in order to gain a stronger competitive advantage over their customers.  The following chart is of the resources, activities, and capabilities that Zespri currently is using to differentiate them as a company in the kiwifruit industry.

Resources are the source of the firm’s capabilities. Resources are bundled to create organisational capabilities. Some of a firm’s resources are tangible and intangible. Tangible resources are assets that can be seen and quantified. Intangible resources include assets that typically are rooted deeply in the firm’s history and have accumulated over time. Intangible resources are relatively difficult for competitors to analyse and imitate. The four types of tangible resources are financial, organisational, physical and technological. And the three types of intangible resources are human, innovation and reputational (Hanson, D., Hitt, M., Ireland, R. D., & Hoskisson, R. E., 2011, pp. 75-78).

Value:It holds value because it gives the viewer the both ways in which the same technological resource can be used.

Calculating value added, could also contribute to determine a strategy of differentiation of products in businesses. Lets take the previous example NIKE. Nike has a low vertical integration but a high value added (thanks to its logo). Since this value added is marketing, value added is in this case an intangible entity. Differentiation is one of the competitive advantages.