The article titled ‘VRIO Framework’ by Ovidijus Jurevicius dated October 21, 2013 explains the concept of VRIO framework and how it can be used to measure competitive advantage of a firm.
The article states that the framework measures sustainable competitive advantage using the four variables, Value, Rarity, Imitability and Organization. If a firm passes this four layered test, it has sustainable competitive advantage over other firms in the industry.
Value refers to the value addition by the process, strategy or product to the organization. It measures the ability to exploit opportunities and defend the organization against threats by external factors.
Rarity is the uniqueness of the product or strategy. If the strategy or product is unique, it offers the company at least temporary competitive advantage. This advantage can turn into long term advantage if the unique product or strategy is very difficult to imitate. However if the imitability of the product is high, then the competitive advantage cannot be sustained on a longer term basis.
Last phase is the organizational structure and processes in place to carry forward the product or strategy and fully utilise ad derive the potential value. If all these phases are satisfied, then the product or strategy is expected to bring sustained competitive advantage to the company. Otherwise, the advantage may not be there or even if it exists, may be short term in nature.
The article is very much related to the concepts of strategic management that we have studied so far. All the concepts of designing the strategy, utilising it, protecting it, as well as the role of external factors can be seen while studying this framework. The article also talks about how the framework is a mixture of other models such as Porter’s five forces model, SWOT analysis or the BCG matrix.
References
Jurevicius, O. (2013). VRIO Framework. Strategic Management Insight. Retrieved from https://www.strategicmanagementinsight.com/tools/vrio.html.
Mindtools. Porter’s Five Forces. Mindtools. Retrieved from https://www.mindtools.com/pages/article/newTMC_08.htm.
Investopedia. BCG Growth Share Matrix. Investopedia. Retrieved from http://www.investopedia.com/terms/b/bcg.asp.
Mindtools. SWOT Analysis. Mindtools. Retrieved from https://www.mindtools.com/pages/article/newTMC_05.htm.
