Question

Define and explain each component of VRIO analysis. What is necessary for a resource or capability to lead to sustainable competitive advantage?

Answer 1

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Components of VRIO n analysis are as follows:

1.V- Value: the analysis includes value as the main attribute to analyze whether we are and value into the product for customers or not, and that value must be more than that of our competitors.

2. R- Rarity: we should have something that is rare to find, that means we must provide something to customers which they cannot get from our competitors, the thing must be rare and unique.

3. I- Imitability: blooms whether it is easy to imitate our product or not, whether anyone can attempt to imitate or make duplicates of our products or not, depending upon the technology and cost involved.

4. O- organization: weather organizations have organized or systematic attributes or not- organized systems, functions, activities, processes, cultures, etc. are included in this process.

The necessity for resources and capabilities to lead sustainable competitive advantage are as follows:

1. Valuable: the resources and capabilities we have must be valuable enough to add value which would help in improving efficiency and productivity.

2. Rare: the resources and capabilities need to be rare and unique in order to have a competitive advantage over others.

3. Imperfectly imitable: the resources and capabilities should be hard to imitate and hard to implement because of increased cost and technology to imitate.

4. Non-substitutable-the real resources we use should be nonsubstitutable with the other commonly found resources in order to make it costlier to find any substitute.