Question 1
The RBV (resource-based view), a common basis for firms’ competitive advantage, looks into the application of various intangible and tangible, but valuable, resources of a particular firm. VRIO is one of the major resource-based tools that can be used to analyze how a company’s strategic capabilities may provide sustainable competitive advantage based on value, rarity, imitability, and organization. Examination of a company’s strengths and weaknesses that VRIO can uncover follows the chart in figure 1 below as in Rothaermel (2013, p. 91). It is noteworthy that any negative answer to the questions in the chart reflects the weaknesses of a firm while an affirmative response represents a strength. The first question in the VRIO framework seeks to establish is valuable to the firm through facilitating the firm’s attempts to defend against the existing threats and exploit its opportunities. A resource only becomes valuable when they promote the organization’s quest to ameliorate value of customers (Rothaermel 2013). In this manner, the VRIO helps the company identify its weaknesses and strengths in such aspects as pricing or differentiation, which are related to value. Resources that are not valuable imply a competitive disadvantage for the company. In the same vein, sustainable advantage requires the company resources to be rare. According to Kozlenkova, Samaha and Palmatier (2014) rare resources can only be acquired by the fewest number of companies. Sustainable competitive advantage requires resources to be rare since otherwise many firms can apply a similar resource in strategy formulation, thus, putting them at the same level. As the chart illustrates, a firm only has a sustainable competitive advantage if its pool of resources is costly to imitate. In this manner, the competitors cannot imitate, duplicate, substitute or buy the resource. Finally, the company resource must be organized to capture the value (Kozlenkova et al. 2014). It is noteworthy that resources alone cannot offer the company any significant competitive advantage unless it is well organized to draw value from the available resource. The company must examine its operational systems, determine their strengths and weaknesses with a view to increasing its ability to maximize its use of the resources.
Fig 1. VRIO