VRIO Analysis

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Barney (1991) defines VRIO analysis as a strategic management tool used to analyze a firm’s internal resources and capabilities, in efforts to determine if they can be used to derive a competitive advantage for the firm. It entails asking and endeavoring to answer questions that ask if a resource is: Valuable; Rare; costly to Imitate; and whether a firm is well Organized to capture the value of the resources? Any resource that meets all four requirements can bring sustained competitive advantage for the company. The pictorial representation of the VRIO analysis tool is as shown below. Rarity of Resources Those resources that are accessible to one or only a limited number of firms are regarded as being rare. When a resource is valuable and rare, a temporary competitive advantage is achieved by the firm, however if the resource is valuable but accessible to more than a few firms, a competitive parity among the firms is achieved (Jurevicius, 2013). Costly to Imitate Resources Jurevicius (2013) explains that a resource is regarded as being costly to imitate when other firms which do not have access to it are incapable of imitating, buying or obtaining a substitute for it, at a price considered to be reasonable to the acquiring firm. Imitation can occur either through duplication or substitution, (Jurevicius, 2013). Barney, (1995) explains why some firms may have access to resources that are too costly to imitate, not disposable to other firms. These may be due to historical factors, causal ambiguity or simply sociological complexities. Resources developed over a long period of time, mostly as a result of intense research and development activities, turn out to be too costly to imitate by other firms. First mover advantages... ... middle of paper ... ...or Competitive Advantage. Academy of Management Executive, 9(4), pp. 49-61. Jurevicius, O. (2013). VRIO analysis, Strategic Management Insight. [online] available at accessed April 8, 2014. Masdar City, (n. d). The Global Centre of Future Energy: Masdar City. [online], available at accessed April 8, 2014. Saxena, R. P. (2011). Dubai Mall: A Multipurpose Destination in the Middle East. Researchgate.net. [online] available at Zerkel, E. (2014). Masdar City: Sustainable City of the Future, The Weather Channel. [online] available at www.weather.com/news/science/earth-day/masdar-united-arab-emirates sustainable-city-20130726 accessed April 7, 2014.

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