Resource Based View - The VRIO framework
Where resources and capabilities in an industry are immobile and heterogeneous, not all firms have the ability to sustain competitive advantages (Barney 105). For this reason, companies that apply the VRIO framework stand to sustain through assessment of the four major resource attributes. While these measures are interdependent, it is important to note here that theories linking the four resource measures are purely theoretical. One such study, the researchers sought to create a structural model that evaluates the effect of capability and resources characteristics on the sustained competitive advantage. It was determined that rareness and value are interdependent and thus may indirectly and directly affect competitive advantage (Talaja 51).
Overall, if a capability or resource controlled by a firm lacks value, organizing it will reduce the firm’s revenues and increase its costs. Where it is valuable and not rare, its exploitation will only produce competitive parity and not a competitive advantage. Where the capability/resource has the first two attributes but is cheap to imitate, its exploitation would only yield short-term competitive advantage (Barney and Hesterly 94). Finally, where a firm exploits a resource that is valuable, rare, expensive to imitate but lacks the sufficient organizational element, it stands to lose some of the competitive advantages to others as was the case for Xerox company.The interdependence of these measures implies that managers seeking to sustain competitive advantage must work towards creating and amassing the various kinds of resources. These include physical, organizational, human, financial and intellectual (Barney 105). Likewise, he/she must amass capabilities to utilize these resources. More importantly, the manager must focus on the characteristics of the available assets.
This will not only boost competitive advantage but also aid in the development of strategies revolving around the capabilities and resources (Talaja 62). Finally, this would also help in neutralizing emerging threats in the environment. Indeed, rarity, imitability, value, and organization would help any manager to gauge the return potential that comes with an exploitation of any available resource and capability.
Works Cited
Barney, Jay and Hesterly, William. Strategic Management and Competitive Advantage. New Jersey: Prentice Hall. 2008. Print.
Talaja, Anita. Testing VRIN Framework: Resource Value and Rareness as Sources of Competitive Advantage and Above Average Performance. Management 17.2(2012): 51-64. Web. 23 Mar. 2016 https://www.efst.hr/management/Vol17No2-2012/3-Talaja.pdf
Barney, Jay. Firm Resources and Sustained Competitive Advantage. Journal of Management 17.1(2001): 99-120. Web. 23 Mar. 2016 https://www.efst.hr/management/Vol17No2-2012/3-Talaja.pdf
