VRIO

VRIO is a business analysis framework that forms part of a firm's larger strategic scheme, proposed by Jay Barney in 1991. The basic strategic process of any firm begins with a vision statement, and continues on through objectives, internal & external analysis, strategic choices (both business-level and corporate-level), and strategic implementation. VRIO falls into the internal analysis step of these procedures, but is used as a framework in evaluating just about all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under. VRIO is an initialism for the four question framework asked about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability). The question of value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?" The question of rarity: "Is control of the resource/capability in the hands of a relative few?" The question of imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?" The question of organization: "Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?" The basic question asked by the V in the VRIO framework for internal analysis is “Is this resource or capability valuable to the firm?” In this case, the definition of value is whether or not the resource or capability works to exploit an opportunity or mitigate a threat in the marketplace. If it does do one of those two things, it can be considered a strength of the company. However, if it does not work to exploit an opportunity or mitigate a threat, it is a weakness. Occasionally, some resources or capabilities could be considered strengths in one industry and weaknesses in a different one.