2.11 The VRIO Framework

Starting with value: Does the product in question provide value to your company? If not, why is the firm even considering it? Putting out a product with no value will only be disadvantageous to the firm.

Moving on to the question of rarity: Is the product we are offering new to the market or already existing in one form or another? If we are offering a simple but different product, are the changes we’ve made significant enough to consider it rare? If not, there’s no expectation of a competitive advantage.

Now considering imitability: Imitability brings to question the ease of copying or imitating the product being offered. Is the product you are offering difficult or easy to duplicate? Is it expensive or inexpensive to develop? If another firm is willing and able to replicate the product and undertake associated costs, our firm can only expect to hold a competitive advantage for a limited time (the time it takes our competition to develop their similar product).

Finally considering organization: When our product demonstrates value, rarity, and difficult imitability, the final and possibly most important element to consider is organization. Is our firm organized and operate in such a manner that we can capture as much profit from our product as possible? What changes need to be made to promote innovation within the firm, create a more dedicated culture, and support a more effective management strategy? If our firm leaves unclaimed value in the market for another firm to take advantage of, our competitive advantage won’t last but when our organization can capture all available value, as well as pass the questions of value, rarity, and imitability, we expect a lasting sustainable competitive advantage.