Vrio Framework

Next, we look at the four VRIO concepts in more detail and then discuss project management in this context.

Valuable?

Rare?

Difficult to imitate?

Supported by Organization?

Competitive Implications

Performance

No

-

-

A

K

Competitive Disadvantage

Below Normal

Yes

No

-

Competitive Parity

Normal

Yes Yes

Yes Yes

Yes

Competitive

Advantage

Sustained

Competitive

Advantage

Above Normal Above Normal

Adapted from Barney, Jay B., Gaining and Sustaining Competitive Advantage, Second Edition, 2002. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

TABLE 20-1. THE VRIO FRAMEWORK

Adapted from Barney, Jay B., Gaining and Sustaining Competitive Advantage, Second Edition, 2002. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

TABLE 20-1. THE VRIO FRAMEWORK

► Valuable: "Do a firm's resources and capabilities enable the firm to respond to environmental threats or opportunities?"13 Valuable resources contribute to a firm's efficiency and effectiveness. A resource has value when it exploits opportunities and neutralizes threats in the environment. In the Resource-Based View context, valuable resources are defined in economic terms—that is, they generate above-normal returns.

►Rare: "Is a resource currently controlled by only a small number of competing firms?"14 Common or generic resources are not sources of competitive advantage. At best, they are a source of competitive convergence or parity. However, rare resources can offer temporary competitive advantages and are sources of strength.15 Rareness, then, is necessary, but not the only resource characteristic for a competitive advantage.

►Inimitable: If resources can be easily copied, a firm stands to only achieve competitive parity through value and rareness. The question of inimitability that we should focus on is: "Do firms without a resource face a cost disadvantage in obtaining or developing it?" Inimitability means firms protect their resources so that competitors cannot easily copy them or find substitutes. For example, companies such as Southwest Airlines use extensive selection processes to hire individuals with spirit and spunk to serve and entertain customers.16 These characteristics are rewarded and encouraged by the company and are not easy for competitors to duplicate.

►Organizational Focus: Finally, in terms of the fourth question, Barney suggests that we also examine the organization. "Are a firm's other policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources?"17 Organizational focus refers to integrated and aligned managerial practices, routines, and processes. Organizational focus also connotes managerial leadership and decisions that support key assets and how they are developed and sustained.

Within the VRIO framework, if a resource is only valuable, it leads to competitive parity. Both value and rarity are required for a temporary competitive advantage; and value, rarity, and inimitability are required for a sustained competitive advantage. An organizational focus is necessary to both develop a competitive advantage and sustain it. The VRIO concepts are presented in Table 20-1.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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