VRIO Analysis

Making the Most of Organizational Resources

VRIO Analysis - Making the Most of Organizational Resources

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A resource is "rare" if few others have access to it.

When did you last ask yourself why your business has a certain market position? Do you know why it's doing better or worse than its competitors?

For example, how do your team's skills and knowledge contribute to the organization's success? Do your patents and copyrights put the company in a winning position? Or is some other factor helping – or impeding – you?

Each organization has its own specific set of resources, from people through processes, physical assets, and more. And the way that you use those resources to operate day to day will be a major factor in your success, too.

You'll need to evaluate both the potential and the effectiveness of all of these resources, so that you can build a competitive edge. And one useful model for doing this is VRIO Analysis.

What Is VRIO?

VRIO Analysis was developed by Jay Barney, as reported in his article, "Firm Resources and Sustained Competitive Advantage." At first, Barney used the terms "Value," "Rareness," "Inimitability," and "Substitutability" but, in later writings, he changed "Substitutability" to "Organization," leading to the acronym we know today: VRIO.

According to Barney, the resources and assets that are valuable, rare and inimitable, and that you are organized to use effectively, will likely contribute most to delivering your organization's mission. Therefore, you need to make sure that you make the fullest use of such resources, and take care to protect them.

But what do these terms mean in this context? Let's explore each one in detail*.

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