BMT1035- STRATEGIC MANAGEMENT

FALL SEMESTER: 2021-22

DIGITAL ASSIGNMENT-06

NAME: Vasu Dev Kancheti

Reg. Number: 20BBA0054

References:

 Barney, J. B. (1995). Looking Inside for Competitive Advantage. Academy

of Management Executive, Vol. 9, Issue 4, pp. 49-61
 Strategic Management Journal, 5, pp. 171–180. Barney, J.B. (1991).
“Firm resources and sustained competitive advantage.” Journal of
Management, 19, pp. 99–120.

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VRIO:
The VRIO framework is a strategic analytical tool that aids firms in identifying and safeguarding
the resources and skills that provide them a long-term competitive edge. Any firm's fundamental
strategy process starts with a vision statement and continues with objectives, internal and
external analysis, strategic decisions (both company and corporate), and strategic
implementation. The company hopes that this procedure will provide them a competitive edge in
the market they operate in. VRIO is part of the internal analysis stage of these procedures, but it's
also utilized as a framework for assessing a company's resources and capabilities, regardless of
whatever phase of the strategic model it's in.

VRIO stands for Value, Rarity, Imitability (Ease/Difficulty to Imitate), and Organization, and it
is a four-question framework that is used to measure a resource's competitive potential (ability to
exploit the resource or capability). Firms use a variety of methodologies to assess their external
(Porter's 5 Forces, PEST analysis) and internal (Value Chain analysis, BCG Matrix)
environments in order to discover the sources of competitive advantage. VRIO analysis is one of
these methods for analyzing a company's internal resources. The RIO analysis asks four
questions to determine if a resource is valuable, uncommon, or both. Is it expensive to imitate? Is
a company structured in such a way that it can capture the value of its resources? A resource or
capacity that fits all four criteria might provide a firm with a long-term competitive advantage.

VALUABLE:

The framework's first inquiry is whether a resource creates value by allowing a company to take
advantage of opportunities or fight against risks. A resource is regarded valuable if the answer is
yes. Resources are also important if they assist firms in improving the perceived value of their
customers. This is accomplished through improving product distinctiveness or lowering the
product's price. Resources that are unable to achieve this need are at a competitive disadvantage.
It's critical to keep an eye on the worth of resources since changing internal and external
circumstances might make them less useful or even useless.

RARE:

Rare resources are those that can only be obtained by one or a few firms. Rare and precious
resources provide a competitive edge for a limited time. Competitive parity, on the other hand,
occurs when a large number of enterprises share a resource or use a capacity in a comparable
way. This is due to the fact that organizations can employ the same resources to accomplish the
same plans, and no organization can outperform the others. Even though competitive parity is not
the intended position, a company should not overlook significant but shared resources. Losing
important resources and competencies would be detrimental to an organization's ability to
compete in the market.

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Difficult To IMITATE:

If other organizations that don't have it can't replicate, acquire, or substitute it for a fair price, it's
expensive to mimic. Imitation can take two forms: directly replicating (duplicating) a resource or
delivering a similar product/service (substituting).

A company with valuable, uncommon, and difficult to duplicate resources can (but does not have
to) attain long-term competitive advantage.

Resources can be hard to imitate because:

 Cultural circumstances: Resources that were created as a result of historical events or

over a lengthy period of time are frequently expensive to duplicate.
 Uncertainty about the cause: Companies are unable to pinpoint the specific resources that
contribute to their competitive edge.
 Difficulty in social relationships: The resources and talents that are determined by the
culture of the firm or interpersonal interactions.

ORGANIZATION:

If a firm is not organized to capture the value from its resources, it will be at a disadvantage. To
fully utilize the potential of its precious, uncommon, and costly to copy resources and
capabilities, a company must arrange its management systems, procedures, policies,
organizational structure, and culture. Only then will businesses be able to maintain a competitive
advantage.

Using VIRO tool:

Tangible and intangible resources are the two sorts of resources. Land, buildings, and machinery
are examples of tangible assets. Because tangible assets are so easy to come by in the market,
they are rarely a source of competitive advantage. Intangible assets, on the other hand, such as
brand recognition, trademarks, intellectual property, a unique training system, or a distinctive
style of completing activities, are more difficult to obtain but provide long-term competitive
advantages. As a result, the first place to seek for valuable, unusual, and difficult to duplicate
resources is the company's intangible assets.

Examining the value chain and doing SWOT analysis are two simple ways to find such
resources. The most valuable activities, which are the source of cost or differentiation advantage,
are identified through value chain analysis. You may simply identify useful resources or talents
by looking into the analysis. Furthermore, a SWOT analysis identifies the company's strengths
that may be exploited to capitalize on chances or protect against threats (which is exactly what a
valuable resource does). If you're still having trouble locating relevant resources, consider the
following questions:

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  Which actions reduce manufacturing costs without lowering consumer perceived value?
 Which activities help to differentiate products or services and boost customer perceptions
of value?
 Do you have any particular ties with your supplier?
 Do you have staff with special abilities and skills?
 Is your company known for its quality, innovation, and customer service?
 Do you excel at any tasks that your competitors don't?
 Do you have any additional advantages over your competitors?

For imitating:

 In your industry, how many other firms own a resource or have the potential to function
in the same way?
 Is it possible for competitors to readily purchase a resource on the market?
 Is it likely that rivals will be able to access the resource or capacity in the near future?
 Is it possible for other organizations to readily reproduce a resource?
 Is it possible for rivals to quickly create an alternative resource?
 Is it protected by patents?
 Is it possible for a resource or competence to be socially complex?
 Is it difficult to pinpoint the specific processes, actions, or other elements that make up
the resource?

When you find a core competence that possesses all four VRIO traits, you should do everything
you can to safeguard it. It is, after all, the source of your long-term competitive edge. The first
thing you should do is inform senior management about this resource and offer ways to use it to
save costs or distinguish products and services. Then you should consider ways to make it more
expensive to copy. If other firms are unable to duplicate a resource at a fair cost, it will remain
scarce for a long time.

The worth of resources fluctuates with time, so it's important to keep an eye on them to see if
they're still as valuable as they were. Competitors will want to copy the resources in order to get
the same competitive advantages, which imply they will no longer be scarce. Inside a business,
new VRIO resources or skills are frequently produced, and by recognizing them, you can better
preserve your sources of competitive advantage.

Advantages and Disadvantages of VRIO:

Few companies take the time to examine their core skills to understand what distinguishes them.
It's a useful activity in our opinion because:

 It enables you to capitalize on previously unappreciated competitive advantages.

 It can assist you in charting a route for future initiatives and effectively allocating
corporate resources.

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  It can provide insights that can aid in the identification and evaluation of prospective
opportunities and dangers in order to determine which are more essential.

The VRIO framework is designed to help you find the precise resources that make your company
more competitive by focusing entirely on internal resources. SWOT (Strengths, Weaknesses,
Opportunities, and Threats), on the other hand, is a high-level strategic planning approach that
helps businesses discover areas where they're doing well and where they may improve, both
internally and externally. It does not analyse your internal resources as fully as VRIO does, but it
does seek to assist you in assessing your future chances based on your current position and
external situations.

VRIO of ITC Ltd. (Indian Company):

An organization's resources may be divided into two types: tangible resources and intangible
resources. Physical items such as land, buildings, plant, equipment, inventory, and money are
examples of Itc Bat's tangible resources. Itc Bat's intangible resources include the skill and
administrative level of its managers, the company's brand names and goodwill, intellectual
property rights, copyrights, trademarks, and a unique connection with supply chain partners.

Valuable: Itc Bat considers the resource to be valuable. The important resources that are useful
to the organisation, according to J Ramachandran and K S Manikandan of the case study, are
financial resources, people resources, marketing experience, and operations management.

Rare - "Itc Bat" must determine whether the Itc Bat's important resources are rare or difficult to
obtain. If they aren't uncommon, both existing rivals and newcomers will be able to simply get
them and enter the competitive environment.

It's Expensive to Imitate: - Most sectors are currently under threat of disruption. According to
the information supplied in ITC Limited: India First, the Itc Bat's primary distinction appears to
be tough to duplicate. On a larger scale, copying of Itc Bat products can take two forms:
duplication of the company's products and competitors developing replacement items that
threaten the current industry structure.

Organizational Competence & Attributes to Maximize Resource Utilization: It assesses how

well a firm has been able to capitalise on a valuable, scarce, and difficult-to-replicate resource in
the marketplace. There are two approaches to analysing the utilisation level of Itc Bat products.
Is the company able to fully use the resource's potential, or does it still have a lot of room for
growth? The amount of exploitation is frequently determined by the firm's execution team and
execution strategy. As a result, the amount of exploitation is an excellent gauge for evaluating
the organization's human resource quality. As a company takes activities that build on its
strategic resources, capabilities tend to emerge or increase over time.

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 Resources Value Rare Imitation Organization Competitive
Advantage
Brand awareness Yes Yes, Itc Bat No Itc Bat has Sustainable
has one of the utilized its Competitive
leading brand leading brand Advantage
in the industry position in
various
segments
Customer Yes, 23% of the Yes, firm has Has been tried Company is Provide
Network and customers invested to by competitors leveraging the medium term
Loyalty contribute to build a strong but none of customer competitive
more than 84% customer them are as loyalty to good advantage
of the sales loyalty successful effect
revenue
Supply Chain Yes Yes Near Fully utilized Keeps the
Network competitors business
Flexibility also have running
flexible supply
chain and
share some of
the suppliers
Global and Local Yes, as it Yes Can be Yes, it is one Providing
Presence diversify the imitated by of the most Strong
revenue competitors diversified Competitive
streams and companies in Advantage
isolate its industry
company's
balance sheet
from economic
cycles

Google’s VRIO capability:

Resources Value Rare Imitation Organization Competitive
Advantage
Excellent Yes Yes Yes Yes Sustained
employee Competitive
management Advantage
Capital Hire and No other For the time Google is Sustained
management retain company being, data- structured in competitive
data inventive, makes such driven human such a way advantage
productive extensive use capital that it can
people with of data-driven management derive value
the use of staff is both from this
human capital management. expensive and capabilities.

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 management difficult to HR and team
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produce some software and data to hire,
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data.

Google's ability to successfully manage its workforce is a source of both distinction and cost
savings. Unlike other organizations that manage their staff based on trust and relationships,
Google manages its personnel using data. This feature enables you to make informed (data-
driven) decisions regarding who to recruit and how to effectively utilize their abilities. As a
result, Google is able to hire creative and productive individuals ($1 million in income per
person). It is also a unique skill since no other organization employs data-driven staff
management as extensively as we do. Is it expensive to copy? It is too expensive to imitate, at
least in the short term. To begin, businesses must develop very complex software, which is both
costly and difficult to accomplish. Second, HR managers should be taught to make data-driven
decisions rather than relying on outdated management techniques.

It is also a unique skill since no other organization employs data-driven staff management as
extensively as we do. Is it expensive to copy? It is too expensive to imitate, at least in the short
term. To begin, businesses must develop very complex software, which is both costly and
difficult to accomplish. Second, HR managers should be taught to make data-driven decisions
rather than relying on outdated management techniques.

THANK YOU

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