VRIO Framework

Valuable
Does a resource adds value by enabling a firm to exploit opportunities
or defend against threats
Does it help organizations to increase the perceived customer value
through product differentiation or decreasing price of product
Resources that cannot meet this condition, lead to competitive
disadvantage
Important to continually review the value of the resources because
constantly changing internal or external conditions can make them
less valuable or useless at all
 Rare
Resources that can only be acquired by one or very few companies
are considered rare
Rare and valuable resources grant temporary competitive advantage
When more than few companies have the same resource or uses the
capability in the similar way, leads to competitive parity
Firms can use identical resources to implement the same strategies
and no organization can achieve superior performance.
Losing valuable resources and capabilities would hurt an organization
because they are essential for staying in the market
 Costly to Imitate
A resource is costly to imitate if other organizations that doesnt have
it cant imitate, buy or substitute it at a reasonable price
A firm that has valuable, rare and costly to imitate resources can (but
not necessarily will) achieve sustained competitive advantage
Reasons why resources can be hard to imitate:
Historical conditions. Resources that were developed due to historical events
or over a long period usually are costly to imitate.
Social Complexity. The resources and capabilities that are based on companys
culture or interpersonal relationships.
 Organized to Capture Value
Resources itself do not confer any advantage for a company if its not
organized to capture the value from them
Firm must organize its management systems, processes, policies,
organizational structure and culture to be able to fully realize the
potential of its valuable, rare and costly to imitate resources and
capabilities
Companies can achieve sustained competitive advantage.
Google's VRIO Capability - Excellent employee
management
Googles ability to manage their people effectively is a source of both differentiation and
cost advantages.
Google uses data about its employees to manage them other hire based on trust and
relationship in people
This capability allows making correct (data based) decisions about which people to hire
and the best way to use their skills.
Google is able to hire innovative employees that are also very productive ($1 million in
revenue per employee)
It is also a rare capability because no other company uses data based employee
management so extensively.
Imitability: Hard to imitate atleast in the near future - companies should build the highly
sophisticated software to make data based decision making, which is both costly and
hard to do - HR managers should be trained to make data based decisions and forget
their old management methods
Google has trained HR managers that know how to use the data and manage people
accordingly company has IT skills to collect and manage the data about its employees.