To help you understand the VRIO Framework, this article discusses the features as well as the stages using a real-world VRIO framework example.
A VRIO analysis is a method for evaluating a company’s internal competitive advantages. Therefore, It starts with four questions to determine whether your businesses’ internal resources can be a source of sustained competitive advantage. Accordingly, you might aim these questions at a business unit, a product, or a service. Here are the four most important aspects of the analysis.
The Four Questions
The questions that a VRIO Analysis asks are classified to assess four basic qualities. These include:
- What is the Value of a service, product, or corporate investment?
- How profitable is it?
- Do you possess a strong brand identity?
- What differentiates you from your rivals?
- How widespread is the item in question?
- Is the marketplace already saturated with it?
- Could it be easily accessed by competitors?
- Do your competitors possess the same resources?
- How difficult is it to imitate?
- Can it be copied easily?
- Do you have a patent to protect it?
- Is there a substitute available in the market?
- How successfully does the company handle it?
- Does the firm recognize its complete commercial viability?
- Do you reward innovation within your team?
VRIO Framework Example
The best way to understand how to conduct the analysis is to look at a real-life example. To illustrate, let’s consider the VRIO framework example of Starbucks.
VRIO Analysis of Starbucks
Kristin Kennedy, Jennifer Azarian, and Colleen Steele conducted a VRIO analysis of Starbucks as part of their research. Consequently, they came up with three of their key business resources:
- A Strong Global Presence
- The introduction of Specialty Coffees
- An Upscale, Cozy Atmosphere
Here are some of the findings from their analysis:
1. Strong Global Presence
Firstly, a strong global presence can prove to be a valuable resource to possess. It helps increase your revenue, allows you easier access to the broader market, in addition to giving you protection against negative media coverage.
Secondly, a strong global presence in a world full of coffeehouse chains can help you stand out from the crowd and become easily recognizable and unique.
Thirdly, the brand image created by Starbucks makes it very hard to imitate. Consequently, it is improbable to imagine any coffeehouse chain trying to compete or challenge the popularity that Starbucks possesses.
Finally, Starbucks has a strong internal framework. It is in a position that allows them to establish stores worldwide without compromising Its brand identity. Consequently, It is able to maintain its branding image by decorating each outlet to give that signature coffee shop experience.
Thus, Starbucks has a sustainable competitive advantage due to its strong global presence.
2. Specialty Coffees
One of the biggest attractions at any Starbucks outlet is the wide range of variants they offer. This variety of customizable specialty coffees is a very valuable resource.
Since Starbucks introduced these new flavors and customizations, they have become a unique attraction. However, A vast majority of existing coffeehouse chains offer these same resources to customers.
Due to their Specialty coffee not being rare, it is easily imitated by global coffee chain houses.
To make sure it does not lose its uniqueness, Starbucks is known to update its menu regularly. As a result, it is able to stay ahead of the competition and take full advantage of its resources.
Therefore, Starbucks has a realized competitive parity owing to its specialty coffees.
3. Upscale and Cozy Atmosphere
Starbucks has aimed to transform how Americans view coffee since Howard Schultz’s shopping trip to Milan in 1983, turning it into an “experience” as opposed to a morning commodity. As a result, their unique shop ambiance is calm, friendly, and welcoming.
The in-store experience provided by Starbucks remains one of its rarest qualities as it is the only large coffeehouse chain to provide such a facility to its customers. However, multiple rivals are very close to duplicating this experience.
Imitating the ambiance that Starbucks provides is not only challenging, it is also relatively expensive. Therefore, this trademark quality allows Starbucks to enjoy a unique decor without the risk of imitation.
Since the late 80s, the company has done an outstanding job of ensuring that the cozy atmosphere has become a core part of the brands’ identity.
As a result, Starbucks has a temporary competitive advantage
In summary, the VRIO framework is an excellent strategic planning tool. It helps you to determine several key factors that will help grow your business. These may include improvements to properly utilize your resources, the efficacy of your internal controls, as well as alerting you which resources are easily replicable.
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