What is the significance of each letter in the VRIO framework?

The VRIO framework is a tool for analyzing a company's internal resources and capabilities to see if they can be a source of sustained competitive advantage. Each letter in VRIO stands for a different aspect of this analysis: Value, Rarity, Imitability, and Organization. 'Value' refers to whether a resource enables a firm to exploit an environmental opportunity or neutralize an environmental threat. 'Rarity' is about whether a resource is possessed by one or few companies. 'Imitability' refers to how easily competitors can duplicate the resource. 'Organization' is about whether a company is organized to exploit the resource. If a resource or capability meets all four of these criteria, it can be a source of sustained competitive advantage.

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VRIO typically comes after you've come up with a mission statement that sets the grand vision for your project. But note that VRIO analysis should take place before the strategic planning process. This is because VRIO uncovers the resources and capabilities that give your organization a long-term competitive advantage. Whatever results you extract from this analysis will in turn determine how you approach your strategic decisions. Each of the four letters (VRIO) asks key questions to determine if the business is well equipped with the resources to be competitive. If it turns out your company lacks certain traits and can't be competitive in specific areas, VRIO can help you avoid pursuing the wrong ideas. (Slide 2)

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VRIO Analysis

How do you know if a venture is worth your time, investment, and resources? Value, rareness, imitability, and organizational health are vital to deter...

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