V.R.I.O. ANALYSIS

Essay text:

can result in changed value ? Resources of different firms can be valuable in different ways (e.g., Timex versus Rolex) ? Value = Lowered costs or increased revenues or both SCARCITY of resources and capabilities ? Resources and capabilities must be in short supply to create competitive advantage (and go beyond competitive parity) ? What would happen if this were not the case? ? An analysis of the firm's resources and capabilities must include critical assessment whether they are unusual when compared to those of competitors ? How rare does a resource have to be in order to have potential for generating a competitive advantage? ? Example of a rare resource: Wal-Mart's point-of-purchase inventory control system ? To be a source of sustained competitive advantage the rarity of the resource must persist over time INIMITABILITY of resources dans capabilities ? Requirement for sustained competitive advantage ? Ease of imitation depends on o Cost asymmetries ("Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?") o Capabilities of competitors ? Sources of cost asymmetries / cost disadvantages fall into two categories : o Impediments to imitation : Impede rivals from duplicating critical resources and capabilities o Early-mover advantages : Set in motion a dynamic that increases the magnitude of that advantage relative to other firms over time Impediments to imitation : o Legal restrictions on imitation : ? Patents, copyrights, trademarks ? Governmental control over entry into markets (licensing, certification, quotas on operating rights) o Superior access to inputs or to customers o Market size and scale economies o Intangible barriers to imitation ? Causal ambiguity ? Dependence on historical circumstances ? Other path dependencies ? Social complexity Degrees of resource and capability imitability Source: C...