VRIO Analysis

VRIO analysis is one of the most effective ways of efficiently and clearly evaluating a company’s resources, assets, and capabilities. But what is VRIO analysis and how, exactly, does it work?

If you’re an aspiring consultant or business professional, you’ll definitely want to keep reading. In this article, we’ll take an in-depth look at what VRIO analysis is and how to do one, so you can start applying this powerful tool to your business analyses and decisions.

What Is VRIO Analysis?

Let’s start by indulging the obvious question: what is VRIO analysis? The basic VRIO analysis definition is this: a VRIO analysis is a business tool that helps evaluate a company’s resources and capabilities according to four dimensions that give the tool its acronym: value, rarity, imitability, and organizational aspects.

Of course, simply knowing the VRIO analysis definition doesn’t necessarily help you to understand it well enough to put it to work for you and your business. To have the VRIO analysis explained properly, we’ll need to look at some examples of VRIO analysis in action.

VRIO Analysis Example

In this section, we’ve gathered several VRIO analysis examples, which should help you get a better sense of what the VRIO analysis does and how to apply it. Each VRIO analysis example in this section demonstrates the ways that this tool can quickly build a better understanding of a company.

VRIO Analysis of Amazon

Value: The VRIO analysis of Amazon starts with the value the company offers. Amazon offers an unparalleled range of products, an extremely convenient shopping experience, and a highly robust logistical infrastructure for serving clients. Each of these helps Amazon maintain an advantage over its competitors.
Rarity: Many of the features Amazon offers its customers are quite rare. These include its patented 1-click ordering technology, as well as its extensive network of massive and highly efficient fulfillment centers.
Imitability: Amazon has reinvested its massive revenues in ways that make its services almost impossible for competitors to imitate. The logistics network that helps operate the company’s distribution as well as its technological infrastructure both require a scale of investment that no competitor can match.
Organization: Amazon is organized in such a way as to disincentivize customers from pursuing alternatives and competitors. This includes the company’s customer obsession approach, its ongoing innovation, and its emphasis on operational efficiency.

Apple VRIO Analysis

Value: The Apple VRIO analysis begins with the unique value that’s offered by Apple’s line of technologically superior products, its innovative design, its highly integrated device ecosystem, and its unparalleled brand image.
Rarity: Amazon maintains rarity by regularly filing new patents and developing new proprietary software, as well as by vertically integrating its supply chain.
Imitability: It would be difficult if not impossible for competitors to match Apple’s commitment to superior design, to a seamless user experience, and to a closed ecosystem of devices and software.
Organization: Apple maintains a competitive advantage through an organizational structure that prizes vision, innovation, and secrecy.

Tesla VRIO Analysis

Value: Tesla offers unique value in combining a pro-environmental approach to electric vehicles with edgy and unique design.
Rarity: In addition to the rarity of its combination of eco-friendly performance and aesthetics, Tesla has a uniquely well-developed infrastructure for manufacturing, servicing, and refueling the batteries that make electric transportation possible.
Imitability: In addition to the scale of its infrastructure, Tesla is hard for competitors to imitate because the company relentlessly pursues new research and development.
Organization: To round out the Tesla VRIO analysis, we must consider the ways that Tesla bucks the trend of larger companies tending toward strategic conservatism. Tesla embraces risk, which enables the company to take advantage of newly emerging opportunities. Additionally, the company’s superior supply chain management helps it stay on top of the market for electric vehicles.

How to Do a VRIO Analysis

Now that you’ve seen the ways that a VRIO analysis can help break down what makes a company successful, let’s take a closer look at how to do a VRIO analysis.

1. The first step in how to conduct a VRIO analysis is to identify a company’s key resources and capabilities, including its tangible and intangible assets, its human capital, and its organizational capabilities
2. Next, assess the value each resource or capability contributes to the company and its customers.
3. Then, evaluate the rarity of each resource or capability compared to the company’s competitors.
4. Next, evaluate the imitability of each item. How hard would it be for the company’s competitors to match its key assets and strengths?
5. After that, you should assess the organization of the company. How does the company’s structure enable it (or not) to fully exploit the potential of each resource and capability?
6. Finally, use the data you’ve generated to draw conclusions about the company. Is it Valuable, Rare, Inimitable, and Organized? Or does it fall short in one or several of these dimensions?

VRIO Analysis Template

If you want to apply the VRIO analysis in your professional work, you’ll want to make use of our VRIO analysis template. We created this free VRIO analysis template so you can start harnessing the power of the VRIO analysis in your own work.

Resource/Capability	Value	Rarity	Imitability	Organization	VRIO Status
Example Resource 1
Example Resource 2
Example Capability 1
Example Capability 2

Conclusion

One of the best things you can do as a business professional is to closely study the examples of other companies, whether they are your direct competitors or not. The VRIO analysis is one of the most effective tools for assessing the ingredients of a company’s success, or its struggles. This framework will allow you to identify those components of a business that provide it with value, rarity, inimitability, and organizational excellence.

Additional Resources:

• Top 7 Business Frameworks
• Top Corporate Training Topics
• 4 Guidelines To Excellent PowerPoint Storytelling
• How Consultants Use Excel