VRIO is a business analysis framework that forms part of a firm's larger strategic scheme. The basic strategic process that any firm goes through begins with a vision statement, and continues on through objectives, internal & external analysis, strategic choices (both business-level and corporate-level), and strategic implementation. The firm will hope that this process results in a competitive advantage in the marketplace they operate in.
VRIO falls into the internal analysis step of these procedures, but is used as a framework in evaluating just about all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under.
VRIO is an initialism for the four question framework asked about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability).
- The Question of Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?"
- The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?"
- The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"
- The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?"