What is the importance of "VRIO FRAMEWORK"

In modern economic theory, employees are treated as the most significant resource and due to their attributes marked as human resources. Usually, the importance of human resources has been explained through their role in creating sustainable competitive advantage. Successful realization of human resources role assumes fulfillment of conditions within the so-called VRIO framework.

Figure 1: VRIO Framework EXPLAINED with EXAMPLES (source: Business to you.com)

 VRIO is initials 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

 ✅The question of Organization

 Once realized the value, rarity, and imitability of resources and capabilities, the next step is to organize the company in a way to exploit these resources. If done successfully, the company can enjoy a period of sustained competitive advantage.

 The firm has a competitive advantage if it is able to create more economic value.

 Human resource as a competitive advantage

Figure 2: VRIO Framework (powesildes.com)

 VALUE

HR executives must start their functions with an eye on the bottom line and address a primary question “How can HR aid in either decreasing costs or increasing revenues?”

In today’s time when everyone is talking numbers; The HR department has to prove its worth and show that it creates value for the organization. HR can help a firm achieve a sustainable competitive advantage by creating value.

 RARENESS

Only value alone cannot help the HR department to achieve a sustainable competitive advantage. HR executives must examine how to develop and exploit rare characteristics of the firm’s human resources to gain a competitive advantage. In order to drive strategic decisions, HR executives should be the ‘rare’ factor in the talent they recruit.

 

IMITABILITY

If the competitors can easily imitate what you offer, then you are at loss! The HR executives must attempt to develop and nurture characteristics of the firm’s human resources that cannot easily be imitated. In any organization, the culture is developed via the HR Department. Hence, by developing a unique culture, executives can help firms in gaining a competitive advantage.

 

 ORGANIZATION

In order for any characteristic of a firm’s human resources to provide a source of competitive advantage, the firm must be organized to exploit the resource. Organization requires developing the systems and practices that allow human resources characteristics to bear the fruit of their potential advantages.

 

The VRIO framework enables business people in HR to transform the HR function into a contributor to the firm performance rather then a drain on firm resources.

 

Walmart VRIO/VRIN Analysis

 A Walmart Supercenter in Pointe-Claire, Quebec, Canada. A VRIO and VRIN examination of Walmart Inc. furthermore, it’s worth chain focuses to reasonable upper hands that incorporate retail abilities and online business capacities and assets that address contention with different retailers. A worth chain investigation shows the meaning of these organizational assets and capacities in profiting the business and shoppers (Johnson, 2019).

Figure 3: Walmart VRIO/VRIN Analysis, Value Chain Analysis (rancord.org)

References

 

 Pesic, A, Milic, V, Stankovic, J, ‘Application of VRIO framework for analyzing human resources’ role in providing competitive advantage’