Importance Of VRIO Analysis Essay

Question:

Discuss about the Importance of VRIO Analysis.

Answer:

Introduction

A business practice that has been developed and formulated for providing guidance to the corporate dealings and trade and is executed beyond the boundaries of nations, In this trade the two parties involved are two entities that too of different regions (Armelini & Villanueva, 2011). And, these agreements and plans are hence developed and are termed as global business strategies. On the basis of the research executed it has been analyzed that generally these strategies are majorly adopted by the private firms more as compared to that of the government governed entities. Moreover, in simpler terms, the global business strategy can be defined as the business strategies indulged by the business corporations and firms operating the in an international business environment and offering the services to the consumers all over the globe. These business strategies are found closely associated with the business development strategies that are adopted by the business firm for fulfilling the short and long-term organizational objectives. Multinational, global and international strategies are the terms that are majorly included in the concept of global strategy (Economywatch 2010). The basic motive of developing and designing these strategies is to accomplish and attain the pre-determined organizational objectives and that too on international grounds. It has been recommended for a business entity to develop a clear difference between the three aspects of global expansion (Armstrong et al., 2015). The three prime elements of international business expansion the available resources, capability and a current position of the Business Corporation and adoption of these components will be proven beneficial for the organization. The below-demonstrated report has been executed on the global strategies of Puma and the prime objective of the report is to analyze the resources and capabilities of the firm for strategic leveraging and thus attaining a competitive advantage.

VRIO analysis

On the basis of the research, it has been concluded that the term VRIO analysis has been considered as an analytical technique or mechanism that is the best platform for evaluating the resources and capabilities and thus leading the business firm to attain competitive advantage. VRIO analysis is the acronym of the evaluation dimensions of Value, Rareness, Imitability, and Organization (Baker, 2014). This mechanism has been developed by Jay B Barney as a medium for evaluating the resources from the microenvironment of the business firm. The below mentioned are the main resources which are evaluated under this approach:

  • Financial resources
  • Human resources
  • Material resources
  • Non-material resources (Data and information)

Importance of VRIO analysis

VRIO analysis has been considered as one of the contemporary means that can be used by any of the business entity for analyzing the resources and capabilities and can also manipulate them for attaining competitive advantage (Baker, 2014). One of the biggest advantages of this approach that it releases the real value of the available resources and capabilities of the firm and through which the business entity will be able in developing further strategies and plans. For instance, huge diversity has been observed in the workforce of Puma and that can be considered a strength of the firm. After analyzing the real value of the human resource the entity can plan training and development sessions for the employees. This will enable the business entity in bringing hike and advancement in the efficiency and that will lead to higher productivity. Another biggest advantage of this approach is that the business entity will be getting aware of the available resources and capabilities of the firm and that will aid them in developing future plans accordingly. And through this, the business organization will be able to allocate the resources that are in surplus in other directions and manage the deficit. And this will allow Puma in managing a smooth and flawless set of business practices and operations. Due to which the business firm will experience an increase in the effectiveness of the delivery of services and through which they will have a pool of satisfied customers. That will ensure a high goodwill and widening of market share. Moreover, the available resources and capabilities that are in surplus can be utilized appropriately for aiding the workforce and their wellbeing (Baum, Frese & Baron, 2014). Through this step, the employees will feel valued and motivated and an enhancement in their productivity and efficiency will be observed. Apart from this, one of the biggest advantages of adopting this approach is that it enables the business firm in attaining a sustainable position of competitive advantage. The business corporation can make use of resources and capabilities in the process of development of strategies and plans for tackling with the competitors. Building a distinct image in the market is also possible if the business entity is appropriately making use of the mentioned mechanism. Increase in the customer base, brand loyalty and enhanced market share are the common benefits that will be attained by the adoption of the VRIO analysis (Thebusinesszoom 2015).

Apart from the number of advantages, there are some disadvantages of this approach such as if the business entity is failing in managing and maintaining the resources and capabilities in an appropriate manner then the entity will be exposed to fierce competition (Bhachu, 2017).

The report has been made focused on the VRIO analysis of Puma so as to analyze and evaluate the resources and capabilities of the business entity. The report further contains a comparison between Puma and Adidas that is one of the biggest rivals of the business firms. The report has been segmented into various divisions and from which the first part comprised of the VRIO framework of Puma.

VRIO framework

A framework is an empirical approach for analyzing the internal environment of a business corporation. This approach evaluates various characters such as Valuable, Rare, Inimitable and Organization of the resources and capabilities of the business firm. The below presented is the framework of Puma:

Human Resources

Valuable

Rare

Inimitable

Organization

Competitive Advantage

· Professionals and experts. Technical and managerial staff)

Yes

Yes

Yes

Yes

Sustainable advantage

· Marketing and Advertising experts

Yes

No

Yes

Yes

Temporary

· Diversity and huge pool of skilled labor

Yes

Yes

Yes

Yes

Consistency

Non-material Resources

Valuable

Rare

Inimitable

Organization

Competitive advantage

· Operations and procedures


· Patents and copyrights

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Temporary

Sustainable

Personal Capital

Valuable

Rare

Inimitable

Organization

Competitive advantage

· International Occurrence

· Strong Industrial presence

· Brand equity

· Huge pool of Customer’s

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Temporary

Temporary

Sustainable

Sustainable

Capabilities

Valuable

Rare

Inimitable

Organization

Competitive Advantage

· Economic capabilities

· Research and development and training centers

· Capability of adopting new projects

· Global expansion model

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

Yes

Yes

Yes

Yes

Sustainable advantage

Uniformity

Temporary

Temporary

The below is the description of the VRIO framework for Puma:

Valuable: On the basis of the above-demonstrated table it has been analyzed the resources and capabilities of the business corporation are said to be valuable if they are aiding and assisting the business enterprise in earning value and attaining competitive advantage. In the present scenario, Puma is having a pool of valuable resources and capabilities that are aiding the business corporation in accomplishing a secured and sustainable position in the market and a competitive advantage in the concerned sector.

Rare: This factor determines that how rare and limited the resources and capabilities of a business firm are. After analyzing the resources and capabilities of Puma it has been evaluated that almost all the available resources with the business firm are rare and limited and that is aiding the business entity in sustaining competitive advantage (Bruni, Gherardi & Poggio, 2014). The diversified range of products with specialized features has been considered as one of the biggest factors that the entity is having over its competitors.

Imitability: On the basis of the above-presented framework it has been analyzed that the resources and capabilities of the business firm are having some distinct features and also the business entity have patents and copyrights over the resources and capabilities (Deakins & Freel, 2009). This prevents the competing brands in imitating the products and services of Puma. The competing brands have to hire the required resources and capabilities from the firm. All this make the business firm to attain a sustainable position and competitive advantage in the market.

Organization: This component describes whether the corporation and its resources are organized and maintained in an effective manner (Dorn & Suessmair, 2017). After analyzing the above-demonstrated framework it has been clearly observed that the resources and capabilities of the business enterprise are well-organized and that is aiding the firm in enjoying a large market share and a competitive advantage over its competing brands.

VRIO analysis of Puma and Nike

Resources and capabilities have been considered as one of the biggest factors that aids and assists the business entity in performing and executing the varied range of operations and functionalities. Moreover, the business corporation should utilize various mechanisms for stimulating the resources and capabilities of the enterprise (Hail, Leuz & Wysocki, 2010). VRIO analysis is the recommended approach that can be adopted by Puma for the process of manipulation. This approach will be proven very much beneficial for the business entity while analyzing the internal sources and capabilities of the enterprise. According to the conducted research, it has been noted down that Jay B Barney introduced the framework of VRIO in 1991 (free-management-ebooks 2018). This tool was introduced in his work ‘Firm Resources and Sustained Competitive Advantage’. The following are some of the resources and capabilities that can be analyzed and evaluated by Puma such as financial, human, material and non-material resources by making use of VRIO analysis. The below presented is the comparison of the resources and capabilities of Puma and Nike:

Valuable: Resources and capabilities minimize the impacts of threats and moreover, the stakeholders determine whether or not the resources are beneficial to the company or not. The resources are proven very much beneficial for the business in various areas, internally and externally and thus will assist in the firm’s development process (Lam & Harker, 2015). According to the present scenario, Puma has a huge pool of valuable resources such as diversity in the workforce and wide range of products. These are considered as the most valuable resources of the entity. Nike is one of the top competing brands of Puma and is having a financial stability and growth. And hence it has been observed that the resources and capabilities of the business firm are aiding the business fir in attaining competitive advantage.

Rare: The business resources and capabilities possessed by the business firm are required to be rare and limited (Lee, Barker & Mouasher, 2013). This is also considered as one of an empirical factor for gaining a position of competitive advantage in the market. On the basis of the executed research, it has been analyzed that Puma has wide range of resources and capabilities that are rare in the market. For instance, the entity can capture multiple scenarios specified in UML into a single performance model and also can deal with multiple workloads. This one of the rare capabilities of the business firm, that is aiding in attaining competitive advantage. Whereas, in case of Nike approximately 100% of its production is outsourced to Asia and due to which the entity is enjoying a strong competitive advantage (sites.google 2018).

Imitability: According to this factor the business entity is required to have resources and capabilities that are hard to imitate or developing alternatives for them will be tough (Nunan & Di Domenico, 2013). For instance, Puma is having resources through which the entity is able to develop and design eco-friendly products. The capability of developing these products is difficult to imitate and many problems are faced by the competing brands. Whereas, Nike is supporting the wide variety of sports and number of charity events such as “Live strong” a foundation that is financially supported by the business corporation for Curing Cancer. This marketing strategy of the business corporation is unique and is un-imitable (Scarborough, 2015). This capability of the enterprise has also been considered as one of the core competency of the firm that aids in enjoying the competitive advantage.

Organization: On the basis of the research it has been inferred that the organization and the available resources and capabilities are required to maintain effectively and equally so as to attain desired outcomes such as competitive advantage. If the business corporation is capable of managing the available resources and capabilities then it leads the firm to enjoy the number of benefits on different grounds (Pardalos and Tsitsiringos, 2013). According to the research, it has been concluded that Puma is a multinational corporation and is very much capable of managing the resources and capabilities in a well-organized manner. And this is one of the biggest reason due to which the business firm is enjoying a competitive advantage in the markets all over the globe. And after analyzing all the resources and capabilities of Nike it has been concluded that the business entity has passed in managing the organization and available resources and capabilities with the enterprise. And due to which the organization is experiencing a safe and sustained position and competitive advantage in the market (Renton et al., 2015).

Conclusion

After summing up the above-presented report it has been analyzed that attainment of competitive advantage and a sustainable position in the market region is one of biggest essentials for any of the business organization in the path of success and growth. VRIO analysis is one of the approaches that can be adopted by the business corporation for analyzing and evaluating the resources and capabilities and thus can earn the competitive advantage over the rival brands. In the present scenario, Puma is the business firm for which this analysis has been presented in various segments. The report comprises of the various aspects of VRIO analysis such as the significance of the approach, a framework has been demonstrated that is describing the approach in a tabular format. The report further comprises of the comparison of the resources and capabilities of Puma and Nike. Nike is one of the biggest competing brands of Puma and the above report consists of a clear comparison of VRIO analysis for both the business entities.

References

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Pardalos, P.M. & Tsitsiringos, V. eds., (2013). Financial engineering, E-commerce and supply chain. Springer Science & Business Media.

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