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How to use VRIO model to analyse the effectiveness of your start-up

By Guest Author on Sunday, March 5th, 2017

This IPitch guest article was kindly supplied by Lucy Adams.  Lucy is a blogger and essay writer from BuzzEssay, a platform which provides custom essay service and high-quality writing assistance. Lucy is a lady-generalist always open to intriguing ideas. Share your best suggestions and get a high-quality paper in the shortest time, at no cost!

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From time to time any company needs to figure out its position on the market. What are the advantages and disadvantages of your business team? Whether the employees’ skills sufficient to achieve the goals?

There are many factors that determine the position of a particular business on the market. Every company has certain human, financial and technological resources, and the defining factor is how much effective it manages these resources.

If you’re dreaming of building an effective business team, this article is just for you! Below we’ll describe VRIO model, a useful set of questions to analyse resources and apply them correctly.

Let’s start with what VRIO is:

· V – Value;

· R – Rarity;

· I – Imitability (uniqueness);

· O – Organisation.

If the resources meet all these requirements, they’re used effectively and can make an invaluable contribution to achieving the company’s mission.

First of all, you should make sure that no elements ignored.

1. Value

Valuable resources help your company generate profit by reducing costs and increasing revenues. Value can be measured in several ways.

High value provides a lot of advantages, including

· High price for the products.

· An efficient production process that will improve the quality of products.

· Productive use of labor resources.

· Creating of innovative products.

· Promotion of your brand.

2. Rarity

Resources are valuable only if nobody (or only “the chosen”) has access to them. It may be

· A genius who works for you.

· An excellent provider with whom you have entered into an agreement on exclusive supply.

· A product or brand that your customers trust.

· The outlets in strategic locations.

3. Imitability

Uniqueness means that your products and services are hard to tamper: there are only a few companies that do similar things.

Uniqueness is a very challenging task because once you launch something new, numerous competitors will try to copy it. Someone just takes your idea and develops it in such a way as to create a cheaper counterpart that will cost less. You can’t remain unique for long, so constantly think about how you can improve your product or service along with protecting your current product from unlicensed copying.

4. Organisation

This element determines the degree of effectiveness of your company in using specific resources that are valuable, rare and inimitable.

Your internal management, understanding of business processes, as well as your staff should focus on getting the resources at a minimum cost to achieve high quality and efficiency. Properly organised business processes push the company forward while the most brilliant but poorly-organised ideas almost never generate revenue.

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How to Apply VRIO to Practice

First of all, identify resources that are valuable, rare and inimitable, and then think about how to use them correctly.

Use the following checklists:

Value Checklist

Brainstorm and determine resources that are the most profitable now or will bring the greatest returns in future. Answer the following questions:

· Do you have any resources that improve the efficiency of business processes?

· Do you have any resources that help create new products and meet customers’ needs?

· Do you have access to valuable materials?

· Have you invested in projects or information technologies that may significantly help you in future?

· Do your customers have the opportunity to use your products and services at any time? Does your company provide them with a shipping and after-sale service?

· How long does your product or service retain its value?

Note that the tastes and demands of customers change over time. If your business is new, you must first think about profits. However, if you are in the market for several years, profit should not be the priority. In this case, bet on building a good reputation for staying afloat.

Rarity checklist

· How long will your resources stay rare or unique?

· Are your resources available exclusively to you? Do the competitors have access to them?

· Will your competitors have these resources in the future?

Imitability checklist

· How difficult is it to counterfeit or imitate your product or service?

· Are there counterparts on the market? If they are, do they meet customers’ needs to the same extent that your product or service?

· How long will it take for a new competitor to appear on the market?

Organisation checklist

· Whether your workforce organised efficiently or not?

· How much attractive are the conditions for workers?

· How much effective is the management?

· Is your business able to innovate?

· How quickly does your company respond to changing circumstances?

Once you answer these four question sets in details and fairly, you’ll be able to see whether you’re using your resources effectively to determine your position on the market.

Balance and manage, and soon you’ll stand out from the competition and succeed in business.

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