the vrio analysis in this video we explain what it is and how to do it the vrio analysis is a strategic management tool that helps managers to identify the resources and capabilities that may give their companies a sustainable competitive advantage it was developed in 1991 by professor jay barney a pioneer of the resource-based view of strategy that says that a company's performance is to a large extent determined by internal factors in this way the resource-based view complements the industrial organization approach to strategy that focuses more on the external environment with tools such as the five forces analysis or the pestle analysis that are described in other videos in avrio analysis we first identify the company's resources these may be tangible such as buildings machines or inventory but they also include intangible resources such as a company's brand image loyal customer base and the skills of its employees according to the vrio framework for any resource to contribute to a firm's long-term success or sustainable competitive advantage it must satisfy the following four criteria first the resource must be valuable this usually means that it creates value for customers or helps you to reduce costs an example may be your coffee shop's roasting machine that enables you to make delicious coffee and cut down on the cost of coffee second the resource should be rare if every competitor has the same resource for example they have the same roasting machine as you then it offers no advantage third the resource should be difficult to imitate if a resource is valuable and rare but competitors can easily imitate it then the advantage to be gained from it will only be temporary this may be the case if you are the only one in town with a roasting machine but competitors are able to buy a similar machine easily finally the company needs to be organized optimally to coordinate and obtain benefits from its unique resources if you are the company with the best coffee roasting machine you must make sure that you have the right suppliers of raw coffee beans and that your staff knows how to operate the machine without proper organization your competitive advantage may remain unused only when a resource satisfies all the four conditions of the vreo can it deliver a sustainable competitive advantage for your company using the vreo framework managers should analyze their resources and capabilities the whole time and take appropriate action to make sure they stay ahead of the competition that concludes the vrio analysis check our other videos for more insights brought to you by sim institute