The VRIO Analysis was developed by Jay B. Barney as a way of evaluating the resources of an organization which are divided as follows:
- Financial resources
- Human resources
- Material resources
- Nonmaterial resources (information, knowledge)
The VRIO Analysis is an analytical technique which for each type of resource considers the following questions (evaluation dimension) for an organization as well as for its competitors. VRIO is an acronym from the first letters of the names of the dimensions:
- Value - How expensive is the resource and how easy is it to obtain on the market (purchase, lease, rent..)?
- Rareness - How rare or limited is the resource?
- Imitability - How difficult is it to imitate the resource?
- Organization, respectively arrangement - Is the resource supported by any existing arrangements and can the organisation use it properly?
Use of the VRIO Analysis in practice: Evaluation with the help of a VRIO analysis is used to assess the situation of the organization (enterprise), its resources and possible competitive potential or potential for improvement in the given area or for a given resource. Such an assessment is then used for example in the strategic management of development in various areas or for decision making about the advantage of an external or internal process and the securing service (e.g. outsourcing decision).
In practice, the VRIO analysis is also used in combination with other analytical techniques to help organizational management evaluate business resources in a more detailed view. For financial resources, there are many detailed financial indicators that evaluate the financial condition or performance of the business from different perspectives. Likewise, human resources, property or information are other detailed indicators of their performance, efficiency or quality. The advantage of a VRIO analysis is its simplicity and clarity.