2018-05-10 12:47:03 Growing a Business English Find out how to identify and secure your company's competitive advantages by performing VRIO analysis. By figuring out the value, rarity,... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/04/Owner-Using-VRIO-Evaluate-Advantage.jpg https://quickbooks.intuit.com/ca/resources/growing-business/vrio-evaluate-competitive-advantage/ Evaluate Your Company's Competitive Advantage With VRIO Analysis

Evaluate Your Company’s Competitive Advantage With VRIO Analysis

2 min read

Think about what your company does well. Do you have an advantage in the market? If you need help answering that question, you should use VRIO Analysis, which looks at the value, rarity, imitability, and organizational efficiency of a business. VRIO Analysis helps you think about what you do, how that’s unique, and how it can give you a competitive advantage.

Are Your Resources Valuable?

Businesses use two types of resources: tangible and intangible. Tangible resources are things you can touch, such as land, machinery, and raw materials. Because anyone can buy these things, their value lies in what they can do and not much else. You may need equipment to make something, but the value of the equipment doesn’t extend beyond that.

Intangible assets, on the other hand, give you a competitive advantage. Brand reputation, trademarks, unique manufacturing processes, and intellectual property are intangible. There’s no store where you can buy these things. Instead, they’re built over time. Because they’re harder to come by, intangible resources tend to be more valuable than tangible ones. If you want a market advantage, think beyond just buying useful things, and try to build a brand image and foster goodwill.

Are Your Resources Rare?

You also have a competitive advantage if your resources are rare or few companies can access them. If you run a coffeehouse and have access to the best coffee beans in the country due to a special business relationship, that’s a competitive advantage, since most coffeehouses don’t have that resource. To stay on top of special resources, such as by tracking your inventory, you might want to use QuickBooks Desktop. It helps you keep track of your order history, when to resupply, and who to contact for resupplying.

Can Others Imitate Your Resource?

Say you run a coffee shop downtown. Your employees earn 10% above the market average, and you’re known for the unique layout of your store. Although these features are strengths, others can copy them, so they’re not competitive advantages. Anyone can buy a storefront downtown, pay their employees the same wages, and copy your floorplan. Features others can’t imitate are the resources that count, such as your buying power and corporate image or how easily you can scale the number of stores you own.

Is Your Company Organized Around the Resource?

Your resources are only as good as your company lets them be. If you don’t structure your business around your resources, you under-utilize them and fail to get their maximum benefits. For instance, if your suppliers are your most important resources, frame your business around strong relationships. If your brand is most important, consider using real-time information from QuickBooks Online to make business decisions.

You can’t control all the factors that determine how competitive you are, but you can always find ways to improve your edge in the market. If you want to set yourself up for long-term success, try using QuickBooks reporting to analyse your company’s performance and build your business around the resources that set it apart.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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