The paper “ The Four Factors of Sustainable Competitive Advantage” is an excellent variant of the literature review on management. Competitive advantage refers to resources and capabilities that strengthen each other. The resources and capabilities must strategically fit into each other in order to generate synergy which is difficult to imitate. According to Passemard (2000), when an organization acquires characteristics that enable it to perform at a higher level compared to other firms in the same field, competitive advantage is achieved. Organizations that need to develop a sustainable, competitive advantage must ensure that they select an appropriate business location, maintain customer loyalty, stock unique merchandise, set up good vendor relations, and maintain proper distribution channels.
Similarly in a resource-based view, an organization must have resources and capabilities greater than those of the competitors for it to develop a sustainable, competitive advantage. Organizations need to analyze their external and internal environments in order to understand their sources of competitive advantages. VRIO analysis tool is one of the tools that can be used to analyze organizations’ internal resources. This is a tool originally developed by Barney.
According to Barney (1991) in his work on ‘ Firm Resources and Sustained Competitive Advantage’ organizations’ resources must have four characteristics if at all they are to be considered to be a source of sustainable competitive advantage. According to him, resources must be rare, valuable, non-substitutable, and imperfectly imitable. VRIO Framework tests whether a firm is organized to capture value from resource or capability, whether a resource or capability is rare, valuable, and costly to imitate. Therefore a resource or capability that will bring sustained competitive advantage to the organization must definitely meet the given four requirements. DEFINITIONSustainable: This refers to market maintenance over a longer-term and not just today.
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