Contemporary Strategic Management Concepts – VRIN + VRIO = SCA
Contemporary Strategic Management Concepts
The first concept – sustainable competitive advantage (SCA)This part will give an introduction of SCA via some basic concepts and models that contribute to form SCA inside an organization, particularly, it will demonstrate some feasible case studies that have been applied VRIN and VRIO to archive SCA.
Introduction of some basic conceptsSince the 1980s, the concept of competitive advantage (CA) has been concerned strongly (Porter 1980, 1985). In order to achieve the CA, the organization should be different by unique specializations including quality, product, service technology or cost leadership (Porter 1985). After the organization has gained CA via successful business strategies in short term, the company should protect continuously its core value in the competitive, complex and turbulent business environment. This will support the firm to obtain the SCA in this environment in long term (Liu 2013; Reider 2015). There is a popular question that many studies and entrepreneurs take time to find the answer “How can the firm achieve SCA in a dynamic business environment?” (Cardeal & António 2012; Liu 2013; Mukesh, Andy & Louis 2013). Hence, RBV, VRIN and VRIO model have been developed to address this issue.
RBV frameworkRBV is an internal-view model that support the organization to look forward and assess all assets inside it (Finney, Lueg & Campbell 2008; Wahyudi, Kartika & Han 2018). The assets have consisted of tangible and intangible assets. According to these authors, tangible assets are lands, buildings and manufactures whereas intangible assets are knowledge, skills. The RBV has an ability to identify the resources and capabilities that have brought competitive advantage and high benefits for the organisation (Hinterhuber 2013; Yeung et al. 2011). Besides, Liu (2013) also has pointed out that RBV has support VRIO model to select resources or capabilities of the firm that obtain SCA.
VRIN frameworkIn 1991, Barney has developed a popular VRIN model to identify SCA from organisation’s CA in a dynamic business environment. According to this author, the VRIN model have consisted of valuable, rare, inimitable and non-substitutable (Appendix 1). The four components are defined similarly from many authors as below (Barney 1991; Cardeal & António 2012; Mukesh, Andy & Louis 2013).
- “Valuable” can be defined that resources of conducting strategies will improve the organisation efficiency or effectiveness. This differentiates from its competitors or decreases its competitive weaknesses in the similar industry.
- “Rare” has meant that the organisational resources are difficult to find, unique to be different from other competitive companies.
- “Imperfectly imitable” has a meaning that the firm’s resources that are impossible to imitate. They are also the complex barriers entry of the market and competitors are difficult to enter.
- Non-Substitutable has been defined that the resources from organisation that could not replace by substitutions.