Chapter 9: Internal Analysis: Assessing Current State
9.1 Characteristics of Export Ready Product
Product Readiness
A product is considered ready for export if it has the following criteria:
- Successful domestically
- A product is deemed to be successful when it meets the financial metrics, producing consistent revenue and the desired profit margin per company standards, as well as the market metrics: high percentage of market share and a competitive position (ET Spotlight, 2023).
- Competitively priced
- When a company sets the price of their product below the price of other similar products in the market or offers a higher value product for the same price as their competition, the product is considered competitively priced.
- Unique in one or more ways
- A product is unique when it has a feature or quality that is better than what is already available in the market. The unique feature can have an innovative design that provides a new and better way to solve the problem.
- Costly to imitate
- Products are considered costly to imitate if they require the competitors to invest significant amounts of time and/or capital to replicate them. A product may also be hard for competitors to copy if it is protected by a patent or a trademark. A costly to imitate product gives companies a competitive advantage.
In addition to the criteria listed above, an export-ready organization must understand the resource-based view (RBV) of the firm and follow the (valuable, rare, inimitable, organization) VRIO framework.
The resource-based theory or RBV is a concept proposing that if a company possess a strategic resource, that resource will help the company to develop a competitive advantage over its rivals. RBV concepts suggest that if a resource meets VRIO attributes, it gives the company a sustainable competitive advantage. As the name suggests, this model sees resources as key to superior firm performance.
Did You Know? What Is a Resource?
There are two main types of resources:
- Tangible Resources
- Are visible and have physical attributes such as: Labour, Capital, Land, Buildings, Plant Equipment, and Supplies.
- Intangible Resources
- Are invisible and have no physical attributes such as Culture, Knowledge, Brand, Reputation, or Intellectual Property (Patent, Design, Copyrights, Trademark, Trade Secrets).
Resources can also be categorized as heterogeneous and immobile.
Heterogeneous Resources
Bundles of resources, capabilities, and competencies that are unique and different from other rivals are considered heterogeneous resources. Let’s consider an example of budget airlines in the United States. Southwest Airlines (SWA) and Alaska Airlines (AS) both compete in the same target market, and they are part of the strategic group (low-cost, point-to-point airlines). But they draw different resource bundles.
SWA relies on employee productivity which translates to turning around a plane fast. Southwest turns around planes at airport gates in only 15 minutes. All staff are trained to perform tasks needed to turnaround the plane, for example: pilots will help to clean the toilets and take out the rubbish. Another distinguishing capability that Southwest possesses is the maintenance of a culture of fun for the customers and staff.
Alaska Airlines differentiated itself by having unique marketing strategies such as various in-plane entertainment activities and by acquiring smaller airlines and taking over more routes, thus increasing its customer base. They were also diversified by offering passenger and cargo services, which they eventually dropped. The key to their success was their dynamic strategy decisions and flexibility in changing the business structure.
Immobile Resources
Resources are immobile when they do not move easily from company to company. For example, Southwest Airlines has maintained a sustainable competitive advantage and outperformed its competitors for decades. Continental was tempted to copy SWA, with Continental Lite offerings. Although it did lower its price and some of the costs, it was unable to successfully imitate the resource bundles and firm capabilities that make SWA unique.
Source: Alonso, 2022; Brown, 2021; Edwards, 2014; Gordian Business, n.d.
What Is the VRIO Framework?
VRIO framework is a valuable tool that evaluates a firm’s internal resources and capabilities to find out if they can be a source of sustainable competitive advantage. It was developed in the 1990s by J.B. Barney and outlined in a Journal of Management article entitled “Firm Resources and Sustained Competitive Advantage.” Barney identified four attributes that a firm resource must have in order to become a source of competitive advantage (Jurevicius, 2023). These attributes are being valuable, rare, and costly to imitate; the firm itself must also be organized to capture the value of the resource. The acronym of the framework comes from the terms valuable, rare, inimitable, and organized.
Valuable
Rare
Inimitable (or costly to imitate)
Organized to utilize the resources
A valuable resource is one that allows the firm to take advantage of external opportunities or negate external threats. If a resource does not allow a firm to minimize threats or take advantage of opportunities, it does not help strengthen the competitive advantage of the firm.
A rare resource is one that can only be acquired by one or a few companies. In other words, a resource is rare if other competitors do not widely possess it.
An inimitable resource is one that is difficult and costly for a competitor to either replicate or acquire.
Organization is required to exploit and capture the value of the resource. The resource on its own does not confer any advantage, even if it is rare, valuable, and inimitable.
Review: VRIO Framework
Review and expand your understanding of VRIO by reading “VRIO Analysis” in Strategic Management (published by Oregon State University).
References
Alonso, T. (November 25, 2022). How Alaska Airlines became a major American airline. Strategy Factory. https://www.cascade.app/studies/alaska-airlines-strategy-study
Barney, J.B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.
Brown, J.A. (September 10, 2021). How is Southwest different from other airlines? Investopedia. https://www.investopedia.com/articles/investing/061015/how-southwest-different-other-airlines.asp
Edwards, J. (2014). Mastering strategic management: Evaluation and execution (1st Canadian ed.). BC Campus. https://opentextbc.ca/strategicmanagement/
Gordian Business (n.d.). Case study 1: The sustainable business model – Southwest Airlines. Gordian Business. http://gordianbusiness.squarespace.com/case-studies/case-study-1.html
Jurevicius, O. (2023, December 1). VRIO framework explained. Strategic Management Insight. https://strategicmanagementinsight.com/tools/vrio/
Attributions
“Characteristics of Export Ready Product” and “Did You Know? What Is a Resource?” are adapted from “ Chapter 4: Managing Firm Resources: Resource-Based Theory” from Mastering Strategic Management – 1st Canadian Edition by Janice Edwards is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
“What Is the VRIO Framework?” is adapted from “VRIO Analysis” from Strategic Management by John Morris is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.
an approach that uses internal resources in new ways to exploit external opportunities rather than acquiring new skills or resources
a model identifying the firm’s internal resources and capabilities for sustainable competitive advantage by value, rarity, initimability, and organization
resources that have physical attributes
resources that are invisible and have no physical attributes such as culture, knowledge, brand, or reputation; also includes intellectual property as identified in patent, designs, copyrights, trademarks, and trade secrets
bundles of resources, capabilities, and competencies that are unique and different from other rivals
when resources cannot move easily from company to company
