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Southwest VRIO / VRIN Analysis | Assignment Help
What is VRIO / VRIN Analysis ?
VRIO stands for – Value of the resource, Rareness of the resource, Imitation Risk, and Organizational Competence.
VRIO is a resource focused strategic analysis tool.
To build a sustainable competitive advantage the resources that –casename— needs to be valuable, rare, and difficult to imitate. Secondly the –casename— needs to possess capabilities, organizational structure, and culture to optimize the available resources usage. VRIO analysis can help organizations such as Southwest to do better resource allocation and build a defensible value and supply chain.
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What is a Valuable Resource for Southwest? Defining Valuable in VRIO
A resource or capability is considered valuable for Southwest , if it allows the
Southwest to exploit opportunities or negate threats
emerging out of both the micro business environment and the macro environment. If a resource does not allow Southwest to minimize threats or exploit opportunities, than it doesn't contribute signficantly to building a sustainable competitive advantage for Southwest.
What are Rare Resources for Southwest? Defining Rare in VRIO
In an industry that Southwest operates in, valuable resources are held by number of competitors. So valuable resources themselves don’t provide a sustainable competitive advantage. Southwest require rare resources to compete in the industry. If Southwest don’t have rare resources that are required to succeed in the industry then Southwest won’t be able to compete successfully in the marketplace. Secondly holding rare resources can provide Southwest competitive advantage against players that don’t have those rare resources. HBR Case Study Solution
What is a Inimitable (Difficult to Immitate) Resource for Southwest? Defining Inimitable in VRIO
A valuable and rare resource can provide a competitive advantage to Southwest for certain period of time as all the competitors are going to try to imitate or replicate that resource. A sustained competitive advantage emerges, if the resource is difficult to imitate by the competitors. Southwest can create inmitability by innovating on the product side, reducing pain points on service delivery, and having an effective post sales servicing strategy.
Check out the SWOT analysis of Southwest
What is a Organization for Southwest? Defining Organization in VRIO
Even if the Southwest has all the valuable resources that are both rare and difficult to imitate, it won’t automatically result into a sustainable competitive advantage. The key to build the sustainable competitive advantage is to have organizational capabilities, expertise, and structure to exploit the resources. If Southwest is not organized based on its strengths then it won’t able to exploit all the resources that it possesses.
Resources | Value | Rare | Imitation | Organization | Competitive Advantage |
---|---|---|---|---|---|
Southwest Customer Network and Loyalty | Yes, 23% of the customers contribute to more than 84% of the sales revenue | Yes, firm has invested to build a strong customer loyalty | Has been tried by competitors but none of them are as successful as Southwest | Southwest is leveraging the customer loyalty to good effect | Provide Southwest medium term competitive advantage |
Global and Local Presence of Southwest | Yes, as it diversify the revenue streams and isolate company's balance sheet from economic cycles | Yes | Can be imitated by competitors of Southwest but at a relatively high cost | Yes, it is one of the most diversified companies in its industry | Providing Strong Competitive Advantage |
Financial Resources of Southwest | Yes | No | Financial instruments and market liquidity are available to all the nearest competitors | Southwest has reasonably sound financial position | Southwest has relatively sustainable Competitive Advantage |
Supply Chain Network Flexibility of Southwest | Yes | Yes | Near competitors also have flexible supply chain and share some of the suppliers | Fully utilized by Southwest organizational structure and capabilities | Keeps the business running |
Track Record of Leadership Team at Southwest | Yes | Yes | Can't be imitated by competitors | Yes | Providing Strong Competitive Advantage |
Opportunities in the E-Commerce Space for Southwest - using Present IT Capabilities | Yes, the e-commerce space is rapidly growing and Southwest can exploit the emerging opportunities | No, most of the competitors are investing in IT to enter the space | The AI and inhouse analytics can be difficult to imitate | It is just the start for the organization | In the long run it can provide sustainable competitive advantage |
Alignment of Activities with Southwest Corporate Strategy | Yes | No | Each of the firm has its own strategy | Yes, company has organizational skills to extract the maximum out of it. | Still lots of potential to build on it |
Marketing Expertise within Southwest | Yes, firms are competing based on differentiation in the industry | No, as most of the competitors also have good marketing departments and expertise | Pricing strategies of Southwest are often matched by competitors | Yes, Southwest is leveraging both its inhouse marketing department and external expertise | Temporary Competitive Advantage |
Brand Positioning of Southwest in Comparison to the Competitors | Yes | No | Can be imitated by competitors but it will require big marketing budget | Yes, the firm has positioned its brands based on consumer behavior | Temporary Competitive Advantage |
Distribution and Logistics Costs Competitiveness | Yes, as it helps Southwest in delivering lower costs | No | Can be imitated by competitors of Southwest but it is difficult | Yes | Medium to Long Term Competitive Advantage |
Position among Retailers and Wholesalers – Southwest retail strategy | Yes, Southwest has strong relationship with retailers and wholesalers | Yes, Southwest has dedicated channel partners | Difficult to imitate though not impossible | Yes, over the years company has used it successfully | Sustainable Competitive Advantage |
Sales Force and Channel Management of Southwest | Yes | No | Can be imitated by competitors | Still there is lot of potential to utilize the excellent sales force | Can provide Southwest sustainable competitive advantage. Potential is certainly there. |
Customer Community of Southwest | Yes, as customers are co-creating products | Yes, the Southwest has able to build a special relationship with its customers | It is very difficult for Southwest competitors to imitate the culture and community dedication | Going by the data, there is still a lot of upside in building on Southwest customers community ecosystem | Providing Strong Competitive Advantage |
Access to Cheap Capital for Southwest | Yes, as a leading player in the industry and current macro economic conditions, Southwest has access to cheap capital | No | Can be imitated by the competitors of Southwest | Not been totally exploited | Not significant in creating competitive advantage |
Southwest SWOT Analysis, SWOT Matrix, Weighted SWOT Case Study Solution & Analysis
Books and References
Ahir Gopaldas and Anton Siebert (2022 July August) "What You’re Getting Wrong About Customer Journeys",
Harvard Business Review , 92
Linda A. Hill, Emily Tedards, and Taran Swan (2021) "Drive Innovation with Better Decision-Making", Harvard Business Review 86
Dyer, J. H., & Hatch, N. (2004). Using Supplier Networks to Learn Faster. Sloan Management Review, 45(3), 57–63
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120
Dyer, J. H., Kale, P., & Singh, H. (2004, July–August). When to ally and when to acquire. Harvard Business Review, 109–115
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