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American Express 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 American Express to do better resource allocation and build a defensible value and supply chain.
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What is a Valuable Resource for American Express? Defining Valuable in VRIO
A resource or capability is considered valuable for American Express , if it allows the
American Express to exploit opportunities or negate threats
emerging out of both the micro business environment and the macro environment. If a resource does not allow American Express to minimize threats or exploit opportunities, than it doesn't contribute signficantly to building a sustainable competitive advantage for American Express.
What are Rare Resources for American Express? Defining Rare in VRIO
In an industry that American Express operates in, valuable resources are held by number of competitors. So valuable resources themselves don’t provide a sustainable competitive advantage. American Express require rare resources to compete in the industry. If American Express don’t have rare resources that are required to succeed in the industry then American Express won’t be able to compete successfully in the marketplace. Secondly holding rare resources can provide American Express competitive advantage against players that don’t have those rare resources. HBR Case Study Solution
What is a Inimitable (Difficult to Immitate) Resource for American Express? Defining Inimitable in VRIO
A valuable and rare resource can provide a competitive advantage to American Express 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. American Express 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 American Express
What is a Organization for American Express? Defining Organization in VRIO
Even if the American Express 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 American Express 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 |
---|---|---|---|---|---|
American Express 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 American Express | American Express is leveraging the customer loyalty to good effect | Provide American Express medium term competitive advantage |
Brand Positioning of American Express 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 |
Global and Local Presence of American Express | Yes, as it diversify the revenue streams and isolate company's balance sheet from economic cycles | Yes | Can be imitated by competitors of American Express but at a relatively high cost | Yes, it is one of the most diversified companies in its industry | Providing Strong Competitive Advantage |
Distribution and Logistics Costs Competitiveness | Yes, as it helps American Express in delivering lower costs | No | Can be imitated by competitors of American Express but it is difficult | Yes | Medium to Long Term Competitive Advantage |
Marketing Expertise within American Express | 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 American Express are often matched by competitors | Yes, American Express is leveraging both its inhouse marketing department and external expertise | Temporary Competitive Advantage |
Track Record of Project Execution | Yes, especially in an industry where there are frequent cost overun | Yes, especially in the segment that American Express operates in | No, none of the competitors so far has able to imitate this expertise | Yes, American Express is successful at it | Providing Strong Competitive Advantage |
Ability to Attract Talent in Various Local & Global Markets | Yes, American Express strategy is built on successful innovation and localization of products | Yes, as talent is critical to firm's growth | Difficult to imitate for the current competitors of American Express | To a large extent yes | Providing Strong Competitive Advantage |
Supply Chain Network Flexibility of American Express | Yes | Yes | Near competitors also have flexible supply chain and share some of the suppliers | Fully utilized by American Express organizational structure and capabilities | Keeps the business running |
Access to Cheap Capital for American Express | Yes, as a leading player in the industry and current macro economic conditions, American Express has access to cheap capital | No | Can be imitated by the competitors of American Express | Not been totally exploited | Not significant in creating competitive advantage |
Intellectual Property Rights, Copyrights, and Trademarks | Yes, they are extremely valuable for American Express to thwart competition | Yes, IPR and other rights are rare and competition of American Express will find it extremely difficult to copy | Risk of imitation is low but given the margins in the industry disruption chances are high | So far the firm has not utilized the full extent of its IPR & other properties | Providing Strong Competitive Advantage |
Successful Implementation of Digital Strategy at American Express | Yes, without a comprehensive digital strategy it is extremely difficult to compete | No, as most of the firms are investing into digitalizing operations | Can be imitated by competitors | One of the leading player in the industry | Digital strategy has become critical in the industry but it can't provide sustainable competitive advantage to |
Position among Retailers and Wholesalers – American Express retail strategy | Yes, American Express has strong relationship with retailers and wholesalers | Yes, American Express has dedicated channel partners | Difficult to imitate though not impossible | Yes, over the years company has used it successfully | Sustainable Competitive Advantage |
Brand awareness of American Express products and services | Yes, the brand awareness of American Express products are high | Yes, American Express has one of the leading brand in the industry | No | American Express has utilized its leading brand position in various segments | Sustainable Competitive Advantage |
Financial Resources of American Express | Yes | No | Financial instruments and market liquidity are available to all the nearest competitors | American Express has reasonably sound financial position | American Express has relatively sustainable Competitive Advantage |
American Express 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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