Barney’s VRIO model

Barney’s VRIO model

Introduction

Many tools are used to analyze a firm’s resources, such as Porter’s 5 model, value chain analysis, and BCG matrix. This essay focuses on one method developed in 1991 by Barney that established a link between a company’s internal resources and its market performance.  The other discussion is on the strategic management process and emphasis of my opinion on which step of the process I view to be more critical. The last section analyses the different aspects of groupthink and its effect on the decision made by an organization.

VRIO framework.

Barney’s VRIO model is a resource-based view (RBV), and therefore any company with vast resources but fails to be organized will not be in a strategic position to take advantage of those resources. However, not all resources within a firm’s control can be utilized to competitive advantage. According to the model developer, “the resources must be valuable, rare, imperfectly imitable and non-substitutable” to have a competitive advantage (Barney, 1991, p.99-117). To capture the value of these resources, prior steps in effective budgeting, management, control, and even planning system must be developed.  For any company to achieve a sustainable competitive advantage, there must be an abundance of the resources that meets the four attributes. Distinctive competence promotes the company’s brand and helps its consumers identify with their products uniquely as opposed to other substitute products available. In the long run, the VRIO model paints a picture of the measure of performance concerning identified internal strengths and weaknesses.

Zaytonn Company, a manufacturer of soaps and detergent, is a perfect example of how the VRIO model has enabled the achieve market dominance. As a former employee of the company, my stay was characterized by constant research and innovation. Their soaps and detergents came in a different fragrance that other competitors found hard to incorporate during production. Take this, for instance, during a time when consumers had to choose between lavender and vanilla fragrance Zaytonn products had almond, coconut, orange, lemon, and cucumber fragrances. To secure the current demand Zaytonn opt to produce the raw resources in their plantations directly. Their products are also characterized by softeners whose ingredients and formulation are a top-secret in their headquarters. When an organization adopts the VRIO model as a tool of analysis, management choices and planning is geared towards utilization and market separation, as seen in the case of Zaytonn.

Steps of the strategic management process.

(López, 2018) The strategic management process is the identification and description of an organization’s strategy in a bid to achieve a competitive advantage. It is broad and detailed to enable managers to have an informed choice that the organization will follow to achieve better performance. There are five steps taken during a management process, namely:

• Formulation of vision and mission
• Information gathering and analysis
• Strategy formulation
• Implementation
• Evaluation and control

In each of the highlighted steps, there are various individual branches of actions taken to arrive at a single major step. The first step is done by management at the top of the hierarchy for clarification purposes of the organization’s aspirations. The vision and mission are reviewed to form the moral of operation to be undertaken in the management process. The second step, commonly known as environmental scanning involves information gathering and analysis. Proper scrutiny of information provided to the organization is taken to ascertain its reliance on the management. This requires continuous improvement of the information in line with the business needs. After analysis, the accompanying step is important and requires sound decision making as it involves the selection of the best cause of action. The strategy formulated in this step is communicated throughout the organization, and the four-step of management is ready to commence (López, 2018).

Now that a business has a strategy in place, it is up to all management levels to implement the plan. At this point, the management process is in action, and the duties and responsibilities of each cause of action are designated. However, if the strategy being implemented is not working due to some unforeseen reason, the third step can be repeated. The flexibility of the management process is tested at this step since adopting a wrong strategy will lead the organization in the wrong direction or even into losses. Finally, the appraisal of all internal and external factors is done through evaluation and control that measures performance. Evaluation assures the management that the organizational strategy, as well as its implementation, meets the organizational objectives. It is mandatory for the organization to “monitor the execution of strategy and make adjustments” of the established tactics for continuous success (Kinicki & Williams, 2018, p.176).

My opinion rest on formulating the organization’s vision and mission. As an initial step, I think it is the most crucial part of any organization’s strategic management process. The end goal will solely rely on what path has been set by the management in terms of its vision that will create internal beliefs to motivate employees towards set goals and objectives. The company’s’ mission extends beyond its internal operation to its consumer. It is what the consumer judge on the intentions of the company when carrying out the daily operations. Ultimately, all the remaining four strategies are built upon the vision and mission that has been developed.

Groupthink

            Groupthink is an approach of issues and decisions through consensus rather than individuals acting independently. The weight of a task is shared among members of a department as opposed to getting it done by oneself. Whilst a lot of decision is personal, some advantages can be derived from groupthink. Such advantages are having a different perspective and better understanding. You know the saying ‘two heads are better than one’. Well, in a groupthink situation member collectively provide intellectual stimulation, which leads to better understanding.

Groupthink in an organization

        An example of my former employer, Zaytonn, groupthink was incorporated in research and innovation centers. I can point this as one of the best practices of group thinking so far. Some departments work effectively when employees work in groups; this is because tasks in research and innovation seek to find a solution to a common problem using various professionals. Just like back in high school days, understanding a complex mathematical problem proved to be useful as a group, but the perfection of the concept was upon and individual’s effort. In a bid to control over-reliance on groupthink, Zaytonn came up with an employee’s milestone tracker that required each worker to have an individual working plan, which was reviewed monthly. The lazy employees would, therefore, not take advantage of other workers’ efforts. In places where there is no groupthink implementation, then it is advisable to communicate ideas and suggestions directly to the managers.

Effects of groupthink on decisions

The Decision-making process in an organization is prolonged once everybody’s opinion is tabled for consideration. In some cases, it helps form a more informed decision as opposed by letting a single individual decide for the majority. The downside of this is a group of people who can push an agenda to their favor, which might not be right for the rest of the organization. The disadvantages of groupthink include “domination and intimidation, satisficing, and goal displacement” (Kinicki & Williams, 2018, p.228). More failures than victory can be anticipated when having groupthink in decision making. One may argue that brainstorming is inclusive, different ideas and solutions to problems lead to dissension.

The outcome of groupthink decisions.

Decisions made through groups are mostly associated with overconfidence, and due to the rational behavior of humans, a warning might be discounted. The group might not reconsider some decisions that might cause huge losses. The other outcome that can arise is making a wrong decision due to a lack of opposition that would have otherwise challenged the decision. Some employees may not voice their opinion due to over domination; hence what was probably best for the organization is stamped upon by each groupthink.

Conclusion

When making strategic management, each step must be taken in chronological order as they are interdependent of each other. In case of any hiccups during operations, businesses will revert to the processes. Managers should be smart and understand that dissension ought to occur once in a while when exerting managerial decisions. I would not advocate for groupthink. It is hard for a group of individuals to impose strict measures n themselves, and what favors them might not be necessarily right. In the end, whatever has been adapted or settled must be analyzed to measure and evaluate progress tools like Barney’s VRIO framework that can be used in the utilization of resources to achieve competitive advantage.

References

Barney, J. (1991). Firms Resources and Sustained Competitive Advantage. Journal of Management, 99-117.

López, José & Guerras-Martín, Luis. (2018). FUNDAMENTALS of STRATEGIC MANAGEMENT Second edition.

Kinicki, W. (2003). Management: A practical introduction. Place of publication not identified: McGraw-Hill.