VRIO framework can be used to determine the return potential associated with the firm’s resources and capabilities.

Capabilities Valuable? Rare? Difficult to Imitate?

Supported by Organization?

Competitive Implications?

DVD Rental Yes No No No TemporaryPhysical Distribution

Yes Yes Yes Yes Temporary

Online Streaming

Yes Yes Yes Yes Sustainable

Title Variety Yes Yes No Yes SustainableConvenience

Yes Yes Yes Yes Sustainable

In case the resource is not valuable, that particular resource might hinder the firm from exploiting opportunities or neutralize threats. By exploiting a resource sometimes, the cost may increase and willingness to pay will decrease. Such resources are weaknesses. Valuable resources that are rare are considered strengths.

A company should exploit a resource which is valuable and rare but not costly to imitate at the same time in order to gain a temporary edge. Leading to first mover advantage. To gain a sustained advantage, company should exploit a resource which is valuable and rare at the same time costly to imitate. This will cause a severe disadvantage for its competitors.

When VRIO is applied for Netflix, it can be seen that the firm’s biggest opportunity was its ability to stream movies over the internet through various electronic devices. This capability was valuable, rare and costly to imitate. Netflix exploited this advantage gaining valuable first mover advantage.