In assessing the health of a firm’s internal environment and competitive advantage, the VRIO is a helpful tool. The basis of the analysis is a throrough evaluation of a company’s various resources and capabilities.
In our analysis, we have chosen the resources and capabilities that we believe are the most important for companies in the athletic footwear industry.
Financial resources:
In order to able to expand its organization, invest in new technology and offer competitive compensation to workers (salaries and bonuses) and shareholders (dividend and stock re-purchases), a company to be competitive in this industry must have a healthy statement of cash flow, reasonable debt (to be able to repay interest) and strong ability to raise capital (which can be evaluated by a firm’s return measures: return on investment and return to equity – if these measures are in good shape investors are likely to invest their capital in the company).
Tangible resources:
To be able to gain competitive advantage against its competitors, a company in this industry also needs state of the art technology and high quality production processes. We also believe that the location of production is important in order to gain advantage in the cost structure.
Intangible resources and organizational capabilities:
The last set of internal factors that help a company to advance in its industry is its intangible resources and organizational capabilities. First, we believe that innovation and creativity are two of the most important aspects in the footwear industry. The firm that can employ and utilize highly innovative employers will therefore gain substantial advantage. We also believe the firm with the strongest sales team (marketing department) and customer services departments will become the most successful. This is particularly important in this industry, as companies often come out with new products. Further, relatively high competition in this industry is another reason why these companies should focus on strong marketing teams and solid customer service