This question contains two parts; be sure to answer both.
What will be an ideal response?
First, describe how an entrepreneur can evaluate a business opportunity using the VRIO framework. Which criteria must the entrepreneur use?
Next, evaluate the following business idea using the VRIO framework: Your parents want to open a mobile pet-grooming company and they have asked you for your opinion about whether they should invest in the concept. They investigated the opportunity and found a vehicle that contains all the necessary equipment. Conduct a VRIO analysis and state your recommendation to your parents.
VRIO is a framework for analyzing a resource or capability to determine its competitive strategic potential by answering four questions about its Value, Rarity, Imitability, and Organization. Evaluating value means asking “Does the resource or capability allow your firm to exploit an opportunity or neutralize a threat?” If the answer is yes, the company will be in a competitive position. Evaluating rarity means asking “Is the resource or capability currently controlled by only a few firms or no other firms?” If the answer is yes, the business will have at least some temporary competitive advantage. Evaluating imitability means asking “Is the resource or capability costly for other firms to imitate?” If the answer is yes, the business definitely has a competitive advantage. Evaluating organization means asking “Is the firm organized to exploit the resource or capability?” If the answer is yes (and the company has value, rarity, and non-imitability) then the firm has the potential to go forward.
Responses to the second part of the question, about the pet-grooming business, will vary, but here is one possible response:
Value: Does the pet-grooming service allow the firm to exploit an opportunity or neutralize a threat? The answer here is yes. Today’s harried professionals want to relax on the weekends, not spend their time taking the dog to the groomer’s. By going directly to their homes, the business has the chance to take advantage of an opportunity.
Rarity: Is the resource currently controlled by only a few firms or no other firms? Right now, no other firms offer a mobile dog-grooming service.
Imitability: Is the resource or capability costly for other firms to imitate? Currently, there are two well-established dog-grooming salons in town. We have to anticipate that once they see how successful we are, they may imitate us. It will not be very expensive for them to enter the mobile grooming business. All they will have to do is lease a van and pay for gas and insurance. They already have employees who know how to do the work and who have good relationships with their customers.
Organization: Is the firm organized to exploit the resource or capability? It should not be difficult to organize the business. We can use software that allows people to book appointments online. Of course, we will have to have someone available to answer the phone during business hours, and ensure that we respond promptly to all messages left on our voice mail
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