Compare and Contrast Swot Analysis and Vrio Model
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Describe the SWOT analysis and the VRIO model and compare them. Highlight their main similarities and differences. (25 points) (A 1ÐÐ-page response is required.)
Student’s Response
The SWOT analysis is used to describe the Strength, Weaknesses, Opportunities and Threats that face a corporation. The purpose of this analysis is to identify the particular competencies that the corporation has as well as to identify the opportunities that they are facing but unable to take advantage of due to the lack of the necessary resources. This analysis allows managers to decide if they should invest their resources to better their strengths or on their “weaknesses to at least make them competitive” (Hunger & Wheelen, 2002, p. 109).
The two main advantages of the SWOT analysis are that it recognizes the impact the external environment can have on any firm and also when compared to other models, this analysis can be relatively simpler. Some disadvantages of this analysis include the fact that this analysis does not “suggest how the firm should go about identifying and assessing its specific strengths and weaknesses and specific environmental opportunities and threats” (Self, Weiner & Dunlop, n.d., n.p.). Criticisms of this analysis also includes the fact that it creates lengthy lists, does not use any weights to illustrate priorities and uses vague words and phrases. Also, some factors end up as such that they could fit in two categories at the same time. This analysis also poses no obligations for the opinions to be supported with any data or analysis and therefore requires only a single level of analysis. Also, it is said that this mode of analysis has no logical link to strategy implementation.
The VRIO model is an assessment of the resources that a company possesses. A resource can be defined as an “asset, competency, process, skill, or knowledge controlled by the corporation” (Hunger & Wheelen, 2002, p. 81). This determines the value of a resource, its rareness, imitability, and organization.
The assessment of value determines “how valuable the resource is to the firm in terms of enabling the firm to respond to threats and create value” (Self, Weiner & Dunlop, n.d., n.p.) and determines if this resource provides any competitive advantage for the firm. Before determining the value, however, the corporation needs to identify the opportunities and threats that face them in the external environment. They should also understand that, in the long run, the value of any one resource is dynamic. The assessment of rareness questions the availability of this resource with ease to other competitors. A widely available resource, however valuable may not add any competitive advantage to the firm. Imitability, defined as the “rate at which a firm’s underlying resources and capabilities (core competencies) can be duplicated by others” (Hunger & Wheelen, 2002, p. 82). The question of organization determines if a firm internally has the capabilities and systems that would allow it to maximize the value that resource possesses.
The four questions that should be used to assess a resource are as follows. Firstly, does a resource provide the firm with any competitive advantage? Secondly,