VRIO ANALYSIS RANDOM NOTES YOU MIGHT NEED PDF

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Summary

THIS IS A VRIO ANALYSIS THAT YOU MIGHT NEED TO PASS YOUR PAPER THAT YOU WILL BE DOING IN THE CLASS...

Description

Value- Worth or utility. Rarity- To be uncommon, or not available to other competitors. Inimitability- An attribute of a resource that describes the degree of difficulty a competitor would face in copying, imitating, or mimicking the value of that resource •

Positive Network Externalities- When the value of a product increases with the number of users.

•

Virtuous Circle- When more sellers attract more buyers, who, in turn, attract more sellers.

Organized to Exploit- The degree to which the legal, administrative, and operating structure of the firm allows it to capture the rents generated by resources.

1. Using the VRIO MODEL: Complete an analysis of Southwest Airlines top 3 key resources and/or capabilities and provide an explanation for why you think they are key for the company. (6 marks) VRIO Analysis Resource

Valuable

Rare

Inimitable

1. Low Cost Strategy or Unique Value

YES

YES

NO

2. Bags Fly Free

YES

YES

NO

3. Load Factor

YES

YES

YES

4. Employment Culture

YES

YES

YES

Organized to Exploit

1. For consecutive years, Southwest's low-cost strategy has been a valuable resource. With the addition to the “Bags Fly Free” ad campaign, they have also become reputable for being the most affordable airline in the industry. This makes their strategy quite rare because no other airline has been recognised for being as cheap as Southwest. Furthermore, this is not inimitable as JetBlue attempted to mimic Southwest to have positive operating profitability yearly, but the airline had made less than a third of Southwest's profits, regardless of coming in second for being the only other airline with a positive operating profitability performance. This results in industry consolidation, higher capacity utilization of planes, lower fuel costs (drop in oil prices) with their profitability at an all time high 2. Southwest Airlines' speciality is that the first and second checked bags are free of charge. Comparatively, in order to increase revenue, most airlines have begun charging for the bags that passengers bring on flights. Some airlines give you one free personal item and then charge you for every other bag, whether it's a carry-on or a checked bag, while others only charge you for checked bags. Southwest, on the other hand, has bucked the trend and is now known for its ad campaign "Bags Fly Free." Because of the increased brand recognition and added value it brings to customers, this capability is extremely valuable. It's also uncommon, because only a few airlines do not charge for checked baggage. In terms of inimitability, this is a capability that other airlines could potentially adopt, however this would prevent the airline from increasing its revenue. Another airline could easily stop charging for bags, but this may disrupt their fixed costs. Southwest is structured to take advantage of this capability because they are adept at identifying new revenue streams. 3....