




































 
 

 

9 
© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

Asian Business Research Journal 
Vol. 3, 9-14, 2018 
ISSN: 2576-6759  
DOI: 10.20448/journal.518.2018.31.9.14 
© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

 
 
 

 
Operationalization of Internal Analysis Using the VRIO Framework: Development 
of Scale for Resource and Capabilities Organization (Case Study: XYZ Company 
Animal Feed Business Unit) 

 
Widya Ariyani1    

Arief Daryanto2      

Sahara3     

 

 
( Corresponding Author) 

 

 

1,2School of Business. Bogor Agricultural University Jl. Raya Pajajaran, Bogor 16151, Indonesia 

 
3Departement of Economic. Faculty of Economics and Management. Bogor Agicultural University.  Jl. Lingkar 
Kampus-Kampus IPB Darmaga, Bogor 16680, Indonesia 

 

 
Abstract 

Finding the source of competitive advantage has become an essential area in the research of 
strategic management. One of the methods commonly used to find out the competitive advantage 
is by conducting internal analysis using the VRIO framework. The weaknesses of said framework 
are that they cannot be used to determine how strong the competitive advantage of the company 
can be managed by them. Therefore the objectives of this paper are to create assessment scales to 
determine how well the resources or capabilities has been managed by the company in a VRIO 
framework. To elaborate on the operationalizing of VRIO scale, a case study in the animal feed 
business unit of XYZ Company was used. 

 
Keywords: Internal analysis, Resource based view, Operationalizing the VRIO scale, Value chain Analysis, Animal feed business unit 

JEL Classification: M20; Q12. 
 
1. Introduction 

In the early 1950s-1960s, strategy was centered on the planning process and gradual execution processes 
(Grant, 2013). However, the strategic planning process in business today puts forward the dynamic of external 
environment. Therefore most of the companies prefer to implement planning process using the market based 
approach (Sirmon et al., 2007). The most popular theory of market-based approach used is the Porter's Five Forces. 
It is a powerful tool for understanding the competitiveness of business environment, and to identify our strategy's 
potential profitability where strategy-making is done by taking external factors into account. 

Lack of attention to internal analysis in strategic management of asset has created a new paradigm: Resource 
Based View (Wernerfelt, 1984; Barney, 1991; Grant, 1991; Peteraf, 1993). Resource Based View sees a company as 
a collection of resources and capabilities (Wernerfelt, 1984). Resources consist of both tangible assets such as 
financial assets and physical assets, as well as intangible assets such as human resources, patents and technology 
(Grant, 1991; Amit and Schoemaker, 1993). An organizational capability is defined as the company's ability to 
manage resources in achieving the desired goals (Amit and Schoemaker, 1993). Capability is not included in 
tangible assets or intangible assets, but rather a "intangible asset" that cannot be easily imitated by purchase but 
must be built by the company itself (Teece et al., 1997). 

Based on the explanation above, we will make two basic assumptions that Resource Based View are resource 
heterogeneity and resource immobility (Mata et al., 1995). First the heterogeneity assumption means the quality of 
being made of many different elements, forms, kinds, or different productive resources between companies; whereas 
the immobility assumptions considered resources are very expensive, difficult to imitate and inelastic in supply.  . 
However, it is impossible to define a set of resources that provide a universal competitive advantage because each 
company's resources have a specific context (Barney, 2001; Wernerfelt, 2013). 

Barney (1991) was the first to attempt to formalize the Resource Based View theory by creating four 
assessment criteria, namely valuable, rare, imperfectly imitable and non-substitutable. These criteria are often 
referred to as the VRIN framework (Barney, 1991). However, it is impossible to define a set of resources that 
provide a universal competitive advantage. The reason as each company's resources has a specific context. Barney's 
competitive advantages are as follow: valuable resources if they can be utilized to improve efficiency and 
effectiveness, or in other words: it must take advantage of an opportunity or neutralize threats within the corporate 
environment. Resources are considered very rarely owned (rare) if not owned by a competitor company or at least, 
only a few competing companies. Resources cannot be imitated perfectly (imitability) whenever it is impossible or 

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substantially difficult for competitors to replicate. And finally, resources cannot be offset if no other asset can meet 
the same or similar strategic value. 

The VRIN framework received criticism because the criteria used could neither explain the differences in each 
company's performance (Newbert, 2007; Kraaijenbrik et al., 2010) nor explain how (Mohamad and Norezam, 2012) 
and when (Kraaijenbrik et al., 2010) the resources and capabilities are built or how well they are managed. 
Therefore, Barney (1995) corrected it by converting it to VRIO. "O" stands for organization means the ability or 
condition necessary to materialize the competitive value of an identified resource or capability. If valuable, rare and 
imperfect resources or capabilities can be replicated, companies need to be set up to manage them and utilize them. 
The weakness of using the VRIO framework is when used to compare performance in managing 
resources/capabilities between 2 or more firms (Knot, 2015). Therefore this journal will discuss the use of scale in 
measuring the level of "organization" of a resource/capability of a company within the VRIO framework. 
 

2. The Concept of Resource Based View 
Resource Based View is a reference or framework for conducting internal analysis by learning all of the 

resources and capabilities owned and controlled by the company. Internal resources of the company can be 
classified into four categories: physical resources (Williamson, 1975) human resources (Becker, 1964) 
organizational resources (Tomer, 1987) and financial resources (David, 2013). Physical resources are physical 
infrastructure used by the companies, structures, buildings and factories, equipment, geographical location or place 
and access to raw materials. Human resources include expertise, education and knowledge as well as skills 
development program for every workers within a company. Organizational resources include the company's formal 
reporting structure, formal and informal planning, control systems, coordination systems, culture and reputation, 
informal relationships between groups within companies, between companies and the environment. Financial 
resources include all the financial resources that a company can use to generate and implement a strategy. 

We can use value chain approach to identify the resources and capabilities of internal company. In the value 
chain approach, production activities are divided into two, namely support activities and primary activities. Porter 
(1998) in his book describes primary activities are activities directly involved in products and services, while 
support activities are activities that ensure that the main activities can be done efficiently and effectively. 

 

2.1. Identification of Competitive Advantage Using the VRIO Framework 
By utilizing the value chain model, an identification technique for competitive advantage based on the valuation 

using VRIO framework is developed. The VRIO framework is structured with a number of questions about 
resources and capabilities, using four indicators of valuability, rarity, imitability and organization. 

The four questions used to analysis the VRIO framework, are as follows: 
a) Valuable: whether these resources/capabilities can encourage companies to make the operation process 

more efficient and effective, or can be used to exploit external opportunities or counteract threats.  
b) Rare: whether the resources/capabilities are controlled only by a small number of companies or rarely 

owned by other companies.  
c) Imitability: whether the resources/capabilities are hard to imitate or replicate by other companies. 
d) Organization: whether the resources/capabilities are supported and managed by the company appropriately. 
According to Chaharbaghi and Lynch (1999) sustainability in gaining the competitive advantage is how a 

company can manage and enhance the resources or ability to achieve new forms of competitive advantage. 
According to Ghemawat (1986) the competitive advantage based on its source can be divided into 3 categories, 
namely (1). Targeted market size,   (2). Primary access to resources or consumers,   and (3).  Limitation of choice of 
competitors. Based on those categories, there are two competitive advantages that are derived from resources 
which are (1). Superior  access to resources,   and (2). Limiting  options for competitors. 

Therefore, in order to obtain sustainable competitive advantage, a resource or capability should be: (1). Rarely 
owned by another company, (2). difficult to obtain / hard to imitate by other companies, and (3). Will be well-
managed by the company. 

Based on the explanation above, the use of VRIO framework is very appropriate to be used in searching for 
sustainable competitive advantage. The disadvantages of the VRIO framework they are unable to provide 
assessment for the third sustainable competitiveness criteria which could be well-managed by the company. 
Therefore, for the fourth question point of "organization", it can be combined with the Likert scale (1-4) to 
demonstrate the assessment score of a company's ability to manage the said resources/capabilities. 
 

3. Case Study of XYZ Company 
The following tables are examples of internal environment analysis using resource based view. To identify the 

resources and capabilities as competitive advantage, we can use value chain analysis combined with VRIO 
framework. 
 

3.1. Value Chain Analysis 
Based on the 'Value Chain' framework of the porter, the activities took place at XYZ Company can be divided 

into two groups: primary activities and support activities, they are presented in Figure 1. Primary activities are an 
activities that have an immediate effect on the production, maintenance, sales and support of the products or 
services to be supplied. Meanwhile, supporting activities assist the primary activities and they form the basis of any 
organization 
 



Asian Business Research Journal, 2018, 3: 9-14 

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© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

 

 

Figure-1. Value Chain Analysis of XYZ Company 
                      Source: Researcher’s approach, 2018 
 

3.2. VRIO Test 
After all the resources and capabilities used in each part of the XYZ Company on animal feed business are 

identified, the next step is to conduct an analysis using the layered analysis of VRI Test (Value Rarity, and 
imitability) they are presented in Table 1. 
 

Table-1. VRI Analysis 

Resource/Capability V R I Strengths or Weaknesses Economical 
Performance  

Clear Mission and Objective of the Animal Feed 
Business Unit 

√ √ - Temporary Competitive 
Advantage 

Above 
Normal 

Big Corporate Loan capacity  
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Big corporate asset and capital  
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Advanced factory technology and facility √ - - Competitive Parity Normal 
Good spatial arrangement of the animal feed factory  √ - - Competitive Parity Normal 
Strategic location of the animal feed factory √ - - Competitive Parity Normal 
The reliable capability of R&D in creating livestock 
feed formula  

√ √ √ Proceed to organization 
analysis 

Above 
Normal 

Qualified and well experienced experts of the company 
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Loyalty of the company employees √ - - Competitive Parity Normal 
Employees motivation  √ - - Competitive Parity Normal 
Sophistication of finished goods technology √ - - Competitive Parity Normal 

Sophistication of raw materials quality control 
technology 

√ √ - Temporary Competitive 
Advantage 

Above 
Normal 

Sophistication of finished goods quality control 
technology  

√ - - 
Competitive Parity 

Normal 

Supplier loyalty  √ - - Competitive Parity Normal 
Raw materials transportation system  √ - - Competitive Parity Normal 

Big raw materials warehouse storage capacity  
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Big production capacity of the company 
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Good administration of the company √ - - Competitive Parity Normal 
The lack of adequate transportation infrastructure for 
animal feed distribution  

- - - Competitive Disadvantage Below 
Normal 

Finished Goods warehouse storage capacity √ - - Competitive Parity Normal 
A strong brand identity has been recognized in a longer 
time  as high quality animal feed producer  

√ √ √ Proceed to organization 
analysis 

Above 
Normal 

Credit Term is too short  
- - - 

Competitive Disadvantage 
Below 
Normal 

Products pricing is the most expensive in its class 
- - - 

Competitive Disadvantage 
Below 
Normal 

An extensive marketing networks 
√ √ √ Proceed to organization 

analysis 
Above 
Normal 

Position as market leader 
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Product assurance and guarantee  √ - - Competitive Parity Normal 



Asian Business Research Journal, 2018, 3: 9-14 

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© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

 

Technical support reliable and well experienced   
√ √ √ Proceed to organization 

analysis 
Above 
Normal 

CSR to the community/academic/farmers √ - - Competitive Parity Normal 

Good corporate financial management capability  
√ √ √ Proceed to organization 

analysis 
Above 
Normal 

Ability for retaining company employees  from 
Hijacking 

√ - - 
Competitive Parity 

Normal 

Ability to improve the quality of employees skill  
(training, seminars, etc.) 

√ - - 
Competitive Parity 

Normal 

Ability to adopt the latest Information Technology 
system 

√ - - 
Competitive Parity 

Normal 

Ability to anticipate raw material price volatility  
√ √ - Temporary Competitive 

Advantage 
Above 
Normal 

Lack of ability to continuously obtain high quality raw 
materials  

- - - Competitive Disadvantage Below 
Normal 

Speed in unloading of raw materials  √ - - Competitive Parity Normal 
Ability to improve production efficiency √ - - Competitive Parity Normal 

The lack of ability to promote the product  
- - - Competitive Disadvantage Below 

Normal 
   Source: Researcher’s approach, 2018 
 

We can categorize the strengths or weaknesses of a company's resources or capabilities based on its 
competitive and economic performance. Table 4 revealed that the business unit of XYZ Company has some 
weaknesses, among others: (1). The lack of adequate transportation infrastructure for animal feed distribution, (2). 
Credit Term is too short, (3). Products pricing is the most expensive in its class, (4). Lack of ability to continuously 
obtain high quality raw materials, and (5). The lack of ability to promote the product.  

Meanwhile, the strategic strengths are: (1). Clear Mission and Objective of the Animal Feed Business, (2). Big 
Corporate Loan capacity, (3). Big corporate asset and business capital, (4). The reliable capability of R&D in  
creating livestock feed formula, (5). Qualified and experienced experts of the company, (6). Sophistication of raw 
materials quality control technology, (8). Big production capacity of the company, (9). A strong brand identity has 
been recognized in a longer time  as high quality animal feed producer, (11). Position as market leader, (12). 
Technical support services reliable and well experienced, (13). Good corporate financial management capabilities, 
and (14). Ability to anticipate raw material price volatility. This list of strengths can be used by animal feed 
business unit in XYZ Company to achieve their competitive advantage. 

To determine the level of a company's ability in managing of any resources or the potential source of 
competitive advantage, an assessment of the "Organization" in the VRIO framework based on the Likert scale are 
presented in Table 2. 

Based on the results of organizational level analysis, the competitiveness used for companies to create a 
sustainable competitive advantage are: (1). A strong brand identity has been recognized in a longer time  as high 
quality animal feed producer (2). An extensive marketing networks, (3). Technical support services reliable and 
well experienced, and (4) Good corporate financial management capabilities. 
 

Table-2. Assessment of Organization Scale 

Resources/Capabilities  Organization 
Scale  

Organization 
Level of 
Capability 

Competitive 
Implication 

1 2 3 4 

Clear Mission and Objective of the Animal Feed Business 
0 1 6 0 71 % 

Temporary 
Competitive 
Advantage 

Big Corporate Loan capacity 
0 0 6 1 79 % 

Temporary 
Competitive 
Advantage 

Big corporate asset and capital  
0 0 3 4 89 % 

Temporary 
Competitive 
Advantage 

Advanced factory technology and facility  0 0 4 3 86 % Competitive Parity 
Good spatial arrangement of the animal feed factory 0 1 4 2 79 % Competitive Parity 
Strategic location of the animal feed factory 0 0 3 4 89 % Competitive Parity 

The reliable capability of R&D in  creating livestock feed formula 
0 0 0 7 100 % 

Proceed to 
organization 
analysis 

Qualified and well experienced experts of the company 
0 0 2 5 93 % 

Temporary 
Competitive 
Advantage 

Loyalty of the company employees 0 0 7 0 75 % Competitive Parity 
Employees motivation  0 0 6 1 79 % Competitive Parity 
Sophistication of finished goods technology 0 0 4 3 86 % Competitive Parity 

Sophistication of raw materials quality control technology 
0 0 2 5 93 % 

Temporary 
Competitive 
Advantage 

Sophistication of finished goods quality control technology  0 0 5 2 82 % Competitive Parity 

Supplier loyalty  0 0 6 1 79 % Competitive Parity 
Raw materials transportation system  0 0 6 1 79 % Competitive Parity 

Big raw materials warehouse storage capacity  
0 0 3 4 89 % 

Temporary 
Competitive 



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Advantage 

Big production capacity of the company 
0 0 3 4 89 % 

Temporary 
Competitive 
Advantage 

Good administration of the company 0 0 3 4 89 % Competitive Parity 
The lack of adequate transportation infrastructure for animal feed 
distribution 0 3 4 0 64 % 

Competitive 
Disadvantage 

Finished Goods warehouse storage capacity 1 0 5 1 71 % Competitive Parity 

A strong brand identity has been recognized in a longer time as 
high quality animal feed producer 

0 0 0 7 100 % 

Proceed to 
organization 
analysis 

Credit Term is too short  
4 0 2 1 50 % 

Competitive 
Disadvantage 

Product pricing is the most expensive in its class 
0 5 2 0 57 % 

Competitive 
Disadvantage 

An extensive marketing networks 
0 0 3 4 89 % 

Proceed to 
organization 
analysis 

Position as market leader 
1 1 4 1 68 % 

Temporary 
Competitive 
Advantage 

Product assurance and guarantee  0 0 5 2 82 % Competitive Parity 

Technical support reliable and well experienced   
0 0 2 5 93 % 

Proceed to 
organization 
analysis 

CSR to the community/academic/farmers 0 0 6 1 79 % Competitive Parity 

Good corporate financial management capability 
0 0 2 5 93 % 

Proceed to 
organization 
analysis 

Ability for retaining company employees  from Hijacking 0 0 6 1 79 % Competitive Parity 
Ability to improve the quality of employees’ skill (training, 
seminars, etc.) 0 1 4 2 79 % 

Competitive Parity 

Ability to adopt the latest Information Technology system 0 0 1 6 96 % Competitive Parity 

Ability to anticipate raw material price volatility 
0 0 7 0 75 % 

Temporary 
Competitive 
Advantage 

Lack of ability to continuously obtain high quality raw materials  
0 2 4 1 71 % 

Competitive 
Disadvantage 

Speed in unloading of raw materials  0 1 1 5 89 % Competitive Parity 
Ability to improve production efficiency 0 1 3 3 82 % Competitive Parity 

The lack of ability to promote the product 
0 2 4 1 71 % 

Competitive 
Disadvantage 

 Source: Researcher’s approach, 2018 
 

4. Conclusion 
Resource Based View approach is a managerial framework used to determine the competitive advantage with 

the potential to deliver sustainable competitive advantage to a firm. It is recommended to combine the value chain 
analysis with VRIO framework and Likert measurement scale in order to measure the level of proficiency of a 
company in managing resources/capabilities as a source of its competitive advantage. Therefore, the company's 
management able to conduct an accurate performance improvement of a potential resources or capabilities to build 
sustained competitive advantage in the business. 

It is suggested that further research on the use a combination of VRIO framework with Likert scale for 
corporate strategic planning activities. In all the suggestions mentioned, that combination could be used in many 
business areas.  
 

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Citation | Widya Ariyani; Arief Daryanto; Sahara (2018). 
Operationalization of Internal Analysis Using the VRIO 
Framework: Development of Scale for Resource and Capabilities 
Organization (Case Study: XYZ Company Animal Feed Business 
Unit). Asian Business Research Journal, 3: 9-14. 
History:  
Received: 24 April 2018 
Revised: 21 May 2018 
Accepted: 30 May 2018 
Published: 4 June 2018 
Licensed: This work is licensed under a Creative Commons 

Attribution 3.0 License  
Publisher:  Eastern Centre of Science and Education 
 

Acknowledgement: All authors contributed to the conception and design of 
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study as planned have been explained. 
Ethical: This study follows all ethical practices during writing.   

 

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