VRIO evaluates the resources of an organization in the context of the competitive advantage those resources can provide by asking the following questions about a resource or capability:
Value: Does the resource enable a firm to exploit an environmental opportunity, and/or neutralize an environmental threat?
Rarity: Is control of the resource in the hands of a relative few, or is it widely possessed?
Imitability: Is it difficult for competitors to imitate this resource?
Organization: Is the company organized, ready, and able to exploit this resource?
A resource or capability that meets all four requirements can be used by a firm to gain and sustain a competitive advantage.
VRIO encourages you to consider the importance of resources in strategic planning.
It may overlook the importance of external factors, such as changes in the business environment.
Sometimes, it's not just individual resources, but the unique combination of resources that can provide a competitive advantage.