Internal Resource Mapping

With an understanding of offerings and market mix elements, we would look at the third key element of internal analysis—Resource Mapping. A resource is defined as a source or supply from which benefit is derived or produced. Resources for any organization could be classified as follows (including tangible and intangible elements):

1. Input-driven resources: materials, energy, natural resources
2. Economic resources: land, capital, infrastructure
3. Human resources: employees, contractors, third parties
4. Technology resources: information, communication, storage systems
5. Intellectual resources: brand capital, intellectual property, patents, and trademarks
6. Partner/intermediary resources: resources which can be leveraged with the support of strong partners, specific associations/alliances, and tie-ups with key intermediary firms

In marketing, as in the case of other businesses, companies can utilize a mix of any of these elements at the right time to deliver outputs based on changing situations and trends. It is with the support of these resources that firms can create unique differentiators in the marketplace as compared to competition. For digital marketing, specifically, some of the intangible elements like brand capital and differentiated marketing techniques could act as crucial resources which can be leveraged quite effectively to make an impact. Some of these elements form a part of the competency mix, which is the last element we would cover for internal analysis.

With an understanding of basic resource elements and types, let us now see, how a company can benchmark its resources to know which of them are more strategic than others and which of them would stand the test of competition more effectively. To conduct this benchmarking exercise, we can make use of a popular framework which companies have applied to develop the best resource mix available for deployment. It is known as the VRIN Framework.

The VRIN Framework (Valuable, Rare, Inimitable, Non-Substitutable) derives its roots from the RBV (Resource-Based View) of viewing the firm and, in turn, developing its approach strategy. RBV theory postulates the firm to be a bundle of resources including assets, capabilities, organizational processes, firm’s attributes, information, and knowledge. It believes that the firm can utilize a mix of these resources taking an inside-out approach as the starting point of the analysis of the internal environment of any organization.

The VRIN model originated from the thought that all the resources that an organization has, may not have strategic relevance. Only certain of those resources are capable of being an input to a value-creating strategy which will put the organization in a position of competitive advantage.

According to the VRIN model (Barney 1991), a firm should display four key attributes and only if these conditions hold can the firm sustain above average returns. These four elements are described as:

1. Valuable: A resource must enable a firm to employ a value-creating strategy, by either outperforming its competitors or reducing its own weaknesses. Relevant in this perspective is that the transformation costs associated with the investment in the resource cannot be higher than the discounted future rents that flow out of the value-creating strategy.
2. Rare: Resources drive competitive advantage only when they are relatively scarce. While a resource does not need to be unique to only one firm, it must not be widely available. The exact amount of rareness will vary by situation, but it must be uncommon enough to give a distinct advantage to the firms that have it. When comparing the rarity of a resource, it is essential to include not only current competitors but also other firms who could possibly enter the industry in future.
3. Inimitable: A resource is termed to be inimitable, if it is controlled by only one firm. A resource can provide sustainable competitive advantage only if competitors are not able to duplicate this asset perfectly and lack the capability to obtain them. The best example in this case would be the development of intellectual property which the company has trademarked and is tough to replicate.
4. Non-substitutable: Even if a resource is rare, potentially value-creating and imperfectly imitable, an equally important aspect is lack of substitutability. If competitors are able to counter the firm’s value-creating strategy with a substitute, prices are driven down to really low levels which make the resulting economic profits negligible.

The VRIN characteristics mentioned are individually necessary, but not sufficient conditions for a sustained competitive advantage. Within the framework of the resource-based view, the chain is as strong as its weakest link and therefore requires the resource to display each of the four characteristics to be a possible source of a sustainable competitive advantage.

Most of the elements of the VRIN model are factors which if rigorously applied by companies to their resource set would result in unique differentiators also termed as internal competencies (which would be discussed in more detail as the last of the internal analysis elements). It is essential that the VRIN framework is iteratively applied to each of the key identified resources across key competitors so that a firm can keep perfecting their resource advantage and to bring it to a level which would be really difficult to imitate or substitute by any competitor.

With this understanding, let us move on to the last element of internal analysis.