Strategic Analysis of Sears Holdings Incorporated using the VRIO Methodology
Rareness tries to understand or measure the limited nature of the resource (Grünig, 2015). Imitability tries to find out the authenticity of the resource and if it is likely to get substitutes of the resource by a potential competitor. Organization tries to understand the strategic impact of the product from all aspects. Sears Holdings Corporation is a retail and wholesale company trading under the symbol SHLD in the United States. Sears Holdings was incorporated in 2004 as Delware Corporation and merged in 2005 with Kmart Holdings Corporation to form Kmart and Sears, one of the largest retail store in the U. First a firm divides resources into two categories: internal and external. For external resources, an organization would use criteria such as Porter’s Five Forces and PESTEL analysis to gauge the competitive advantage of a product.
For internal resources, a firm would use approaches such as Value Chain analysis, Boston Corporation Group (BCG) matrix, Strength Weakness Opportunity and Threat (SWOT) analysis and Value Rareness Imitability Organization (VRIO) criterion. How do we then analyze the strategy of Sear Holdings using VRIO method? VRIO assumes that assets must be valuable, rare, and non-substitutable. Such a resource that meets the four conditions is believed to enhance sustainable competitive advantage for that firm. Resources are also valuable if they help firms to positively impact the deduced customer value. This is done by increasing disparity or decreasing the price of the product (Knott, 2015). The assets that do not meet this condition lead to competitive parity or disadvantage. The following is a SWOT analysis of Sear Holdings Corporation: Strengths 1.
Strong retail presence globally (twelfth largest retailer in the U. Digital and technological upgrade. Transformational strategy for growth. Threats 1. Not very keen on customer preferences and on selling customer centric products. Low profit margins if inventories are not successfully managed. These brands have already made a name for themselves and acquired market share. Consumers see the value they create and therefore bringing in a substitute might or might not receive the much-needed traction. Imitability There are two ways of imitating a product: duplicating the product or substituting the product. Some products especially authentic ones are hard to come up with substitutes and therefore very costly to imitate. Sears Holdings Corporation sells designer items and therefore hard to duplicate or substitute since they have already acquired the market share, the authenticity and they have a strong strategic value.
Does your organization’s culture reward brilliant ideas from the staff? Having defined what all the four VRIO attributes mean, let’s take a look at the VRIO Framework of Sears Holdings Corporation. Sears Holdings Corporation VRIO Capability Brand management and global presence Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? Yes Yes Yes Yes Result: sustained competitive advantage Employee management Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? Yes Yes Yes Yes Result: sustained competitive advantage Products variety Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? Yes Yes Yes Yes Result: sustained competitive advantage Retail model Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? No No No No Result: realized competitive parity Customer centricity Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? Yes Yes Yes Yes Result: realized competitive advantage Payment systems Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? No No No Yes Result: realized competitive parity Sales effort Is it valuable? Is it rare? Is it costly to imitate? Is a firm organized to exploit it? Yes Yes Yes Yes Result: sustained competitive advantage Brand management and global presence Having a strong brand management and global presence is important increasing the size, sales, and market share of a company.
Sears Holdings Co. is the second largest retailer in the U. S. The training they offer to employees is usually unique and best suited to their kind of scenario. Employees have flexible working hours that allows them to come back more productive. Companies that also reward their employees tend to be more productive and thus have a greater profit margin. Generally, employee management has a realized sustainable competitive advantage. Products variety Sears Holdings offer a wide variety of products from brands ranging from Kenmore, Craftsman and DieHard among others. The organization is still overly reliant on the retail model and does not consider other alternatives. For instance, vendors have refused to adopt other payment systems. In summary, retail model has a realized competitive parity.
Consumer centricity Sears Holdings has partnered with genuine vendors who supply products to them. Being authentic suppliers, the company at hand is able to create value to its customers and are assured of the difficulty in finding substitutes of the products in the market. Sears Co. ability to manage their people effectively is a source of both demarcation and cost benefits. Most companies rely on trust and relationship to manage people both employees and clients. However, Sears Co. uses data analytics to learn more about its employees’ behavior and consumers so that they can better serve the two groups. Strategic Direction, 32(7), 32-34. Retrieved on: 13th April, 2018. Bondarenko, T. G. , Isaeva, E. S. Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage? Retrieved on: 13th April, 2018.
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