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firm’s performance relative to industry peers is likely to vary according to the level to
which resources, capabilities, and ultimately core competences satisfy VRIO criteria.
The four criteria are explored next.
Valuable

A resource or capability is said to be valuable if it allows the firm to exploit
opportunities or negate threats in the environment. Union Pacific’s extensive network
of rail-line property and equipment in the Gulf Coast of the United States is valuable
because it allows the company to provide a cost-effective way to transport chemicals.
Because the Gulf Coast is the gateway for the majority of chemical production in the
United States, the rail network allows the firm to exploit a market opportunity.
Delta’s control of the majority of gates at the Cincinnati / Northern Kentucky
International Airport (CVG) gives it a significant advantage in many markets.
Travelers worldwide have rated CVG one of the best airports for service and
convenience 10 years running. The possession of this resource allows Delta to
minimize the threat of competition in this city. Delta controls air travel in this
desirable hub city, which means that this asset (resource) has significant value. If a
resource does not allow a firm to minimize threats or exploit opportunities, it does not
enhance the competitive position of the firm. In fact, some scholars suggest that
owning resources that do not meet the VRIO test of value actually puts the firm at a
competitive disadvantage. [25]
Rare
A resource is rare simply if it is not widely possessed by other competitors. Of
the criteria this is probably the easiest to judge. For example, Coke’s brand name is
valuable but most of Coke’s competitors (Pepsi, 7Up, RC) also have widely
recognized brand names, making it not that rare. Of course, Coke’s brand may be the
most recognized, but that makes it more valuable, not more rare, in this case.
A firm that possesses valuable resources that are not rare is not in a position of
advantage relative to competitors. Rather, valuable resources that are commonly held
by many competitors simply allow firms to be at par with competitors. However,
when a firm maintains possession of valuable resources that are rare in the industry
they are in a position of competitive advantage over firms that do not possess the
resource. They may be able to exploit opportunities or negate threats in ways that
those lacking the resource will not be able to do. Delta’s virtual control of air traffic
through Cincinnati gives it a valuable and rare resource in that market.
How rare do the resources need to be for a firm to have a competitive
advantage? In practice, this is a difficult question to answer unequivocally. At the two
extremes (i.e., one firm possesses the resource or all firms possess it), the concept is
intuitive. If only one firm possesses the resource, it has significant advantage over all
other competitors. For instance, Monsanto had such an advantage for many years
because they owned the patent to aspartame, the chemical compound in NutraSweet,
they had a valuable and extremely rare resource. Because during the lifetime of the
patent they were the only firm that could sell aspartame, they had an advantage in the
artificial sweetener market. However, meeting the condition of rarity does not always
require exclusive ownership. When only a few firms possess the resource, they will
have an advantage over the remaining competitors. For instance, Toyota and Honda

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