[SOUND] Hi, welcome back. Understanding which factors generate competitive advantages and which factors generate competitive disadvantage is important for you, when formulating your strategy. Your strategies should take full advantage of your firm's advantages and avoid your firm's disadvantages. Although this may seem obvious, we don't always do that properly. A clear understanding of your competitive advantage will help you to choose in which campaigns to engage. Since you still have finalized resources, time, energy, resources, you should look for situations in which you can use your advantages. An extremely useful tool was designed by Jay Barney, VRIO, which allows systematic analysis of the factors of the companies that generate advantage or disadvantage. The basic idea behind this tool is that the competitive advantages are derived from your firm's resources. The application of this technique is relatively simple. Once you have analyzed your competitors, your customers, your client's take each of your company's resources and systematically check the value of this feature according to the VRIO variables. VRIO is the acronym for value, rarity, imitability, and organization. Value refers to how much a resource allows your firm to mitigate threats and exploit opportunities. If a resource helps in one or two ways it will be considered a strength. If not, it will be considered a weakness. Rarity refers to how scarce the resource you have. Obviously, the rarer the feature you control, the better off you will be. Imitability, how difficult or expensive it would be for a competitor to obtain, imitate or duplicate the resource you control. Organization, is the firm organized and able to exploit the resource you control? The analysis is done as follows. Take each of the attributes that are important from the customer's perspective and ask yourself, is this resource variable? If not, these features generate competitive disadvantage. If yes, ask, is it rare? If not, this feature generates loss of competitiveness. If yes, ask, is it too difficult or expensive to imitate? If not, this feature will generate competitive parity. Competitive parity is not bad, it just means that you are like everybody else. You don't have a problem really but you don't have an advantage. If yes, ask, is the organization prepared to use this resource? If no, this feature creates us an untapped competitive advantage. If yes, this feature creates a sustainable competitive advantage. It is important you read first the notion that a good strategy uses the firm's competitive advantage in order to allow the company to mitigate risks and generate the maximum value it can. Let's take a look at a quick example. In the chocolates el Nobre case, the main resource generating a competitive advantage was the control of the Creole cocoa. Not only did the company have access to a very scarce resource, extremely valuable, impossible to copy, but he knew how to use it to make excellent fine chocolates. If el Nobre's strategy continued to operate in the milk powder, the one that is used for chocolate milk, el Nobre would not be competitive, because the superior quality of the chocolate that el Nobre could produce was not valued by the customer. With each strategy of focusing on fine chocolates, el Nobre was less subject to fluctuations in the economy but was also able to charge a much higher price. The VRIO analysis can be also used successfully in sales. One of the ways is to influence the client's decision-making process, in order to convince the customer or client to value and prioritize the resources that generate a sustainable competitive advantage for your firm. Another way of using the analytical tool is to focus your sales pitch in a way that explores the resources your firm controls. And that generates a sustainable competitive advantage. In order to do that, you needed to understand your client's operation to develop a solution that serves the client's best interest. The combined use of the VRIO analysis and the win-loss analysis generates a customer knowledge that helps you to identify how to increase your performance and exploit your competitive advantage. This is the topic for our next video. Thank you for watching and I'll see you in our next video. [SOUND]