VRIO is an initialism for the four question framework asked about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability).

The Question of Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?"

The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?"

The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"

The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?

Resources can be a source of competitive advantage, competitive parity and competitive disadvantage depending on whether it follows the VRIO criteria .The criteria are explained below

If the resource is not valuable it should be outsourced because it brings no value to us

If the resource is valuable but not rare the company is in competitive conformity. It means we are not worse than our competition,

If the resource is valuable and rare but it is not expensive to imitate it, we have a temporary competitive advantage. Other companies will try to imitate it in the near future, then we lost our competitiev advantage.

If the resource is valuable, rare and is expensive to imitate it but we are not able to organizate our company, the resource become expensive for us (unused incurred costs)