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VRIO framework is the tool used to analyze firm’s internal resources and capabilities to find out if they can be a source of sustained competitive advantage. Toyota's strength does not lie in a single core competency. It rises from a complex, interlocking set of extraordinary skills. These include working closely with suppliers, continually finding ways to innovate and improve, and constantly challenging itself to cut costs.
We shall focus o the following strengths of Toyota, and shall apply the VRIO framework to analyze which amongst these is a potential sustained competitive advantage: 1) Company Culture- The Toyota Way 2) Toyota Production System 3) R&D and focus on “green” cars 4) Diversified product portfolio
Production System:
The first question of the framework asks if a resource adds value by enabling a firm to exploit opportunities or defend against threats. The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota that comprises its management philosophy and practices. This system, more than any other aspect of the company, is responsible for having made Toyota the company it is today. The Toyota production paradigm is a valuable resource as it a major cost reduction driver and at the same time increases the product quality.
Next, we come to the question of rarity. Rare and valuable resources grant temporary competitive advantage. Toyota is the innovator of this new production management which is popularly known as TPS. TPS is more a philosophy than a set of rules or guidelines. It's a mind-set that extends into all areas of Toyota's business. It is very deep rooted into the company’s culture. Hence, it is a rare resource. Perhaps Toyota's most defining characteristic is its obsession with eliminating waste, or muda in Japanese. It is a mind-set that goes well beyond the cost-cutting espoused by

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