When updating the vmtools on a virtual machine, if you encounter the below message it most likely means you have issues with the security permissions. I have seen users also talk about how the VmwareToolsUpgraded.exe under C:\Windows\Temp has read only permissions and that causes it. In my case this wasnt the issue.
What you need to do is shut the VM down and go to the below settings
- Right click edit settings
- Click on the Options tab on top
- Select the General option from the below table
- Then click on Configuration Parameters
- At the end add a Row by clicking on a button called "Add Row" and enter the below configuration line and then start the VM.