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CS Professional · Strategic Management and Corporate Finance · Competitive Positioning

A listed Indian FMCG company has strong brand equity, a unique distribution network reaching rural outlets, and a recipe know-how that is protected. The board wants to know why these cannot alone guarantee sustained advantage in VRIO analysis. Which additional element must be present for a resource that is valuable, rare and costly to imitate to translate into sustained competitive advantage?

The firm must be organised to exploit the resource, meaning its structure, processes and systems must capture the value. This is the organisation element of VRIO. Funding method, balance sheet recognition or licensing to rivals does not turn valuable, rare, inimitable resources into sustained advantage.

  1. AThe firm must be organised to exploit the resource through its processes, structure and systemsCorrect
  2. BThe firm must have raised the resource through equity rather than debt
  3. CThe firm must report the resource as an intangible asset in its accounts
  4. DThe firm must license the resource to competitors for royalty

Explanation

The 'O' in VRIO is organisation: the firm needs structure, processes and control systems to capture value from the resource. Funding source, accounting recognition or licensing to rivals neither supply this capability nor preserve advantage; licensing would actually erode rarity.

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