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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: Internal Environment

A Pune-based software firm, Nirmal Tech, tests its in-house payroll platform against four VRIO questions. The platform is valuable and rare. Competitors could replicate it within a few months at modest cost. The firm is well organised to exploit it. According to VRIO analysis, what is the competitive implication of this resource?

The implication is a temporary competitive advantage. The platform is valuable and rare, so it gives an edge, but because rivals can copy it quickly and cheaply, it is not inimitable. Only a resource that is also costly to imitate and well exploited yields sustained advantage.

  1. ASustained competitive advantage
  2. BCompetitive parity
  3. CTemporary competitive advantageCorrect
  4. DCompetitive disadvantage

Explanation

Valuable and rare gives at least a competitive advantage. Because it is easy to imitate (not costly to imitate), the advantage cannot last, so it is temporary. Sustained advantage would require the resource to be costly to imitate as well; parity would need it to be not rare.

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