ACCA Strategic Professional · Strategic Business Leader · Concepts of strategy
Drummond Retail has been the cost leader in its market through scale purchasing. A recent analysis shows that a rival, Vexa, matched Drummond's unit costs within two years by adopting the same suppliers and inventory software, both of which are available to any firm. Which conclusion about Drummond's strategic capability is most appropriate?
Drummond's cost position reflects a threshold capability. Because Vexa matched it using suppliers and software available to any firm, the capability is easily imitated, so it allows Drummond to compete but cannot be a source of sustainable competitive advantage or a core competence.
- ADrummond's capability is a threshold capability that supports competing but does not provide sustainable advantageCorrect
- BDrummond has a core competence because it achieved low cost at some point
- CDrummond's advantage is sustainable because cost leadership is a generic strategy
- DDrummond's capability is a unique resource because Vexa needed two years to match it
Explanation
Capabilities that rivals can readily acquire or replicate are threshold capabilities, needed to compete but not distinctive. A two-year lag is a short delay, not inimitability, and a generic strategy label does not itself make advantage sustainable. A core competence must be difficult to imitate, which this is not.
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