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

Kaveri Textiles, a Coimbatore firm, has a spinning process that is so well integrated with its dyeing technology that rivals cannot copy it even after hiring its former engineers. Using the VRIO framework, which of the following is the best description of the resource if the firm is also organised to exploit it fully?

The resource satisfies all four VRIO tests: it is valuable, rare, costly to imitate and the firm is organised to exploit it. When all four conditions hold, the firm enjoys a sustained competitive advantage rather than a temporary advantage or mere parity with rivals.

  1. AValuable, rare, costly to imitate and exploited: a sustained competitive advantageCorrect
  2. BValuable and rare only: a temporary competitive advantage
  3. CValuable only: competitive parity
  4. DNot valuable: a competitive disadvantage

Explanation

The resource is valuable (it creates advantage), rare (rivals lack it), costly to imitate (rivals cannot copy it even by hiring engineers) and the firm is organised to exploit it. All four VRIO conditions are met, which gives a sustained competitive advantage. A temporary advantage would apply only if the resource were easy to imitate.

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