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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

Lakshya General Insurance wants a competitive advantage that rivals will find hard to copy. Its claims-settlement platform was built over ten years, uses proprietary data, and is deeply tied to its unique staff training and culture. Which assessment is most consistent with resource-based thinking on sustainable advantage?

The advantage is likely sustainable. A resource that is valuable, rare, costly to imitate and embedded in the organisation, like Lakshya's long-built platform with proprietary data and culture, is difficult for rivals to copy, so it supports lasting competitive advantage.

  1. AThe advantage is sustainable because the resource is valuable, rare, costly to imitate and embedded in the organisationCorrect
  2. BThe advantage is temporary because any valuable resource is quickly copied
  3. CThe advantage exists only if Lakshya charges the lowest prices in the market
  4. DThe advantage is sustainable only if Lakshya enters a new industry
  5. The advantage is irrelevant because only the external environment determines profitability

Explanation

Resource-based thinking holds that resources that are valuable, rare, hard to imitate and organisationally embedded give lasting advantage. The platform's long build, proprietary data and cultural links make imitation costly. The other options wrongly tie advantage to price, diversification or external factors alone, or assume all resources are copied quickly.

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