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

Meridian Pharma uses the VRIO framework to assess a resource. Its patented drug-delivery know-how is valuable and rare, and rivals find it very costly to imitate, but the company has no R&D commercialisation team or systems to exploit it fully. What is the implication for competitive advantage?

The firm has only an unexploited competitive advantage. The know-how passes the value, rarity and inimitability tests, but the firm lacks the organisation, systems and team to capture its value. Sustained advantage under VRIO requires all four conditions, including being organised to exploit the resource.

  1. AThe resource gives only an unexploited competitive advantage, because the firm is not organised to capture its valueCorrect
  2. BThe resource gives a sustained competitive advantage
  3. CThe resource gives competitive parity only
  4. DThe resource is a competitive disadvantage

Explanation

VRIO asks whether a resource is valuable, rare, costly to imitate and whether the firm is organised to exploit it. Here the first three tests are met but the organisation test fails, so the potential advantage is unexploited. Sustained advantage needs all four conditions to be satisfied. Parity occurs when a resource is only valuable. A disadvantage arises when it is not valuable.

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