Skip to content

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

Prakash Textiles, a Surat-based firm, is known for a unique dyeing process that rivals cannot copy, is hard to substitute, and adds clear value to customers. According to the VRIO framework, which additional question must be answered 'yes' for this resource to give the firm a sustained competitive advantage, beyond being valuable, rare and costly to imitate?

The missing question in VRIO is whether the firm is organised to exploit the resource. A valuable, rare and hard-to-imitate resource yields sustained advantage only when the firm has suitable structure, processes and systems to capture its value; the other options describe features that erode advantage.

  1. AIs the firm organised to exploit the resource?Correct
  2. BIs the resource available in the open market?
  3. CIs the resource owned by a government body?
  4. DIs the resource easily transferable to competitors?

Explanation

VRIO stands for Value, Rarity, Imitability and Organisation. Even a valuable, rare and inimitable resource gives full sustained advantage only if the firm has the processes, structure and systems to exploit it. The other options describe features that would weaken, not create, advantage.

Did you get it right without looking?

One question tells you little. A timed set on Strategic Analysis: Internal Environment shows your real accuracy, how long you take and where you lose marks.

Practise Strategic Analysis: Internal EnvironmentFree diagnostic mock

More Strategic Analysis: Internal Environment questions