Skip to content

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

Sundaram Auto Components has developed a rare engineering skill that its rivals find hard to copy. However, the firm has no systems, structure or processes to put this skill to use in its products. According to the VRIO framework, what level of competitive position does the skill give the firm?

The skill gives an unused competitive advantage. It is valuable, rare and costly to imitate, but because the firm lacks the organisation to exploit it, the O condition of VRIO fails. Sustained advantage needs all four conditions to be met together.

  1. ASustained competitive advantage
  2. BTemporary competitive advantage
  3. CUnused competitive advantageCorrect
  4. DCompetitive disadvantage

Explanation

The skill is valuable, rare and costly to imitate, but the organisation is not set up to exploit it. When the O condition fails, the VRIO framework describes the position as an unused competitive advantage. A sustained advantage needs the firm to exploit the resource, and a temporary advantage needs the resource to be easy to imitate.

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