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

Sundaram Textiles Ltd has strong brand recall in southern India. Its rivals can buy similar looms and hire similar weavers, but they cannot copy the trust built over 60 years among retailers. In the VRIO framework, this brand trust is most likely to give Sundaram a sustained competitive advantage because it is:

The brand trust gives a sustained competitive advantage because it is valuable to retailers, rare among competitors, costly to imitate since it rests on 60 years of history, and the firm is organised to exploit it. Meeting all four VRIO questions points to sustained advantage rather than parity.

  1. AValuable but easily imitated by rivals
  2. BValuable, rare and costly to imitate, with the firm organised to exploit itCorrect
  3. CRare but not valuable to customers
  4. DNot rare, since all firms in the industry possess it

Explanation

Trust built over decades is valued by retailers, is not held by rivals, and cannot be quickly copied since it depends on history. Sundaram is also organised to use it. This satisfies all four VRIO tests, so it yields a sustained advantage. Option A is wrong because imitation is stated to be difficult.

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