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

Tanishq Textiles, a mid-sized Surat firm, finds that its proprietary digital-printing know-how is valuable, hard for rivals to imitate, and cannot be easily replaced by another technology. In the VRIO framework, which question is the firm still required to answer to decide whether this resource gives it a sustained competitive advantage?

The firm must still ask whether it is organised to capture the value of the resource. VRIO tests value, rarity, imitability and organisation; the resource passes the first three, so sustained advantage depends on having suitable processes, structure and systems to exploit it.

  1. AWhether the firm is organised to capture the value of the resourceCorrect
  2. BWhether the resource is cheaper than its substitutes
  3. CWhether the industry is in the growth stage
  4. DWhether the resource appears on the balance sheet

Explanation

VRIO asks whether a resource is Valuable, Rare, costly to Imitate and whether the firm is Organised to exploit it. The resource is already valuable and hard to imitate, so the remaining test is organisation. The other options are not VRIO questions.

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