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

Tanishq Textiles, a Surat-based fabric maker, owns a patented dye process that rivals cannot copy, and the process lets it produce colour-fast fabric at lower cost. Its managers want to know whether this is a source of sustained competitive advantage. Which test from the VRIO framework asks whether competitors can duplicate the resource only at a high cost or with great difficulty?

The correct test is Imitability. In the VRIO framework, this test checks whether competitors can copy a resource only at great cost or with difficulty. Value, rarity and organisation test different things: usefulness, scarcity among rivals and the firm's ability to exploit the resource respectively.

  1. AValue
  2. BRarity
  3. CImitabilityCorrect
  4. DOrganisation

Explanation

In the VRIO framework, the question of whether rivals can copy a resource, or can only do so at high cost, is the test of imitability (Inimitable). Value asks if the resource exploits opportunities or neutralises threats. Rarity asks if few competitors have it. Organisation asks if the firm is set up to exploit it.

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