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

Tata Motors-like firm 'Bharat Auto Ltd' has a patented battery-swapping technology that competitors cannot easily imitate, and it is also hard to substitute. Using the VRIO framework, if the resource is also supported by an organisation that is structured to exploit it, which outcome best describes the firm's position?

The firm enjoys a sustained competitive advantage. The resource is valuable, rare and hard to imitate, and the organisation is arranged to exploit it, so it passes all four VRIO tests. Only imitability failing would reduce it to a temporary advantage.

  1. ACompetitive parity
  2. BTemporary competitive advantage
  3. CSustained competitive advantageCorrect
  4. DCompetitive disadvantage

Explanation

VRIO asks whether a resource is Valuable, Rare, Inimitable and Organised to capture value. A patented technology that is hard to imitate or substitute and is supported by an organisation structured to exploit it satisfies all four tests. Temporary advantage would result if the resource were imitable, which is not the case here.

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