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

Vikram Pharma finds that its R&D team's know-how was built over twenty years through unique experiences, its history cannot be replicated, and rivals cannot pinpoint exactly how it produces results. It is unclear which specific process creates the advantage. Which barrier to imitation best describes this situation, and what does it imply?

The situation shows path dependency, since the know-how came from unique historical experience, and causal ambiguity, since rivals cannot identify what produces the results. Both make imitation costly and uncertain, so the advantage is more likely to be sustained over time.

  1. ACausal ambiguity and path dependency; imitation is difficult, so advantage is more likely to be sustainedCorrect
  2. BEconomies of scale; imitation is easy because costs fall
  3. CLegal patent protection only; advantage ends when patent expires
  4. DResource mobility; the advantage moves easily to rivals

Explanation

Unique historical conditions create path dependency, and when competitors cannot identify exactly what causes success, there is causal ambiguity. Both raise the cost of imitation and help sustain advantage. The patent and mobility options do not match the facts given, and economies of scale is unrelated to the described situation.

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