Café Coffee Day – VRIO Analysis
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Transcript of Café Coffee Day – VRIO Analysis
Café Coffee Day – VRIO Analysis Shilpa Isabella D’souza -‐ 1000534709
The VRIO tool is important to assess the health of a firm and its internal environment. The chosen firm is Café Coffee Day – India’s largest chain of coffee shops as mentioned in the SWOT. The following covers the main aspects of this analysis: Value -‐ How expensive is the resource and how easy is it to obtain on the market (purchase, lease, rent)? The most important resource is the financial resource, which no other new enterprise can match up to which is $845 million for this firm as per the Forbes list. The firm has the ability to purchase whatever is necessary for its growth and development. The main resource is however the Coffee beans or rather the Coffee powder that the parent company of Café Coffee Day owns in abundance – Over ten thousand acres of coffee estates covering a huge part of the Western Ghats in India. Rareness -‐ How rare or limited is the resource? The financial resources that the firm holds are rare in the sense that no competitor can match up to its value in monetary terms. It stands well above competition and cannot be matched up to. The coffee resource is not exactly rare but its supply is limited. As the parent company of Café Coffee Day is Amalgamated Bean Coffee Limited, which owns the main resource as a whole, it processes the coffee beans and supplies powdered coffee to the outlets. Imitability -‐ How difficult is it to imitate the resource? It is very easy to imitate the resource but it is very hard for a new company to imitate the financial resources that are at Café Coffee Day’s disposal. Not only will a new firm require large initial investment but it will also require knowledge and experience to mimic the production process and the supply chain trend that café coffee day follows. Organization-‐ is the resource supported by any existing arrangements and can the organization use it properly? The firm follows a formal organization structure where the subordinates report to their immediate managers and he in turn to the senior manager and so on. They
however have a grievance cell wherein any employee can register a complaint no matter what his role is in the organization. Such a structure promotes a healthy work environment and encourages the employees to work hard. They have a strict budget policy in place and they have generous compensation packages. Since the firm is properly organized it is able to exploit its resources and capabilities to the maximum extent. Café Coffee Day has a large number of complementary assets in the form of sister companies that solely deal with selling of coffee powder and another firm that has started selling coffee machines. The firm also has innovative marketing strategies that keep competition at bay. Therefore the assessment using VRIO is summarized as follows: VALUABLE? YES RARE? YES (financial resource) COSTLY TO IMITATE? YES EXPLOITED BY ORGANIZATION? YES COMPETITIVE IMPLICATION Sustained Competitive Advantage FIRM PERFORMANCE BASED ON VRIO Persistently Above Average