Café Coffee Day – VRIO Analysis

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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

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A VRIO Analysis done for Cafe Coffee Day

Transcript of Café Coffee Day – VRIO Analysis

Page 1: 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  

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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