VRIO Analysis of Chow Tai Fook

Posted by Zachary Edwards on Mar-22-2018

The VRIO Analysis of Chow Tai Fook will look at each of its internal resources one by one to assess whether these provide sustained competitive advantage. The Chow Tai Fook VRIO Analysis also mentions at each stage whether these resources could be improved to provide a greater competitive advantage. Lastly, the resources analysed are summarised as to whether they offer sustained competitive advantage, has an unused competitive advantage, temporary competitive advantage, competitive parity or competitive disadvantage.

Valuable

• The Chow Tai Fook VRIO Analysis shows that the financial resources of Chow Tai Fook are highly valuable as these help in investing into external opportunities that arise. These also help Chow Tai Fook in combating external threats.
• According to the VRIO Analysis of Chow Tai Fook, its local food products are a valuable resource as these are highly differentiated. This makes the perceived value for these by customers high. These are also valued more than the competition by customers due to the differentiation in these products.
• The Chow Tai Fook VRIO Analysis shows that Chow Tai Fook's employees are a valuable resource to the firm. A significant portion of the workforce is highly trained, and this leads to more productive output for the organisation. The employees are also loyal, and retention levels for the organisation are high. All of this translates into greater value for the end consumers of Chow Tai Fook's products.
• According to the VRIO Analysis of Chow Tai Fook, its patents are a valuable resource as these allow the firm to sell its products without competitive interference. This results in greater revenue for Chow Tai Fook. These patents also provide Chow Tai Fook with licensing revenue when it licenses these patents out to other manufacturers.
• The Chow Tai Fook VRIO Analysis shows that Chow Tai Fook’s distribution network is a valuable resource. This helps it in reaching out to more and more customers. This ensures greater revenues for Chow Tai Fook. It also ensures that promotion activities translate into sales as the products are easily available.
• According to the VRIO Analysis of Chow Tai Fook, its cost structure is not a valuable resource. This is because the methods of production lead to greater costs than that of competition, which affects the overall profits of the firm. Therefore, its cost structure is a competitive disadvantage that needs to be worked on.
• The Chow Tai Fook VRIO Analysis shows that the research and development at Chow Tai Fook is not a valuable resource. This is because research and development are costing more than the benefits it provides in the form of innovation. There have been very few innovative features and breakthrough products in the past few years. Therefore, research and development are a competitive disadvantage for Chow Tai Fook. It is recommended that the research and development teams are improved, and costs are cut for these.

Rare

• The financial resources of Chow Tai Fook are found to be rare according to the VRIO Analysis of Chow Tai Fook. Strong financial resources are only possessed by a few companies in the industry.
• The local food products are found to be not rare as identified by Chow Tai Fook VRIO Analysis. These are easily provided in the market by other competitors. This means that competitors can use these resources in the same way as Chow Tai Fook and inhibit competitive advantage. This means that the local food products result in competitive parity for Chow Tai Fook. As this resource is valuable, Chow Tai Fook can still make use of this resource.
• The employees of Chow Tai Fook are a rare resource as identified by the VRIO Analysis of Chow Tai Fook. These employees are highly trained and skilled, which is not the case with employees in other firms. The better compensation and work environment ensure that these employees do not leave for other firms.
• The patents of Chow Tai Fook are a rare resource as identified by the Chow Tai Fook VRIO Analysis. These patents are not easily available and are not possessed by competitors. This allows Chow Tai Fook to use them without interference from the competition.
• The distribution network of Chow Tai Fook is a rare resource as identified by the VRIO Analysis of Chow Tai Fook. This is because competitors would require a lot of investment and time to come up with a better distribution network than that of Chow Tai Fook. These are also possessed by very few firms in the industry.

Imitable

• The financial resources of Chow Tai Fook are costly to imitate as identified by the Chow Tai Fook VRIO Analysis. These resources have been acquired by the company through prolonged profits over the years. New entrants and competitors would require similar profits for a long period of time to accumulate these amounts of financial resources.
• The local food products are not that costly to imitate as identified by the VRIO Analysis of Chow Tai Fook. These can be acquired by competitors as well if they invest a significant amount in research and development. These also do not require years long experience. Therefore, the local food products by Chow Tai Fook provide it with a temporary competitive advantage that competitors can too acquire in the long run.
• The employees of Chow Tai Fook are also not costly to imitate as identified by the Chow Tai Fook VRIO Analysis. This is because other firms can also train their employees to improve their skills. These companies can also hire employees from Chow Tai Fook by offering better compensation packages, work environment, benefits, growth opportunities etc. This makes the employees of Chow Tai Fook a resource that provides a temporary competitive advantage. Competition can acquire these in the future.
• The patents of Chow Tai Fook are very difficult to imitate as identified by the VRIO Analysis of Chow Tai Fook. This is because it is not legally allowed to imitate a patented product. Similar resources to be developed and getting a patent for them is also a costly process.
• The distribution network of Chow Tai Fook is also very costly to imitate by competition as identified by the Chow Tai Fook VRIO Analysis. This has been developed over the years gradually by Chow Tai Fook. Competitors would have to invest a significant amount if they are to imitate a similar distribution system.

Organisation

• The financial resources of Chow Tai Fook are organised to capture value as identified by the VRIO Analysis of Chow Tai Fook. These resources are used strategically to invest in the right places; making use of opportunities and combatting threats. Therefore, these resources prove to be a source of sustained competitive advantage for Chow Tai Fook.
• The Patents of Chow Tai Fook are not well organised as identified by the Chow Tai Fook VRIO Analysis. This means that the organisation is not using these patents to their full potential. An unused competitive advantage exists that can be changed into a sustainable competitive advantage if Chow Tai Fook starts selling patented products before the patents expire.
• The distribution network of Chow Tai Fook is organised as identified by the VRIO Analysis of Chow Tai Fook. Chow Tai Fook uses this network to reach out to its customers by ensuring that products are available on all of its outlets. Therefore, these resources prove to be a source of sustained competitive advantage for Chow Tai Fook.

From the VRIO Analysis of Chow Tai Fook, it was identified that the financial resources and distribution network provide a sustained competitive advantage. The patents are a source of unused competitive advantage. There exists a temporary competitive advantage for employees. There exists a competitive parity for local food products. Lastly, the cost structure of Chow Tai Fook is a competitive disadvantage. Research and Development is also a competitive disadvantage.