Management Notes

Reference Notes for Management

Capabilities that other firms cannot develop easily are classified as

Capabilities that other firms cannot develop easily are classified as


A. costly to imitate.
B. rare.
C. valuable.
D. Non substitutable.

The Correct Answer Is:

  • A. costly to imitate.

The correct answer is A. costly to imitate, and I’ll explain in detail why this is the correct answer, as well as why the other options, B. rare, C. valuable, and D. non-substitutable, are not as appropriate.

Costly to Imitate (Correct Answer):

Capabilities that other firms cannot easily develop are classified as “costly to imitate.” This concept is a fundamental component of the resource-based view of a firm, which emphasizes that sustainable competitive advantages are built on unique and difficult-to-replicate resources and capabilities.

When a firm possesses capabilities that are costly to imitate, it means that their competitors would face significant challenges and resource constraints in trying to replicate or mimic those capabilities.

This could be due to various factors such as proprietary technology, specialized skills and knowledge, exclusive partnerships, or a well-established brand. In essence, these capabilities provide a strong barrier to entry for competitors, which can lead to a sustained competitive advantage.

For example, Apple’s iOS operating system is a capability that is costly to imitate. It is not just about the technology itself but also the ecosystem, developer community, and brand loyalty that Apple has built around it. Competitors find it extremely challenging to replicate this ecosystem, and it gives Apple a competitive advantage in the smartphone market.

In summary, the term “costly to imitate” accurately encapsulates the concept of capabilities that provide a firm with a competitive edge by making it difficult for competitors to replicate those capabilities without incurring substantial costs or resource commitments.

Rare (Not Correct):

While rarity is an important aspect of valuable and inimitable resources or capabilities, it is not the same as being “costly to imitate.” Rarity alone does not imply that it is difficult or costly for other firms to develop similar capabilities.

Rare resources or capabilities are those that are not widely available in the industry, but they may still be relatively easy for competitors to replicate if they have the necessary resources and knowledge.

For example, consider a unique blend of coffee beans used by a coffee shop. If this coffee blend is rare but not protected by any proprietary processes or intellectual property, it could be relatively easy for competitors to find and use similar coffee beans, making it not costly to imitate.

Valuable (Not Correct):

Valuable capabilities are certainly important, but they may not necessarily be costly to imitate. A capability can be valuable if it provides a firm with a competitive advantage, but if competitors can replicate it without incurring significant costs or difficulties, it is not costly to imitate.

Value, in this context, is about how well a capability helps a firm achieve its strategic objectives and gain a competitive edge, not about how hard it is to copy.

For example, a customer-centric approach to service can be extremely valuable for a company, but it may not be costly to imitate if other firms can easily adopt a similar approach by training their employees in customer service best practices.

Non-Substitutable (Not Correct):

Non-substitutable capabilities are those that have no direct substitutes in the market, meaning there are no alternative resources or capabilities that can perform the same function or deliver the same benefits.

While non-substitutability is important for a competitive advantage, it does not inherently make a capability costly to imitate. Competitors might not be able to find a direct substitute, but they could still develop alternative capabilities that achieve similar results.

For instance, if a company has a patented technology for a specific manufacturing process, it may be non-substitutable because there is no direct alternative technology available. However, competitors might invest in research and development to create a different technology that achieves the same or similar manufacturing results, making the original technology not costly to imitate.

In conclusion, the correct answer is “A. costly to imitate” because it accurately represents the concept of capabilities that provide firms with sustainable competitive advantages by being difficult for competitors to replicate without significant costs or resource constraints.

The other options, while important in the context of competitive advantage, do not fully capture the idea of costly imitation. Rarity, value, and non-substitutability are essential components of a firm’s resource and capability analysis, but they do not inherently make a capability hard or costly to imitate, which is the key focus of the question.

Related Posts

Leave a Comment