Cadbury Vrio
Resource Based View - VRIO Analysis
1. Tangible Resources
a) Financial Resources:
* Firm’s cash and cash equivalents-
The total cash and cash equivalents of the firm stood at around Rs. 271.5 Crores in the year ended March 2009 (before merger with Kraft). Liquidity is important for a business to factor in for unforeseeable events. The ideal cash reserve requirement can be calculated by taking into account and listing possible unfavorable events and assigning probabilities to them.
Current Ratio-1.04
Quick ratio-0.68
These ratios indicate that the firm has the ability to meet its short term obligations and has an efficient operating cycle. It also indicates that it is being able to meet its working capital requirements from current liabilities.
* Firm’s capacity to raise Equity and Debt-
The Debt/Equity ratio of the company is as low as 0.02%. This ratio is negligible and it can be said that it is almost an all equity company. Because of such a capital structure of the company, it gives the signal of a safe investment. The risk associated with the company will be low and hence it will be able to raise additional debt as well as equity with reasonable ease. However, we suggest that the company can take the benefit of financial leverage by raising debt in case of future capital requirements. It is outstanding that the company has huge Reserves and Surplus and hence they can fund projects through Internal Equity.
The interest coverage ratio is also very high. It stands at 136.88. This indicates that the company will have no problem in raising debt and it also might be able to raise debt at a considerably low cost.
Note: All financial data is from Final Report of March 2009 since the company was merger post that.
Resources | Value | Rarity | Difficult to Imitate | Organization | Competitive Implications | Economic Implications | Cash reserves | YES | NO | NO | NO | Competitive parity | Normal | Equity RaisingCapacity | YES | YES
1. Tangible Resources
a) Financial Resources:
* Firm’s cash and cash equivalents-
The total cash and cash equivalents of the firm stood at around Rs. 271.5 Crores in the year ended March 2009 (before merger with Kraft). Liquidity is important for a business to factor in for unforeseeable events. The ideal cash reserve requirement can be calculated by taking into account and listing possible unfavorable events and assigning probabilities to them.
Current Ratio-1.04
Quick ratio-0.68
These ratios indicate that the firm has the ability to meet its short term obligations and has an efficient operating cycle. It also indicates that it is being able to meet its working capital requirements from current liabilities.
* Firm’s capacity to raise Equity and Debt-
The Debt/Equity ratio of the company is as low as 0.02%. This ratio is negligible and it can be said that it is almost an all equity company. Because of such a capital structure of the company, it gives the signal of a safe investment. The risk associated with the company will be low and hence it will be able to raise additional debt as well as equity with reasonable ease. However, we suggest that the company can take the benefit of financial leverage by raising debt in case of future capital requirements. It is outstanding that the company has huge Reserves and Surplus and hence they can fund projects through Internal Equity.
The interest coverage ratio is also very high. It stands at 136.88. This indicates that the company will have no problem in raising debt and it also might be able to raise debt at a considerably low cost.
Note: All financial data is from Final Report of March 2009 since the company was merger post that.
Resources | Value | Rarity | Difficult to Imitate | Organization | Competitive Implications | Economic Implications | Cash reserves | YES | NO | NO | NO | Competitive parity | Normal | Equity RaisingCapacity | YES | YES
References: http://www.cadburyindia.com http://www.indiainfoline.com/Markets/Company/Fundamentals/Directors-Report/Cadbury-India-Ltd/500793 http://www.moneycontrol.com/financials/cadburyindia/balance-sheet/CI#CI