Question

FL Systems Inc. and Oryxo Systems Inc. are two competing firms. FL Systems Inc. has $300,000 in tangible assets and $200,000 in intangible assets. Oryxo Systems Inc. has $150,000 in tangible assets and $347,000 in intangible assets. In the context of the resource-based view, which of the following is the most likely implication of the asset values of the two companies?

A. Oryxo Systems Inc. has less valuable resources than FL Systems Inc.
B. Oryxo Systems Inc. has less invisible assets than FL Systems Inc.
C. FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.
D. FL Systems Inc. will find it easier than Oryxo Systems Inc. to sustain competitive advantage.

Answer 1

C. FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.

Step-by-step explanation:

A firm with higher intangible assets usually enjoys competitive advantage over a firm that has lower intangible assets. The reason is that competitive advantage is more likely to be derived from intangible assets such as goodwill, brand recognition and intellectual property which include copyrights, patents, and trademarks.

For example, a company with a higher goodwill is likely to be patronised more in an industry than a firm with a lower goodwill. This is because he is already well known to always supply high quality good with higher customer satisfaction.

Intangible assets are unique because they are not physical in nature and they are usually created through research and development efforts or acquired through the acquisition of another firm, rather than being purchased in the open market like tangible assets like plant and machinery that are physical in nature.

Therefore, FL Systems Inc. with $200,000 in intangible assets will find it harder to attain competitive advantage than Oryxo Systems Inc. with higher $347,000 in intangible assets.

Answer 2

C. FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.

Step-by-step explanation:

If FL Systems Inc. and Oryxo Systems Inc. are two competing firms. FL Systems Inc. has $300,000 in tangible assets and $200,000 in intangible assets. Oryxo Systems Inc. has $150,000 in tangible assets and $347,000 in intangible assets.

Then in the context of the resource-based view, the most likely implication of the asset values of the two companies is that FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.

The reason is that any company can buy fixed assets in the open market but intangibles are unique to the company that has it and cannot be imitated.

In the scenario Oryxo Systems Inc. has $347,000 in intangible assets compared to FL Systems Inc. which has $200,000 in intangible assets. It therefore means that Oryxo has more potential of competitive advantage than FL systems.