Apple Inc. VRIO Analysis – Core Competencies & Competitive Advantages

Apple VRIO Analysis, Valuable, Rare, non-Imitability, Organization, core competencies, competitive advantages, consumer electronics business management analysis
A Magic Mouse from Apple. Major core competencies are identifiable through a VRIO analysis of Apple Inc. Such competencies are clear competitive advantages for the company’s long-term profitability in the computer, consumer electronics, and online digital products industries and beyond. (Public Domain Image)

Apple Inc. has a history of success in the computer technology and consumer electronics market, despite bouts of challenges in the changing global business environment. This performance record reveals the company’s use of its core competencies, which are identified in this VRIO analysis. The VRIO analysis model evaluates the value, rarity, imitability, and organization of the business. The ultimate aim of this internal analysis is to determine the core competencies and competitive advantages of the company, based on the VRIO variables. In this case, Apple Inc. exploits its core competencies to achieve long-term competitive advantages against aggressive competitors. The firm’s strategic objectives and planning are focused on business development in areas where competitors are weak. In responding to Apple’s VRIO analysis, managers can arrive at the best courses of action to strengthen the business based on the core competencies or long-term competitive advantages, which satisfy all of the four VRIO variables. Related information may be obtained through a Four Corners Analysis of Apple Inc. (based on Michael Porter’s framework). In addition, a McKinsey 7S analysis of Apple Inc. can pinpoint factors that the business can use to harness its core competencies shown in this VRIO analysis.

VRIO Analysis Table – Apple Inc.

The following table presents the resources and capabilities of Apple Inc. Each of these factors is evaluated based on the VRIO variables. The company’s long-term competitive advantages or core competencies are the resources and capabilities that have checkmarks for all of the four variables:

Apple’s Organizational Resources & CapabilitiesVRIO
– Business process automation   
– Competitive employee compensation packages  
– Human resource capabilities for innovation  
– Product mix diversity 
Sustained (Long-Term) Competitive Advantage(s):    
– Globally popular premium brand
– Systems set up for rapid innovation
– Ecosystem of complementary products
– Access to user information
– Artificial intelligence capabilities
– Global distribution and sales network

* This VRIO table is best viewed using HTML5-compatible browsers.

Non-core Competencies. In the VRIO internal analysis model, each resource and capability that does not satisfy all of the VRIO questions is considered a non-core competency or non-core competitive advantage. For example, in the table above, Apple’s non-core competencies include business process automation, which is valuable but common throughout the industry and even in other industries and markets. Also, competitive employee compensation packages are a capability that helps the company maintain a highly skilled workforce that supports rapid innovation. However, this capability is a non-core competency in Apple’s case because other technology companies, such as Google and Microsoft, also offer competitive employee compensation packages. In relation, Apple’s human resource capabilities to support innovation are common in other firms in the computing technology, consumer electronics, and digital/online services industries. The increasing diversity of the company’s product mix is a sign of strategic efforts to reduce the per-market risk exposure of the business. These resources and capabilities are important but not the top priorities determined in this VRIO analysis of Apple Inc.

Apple’s Core Competencies (Long-term Competitive Advantages). The VRIO table above identifies six resources or capabilities that are categorized as Apple’s core competencies or long-term/sustainable competitive advantages. For instance, the company’s globally popular brand is a core competency because it is valuable, rare, and difficult (if not impossible) to imitate, and the business is organized around the use of this brand as a major competitive strength. Apple also has its systems set up for rapid innovation, which is a critical success factor of the business. This resource/capability enables the corporation to maintain a high rate of innovation, which is especially notable in hardware products like the iPhone. The VRIO table also identifies the ecosystem of complementary products as another one of Apple’s core competencies. This competency involves products that mutually promote each other. For example, because of cross-device compatibility and accessibility, customers are more likely to purchase an iPhone when they already have a MacBook, and are more likely to purchase apps and digital products via iTunes when they already have a MacBook or an iPhone. This ecosystem of complementary products makes it difficult for competitors to acquire customers who already own Apple products. Apple Inc. also has the sustained/long-term competitive advantage of access to user information, which includes device type and model, geographic location, app usage, and so on, depending on individual users’ privacy settings. Despite privacy regulations, the company’s large global user base helps in gaining valuable information to support innovation and new product development, as well as marketing strategies and business management and strategic planning. Furthermore, Apple’s artificial intelligence capabilities provide competitive advantage in terms of convenient and efficient services, such as through Siri and related AI functions. Among the VRIO factors, the international distribution network is also identified as a core competency. Apple Inc. maintains long-term competitive advantage partially through its global network of strategically located authorized distributors and sellers. This network streamlines the company’s strategic plans and efforts in reaching target customers worldwide.

Key Points from the VRIO Analysis of Apple Inc.

The core competencies shown in the VRIO table for Apple’s business case provide a picture of how the company maintains its competitiveness despite challenges in the industry and internal issues in the organization. These sustainable competencies offer long-term competitive advantages that the company uses to ensure a profitable future while addressing current problems. For example, Apple uses its brand and capacity for rapid innovation to maintain competitiveness despite the aggressiveness of Samsung, Huawei, and LG, among other consumer electronics manufacturers. This VRIO analysis of Apple Inc. also shifts attention to business diversification, as well as possible strategic changes for long-term competitiveness based on technological innovation.

Some Recommendations. Apple Inc.’s operations are currently focused on consumer electronics and online/digital products, which are the main revenue sources. However, the company’s strategic plans already include major opportunities to develop the business in other industries or markets. For example, the artificial intelligence and robotics markets are gaining ground, along with the autonomous and self-driving automobile markets. These opportunities require that Apple use its core competitive advantages identified in this VRIO analysis to strategically position the business to offer technologically advanced products that make the corporation a major player early on as these markets develop.

References

  • Apple Inc. Annual Report to the U.S. Securities and Exchange Commission.
  • Apple Inc. Retail Store List.
  • Chatzoglou, P., Chatzoudes, D., Sarigiannidis, L., & Theriou, G. (2018). The role of firm-specific factors in the strategy-performance relationship: Revisiting the resource-based view of the firm and the VRIO framework. Management Research Review41(1), 46-73.
  • Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources? Management Decision53(8), 1806-1822.
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