Microsoft VRIO Analysis – Core Competencies & Competitive Advantages

Microsoft Corporation VRIO Analysis, Value, Rarity, Imitability, Organization, core competencies, competitive advantages, computer business management case
A Microsoft Surface Cafe in Toronto Eaton Centre in 2014. A VRIO analysis of Microsoft Corporation determines that the business has core competencies for continuing growth, although transforming non-core competencies into core competencies can further secure the company’s development in the computing technology, online/cloud-based services, and artificial intelligence industries. (Public Domain Image)

Microsoft Corporation is a major American technology business that competes in a number of global markets. For example, the company is a competitor in the cloud computing market and the computer software market. Microsoft’s current status as one of the most valuable businesses in the United States is linked to key competencies, such as what the following VRIO analysis determines. Jay B. Barney’s framework, now known as the VRIO model for the internal analysis of businesses, is designed to assess organizational resources and capabilities that contribute to overall competitive advantages. The strategic planning objective in using this company analysis model is to determine the resources and capabilities that support Microsoft’s competitiveness in a sustainable way. Considering the past decline and recent improvement of the company’s performance, this VRIO analysis represents some of the most critical core competencies that support such business resurgence. Through these competencies, Microsoft Corporation manages to continue its growth in spite of the rise of other major technology firms in various markets.

VRIO Analysis Table – Microsoft Corporation

The core competencies or long-term competitive advantages of Microsoft are enumerated in the following VRIO table. The resources and capabilities that satisfy all of the VRIO questions regarding Value (V), Rarity (R), Inimitability (I), and Organization (O) are the ones that offer sustainable competitive advantages or core competencies to the technology business. Microsoft uses these core competencies to maintain a strong potential for business growth even in the face of fierce competition.

Microsoft’s Organizational Resources & Capabilities V R I O
– Human resource capabilities for technological advancement      
– Effective software functionality for business applications      
– Extensive low-restriction distribution network    
– Growing portfolio of products for other platforms    
– Large partnership network with various manufacturers    
– AI capabilities  
Sustainable Competitive Advantage(s):        
– Strong brand image
– High compatibility with a wide array of third-party products
– Network externalities based on enterprise-level cloud services market share
– Network externalities based on leading market share for desktop operating systems

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

Non-core Competencies. Microsoft’s leadership and expertise in the computing technology industry maintains a workforce that is capable of contributing to the technological advancement of the organization. The above VRIO table determines that this capability is valuable, but not rare in the industry, considering the competitive workforces of technology firms like Apple, Google (Alphabet), Amazon, and others. New firms also have access to competitively skilled workers. Thus, human resource capabilities for technological advancement are not a core competency of Microsoft Corporation. Similarly, the company’s effective software functionality for business applications is valuable, but other firms offer similar products. Moreover, Microsoft has a distribution network with minimal restrictions, such that various sellers of different types, sizes, and locations are involved. In the VRIO table, it is determined that this distribution network is valuable and rare, but easy to imitate. Thus, this resource is not a sustainable or long-term competitive advantage. On the other hand, Microsoft’s growing portfolio of products for other platforms, such as apps for iOS, expand the company’s market reach, but competitors can readily develop their own products (e.g., mobile apps) for the same platforms. Also, even though the firm has partnerships with various manufacturers of computer hardware, competing software developers may establish similar partnerships. Thus, this capability is not a core competency. Moreover, the VRIO table determines that Microsoft Corporation’s artificial intelligence capabilities are strong and competitive, although the company is not yet fully organized around offering comprehensive AI services and functions to its various target markets.

Microsoft’s Core Competencies (Long-Term Competitive Advantages). Microsoft has four resources and capabilities that are determined as core competencies or long-term/sustainable competitive advantages in this VRIO analysis. The first core competency is the company’s strong brand image, which empowers the business to compete against other firms, especially those with lesser-known brands. In addition, Microsoft’s products have high compatibility with third-party products. For example, various laptop brands use the Windows operating system, and various productivity software products from third parties are designed to work with Windows. This strategic factor is a core competency that contributes to Microsoft’s competitiveness because it increases customer satisfaction in terms of using Windows devices. The network externalities based on the enterprise-level cloud services market share of the business is among the core competencies enumerated in this VRIO analysis of Microsoft Corporation. This core competency refers to customers’ likelihood of using the company’s products because of actual or perceived benefits of having peers who use the same products. Despite competition with Google’s G Suite, Microsoft has managed to dominate the market. In relation, the company’s leading market share for desktop operating systems supports the core competency of associated network externalities. This core competency is connected to the other core competencies in the VRIO table, such as the strong image of the Microsoft brand. The leading market share’s network externalities are a long-term competitive advantage because, along with the compatibility factor, it encourages customers to keep using the company’s products, instead of trying out competing products that are untested.

Key Points from the VRIO Analysis of Microsoft Corporation

Microsoft’s non-core competencies contribute to the organization’s competitiveness. Based on the VRIO table, the company’s human resources, global distribution network, and product portfolio are competencies that add to the competitiveness of the technology business. However, the core competencies are the main factors that are responsible for Microsoft’s strategic success, especially in recent times after its leadership turnaround. Through these core competencies or sustained competitive advantages, the company keeps its market position as one of the leading technology businesses in the world. However, to maximize its growth potential, Microsoft needs to improve its situation by transforming its non-core competencies into core competencies.

Some Recommendations. Artificial intelligence is part of Microsoft Corporation’s ongoing strategic plans to grow the business and establish its presence as a leading AI provider. However, as shown in the VRIO table, AI capabilities are still a non-core competency because the company’s focus remains on computing hardware, software, and related cloud-based or online services. Nonetheless, Microsoft has the opportunity to make AI a core competency for competing against the AI offerings of other firms. This shift is possible by further building the business organization to support AI development and to offer AI services. In addition, this VRIO analysis of Microsoft Corporation presents the growing portfolio of products for other platforms, which has the potential to become a core competency. Further expanding the portfolio can increase the company’s market reach and brand recall. Such strategic expansion of the product portfolio can increase Microsoft’s competitiveness based on network externalities, product compatibility, and customer convenience.