Apple VRIO analysis
VRIO Analysis of Apple Inc
Apple is the world's largest technology brand based in Cupertino, California, United States. Founded by Steve Jobs and Steve Wozniak, the company is known worldwide for its focus upon innovation and its large range of innovative products including Mac, iPhone, and iPad.
Over the past few years, the company has experienced very fast growth in its market capitalization. Currently, Apple is the company with the highest market capitalization in the entire technology industry. The release of the iPhone 11 was followed by a fast rise in Apple’s market cap which breached the $1.3 trillion mark and has increased to above $2.5 trillion since then.
The smartphone industry has grown highly competitive where several brands are targeting the same market segment. iPhone is the core product of Apple, accounting for the highest part of its revenue overall. However, there are several rival brands in the market in both the smartphone and computing industries. The battle for market share in the smartphone industry has particularly grown quite intense where Samsung and Huawei are among the leading competitors of Apple followed by others like LG, Xiaomi, One Plus and so on.
Apple’s leading position in the technology industry is based upon its strong competitive edge. Its business model is considered stronger compared to most of its rivals. The company’s focus on innovation is a leading source of competitive advantage. The other areas where Apple has been able to achieve a strong competitive advantage include marketing and product quality. However, considering the intensity of rivalry in the technology industry, one cannot rely upon a single source of competitive advantage.
This is a VRIO analysis of Apple discussing its core competencies and how they have helped the company build a sustainable competitive advantage.
Leading core competencies of Apple:
Research and innovation:-
Apple is well known worldwide for its focus on research and innovation. It has brought a large range of some of the most innovative technology products to the market including iPhone and Mac OS. Every year the company spends a huge sum on research and development. Apple was always known for its innovative ideas and apart from product innovation, it is also known for its marketing innovation since the time of Steve Jobs. In fiscal 2019, the research and development expenses of Apple crossed $16 billion.
The technology industry has grown highly competitive and every technology brand invests a large sum each year in research and development to retain its market position and market share. The latest models of iPhone and Macbook have some of the most innovative technologies onboard. Moreover, Apple is constantly innovating and improving its existing product line. The company has been able to generate a source of sustainable competitive advantage through a consistent focus on innovation. R&D is a key focus area for the business and also one of the several key drivers of its faster growth and market edge.
In an era of intense competition, several things depend directly upon marketing including popularity, customer loyalty, sales, and brand recognition. However, when it comes to marketing, Apple is considered second to none. Steve Jobs was known as one of the most innovative marketers in the entire technology industry. While a lot of Apple’s popularity is based upon its product quality, the company has sustained its leadership position in the industry well through innovative marketing. Even with a lot of focus on technological innovation, a brand can fail if it does not focus on innovative marketing.
However, Apple has always led the way in terms of innovative marketing. It utilizes several marketing channels for marketing and promotion. However, the main reason its marketing strategy has been so successful is because of its focus on customer experience. Apple creates unique and innovative products and its marketing strategy is equally unique and innovative. Not just the digital channels of promotion and media, but Apple does a lot of marketing through its own physical stores too. So, marketing is a source of sustainable competitive advantage for the brand which has helped it position itself as a leader in the tech industry and build a distinct and unique identity. Apple's unshakable market position is also a result of its strong brand image.
Another one of the leading sources of competitive advantage for Apple is its large and innovative product line. While its core product is the iPhone accounting for the largest part of the company’s annual net revenue, Apple has also brought more computing, entertainment and mobile technology products including Macbook, iPad, Apple Watch, Apple TV as well as a large range of complementary services. In recent years, its income from services has climbed a lot. In 2019, the net revenue of Apple from sales of the iPhone was $142.4 billion while that form the sales of Mac was around $25.7 billion. Revenue from services has climbed to $46.3 billion in 2019. Sales of the iPad generated $21.3 billion in revenue for Apple in 2019, whereas the sales of Wearables, Home and Accessories brought $24.5 billion in revenue for fiscal 2019.
In this way, a large and varied product line has helped the company grow its revenue faster. Apple products are mainly premium products and the heavy profit margins that the company earns on each product cannot be matched by other brands offering similar products or services. The uniqueness and quality of these products is a source of sustainable competitive advantage for the brand and also the reason behind its popularity as well as the company’s profitability. Iphone still drives the largets part of the company's revenues but it has been able to create diverse channels and the leading new channels of financial growth are the services and wearable segments.
Premium product quality:-
A company cannot earn a competitive advantage from its products unless there is something unique and outstanding about them. However, when it comes to Apple, all its products are of premium quality. Apple mainly targets the upper class and upper-middle-class customers through its products. The premium products of Apple also come with premium price tags. However, the premium quality of these products is one of Apple’s core sources of competitive advantage.
It is mainly because of their premium quality and outstanding performance that these products including the iPhone and Macbook enjoy heavy popularity and high demand in most corners of the world. In the case of Apple, Premium product quality is not just a driver of demand but also of profitability for the company. Moreover, the premium quality of these products makes them unique and inimitable. A large part of the credit also goes to the technology inside these products. Apple’s iOS and Mac OS are the primary sources of differentiation and drivers of demand for two of its leading products.
As the level of competition in the technology industry has grown quite intense, companies are now competing in the area of HR as well. The demand for talent and highly skilled tech professionals has grown a lot. Large technology brands like Google, Apple, Microsoft, Amazon, and Facebook have very large HR budgets. They try to attract the best talent and pay them fat salaries as well as other financial and nonfinancial incentives to retain them. Tim Cook has done a lot to revive Apple’s organizational culture and to make the environment more worker-friendly. Talented human resources are also a key source of competitive advantage for the brand since the pace of innovation at Apple depends on the ability of its people.
Apple’s focus on quality and technological innovation has earned it a leadership position in the industry. Premium quality products and improved customer experience have also led to higher recognition and stronger competitive advantage compared to the rivals. Overall, Apple enjoys very strong brand equity which has also led to higher customer loyalty. Brand equity is a very important source of competitive advantage for any large brand considering that consumers’ trust matters more than anything else in the hypercompetitive environment. How much your customers’ trust you affects the level of sales and revenue. Apple has been able to win the trust of its customers through a sustained focus on quality and innovation. It is why despite the premium prices, sales of Apple products are so high. Moreover, Apple places a special focus on its users’ privacy, which is also a key reason behind higher brand equity and overall trust.
Apple is a globally well-recognized brand. The company is famous for its innovative products, quality, and marketing. Strong brand recognition translates into easy brand recall and higher sales. The company has also achieved higher customer engagement and trust through a consistent focus on quality and customer experience. Its strong recognition is also one of the primary factors driving faster growth of the brand.
Managing supply chain operation has become critical to business success in the twenty-first century. As the level of competition in the tech hardware industry has grown, it is critical for businesses to ensure the availability of quality raw materials to produce great quality products and find faster business growth. Innovative supply chain management ensures low operational expenses as well as timely production. Apple has a large and global supply chain. It sources from several corners of the world. However, the largest part of its supply chain is based in Asia and mainly China which is because of the availability of quality raw material and labor. The company is highly successful in terms of managing a resilient supply chain.
Apple’s strong position in the technology industry and its strong financial position also offer it higher bargaining power against its suppliers. This helps Apple purchase good quality raw material at lower prices and maintain higher profit margins. Its bargaining position is driven by its market leading position and also its financial strength.
Global Sales & Distribution:-
Apple has a global sales and distribution network which includes physical and online distribution network. Apple utilizes multiple channels for sales and distribution including authorized resellers, e-commerce, and physical stores to sell its products. In several of its leading markets, Apple has established its branded retail stores which work as both sales and marketing channels for the company.
|R&D Capabilities||✓||✓||✓||✓||Sustainable competitive advantage|
|Marketing||✓||✓||✓||✓||Sustainable competitive advantage|
|Product Line||✓||✓||✓||✓||Sustainable competitive advantage|
|Product quality||✓||✓||✓||✓||Sustainable competitive advantage|
|Talented HR||✓||✓||✓||Competitive Parity|
|Brand Equity||✓||✓||✓||✓||Sustainable competitive advantage|
|Global Recognition||✓||✓||✓||Competitive Parity|
|Supply Chain||✓||✓||✓||Competitive Parity|
|Bargaining Strength||✓||✓||✓||Competitive Parity|
|Global sales and Distribution||✓||✓||✓||Competitive Parity|
Pratap, Abhijeet. "APPLE VRIO ANALYSIS ." Notesmatic, Jan. 2020, notesmatic.com/2020/01/apple-vrio-analysis/.
Pratap, A. (2020, January). APPLE VRIO ANALYSIS . In Notesmatic. Retrieved from https://notesmatic.com/2020/01/apple-vrio-analysis/