How Apple Can Gain Competitive Advantage through Leveraging Its Internal Resources and Competencies - Case Study Example

How Apple can gain competitive advantage through leveraging its internal resources and competences? Contents Business environment and Critical Success Factors in the industry 3 Resources, Competences & Competitive Advantage 4 Resource-Based View of Strategy 5 VRIN Framework analysis 6 Capabilities for Sustainable Competitive Advantage 7 Porter’s Value Chain 8 Value system 9 Conclusion 9 References 11 Business environment and Critical Success Factors in the industry Apple Inc. is an U.S. based Multinational Corporation which is involved in designing, manufacturing, developing and selling computer software, consumer electronics, personal computer and online services. The business environment of this company includes micro economic and macro economic factors. These micro economic factors are buyers, suppliers, substitutes, competitors and new entrants. Apple Inc dominates the industry of consumer electronics and it has wide spread production capacity by which the company is able to produce goods at comparatively lower cost than other manufacturers. In case of new entrants this can be said that to compete with Apple Inc. a new company has to invest a huge amount of capital in business which is quite an impossible option at the time of entering in the market. This company is continuously differentiate its products from the other branded products in the market and for that reason threat of new entrants is very low in this field (Gitman and McDaniel, 2008). Apple Inc invented iPhone and iPad in the market and the staffs of this company are providing continuous effort in the research & development activities for manufacturing more unique products. Therefore, threat of competitors is also very low in this regard. Samsung, Sony Ericcson, Nokia have launched iPhone in the market which has become substitute of the products of Apple Inc. Bargaining power of supplier is high as they are providing unique parts and raw materials for manufacturing exclusive products. But bargaining power of buyers is not a threat to the company as it has a wide range of customers. Macro economic factors include political, technological, economic and socio-cultural factors. In case of technology this can be observed that the company is involved to improve more technological advancement for new innovation. Some political factors like lower investment barrier, market barrier etc in China hamper the business activities of this company. The company is facing monopolistic competition in the market. There are lot of competitors in the same industry which will direct the low entry barrier of new entrants. Again the products of this company can change the life style of consumers in a dynamic way. The company has adopted few strategies to enhance its capabilities. They are considered population growth rate, culture, religion, perception of all types of customers to increase the volume of sale (Zylla-Woellner, 2013). Already the company has established a strong brand name in the global market and achieve the dependency and trust of customers. New ideas and innovation in case of consumer electronic goods provide a completely new platform than the other existing brands in the market. Resources, Competences & Competitive Advantage In any organization resource and competence are very important aspects to gain competitive advantages in a maximum way. Having adequate resources not enough to achieve sufficient competitive advantages in the market. Competency is required along with sufficient resources. Otherwise resources will not be utilized in an optimum way. Resources include both tangible and intangible resources. Here in case of Apple Inc, tangible resources are the human resources [programmers, engineers, designers and last but not the least the former CEO, Late Steve Jobs of this company, its retail stores and hardware & software components. Intangible resources include brand name, knowledge & skill of employees, innovation capability, powerful brand image, unique design capability, customer’s database etc. From the above diagram this can be said that threshold resources are hardware and soft ware components of this company and its technological infrastructure. Again unique and intangible resources of this company are brand name and brand image in the market (Hoskisson, Hitt, Ireland and Harrison, 2012). Threshold competence of this company includes its unique designable products and advanced technology. Core competence refers to the high level customer services. From the above analysis this can be interpreted that threshold resources and competency are required to compete in the market whereas unique resource and core competency are required to achieve competitive advantages not only in the domestic market but also in the international market. Its innovative strategy helps the company to achieve maximum market share and brand loyalty especially personal computer and consumer electronics segment. By introducing new technologies the company can add value to its products and offer those value added products to the whole world. Resource-Based View of Strategy The capabilities of an organization depend on its resources and competencies. Apple is considered to be an innovative company that has set its mark on the industry. The major resources that the company possess is in the form of advanced technologies, skilled workforce and well developed research and development team. The competency that is possessed by the company is on the basis of these resources which are tangible and intangible in nature (Lynch, 2006). The extraordinary profit that is gained by the company is because of its resources and competencies which make them stay ahead of the competitors for instance competing with Samsung in smartphone and tablet markets. The major strategy that has been formulated by the company on the basis of their competencies and resources is that to position their products as high priced and high quality (Porth, 2003).This strategy has enabled the company to develop a niche market of their own where their competitors would only sustain if they can meet the high quality level of Apple. VRIN Framework analysis The VRIN framework majorly comprises of four important parameters that is applied on the resources and capabilities of an organization to analyze whether such resources would help the organization for long term sustainability. The resources that are most valuable for Apple is its brand name, customer loyalty that it has acquired through quality products and customer service, logistic management, product design, international distribution of its products, top management and innovation. These resources are highly valuable for the firm and these even form the competitive advantage of the organization that enables the firm to remain competitive and excel in the industry. The other factor of framework is rarity and the resources/capabilities of the company that are rare are its brand name, innovation and customer loyalty. These three capabilities are inter-related and they are rare and cannot be possessed easily by any other players. The brand name that Apple has established is based on its innovation and its innovative product line that are customer centric has made the company enhance upon its customer loyalty. The next factor relates to those resources or capabilities of the firm that cannot be imitated by other competitors or are inimitable (Grant, 2010). These resources comprise of its logistic management in the form of well structured relationships with the suppliers who supplies as per the requirements and within time, the brand name of the company which cannot be copied by others, top management and their skills, and the widespread customer loyalty. These capabilities of the company cannot be acquired by other companies in the same industry or by any other new entrants as they have been gained through the skills and expertise of top management and the employees of Apple. The last factor of the framework is non-substitutable which states that there are certain resources that are possessed by a firm which cannot be easily substituted by any other resources and are not strategically equivalent. These resources in case of Apple are its brand name and customer loyalty. These intangible resources cannot be replaced as they are developed once and defines the market positioning of the company. Capabilities for Sustainable Competitive Advantage The sustainable competitive advantage that is gained by a company depends on various capabilities that are possessed by the company. The major competitive advantage of Apple has been its innovation capability and its brand name. Over the years the company has been able to establish a strong position in the market through its different innovative strategies that is highly reflected through its product lines. The major capability that has given rise to its sustainable competitive advantage is its innovative capability, being truly competitive and its capability of maintaining appropriability. These capabilities revolve around the aspect that the company always aimed at being the market leader. The top management of the company focused towards the goal that they needed to position the company in such a way that they are able to capture the maximum percentage of the market share (Stonehouse, Hamill, Campbell and Purdie, 2000). The company always has performed as per their ethics and moral values so as to create high satisfaction level for the customers. The company can even gain competitive advantage by indulging into product development and also through extending their loyal customer base. This would facilitate the company to sustain their competitive advantage for long term. Porter’s Value Chain Value chain analysis is a concept which was implemented by Michel Porter. This concept provides a systematic view to each organization so that organization can compose a proper transforming process between inputs and outputs at each and every step. Here, M. Porter defined the term ‘Value’ as the price which a consumer is prepared to pay for getting a particular product or access any service. Profit arises from the difference between value and total cost of the enterprise. Porter’s value chain model includes five value generating primary activities and these are inbound logistic, operation, outbound logistic, marketing & sales and services (Sekhar, 2009). Now in case of inbound logistic of Apple Inc., this can be observed that the company is obtained components from multiple sources and these sources are not bound within one country. Hardware products are manufactured by the outsource partners of this company and these outsource partners are mainly located in Asia. Foxconn is one of the outsource partner of Apple Inc. The company works with its OEM partners to delegate raw material acquisition process. The company is utilizing original equipment manufacturers (OEM) for economies of scale in case of production (Magretta, 2013). The company is used variety of direct and indirect distribution channels such as online stores, retail stores, whole sellers, value added resellers, 3rd party cellular network carriers etc as its outbound logistic. The company is doing their selling and marketing activities by focusing on few factors which are brand loyalty, reasonable pricing and retail outlets. They are providing customer services over the telephone and internet. Value system The value system of a company describes the essential factors in its value chain that helps to reach out to the maximum market segment. Value chain analysis of Apple states that it has given equal importance to its primary and secondary activities. The company explores maximum opportunities in the form of inventing new products or entering into new markets. Key focus of the company has always been to be a market leader and not to compromise on quality just to remain competitive in the market place. Internal cost structure of the company is very high which majorly reflects its high R&D costs and that of production and distribution (Johnson, Scholes and Whittington, 2005). The company however can control the internal costs through outsourcing materials from various other sources or through extending its supplier base who can offer better prices to the company. On the other hand the strategy of the top management of the company is that value can only be created when the processes within the organization are well structured and are aligned towards creating value for the customers. Apple Inc is well known for its international distribution which makes them attain a competitive advantage in the industry. The future focus of the company should be on improving its distribution network across the globe so that the firm can reach out to more number of customers. Conclusion Apple Inc. is a worldwide famous brand name for its diversified product range, innovation of new products such as iPad, iTunes, iPhone etc. Except the threat of supplier the company has not faced any other threat to run its business activities and its innovative work has become threat for the other competitors in the global market. Again the company is able to provide the opportunities of economies of scale and cost effectiveness to its customers as it is able to produce the electronic products at comparatively low cost than the other competitors. It is maintaining Porter’s value chain system in its operating activities. Its resources and core competency help to achieve maximum competitive advantages in the market. The company possesses certain resources or capabilities that cannot be easily imitated by any other players in the industry. These resources majorly comprise of brand name, its innovation capabilities, skills and expertise possessed by the top management, well defined supply management structure, and customer loyalty towards the brand. The company needs to only focus on developing extended base of customers through more innovative products which would even help the company to sustain in the industry. The company encompasses immense resources and competencies all it needs is to focus on invention and capture the first mover advantages in the industry. References Gitman, L. and McDaniel, C. 2008. The Future of Business: The Essentials. Boston: Cengage Learning. Grant, R. 2010. Contemporary Strategy Analysis: Concepts, Techniques, Applications. Massachussets: Blackwell. Hoskisson, R., Hitt, M., Ireland, R. and Harrison, J. 2012. Competing for Advantage. Boston: Cengage Learning. Johnson, G., Scholes, K. and Whittington, R. 2005. Exploring corporate Strategy. Harlow: Financial Times Prentice Hall. Lynch, R.2006. Corporate Strategy. Harlow: Financial Times Prentice Hall. Magretta, J. 2013. Understanding Michael Porter: The Essential Guide to Competition and Strategy. Boston: Harvard Business Press. Porth, S. 2003. Strategic Management: A Cross Functional Approach. New Jersey: Prentice Hall. Sekhar, G. 2009. Business Policy and Strategic Management. New Delhi: I. K. International Pvt Ltd. Stonehouse, G., Hamill, J., Campbell, D. and Purdie, T. 2000. Global and transnational Business: Strategy and Management. Chichester: John Wiley and Sons Ltd. Zylla-Woellner, J. 2013. Global economic Development within the Scope of Apple Inc. Germany: GRIN Verlag. Read More