The resource-based approach looks at a firm’s internal strength in terms of resources and capabilities that will provide a competitive edge. This approach assumes that a firm’s external opportunities and threats are the same as the rest of the industry but the internal resources are different. By developing a strategy based on these internal resources, a firm can create new opportunities that will bring in more profit in the long run.
A competitive advantage can be achieved by creating value not available in the competition. This value can be in the form of cheaper products due to lower production cost or through differentiation, which is producing products that are superior to any in the market. When no one else can match your product, it becomes your competitive advantage.
“Apple is a US based Multinational Corporation which designs, manufactures and markets a range of consumer electronics and software products. Apple’s financial results for 2017 fourth quarter that ended September 30, 2017, the company posted quarterly revenue of $52.6 billion, an increase of 12 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.07, up 24 percent. International sales accounted for 62 percent of the quarter’s revenue.” (Apple Inc)
Apple has won numerous awards and accolades from the most admired company to “brand-of-the-year” for its multitude of products. We can examine how Apple is able to create and sustain this competitive advantage from the resource-based perspective.
Apple’s competitive advantage is derived from this differentiation strategy which is based on its unmatched innovation. This exceptional innovation strategy has lessened consumer’s price sensitivity and allowed Apple charge top prices for its offerings even in a highly competitive market. Apple has constantly developed and introduced new and innovative products that challenge current technologies. This has enabled Apple to be the market pioneer and established huge advantages over its competitors. As a result, Apple has prevented its competitors from employing identical approach. These indicate that Apple’s rivals do not have the resources that Apple commands and this shows that Apple’s internal resources are, therefore, “heterogeneously spread” and “imperfectly mobile”, which confirms Apple’s competitive advantage.
From the resource-based viewpoint, Apple’s ability to innovate stems from its internal strategies and processes through which its tangible and non-tangible assets are organized and utilised in order to realize its competitive advantage. The assets can be in the form of offices, retail stores, factories, capital etc (tangible) and knowledge, reputation, management, human resources etc (intangible).
The four criteria in resources that a firm must have in order to establish competitive advantage are value, rareness, imperfect inimitability, and substitutability. With Apple focusing on its internal resources, it has realised potential sources of competitive advantage which is not due to external forces. All these internal factors act in unison to place Apple where it is in the industry. The late Steve Jobs; the former CEO and co-founder of Apple, is definitely one of the most valuable resources of the company. He not only pioneered hot selling products but also established a working environment that attracts the best and innovative people to work in Apple. Having the cream of the industry working in Apple has enabled Apple to produce in-house from planning to production by utilising its excellent internal resources. The combined use of these resources and capabilities has managed to push Apple ahead of its rivals.
While Apple products are made from widely available materials as used by its competitors, the process and manufacturing of the end-product are patented thus cannot be imitated by its competitors. This creates a resource & competence combination that is rare and ensuring a superior competitive advantage. Apple’s patent protections also ensure sustainability of its competitive advantage by hindering any similar or copy of Apple’s products by the competition.
Apple has also managed to establish a reputation as a pioneering and ground-breaking technology company through its innovative products (Mac, I-pod, I-phone etc) which is also imperfectly imitable.
Based on the above, Apple’s competitive advantage can be attributed to the strengths of Apple’s resource base. In view of the high level of competition in its markets, Apple has been able to use its in-house resources to control external opportunities and manage external threats.
