Apple, iPhone a look from a resource-based view (Part I)

I find it quite interesting to study and apply the resourced-based view to Apple on the analysis of its competitive advantage. Michael Porter was famous for his five forces model teaching the firm how to deal with its external forces (buyers, suppliers, substitutors, new entrants and the competitors). However, as a company with interest (and even obsession) in technological innovation, Apple is better looked at and analysed by the resource-based view. Since the other purpose of this writing is for my Corporate Strategy class at the ABS (Amsterdam Business School), I am going to mention all of the relevant names in the reading of the resource-based view, named below:

- Barney (VRIO, 1995)

- Prahalad and Hamel (Core Competence, 1990)

- Peteraf ( Conerstone of the RBV, 1993)

- Grant (Knowledge-based, 1996)

- Stalk (Capabilities-based, 1992)

and along with that will be the Schumpeterian view on competitive advantage, Kim & Mauborgne (Blue Ocean strategy), Brandeburger & Stuart (1996), Value-based Strategy,... 

The first, common point among Barney, Peteraf, Prahalad & Hamel in order for a firm to gain competitive advantage is the question of value. 

Do Apple's resources and capabilities add value for the finding of new opportunities? Steve Jobs, in his keynote presentation of the iPhone in 2007 introduced a device which is an integration of three separate devices: a wide screen iPod with touch controls, a revolutionary mobile phone, and an Internet communication device. All of the three separate products, Apple took advantage of its existing products: iPod and Safari (Internet communicator). The new opportunity lay in the mobile phone, especially when it's a revolutionary mobile phone. All of the three integrated in one device, and what make the device outstanding is a big screen, with touch control. Apple has separated itself from the design of the cell phone at that moment: no main button, no key board (looking at Blackberry, Nokia, Motorola, Samsung,...), but only a big screen. There is also no need for a stylus, but the most handy pointer: finger. Creating an iPhone, based on this differentiation in design, and the idea of combining the three powerful products on a device, called smartphone Apple created a product with added value to customers/ end users and at the same time, brought it a lot of opportunity in the cell phone industry, which later is known as 'smartphone'. Apple, with the introduction of iPhone can be seen as a leader in the new industry. Apple had a chance of winning a large customer base where targeted ones are not businesses but consumers. There is one important thing I would like to point out here. Before, with a PC, customers are in businesses. The Apple's user-friendly PC did not succeed in the market in the 90s since the focus was on business, there was not really a need for user-friendly experience. Compaq, HP later on were the winner. There were also devices from HP, O2,... which also enable pointing (by a stylus), checking email, calendar, web surfing,... but those products are much more in business line not consumer line. HP's smartphone, Palm was not a popular product due to the main focus, business customers. Apple, still the same focus to consumers, gained a big market share in smartphone area since compared to HP, it has much larger customer base (consumers vs businesses).

The second point for Apple to keep its competitive advantage is imitability that Barney and Peteraf shared. Apple introduced its iPhone in January 2007 and the first product was on sales from June 2007. Only after about two years after that (2009), other competitors like HTC, Nokia, Samsung,... were able to catch up with Apple in smartphone, especially touch screen device. (HTC is also a new interesting player in smartphone).  

Going into this industry for Apple is like going to a 'blue ocean' where a lot of opportunities are out there to be achieved, where there were not a lot of competition at that time, and competitors need time to develop product and catch up in the market. 

Apple produced a hardware, a phone for one of the reasons, it has great software to go with its phone as Steve Jobs referred to Alan Kay thirty years ago 'People who are really serious about software should make their own hardware'. In 2007, there was no real player in smartphone who offered both perfect or almost perfect hardware product together with excellent software from a consumer point of view. Even up till now, 2010; the industry is still in it new phase of the life cycle where Nokia has plan to develop its own mobile operating system (MeeGo), RIM with Blackberry (but no touch screen), Samsung and HTC offer good products but using Android (Google's mobile operating system). That is to say the resources and capabilities that Apple has is hard or costly to imitate, which enable the firm to sustain its competitive advantage. The design of Apple products bear similarity among each other (iPhone 4, Macbook Pro, iPad,...) in the external appearance. They also share similar user interface in the software (iPhone 4, new Macbook Air, Macbook Pro, iMac,...). All of the similarities of Apple's products distinguish itself from other products in the market in hardware and software design. Because Apple develops its own softwares for its hardwares, the capabilities that it possesses is rare, or in another word, the resources or capabilities are not controlled by other firms or any competitor. Thus, Apple brings itself the source of competitive advantage. 

To be continued:

- Apple's heterogeneous resources

(- Ex-ante and ex-post limits to competition)

- Apple's organizational resources (Grant, Stalk)

- Apple's innovation (Schumpeter, Kim & Mauborgne)

- Apple's business model

Apple and iPhone, a look from a technology life cycle

In 1984, Apple introduced the Apple I, the first line of computers that changed Apple and the computer industry. From that on, not a lot of people had heard of Apple computer but instead Compaq, Toshiba, Sony, Dell,... Sales of Apple's PC and Mac have been up in recent years, due to my own hypothesis that a lot of users who use iPod and especially iPhone have been getting more acquainted with the interface that is claimed to be user-friendly. Thanks to that, Apple's sales of PC and Mac are up, leaving the business unit alone, I'm not sure if they can reach the sales of $22bln for Mac FY 2010. (Source: Apple keynote for new Macbook air, iLife,...)

In late June 2007, Apple introduced a 'revolution' in Phone, the iPhone (which has come to iPhone 3G, iPhone 3GS, iPhone 4 just from 2007 to 2010). iPhone has been a huge success for Apple so far in the smartphone industry. However, success in one phase of the technology life cycle does not guarantee success in the next phase (Stoelhorst, Building Resource-based Competitive Advantage Over a Technology Life Cycle). The thinking becomes more interesting when assessing which phase of the life cycle the smartphone industry is in (refer to the four phases in Stoelhorst's). Will Apple maintain its competitive advantage when the industry comes to the next phase? Or will Apple's start with the iPhone for the smartphone industry end up like the Apple I for the computer industry in 1980s? The question is to be observed in the next 5, 10 or 20 years. Yet, over the next writing, I would like to look and analyse Apple from a resource-based view on its competencies and its capabilities.