VRIO Analysis of Google

Author- | Posted- | Updated: October 8, 2020 |

The resources and capabilities of a company are its drivers of competitive advantage. Nearly everything a business owns can be classified as a resource or capability. By understanding the resources and capabilities of different enterprises, one can understand why operational performance varies from one business to another. To achieve a source of sustainable competitive advantage, the resource or capability a firm owns must be valuable, rare, inimitable, and organized.

The VRIO framework comes to the help of managers when analyzing a company’s resources and capabilities. VRIO is an acronym for Valuable, Rare, Inimitable, and Organized. These four bricks of VRIO represent the four properties of the resources and capabilities that help at generating a sustainable competitive advantage. When the resource or capability satisfies all these requirements, the competitive advantage thus achieved will be sustainable, whereas, when it meets fewer standards, the competitive advantage will be temporary. 

Moreover, a sustainable competitive advantage comes from core competencies that arise from resources and capabilities.

VRIO Analysis of Google:

Core CompetencyValuableRareInimitableOrganizedCompetitiveAdvantage 
Brand ImageYesYesYesYesSustainable advantage
R&DYesYesNoYesTemporary advantage
Customer ExperienceYesYesYesYesSustainable advantage
Product RangeYesYesYesYesSustainable advantage
Market PositionYesYesYesYesSustainable advantage
Customer LoyaltyYesNoNoYesTemporary advantage
HRMYesYesNoYesTemporary advantage
Financial PositionYesYesNoYesTemporary advantage

Brand Image:

In the technology industry, brand image is a significant source of sustainable competitive advantage. While product quality is a leading factor that affects the consumers’ perception of a brand, there are more factors that can affect brand image.  However, brand image is a decisive factor that affects consumers’ choice of products. This is also something that makes the entry of new players in the industry difficult. Apart from everything, it is the brand image that differentiates one firm from another. Google has set itself apart from the crowd of technology brands as a highly customer-oriented and innovative tech company. As a tech organization, its focus has remained on bringing products and services that make life easier for people and offer a superior level of customer experience. While the role of tech in people’s daily lives around the world has kept growing, there are several products made by Google that people use on a daily basis free of cost. Its user-friendly products and services have helped it acquire a customer-friendly image. Google remains dedicated to improving its brand image by investing in key areas including the efficiency of its products and services, pricing as well as in other areas like CSR and sustainability

R&D:

The tech industry is experiencing an intense level of competition, The big four or five players invest a large sum each year in research and development to maintain their dominance of the market. The technology industry is growing at a very fast pace with new technologies being released and digitalization continuing to gain pace worldwide. In an extremely competitive environment, growth is not possible without a continuous focus on innovation. It is a crucial factor that apart from product differentiation drives faster growth for technology brands. However, while investing in research and development is critical for the technology brands, it is not a sustainable source of competitive advantage, the primary reason being the aggressive focus of rivals brands on R&D. Like Google, the rival players such as Facebook, Amazon, and Microsoft also invest aggressively in research and development, Amazon has the largest R&D budget of all the brands in the industry. So, while R&D offers a temporary competitive advantage, it also requires continuous dedication and investment. Google’s rivals, apart from continuously updating their products and services, are also bringing new innovations to the market to grow their overall influence. As a result, Google cannot reduce its focus on innovation or it risks losing market share to its competitors.

Customer Experience:

Customer experience is one of the key focus areas for technology businesses. It is a major source of popularity for them. It is why all the leading technology brands including Google, Amazon, Facebook, and Apple focus on delivering a superior customer experience. There are several factors that affect the user experience in the case of Google products. Apart from speed and accessibility, pricing and the efficiency of products and services also affects the customer experience. From its browser to Gmail, advertising as well as other services including cloud services, Google has focused on delivering a superior customer experience. Since the apps and services made by Google deliver a superior customer experience, they are popular worldwide and enjoy a larger market share as compared to the rivals. In the case of Google, its focus on customer experience has resulted in a source of sustainable competitive advantage. It is because Google’s products including browser, advertising, search, and Android are all leaders in their segments because of the differentiated, innovative, and overall superior customer experience that they offer. Its products are not just innovative but also faster as well as easier to access worldwide. 

In terms of advertising too, the company offers better ROI for its customers than its rivals. The overall result is that the user experience offered by Google is a lot better than its rivals in the core business areas. This has led to a sustainable competitive advantage for the brand and most of the segments where Google operates, it is a lot ahead of its competitors in terms of service quality and market share. Chrome browser is unbeatable in terms of speed and so is Google’s search engine in terms of efficiency and Gmail in terms of usability. Overall, there is a vast difference between the service quality of user products compared to those offered by rivals.

Product range & Market Position:

The large product range of Google is also a critical source of competitive advantage for the brand. It has brought a large range of interrelated tools and services for users worldwide which have helped it strengthen its core competitive advantage. From browser to email, search, maps, and other online services, the company offers a large range of products that can be used by individuals as well as corporate users. Google also extended its product offerings by including cloud computing products. Overall, Google offers a fuller range of services as compared to other internet companies like Facebook, Amazon, or Microsoft. In this regard, Google is considered unbeatable. From search to advertising and browsing, the internet is dominated by Google products. Together these products and services have differentiated Google from other brands making it the largest player in the internet industry. The result is that Google is far ahead of all competitors in this area. Overall, by introducing a full range of internet-based services, the company has been able to gain a sustainable competitive advantage which is bolstered by its mobile OS – Android. Its presence in mobile applications is also challenged by none else but only Apple to some extent. 

Otherwise, Google dominates the web on both desktop and mobile devices. Google is further growing its range by introducing cloud-based services like Google Meet. These products will further strengthen its core value proposition and as is frequently cited Google operates as a monopoly. Breaking this monopoly has proved difficult even for the law and the governments in various regions including the US and Europe. Google’s market position and market share in the internet industry remain unchallenged where it is the undisputed leader. Despite the antitrust challenges against the company, shaking its position has remained impossible. Overall, Google’s dominance of the web world continues to grow. Thus, its large product range as well as its market position are both critical sources of sustainable competitive advantage for the brand. Comparing the market share of its search, browser, and email, as well as more products and services with those made by the competitors of Google, shows that none of its rivals is as strong to bring a line of products and services that could match the efficiency, scalability, and usability of Google products. As Google exercises its dominance on the web, neither the larger tech brands like Apple, Microsoft, or Amazon and nor any of the smaller ones including Facebook has been able to break a chunk of its market share in the internet industry.

Customer loyalty:

Customer loyalty depends on various factors in the technology industry but most of all it depends on the quality, accessibility, and pricing of products and services. To an extent customer loyalty also depends on brand image and the company’s reputation in the market. However, when it comes to the quality of products and services as well as accessibility or innovativeness, Google is ahead of its rivals in the industry. It has brought a large range of products that individual users from across the world can use without paying. Its browser, email, and maps as well as more products are accessible to consumers around the world. Chrome is the fastest browser and used by the largest number of consumers worldwide. Google search is also the fastest and the most efficient search engine and therefore enjoys the largest market share. Smartphone buyers make use of the Android OS and Google Play for free.

Gmail is available for free use by individual users, and corporate users can avail of its services at affordable prices. The pricing strategy used by Google is also customer friendly which means its corporate customers get the twin benefit of higher affordability and efficiency. The result is that the company has successfully gained high-level customer loyalty. However, to retain its loyal users, the company has to stay focused on innovation. For that, it needs to invest a large sum each year in research and development, since, user loyalty also depends on user experience, the company invests in product innovation so that its products continue to deliver a seamless customer experience. These factors have led to faster market growth. However, like Google, its competitors have also gained highly loyal customers, including Facebook, Microsoft, and Amazon, as well as Apple, which to an extent, diminishes the strength of competitive advantage generated from this core competency. As a result, user loyalty is a source of temporary advantage for the brand. 

HRM:

The human capital of a tech brand is one of its core sources of competitive advantage. The tech businesses compete aggressively for acquiring the most talented employees. Apart from paying them fat salary packages, these firms also reward them with extraordinary benefits. Since the tech industry experiences a higher employee turnover rate, the businesses employ various methods to attract and retain talent apart from paying the highest salaries in the entire industry. Google had been termed an HR leader in its initial days, and the company continued to remain the most attractive employer in the tech industry for several years. In recent years, the number of HR issues faced by the company suddenly crept up, and Google was forced to respond to the law and other stakeholders on various points related to HRM. Apart from the allegations of sexually predatory behavior by executives, claims related to harassment also grew. While the company remains one of the most attractive employers in the tech industry, its reputation in HR has been a little diminished. Google is still facing these issues, but the company is among the richest and the salaries and benefits it offers. It continues to draw applicants from ivy league colleges in large numbers.

Moreover, being a software company, Google’s competitive advantage depends a lot on its people and talent. How talented Google’s employees are, decides the quality of its products and services, and the pace of innovation inside the company. Its rivals are also equally aggressive in terms of attracting and retaining talent that includes programmers, managers, and engineers mainly. Microsoft, Apple, Amazon, and Facebook all pay large salary packages and offer competing benefits. The competitive advantage that Google generates through HR is temporary.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.