Assessing Competitive
Advantage: Apple vs.
BlackBerry
WE BEGAN OUR JOURNEY into strategic management
(in Chapter 1) by looking at how Apple achieved
a sustainable competitive advantage (until the end
of 2012), while its various competitors struggled to
keep up. Prior to the introduction of the iPhone in
2007, however, the Canadian high-tech company
BlackBerry was a global leader in wireless communication.
As an early innovator, BlackBerry defined
the smartphone category and changed the way millions
of people around the world live and work. At one
point, the BlackBerry smartphone was a corporate
status symbol.
As we discussed in Chapter 1, strategy is a set of
goal-directed actions a firm takes to gain and sustain
competitive advantage. Since competitive advantage
is defined as superior performance relative to other
competitors in the same industry or the industry average,
a firm’s managers must be able to accomplish
two critical tasks:
1. Accurately assess the performance of their firm.
2. Compare and benchmark their firm’s performance
to other competitors in the same industry
or against the industry average.
One of the most commonly used metrics in assessing
firm financial performance is return on invested
capital (ROIC), where ROIC 5 (Net profits/Invested
capital). 1
ROIC is a popular metric because it is a good
proxy for firm profitability. In particular, the ratio measures
how effectively a company uses its total invested
capital, which consists of two components: (1) shareholders’
equity through the selling of shares to the
public, and (2) interest-bearing debt through borrowing
from financial institutions and bond holders