Apple and Samsung: Rivalry in a Changed Market - Essay Example

? Apple and Samsung Apple and Samsung are undeniably the fiercest competitors in the consumer electronics in the market with very large loyal fan bases particularly in their flagship products including the iPhone 5s and the Galaxy S4. Both companies have clawed their way to smartphone market dominance though in a very different way making their obvious difference is in the way they release new products (Wagstaff & Kim, 2012). Both the companies enjoy multitude of fan sites and blogs, which cover them thus making it difficult to grasp at any fact or figures available to claim advantage to one side or the other in the market place or even superiority for one side over the other. Apple and Samsung companies are doing very well and they have several things in common. The objective of this writing is to compare and evaluate the two major competitor corporations, Apple and Samsung. According to Wagstaff & Kim (2012), it is undeniable that both companies are similar in terms of size though were founded in different periods. Steve Jobs and Steve Wozniak founded Apple in 1976 while Samsung was founded in 1938 by a Korean businessperson, Byung-Chull Lee. Even though Samsung started as a vegetable and fruit company, it later started back in 1969 as an electronic company. Apple’s personal computers were amongst the best but later experienced a decrease in sales after the high competition in electronics began. The company then started to produce new product iPod that largely enhanced her revenues. On the other hand, Samsung was developing slowly through introduction of various products in the market prompting it to change her mission statement to keep pace with its growing global operations, changes in the world economy as well as escalation from well-established companies. Moreover, Apple prides herself on innovation and is known for taking 8 years to develop a single product before releasing it to market. Worstall (2013) explains that Apple’s culture is to release products that are not perfect and once released, they make major updates hardly, confident that their original work is the best. This technique ensures a fascinated tech press and awed public, which compels a certain level of security as well as secrecy that segregates the company from attaining valuable market feedback prior to launch. This further raise the stakes of every product launch to the market changing and checking on any of their recent launches such as iPhone 5 and iOS7, it is nearly impossible for Apple live up to the demand for their products. Samsung however, releases a less than perfect product and iterate their way to success, which conforms, to their history of releasing new products that are far from perfect. The company does not make massive splash, instead the first generation product is meant to gauge interest and test capabilities since they are content to iterate their way to successful products. It is worth noting that Samsung uses less resources in product launch compared Apple although they are both at the top of the global smartphone market (Worstall, 2013). Although Samsung is a vast industrial conglomerate that manufacturers several things such as refrigerators and semiconductors, most people identifies it with smartphones, which is actually powering her growth. The company’s stunning fourth quarter results saw her profits rising to 87%. It is apparent that the phone division contributed to half of the profit and it does not break out smartphone revenues (Gupta, Kim and Levine, 2013). In 2011, Samsung sold almost 63.5 million in the quarter of which 40 million came from Samsung Galaxy S3 although the market seem to reach saturation in developed countries and the competition is high in developing countries. In the last quarter of 2011, Apple saw a remarkable profit of $13bn, which included 48 million of iPhones outpacing the Samsung Galaxy S3. Apple is even more dependent for profits for profits on smartphones compared to Samsung and Apple still takes a vast share of the mobile phone industry’s profit. Samsung vs. Apple’s smartphones, tablets and other cloud access devices rivalry is inflaming and the struggle has greatly changed the two companies’ business models. Samsung is really biting into Apple’s share of the smartphones, tablets and PC markets which has led to the series of Apple’s lawsuits. Both the companies vie for similar prize using different business models with Apple using a classic virtual integration while Samsung uses vertical integrated supplier in the electronics market. Apple utilizes a bigger percentage of the inputs for her products sourced from external suppliers while Samsung is focussed on building price performance competitive via internal development and supply of key component inputs. According to Wagstaff & Kim (2012), Apple has managed to keep R & D and cost of revenue expenditure relatively low through outsourcing most of their hardware piece in their component and hardware production. Apple’s margin is kept high by concentrating on a few designed premium priced products that effectively display her highly featured, proprietary software architecture. Demand for Apple products is skilfully stimulated through the leading edge advertising and sales promotion that has attracted the cooperation’s retail outlets and reseller counters that is quibble with Apple business model. According to Gupta, Kim and Levine (2013), Apple has made focus a virtue and it gets almost all her revenues from cloud access devices as well as other associated peripherals and services. Samsung’s business model is more cautious compared to the Apple’s high risk business model. Samsung’s component sector feeds multiple downstream product markets and their electronic strength depend on flat panel displays, plus memory, logic, sensors, LED light sources and lithium ion batteries (Worstall, 2013). Their strength in their components will further drive her expansion into new fields including medical electronics as well as data centre hardware. Samsung beat some of their competitors by outspending them in various areas of the value chain especially R & D, capital expenditures, marketing and promotion and is currently leaning on the same formula in her fight with Apple. As much as the two companies revenues are comparable, Samsung spent $10 billion on R & D but Apple used $3.6 billion while $20 billion on capital expenditure versus $10.4 billion for Apple in 2012. Samsung further spent $29.5 billion on selling and administrative costs while comparing Apple’s $10.3 billion in the year 2012. Samsung’s spending is spread across all the business lines that strengthens her competitiveness in cloud access devices and provides long-term stability (Wagstaff & Kim, 2012). It is undeniable that Samsung finds Apple’s growth and profitability enticing thus forcing it to throw some caution to the wind and competing with Apple has driven it to accelerate levels in software and cloud based value added. The company also aims at integrating the universe of Samsung mobile and consumer electronic products in the Apple’s style of integrated product portfolio (Worstall, 2013). On the other hand, Apple is also trying to make some changes that relate with Samsung’s business operations including Samsung’s strength in semiconductors, flat panel displays and batteries. Samsung’s superiority prompted it to be Apple’s most significant components supplier and the high degree of reliance has given her Korean rival a window into Apple’s product development and production plan. References Gupta, Poornima, Kim, Miyoung and Levine, Dan. (2013, February 10). Reuters. Retrieved from http://www.reuters.com/article/2013/02/10/net-us-apple-samsung-idUSBRE91901Q20130210 Wagstaff, Jeremy & Kim, Miyoung. (2012, December 7). Apple and Samsung: A defining rivalry in a changed market. NBC News. http://www.nbcnews.com/technology/apple-samsung-defining-rivalry-changed-market-1C7499427 Worstall, Tim. (2013, September 9). Why Samsung Beats Apple or Perhaps Vice Versa. Forbes. Retrieved from http://www.forbes.com/sites/timworstall/2013/09/09/why-samsung-beats-apple-or-perhaps-vice-versa/ Read More