How Does the Cell Phone Industry Behave - Case Study Example

Industrial Organization: How does the Cell Phone Industry Behave Table of Contents Introduction 3 Thesis ment 4 of the Products iPhone and Samsung Galaxy 4 Description of the Firms in the Industry as Well as The Level of Concentration 5 Level of Concentration 6 Cost Structure of the Industry 7 Demands of the Industry and its Customers 7 Downstream and Upstream Industries 8 Kinds of Strategic Interactions for this Industry 10 How Prices are Set 11 Conclusion 13 Works Cited 14 Introduction The cell phone industry is observed to be one of the rapidly growing industries throughout the world. With the advent of new technological features and innovations at a sustained manner, the industry has grown significantly with the increase of number of buyers and market size. Certain key features such as affordable mobile phones rendered by the companies and reduced amount of service related costs have been the vital determinants for the recent proliferation in this segment. In this industry, amid the leading players, Samsung and Apple have been the dominant players especially since the market surge of smartphones in the past decade. Samsung, a dominant player in the cell phone industry, commenced its business as a General Store in 1938, in northern area of Kyungsang, located in South Korea. The company is well known for manufacturing cheaper or affordable variety of electronic products. The present version of Samsung has been re-established under the invaluable guidance of its existing Chairman Lee Kun-hee. The main objectives of Samsung are to manufacture better technological features driven products through creative thoughts and investments on capital along with manpower resources. Samsung was ranked as the leading company in terms of technology based products in the global market during 2002. It has been observed that Samsung is one of the foremost companies in capturing the global markets with its products, irrespective of other competitors in the market. It can be stated that the success of the organization is essentially based on the handling the process of global branded products effectively. It also consists of efficient product line strategy in respect of brands. It makes huge investments in the area of Research & Development (R&D) for incorporating innovative technologies in various products especially mobile phones to meet the expectations of its diverse range of consumers (Roll 152-154). On the other hand, Apple Inc, a California based organization has been the pioneer in especially the smartphone industry by offering its unparallel offerings such as iPhone and iPad among others. In the cell phone industry, Apple has created its dominance by offering a series of iPhone version in recent years which has grabbed the attention of global consumers (Morningstar Equity Research, “Apple, Inc”). Thesis Statement The essay intends to provide a critical assessment of the prevalent behavior in the cell phone industry by significant consideration towards leading branded products such as iPhone and Samsung Galaxy rendered by Apple as well as Samsung respectively. It also provides a brief description about the organizations as well as the level of concentration in the industry. Moreover, the capital intensity (cost structure of the industry) and downstream and upstream industries are also discussed. Description of the Products iPhone and Samsung Galaxy Among the number of recognized products produced in the cell phone industry, Samsung Galaxy and iPhone brands have caught the imagination of global consumer segments. iPhone is one of the attractive and feature driven mobile phones that was launched first by Apple Inc. in 2007. iPhone has brought a drastic change in the technological innovations and given a new direction to the technological world. iPhone offers cellular connectivity, multi-touch screen facility, a number of downloadable apps, along with certain other features like proximity sensor which have been the major factors for its continued success in the industry. Conversely, Samsung in order to rival iPhone brought into the market Samsung Ultra Smart F700, which was quite alike the iPhone offered by Apple. Both the handsets possessed a number of facilities and had been considered as an all-in-one gadget. Moreover, Samsung’s F700 consisted of extensive features including touch-screen facility, camera enabled feature, text messenger, portable media player and web browsing facilities. It also comprised several other features such as multimedia as well as other basic functions which the ordinary phones offered (Blokdijk 87). Subsequently, Samsung has come out with a revolutionary set of smarphones named as Galaxy Series. It offers around 21 types of versions of Galaxy Series around the world. Here, it can be stated that Samsung Galaxy S has around five various versions in the US amid top five carriers. The product strategy of Samsung is to manufacture variations in terms of pricing points and overflow the market by diverse carriers around the world (Say Media Inc., “A Brief History of the (Samsung) Galaxy”). Samsung Galaxy is a mobile series of devices manufactured by Samsung that is operated by Android system. The Galaxy Note is also operated with AT&T Code Scanner through which the application is started. It helps in gathering information by using the phones with bar code facilities (Gookin 246). Description of the Firms in the Industry as Well as The Level of Concentration Samsung has boarded through of journey of technology where competition is huge and alterations in technology are bound to arrive in the modern day context. It can be stated that technology should be established and appropriate technologies are required to be chosen which would facilitate the organization to gain extensive profits by delivering better innovative products to customers, through which sustainability can also be maintained. As observed earlier, Samsung since its inception possessed the potential of making it to the highest level through innovation of technologies in the products. Similarly, Apple has also focused on maintaining a specific set of product line in the cell phone industry but has brought in new features in the offering each year which has been a major factor. Apple has also focused on meeting the consumer requirements by providing them an option of app store which is a unique offering. It can be stated that Samsung has carried the position of leadership in technology aspects from very early stages since 1993. Samsung is committed to undertake analog and logic chip development since 2001, which is considered to be significant in terms of product portfolio and sales volume. Recently, a new business has been added to the organizational portfolio in the form of Samsung Electronics and Samsung Electro-Mechanics in the year 2009 for raising efficiency and competitiveness along with upholding its leadership position (Samsung, “Business Overview”). It can also be stated that with the accomplishment of certain objectives it would assist the organization to conceive its competitive position in the market irrespective of competitors. Level of Concentration The cell phone industry is extremely concentrated as there are a few organizations that are generally dominant names in the industry. These companies include Apple, Samsung and Nokia among others that possess substantial amount of market share. A major reason behind the level of concentration amid these companies is that the companies generally offer products for a wide range of target consumers in varied price level. Moreover, the proliferation of smartphones and contextually the ability of the companies to offer world-class devices have been the key aspects for the prevailing scenario (Conly, “Global Mobile Phone Industry”). Cost Structure of the Industry In response to capital intensiveness aspect, it can be stated that in the department of product portfolio, capital intensity of Samsung has increased considerably in ratio to the revenues earned by selling technology products to the customers in the market. It can also be stated that semiconductors while using as a component can be utilized in the production process for enhancing sales and profitability for the organization. There is a tougher competition between Samsung and Apple in technical products as well as in terms of capital intensity structures. In reference to capital intensiveness, Samsung has not been categorized in top grade due to ineffective business operations in terms of technology products. Though the performance is satisfactory, it cannot be denied that operating aspects is lower compared to other leading technological companies. Another significant factor in capital intensity in the operations of Samsung, due to its hardware oriented structure. It is required for the organization to develop Research & Development criteria, which is observed to be essential for electronic products such as cell phone and maintain effective customer base in global markets (Fitch Ratings, Inc., “Samsung - Limited Room for Upgrade Despite Performance”). Demands of the Industry and its Customers The cell phone industry served by Samsung and Apple focuses on innovativeness, value creation, along with providing convenience as well as uniquely designed products for attracting customers for earning greater profits for the organizations. It can be stated that the mobile handsets manufactured by the organizations are admired by consumers across the world which increases consumer lifestyle, product lifecycle along with the demands in the market. Moreover, the incorporation of various technologies in mobile handsets such as WiMax and High-Speed Downlink Packet Access (HSDPA) has assisted especially Samsung in solidifying the business. Furthermore, the latest technologies for mobile phones associate greater efficiency that increases the capability of MP3 and other extensive features in mobile phones. The business of mobile phones is the key aspect of setting flagship of the products launched by the organizations such as Apple and Samsung. The companies also maintain the aspect of leadership through continuous development and innovation of technological products that increase the demands of customers in present as well as future context (Samsung, “Set Business”). Moreover, the company also consists of customers including stakeholders and business partners (Samsung, “Samsung Value & Code of Conduct”). Downstream and Upstream Industries Downstream and upstream industries can be signified on the basis of supply chain management (SCM). It is been observed that Samsung and Apple are fighting against one another for the determination of innovativeness in supply chain management. The description of supply chain management can be provided on the basis of table of Garner which depicts that Samsung stands 13th in the world among all technological firms. According to the research study presented by Garner, there are many ups and downs in the process of supply chain for Samsung while developing inventory control as well as strategies of distribution. It can also be stated that the operation of supply chain for Samsung in the global context is very authentic in nature. The produced products are distributed within short duration in any regions of the world, which makes the organization capable of competing and gaining advantage in the global market context. Moreover, the products are designed and are recycled from the starting to the end point of the production process. With the effective supply chain process, Samsung has maintained the technology process in the areas of Saudi Arabia, through marketing of cutting-edge technology which helps in elevating sales of various mobile devices including Galaxy Tab and Smartphones. These devices enable various information through which easy and fast accessing of Wi-Fi system are carried out (Hanware, “Competitors Eager to Learn from Samsungs Supply Chain Management System”). Samsung is always in search for partners who are potential enough to provide business opportunities by collaboration for distinctive and innovative technologies of products to be produced in order to maintain the growth of business. The dealings are conducted with the suppliers with sheer integrity and honesty for maintaining prosperity and growth of the organization. This would also help in accomplishing objectives for the organization. Moreover, with the activities provided in the supply chain process, most of the competitors are trying to adopt it, in order to maintain their sustainability in the global market context. The conduction of business is conceived under the jurisdiction of the law and governing codes. The process of supply chain enables the customers with better quality of products that are delivered to the suppliers in order to generate effective revenues. The customers are facilitated by receiving innovative technological products which assists them to obtain valuable information through various technological systems (Samsung, “Global Procurement”). It has been also observed that that the widespread investments in SCM by both Samsung and Apple have assisted the organizations in retaining the reliability and market share (Hanware, “Competitors Eager To Learn From Samsungs Supply Chain Management System”). In relation to the effects of supply chain with regards to cost and demand, it can be stated that there would remain certain challenges that can be faced through rising of costs for producing products. However, with the cyclic dimensions of the products to be offered to the customers, it also proves to be detrimental for Samsung. It is however required for Samsung to strengthen the R&D department as regards to its competitors in order to compete in the global markets. In terms of implications, it can be said that with better quality of products delivered by the suppliers in the market, it enhances the demands of produced products resulting in generating effective revenues for the organization (McKinsey & Company, “Creating Value in SemiConductor Industry”). Kinds of Strategic Interactions for this Industry It can be stated that in reference to the cell phone industry, Samsung is quite circumspect in describing various information regarding marketing plan. The organization looks for definite strategies while implementing various processes related to marketing. Once the decisions are formulated by the organization, monitoring process is carried out after implementation of the decision making processes. There are various kinds of strategic interactions including supply chain management, public relations, customer relations and marketing planning among others. In terms of relation with the customers, Samsung focuses on providing public relations through various information related to products launching, promotion, and advertisement of varied technological products. Samsung is well known for its innovativeness, reliability and quality assurance. Samsung’s marketing communications endeavors assist the organization through a wide range of telecommunication processes which helps in maintaining the business effectively through various business and service providers in the organization. With the authorization of various centres along with effective networking, it assists the organization to stay connected globally. Moreover, the organization also focuses on supplying quality products to valuable consumers in order to sustain its productivity in the global market (Samsung Communications, “Samsung Communications – One of Australia’s Leading Providers of IP Telephony Solutions”). How Prices are Set The prices of the technological products such as mobile devices are structured in the organization according to the quality of the mobile sets along with the features present in it. It is a common phenomenon in the technology industry. Moreover, the prices of the mobile sets are also estimated on the basis of operating system. The prices of the products are also reviewed once the demand for the product rises. Prices of technology products such as mobile phones take a pendulum swing and do not stick at a particular fixed rate. The organization’s prepares strategies plan regarding the pricing of the products through its quality and demand in the markets. The prices of mobile products are calculated on the basis of value of products to the customers. Another dimension through which pricing of the product can be determined is the buying behavior of the customers through the conduction of the surveys for maintaining the demand for the product. With the increase in demand at times it is observed that prices of the products also augment significantly (Holden & Burton, “Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table”). Conclusion From the above observation, it can be comprehended that Samsung and Apple are amid the leading names in the cell phone industry. The companies comprise efficient product line strategy in respect of brands. Through the incorporation of innovative technologies and trendy designs in electronic products, Samsung and Apple have captured exclusive places in customers mind as well as in the market. Moreover, with adequate supply chain and continued improvement in R&D, the companies would be able to capture better markets and attract more customers in the future. However, cell phone industry is changing rapidly with alterations in consumer demands thus, these companies need to comply with these alterations to sustain their dominance in the market. Works Cited Blokdijk, Gerard. IPhone 100 Need to Know Time Savers. United States: Lulu.com, 2011. Print. Conly, Keith. Global Mobile Phone Industry. Comparative Analysis, 2010. Web. 04 Apr. 2013. Fitch Ratings, Inc. Samsung - Limited Room for Upgrade despite Performance, 2013. Web. 01 Apr. 2013. Gookin, Dan. Samsung Galaxy Note for Dummies. United States: John Wiley & Sons, 2012. Print. Hanware, Khalil. Competitors Eager to Learn From Samsungs Supply Chain Management System. Arab News, 2012. Web. 01 Apr. 2013. Holden, Reed & Mark Burton, Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table. United States: John Wiley & Sons, 2010. Print. McKinsey & Company. “Creating Value in SemiConductor Industry”. McKinsey On Semiconductors, (2011): 1-76. Print. Morningstar Equity Research. Apple, Inc, 2012. Web. 04 Apr. 2013. Roll, Martin. Asian Brand Strategy: How Asia Builds Strong Brands. United Kingdom: Palgrave Macmillan, 2005. Print. Say Media Inc. A Brief History of the (Samsung) Galaxy, 2013. Web. 01 Apr. 2013. Samsung, Business Overview, 2013. Web. 01 Apr. 2013. Samsung, Samsung Value & Code of Conduct, 2013. Web. 01 Apr. 2013. Samsung, Set Business, 2013. Web. 01 Apr. 2013. Samsung, Global Procurement, 2013. Web. 01 Apr. 2013. Samsung Communications. Samsung Communications – One of Australia’s Leading Providers of IP Telephony Solutions, 2012. Web. 01 Apr. 2013. Read More