Apple vs Samsung - Case Study Example

In the last one month, both apple and Samsung have launched major and distinctive products in the smartphone market, Apples latest offering is the IPhone 5S while Samsung has the curved glass 64 bit S4. Without doubt, these two are the most successful mobile firms in the world, however their approaches are radically different and they employ radially different strategies. Samsung has distinguished itself as a manufacturing and innovation powerhouse while apple is undoubtedly the world’s most successful and valuable service company globally. Apple sets itself apart from other firms in the industry by virtue of the fact that it is no longer a predominantly a production firm but a platform business. It vision statement states that its aims to make a positive contribution to the world by proving humanity with tools for the mind for the sale of technical and leaderships advancement. Its commitment to this is evident in its leadership in the market is determined by its ability to consistently develop its platform. The A7 chip is its latest innovation and through it, apple has established itself as a major platform for the integration of monitoring, health data and location services. Ergo, it keeps making sizeable profits because it has mastered and invested in the platform and ecosystem business strategy. Samsung on the other hand has over years reinvented itself and its main strategic selling point so far its innovations on hardware, this is in line with its vision embedded in three principles namely, new technology, innovations and finding solutions. It has turned technical novelty which was retrospectively the preserve of a few wealthy individuals and firms into a mainstream commodity (Grandoni, 2012). To achieve this Samsung invests huge amounts of money in technical innovation and this dedication saw them introduce the OLED screen after 10 years of painstaking work not to mention billions of dollars (Klosek, 2013). Its technology has in the last few years constantly dwarfed those of apple and any other mobile firm and it therefore comes as no surprise that they are the most popular smartphone brand having over taken apple in 2012. Like any other firms, the two giants are faced with various internal and external factors that determine their capacity for growth as well as hinder and sometimes endanger their very dominance and existence. For managers to be able to chart the course for the future they need to be aware of the firms presents position in relation to the market and make contingencies for the sake of preparing for posterity, to this end a SWOT analysis is important. Strengths Apples’ brand image is its main strength owing to the fact that the brand has universally been associated with quality and superiority of design, in fact it is one of the few firms which charge more because their client base expect their products to be expensive and automatically higher quality. Samsung on the other hand draws its strength from its easy hardware integration, innovation of design and its low production costs as well as the innovative design that makes it appear superior even to apple. Secondly, the apple customer base is extremely loyal; many of those who use apple products may be aware of other better or cheaper ones in the market but they still prefer apple out of a sense of brand loyalty, this is likely due to the fact that it is often associated with class and style. While Samsung may not have as high a rating in respect to loyal customers, its attractive prices have “bought” it many customers. Weaknesses Since they have their own OS, Mac OS, their products are limited and therefore customers with specific needs may be forced to switch, in addition their high processors, which endear them to some customers, have forced some clients to shift to cheaper smartphones with similar features for lower prices. Furthermore, their frequent upgrades tend to devalue older phones especially when they reduce support for them which disadvantage customers who cannot keep up with the upgrades. Samsung key weaknesses are the fact that it has focused on too many products which makes it difficult for it to compete with apple in terms of precision of design since the latter specializes on just a few products. In addition, low prices by Samsung have made its profit margin considerably low compared to apple; as a result, they have to spend a lot of money on advertisement. Opportunities The market for smartphones is growing rapidly many corporates and individuals will be likely to increase their demand for their products soon, this makes both apple and Samsung products substantially attractive to other firms. The ease of integration with I cloud has also made their services and products accessible across several platforms giving it an edge over competitors whose products are not as easily synched with it. Threats Competition from mobile firms such as Samsung and operating systems such as Google’s android has bitten deeply into apple market share and their continued growth is a perpetual threat to apples dominance. The current economic turmoil is also increasingly making it hard for apple customers to remain loyal to its high prices especially when there are other phones and tablets with better specifications out there for lower prices. Samsung on the other hand is faced with the threat of legal consequences especially from apple which has recently sued them and won over patent violation, to a major extent, since both companies are the biggest in their industry they are each other’s biggest competitive threat. Samsung takes cognizance of the fact that different cultures that make up the global smartphone markets, have diverse needs and to effectively tap into it, they have to make certain adjustments based on the various social economic conditions. For example, they are well aware that Japanese customers as well as most of Europe and North America associate higher prices with good quality; as a result most of their marketing for their flagship models such as the galaxy S4 are targeted predominantly in these areas and they are significantly pricier than the models sold elsewhere say in China and Africa. Apple on the other hand has embraced a contrary strategy, they believe in uniformity and they sell the same product everywhere irrespective of the social cultural or economic setting. Apple believes that by providing global uniformity, they strengthen their brand image and create trust which based on its ratings in regard to brand recognition appears to work. While apple may lay claim to being the most influential smart phone firm, Samsung has an edge over it in terms of entrepreneurial capability and core competencies. Apart from being smart phone giants, Samsung has also diversified into other electronic equipment such as refrigerators, water dispensers, TVs and laptops. Therefore, while apple and most of the mobile and PC firms like Microsoft are trying to figure out how to enter ,say the TV market, Samsung is already eons a ahead. In addition, Samsung’s other core competence lie in the advertising strategy, in the same way they shell out millions of dollars in manufacturing new hardware, they spend substantially more than apple in advertising. As a result, their product launches are accessible to more people around the world than apple, this works in favor of their marketing strategy of maximized production where they aim at making profits from selling many units. Apple on the other hand, by virtue of its pricy products has a very specific core market which is mostly North America, Canada and Europe; their products are substantially pricier than Samsung so they focus on the narrow markets compensating for their numerically lower sales with higher margins. Strategically, Samsung has placed itself in a position where its users can access numerous services availed by other firms such as Google by basing their products on the Android platform, consequently this makes it an easier firm to shift to for customers from smaller mobile firms such as LG and Sony Ericson which are also on the same platform. This in a way make it superior to apple since anyone wanting to upgrade forms say, LG, will be likely to opt for Samsung since they provide familiar services that they have gotten used to such as the Google play apps store. Apple on the other hand has identified its main competency to be innovation; apple and non-apple clients are often in agreement that the American giant can always be depended on to introduce new and innovative products whether soft or hardware (Kolawole, 2012). Apple has established itself as the undisputed world number one manufacture of software, with over 10 billion apps having been downloaded from its web store in the last few years. Retrospectively, they gave the world the first laptop with a GUI and the first laptop and tablet; recently they were awarded 900 million in a suit after they had sued Samsung for infringing on their copyright. What this says is that apple are market leaders and customers and competitors are forced to acknowledge that they set the trend in innovation, this is probably because while Samsung spends money on manufacture and promotion, apple biggest war chest is dedicated to research and the creation of new products. Samsung and apple have achieved considerable success based on their different strategies but they also stand to learn a lot form each other; in addition they could explore alternative strategic measure so they can diversify their products and ultimately increase productivity. One strategy that apple could employ is investing more money on sales promotion and reducing the prices for their products, one of the reasons Samsung is cutting into apple territory so fast is because they have been willing to sacrifice their profit margins for the sake of wider distributions. However apple might still make sizable profits by selling fewer and more expensive units although this is also likely going to reduce their attractiveness to emerging markets. Samsung phones are unequivocally more affordable, ergo popular in emerging and developing economies, in future when the buying power of the new clientele increases, it is likely that they will stick to it (Cheng, 2013). Apple could benefit from such a strategy since although it has a crop of loyal customers in the wealthy west, it is not doing much to groom future clients from the fast growing east and in future, they may find themselves globally marginalized. Samsung on the other hand should invest more money on innovation as opposed to being too focused on design and sales, at the end of the day, the reason apple appears superior is because they appear to be the trend setters while Samsung follows. In the same way Samsung advertising revenues reflect on high sales, apple’s innovation costs are reflected in the ingenuity of their products, that they won a lawsuit against Samsung in a matter of copyright was symbolic of the fact that Samsung needs to work more so as to build itself a reputation as an innovator rather than manufacturer, this way its products may look as authentic as apples do and they could make sales even at higher prices. One of apple’s main ethical challenges stems from its lack of vertical integration, although it is a big firm and it has an expensive product line, its production line is hardly integrated. They have outsourced all their manufacturing to china where it is cheaper to assemble their products and ironically they buy many of their core parts such as camera screens from Samsung which is their main competitor. Their lack or vertical integration has put them in the spotlight for negative reasons after it was discovered that some of the factories where their components are manufactured in China disregard labor and human right regulations. As a result they have gotten a lot of negative publicity which may ultimately affect their sales of their clients feel they exploit the Chinese workers so as to make astronomical profits. Samsung on the other hand is the archetype of vertical integration, they not only design and manufacture their own chips but they even make Apple’s, in the past they would design and manufacture both theirs and their competitors. Samsung’s vertical integration has made it more self-reliant and their cost of production are comparatively low than apple’s owing to the fact they produce a sizable number thus reducing their cost per unit. This gives it an edge because it can bring new products into the market very fast since it’s in control of the production process, as a result when apple or any competitor launch a new product, it can produce an equivalent in record time (Worstall, 2013). Apple however is comparatively slow on the uptake since its rate of finishing its products is influenced by several parties involved in the production process. Apple like one of the many computer firms outsourcing in china has been faced with the challenge of the poor worrying condition in the foreign factories and there have been numerous accusation in regard to its unethical complacency. In order to mitigate this, apple brought the Fair Labor Association to carry out audits in these firms in order to ensure their production process did not result in human rights and labor law violation (Lamar, 2012). The unethical and sometimes even illegal way through which Apple supplies treat their workers was embodied in the recent spate of worker suicide in Foxconn which was one of apples biggest supplier of components. When such cases arise apple carries out an internal audit of the firm in question and the working condition and if they find them to be below par, they immediately terminate the firm’s contract. In addition, after the negative publicity it got, apple has been taking an active part in monitoring and dictating policy for its supplying companies so they ensure the staff are not mistreated or exploited. Nevertheless, Samsung despite the lack of publicity on the matter has also been embroiled in similar ethical controversies after it emerged that in some of its production companies, they were hiring underage workers and workers would at time have only one day off a month and work a 16 hour day. Samsung management carried out an independent audit and although they did not claim to have found any evidence of abuse of underage works they designed a new labor policy. This was meant to eliminate punitive measure such as fines for late coming as well as ensure the working hours and overtime conditions are improved by the end of 2014 (Nam, 2012). They intend to implement this by hiring auditors to regularly inspect their factories and those of their suppliers. Increasing their level of vertical integration is one of the main strategies that apple could greatly benefit from adopting. Owing to their predominantly horizontal integration, they have placed too much of their productivity in the hands of third parties. In as much as it may be cheaper to outsource, it is resulting in negative publicity since apple is seen as the American giant that does not employ Americans as well as the aforementioned human rights violations attributed to its manufacturers, and by extension to the firm. Secondly, apple should focus on manufacturing products that can be acceded in emerging markets such as India so that they can “trap” the customers early enough such that when the economies grow, they will have a ready market for their various gadgets (Singh, 2013). Samsung has released smartphones going for as little as 100 dollar in the Asian and African market, this has automatically made it the biggest supplier therein, apples’ brands bearing more or less the same specifications go for a much as 400 dollars which is way above the purchasing power of many perceptive customers. Apple and Samsung, both being the smartphone giants they are could adjust their strategies in relation to each other so to make the competition friendlier. For one, apple should try to either integrate android or make some of their apps software accessible to mobile users operating on Android or windows platforms. This way both firms will be better placed to attract customers from each other, while this may be seen as a plus for Samsung since it will be better placed to hijack apples customers from a critical perspective even apple would have a lot to gain. There are millions of smartphone customers serviced by other smartphone firms such as LG, Motorola, and Huawei, in as much as many will be attracted to apple’s superior brand image; they often end up opting Samsung since it is more compatible with their previous model. Therefore by opening its doors to android, Apple may in the short run by exposing itself to inroads from its main competitors, be making itself substantially easier to shift to and thus a more formidable competitor. References Cheng, J. (2013, Nov 06). Samsung opens itself to investors with first analyst day in eight years; despite three straight record quarterly profits, share price is roughly even for year. Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/1448591923?accountid=1331 Grandoni, D. (2012, 15 Apr). Samsung Finds More Labor Violations At China Factories. The Huffington Post. http://www.huffingtonpost.com/2012/11/26/samsung-labor-china_n_2190246.html Klosek, N. (2013). Samsung launches sub-$9K 55-inch curved OLED TV. Dealerscope, 55(10), 8. Retrieved from http://search.proquest.com/docview/1441431618?accountid=1331 Kolawole, E. (2012, Nov 14). Apple vs. samsung: Battle of the innovation strategies (posted 2012-11-14 02:45:22). The Washington Post. Retrieved from http://search.proquest.com/docview/1223821052?accountid=1331 Lamar, M. (2012, Feb 14). Corporate news: Apple initiates audits of labor conditions. Wall Street Journal. Retrieved from http://search.proquest.com/docview/921285573?accountid=1331 NAM, I (2012). Samsung Addresses Labor Issues at China Suppliers. Wall street Journal. http://online.wsj.com/news/articles/SB10001424127887324469304578142160529990222 Singh, S. (2013, Jan 24). Samsung better placed to trump apple in india in smartphone market, says john sculley hardware]. The Economic Times. Worstall, T. (2013). Why Samsung Beats Apple, or Perhaps Vice Versa. Forbes. http://www.forbes.com/sites/timworstall/2013/09/09/why-samsung-beats-apple-or-perhaps-vice-versa/ Read More