Business Strategies of Apple and Samsung - Case Study Example

Samsung Vs Apple Business Strategy A strategy for a business is the process by which a firm sets an absolute guideline geared towards achieving its desired commercial goals. It usually a plan for any business covers a period in the range between 5-10 years. A plan mainly deals with resource allocation issues e.g. Financing new plants in non-traditional markets; penetrating a new market. A strategy also deals with the products that need allocation of significant resources. These might be the flagship products of the company and generates more revenue. This paper seeks to discuss the strategy employed by Samsung vis a vis the strategy used by Apple. In doing this, the paper will pay much attention to the factors that have contributed towards the success of Apple in the smartphone industry as opposed to Samsung. Moreover, the paper will provide an opinion on how successful these tow companies have implemented their strategies to remain competitive in the smartphone industry Introduction A strategy deals with the scope of firms operations i.e. what, when and where they produce certain products. For example, Nestles scope is focused on food products - and they have developed super factories in key geographical locations globally to produce these items. Once defined, a business strategy sets priorities for the company and management team that helps to attract and retain the talented workers to move the firm forward. Although each department in a company may focus on different goals to accomplish certain tasks, these goals should however not jeopardize the overall strategic direction the company takes. Apple business strategy Apple is an American-based multinational company that deals in the design and selling of personal computers, music streaming, computer software plus a range of hand-held gadgets. Established in 1976 by Steve Jobs and Steve Wozniak (Nielson. 2011). Apple has grown in leaps and bounds to become one of the modern leaders in consumer electronics. Every product that is manufactured by Apple is taken as a single business unit. Therefore, analysis is usually done on each unit in terms of its competitive position, its market segment, and the value it brings to the firm in general. At the onset of the millennium, Apple came up with new strategic ideas to exploit the expanding global market in consumer electronics. It launched its own Apple versions of electronic products like MP3 players, digital cameras and phones that had a higher quality and came with the user-friendly software. The product that placed Apple on the map was the iPod – a portable music player that stored thousands of audio and video songs. In 2007, Apple followed up the launch of the iPod with the iPhone, a mobile telephone that had a user-friendly operating system and music streaming capability(Banks, T. 2012). In order to distribute the iPhone widely, Apple negotiated exclusive contracts with a single national telecommunications companies in major countries to market and distributed the handsets. The mobile phone was highly priced – for example, US$599 in North America (Childress, V. W. 2012). However, in order to achieve its volume targets, the cost was reduced though they remained at the high end of the smartphone market. This was in tandem with Apples long-term, high-price, high-quality strategy4. But the company had set its sights on expanding into the global market that had aggressive competitors. With these landmark products, Apple first adopted the differentiation strategy. Apple had to give the impression that they are adding value despite the fact of costing the products at high prices. They invoked the differentiation strategy. The strategy is a smart move for a business to establish a significant market share primarily because consumers perceive the quality of a product or service relative to the pricing5. One of the marketing features Apple adopted in marketing the iPhone was that the iPhone possessed its brand of applications that could be downloaded and installed on the phone. The iPhones had inbuilt software in App store. Focused differentiation strategy followed after that; this method is aimed at identifying, segmenting and capturing new markets. Later, Apple introduced the second generation iPhone 4 (Apple, 2012). The new model made further advances in technology. Being the market leader, Apple was able to make major increases in revenues from the development of the iPod and iTunes. In a quick rejoinder, Apple launched their Apple Tablet in 2010 – which had a risk factor, and it was not easy to predict how the tablet will perform in the market. The second-generation Apple tablet was launched in 2011 after the overwhelming response the initial model received. Apple then adopted the group mapping strategy. They identified a market niche and focused on it. With this hindsight, it can be showed that Apple has taken up the high-value high price marketing strategy that attracts the high-end segment of the consumer market. Samsung strategy A while back Samsung was struggling to stamp its authority in the smartphone market with few inroads. But, currently it makes more smartphones than anybody else in the market and has put Apple on the back foot. This, in addition to being the worlds largest technology company by revenue generated. They heavily hyped the launch of its flagship Galaxy S4 smartphone as a bold step towards knocking off Apple off the top perch. They and theyve gone all out with a massive screen and impressive new features. Below are the key strategic pillars that drive Samsung’s unprecedented growth. The Ultimate Fast Follower in the Smartphone Market Samsung is better placed at learning from its competitors since their strategy is premised on reading the market and capitalizing on the shortcomings. This policy does not mean they ignore their customers’ expectations, but theyre very alert to their competitors’ movements in the market first and observing what seems to be gaining traction. Samsung then quickly comes up with their version of that innovation. Samsungs aggression has put into crossroads with legalities in the past, losing a high-profile case to Apple for imitating several of its designs. But the reputation damage and the fine were a small price to pay vis a vis the benefits accrued from the imitations. The company responds and manufacturers quickly, coming up with different devices. It observes what the market needs, markets massively, and kills products that dont take off. Instead of just providing a cheaper alternative of the iPhone, its positioned itself with large screens, unique features, well thought marketing strategies, and delivering according to consumers tastes. The Galaxy Note was a good example. The company conducted a market research that noted that Asian-language natives longed for a handheld device they could handwrite on. The resulting production was a perfect combination of the phone and tablet which took the market by storm. In business, it is always advisable to use all the resources at your disposal to rally behind a product you want to penetrate the amrket.6 When Samsung wants to get behind an initiative, it can do so with considerable proactiveness. Thats has been the case during the launch of its flagship Galaxy phones. Samsungs marketing push has always been extensive. In America, where the iPhone is still dominating the market, last year the company increased its advertising budget five-fold, to $401 million from $78 million. Thats $68 million ahead of Apple and more than $200 million ahead of its nearest competitor in the Android market. And thats only a fraction of its ad budget. This push has paid off too, with Samsung scoring many points at Apples expense. (Nagpal, P. 2014) The Supply chain and distribution strategy has gone a long way in cementing its position. It manufactures most of the components utilized by smartphones thus giving it a cost advantage and allowing it to be flexible in terms of its production cycles. The management of the company emphasizes on commitment towards the cause. When Samsung decides to get into a particular business, it goes in strong. The past decade characterized Samsung as an investor in battery manufacture for digital devices and flash memory to being a global electronic giant. Samsung Vs Apple In the recent past, Apple and Samsung have clashed on many fronts; marketing, commercial and even legal. Their infamous legal war cost more than a billion dollars and spanned four continents. No matter the financial outcome, Apple may well emerge from the legal wrangling as the loser. Two juries have found that Samsung did indeed plot to steal the iPhone’s appearance and technology, which is why a California jury, in 2012, awarded Apple more than a billion dollars in damages from Samsung (reduced to $890 million in late 2013 after the judge found that some of the calculations were faulty). But, as the litigation drags on, Samsung has grabbed an increasing share of the market (currently 31 percent versus Apple’s 15.6 percent), not only by pumping out “Apple-ish, only cheaper" technology but by creating its own innovative features and products (Lessin, J. E. (2012). This has positioned Samsung as a global leader in the smartphone market, much to the chagrin of Apple. Samsung’s tremendous growth has been fuelled through aggressive marketing strategies and innovative designs that target the young people. This has presented Apple with a formidable threat to this mobile generation. Although Samsung has put itself into the driving gear in the smartphone market; their momentum could be short-lived if their research and development team cannot keep up with Apples innovative streak that has churned some of the most incredible products ranging from the iPod to the iPad. Despite the fact that Samsung was established as family empire with a huge portfolio ranging from marine to insurance to consumer electronics, they are preying into uncharted territory in the smartphone market with much aplomb as the founders of Apple who were daring risk takers. They possess the technological sophistication that makes the critical components of mobile devices which they also supply to Apple. But, they are undone by the lack of loyalty shown by its customers compared to Apple consumers who usually line up the shops prior to the launch of many Apple products. This has ensured that Apple controls a majority of the profits from the smartphone market despite shipping less volume than Samsung. As Apple creates ripples that cascade across the globe from its Silicon Valley abode with its cutting edge innovations; Samsung is not sitting pretty. It has invested more into their R&D department that came up with some of the latest features on mobile platform e.g. 5-inch screens, eye tracking software and gesture recognition. This features moved the bar for Apple. Interestingly, Samsung is building a new technological campus in San Jose that will recruit local expertise with the ambition of expanding its cutting edge research on semiconductors. The stiff competition witnessed between these giants coupled with a big number of new market entrants has led the fight for raw materials for smartphone devices. Therefore, suppliers of these materials posing a threat to the expansion of these businesses. Apple strategy, therefore, has to put this into perspective when drawing up their plans. This is because their business mainly relies on raw material from suppliers which include Samsung. This is because the suppliers can dictate their business and arm-twist their activities. The bargaining power of consumers together with the entry of alternative products from other manufacturers is slowly eating into the margins of both Samsung and Apple. This is forcing these companies to start switching strategy to look for other market segments that are not traditional to them. The infrastructural ecosystem of a firm refers to its value chain, organizational structure, control system, and the company’s corporate culture. Apple is mainly found in America and developed nation this is unlike Samsung which has an edge due to its expansive network across the globe selling more than 30 brands of its device in comparison to Apple which has about 5 devices. Conclusion The strategy that has been employed by Samsung and Apple has seen tremendous growth in the mobile industry with Samsung struggling so hard to catch up with the dynamic technology. For Apple, this has been the only opportunity to advance its technological advancements to remain relevant in the mobile industry. Samsung, despite being relatively competitive, has employed strategies that are aimed at countering chosen being implemented by Apple. All the same, Apple remains the most strategically placed company as far as smartphone production is concerned. This means that Samsung will have to invent new strategies to remain relevant in the market. References 24/7 wall st.: Samsung adds U.S. smartphone market share in December. (2015). (). Chatham, United States, Chatham: Newstex. Android OS leads in U.S. smartphone market: Nielson. (2011, Jul 28, 2011). Xinhua News Agency - CEIS, pp. n/a. Banks, T. (2012, Aug 28, 2012). Apple vs. Samsung - what does it mean for design? Design Week (Online), n/a. Childress, V. W. (2012). Highway construction in the U.S.: COSTS, BENEFITS, DEPENDENCE. Technology and Engineering Teacher, 72(4), 24-29. Lessin, J. E. (2012, Dec 6, 2012). Samsung, Apple back in court --- companies battle over $1.05 billion damages from patent trials August verdict. Wall Street Journal, pp. B.9. Nagpal, P. (2014). Key actors in the mobile phone industry: The smartphone wars. Academy of Information and Management Sciences Journal, 17(1), 87-93. Read More