Apple and Samsung: Leading Rival - Essay Example

A steep downfall in the prices of electronic products has surely been driven by product innovation. But there comes a stage of stagnation in every industry; the electronics industry is not an exception to it, considering how the leading electronics company, Apple Corp., and its former CEO Steve Job have been striving hard to maintain a competitive edge through cost-cutting made possible only by launching of better versions of their electronic products.

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Former CEO, Jobs, led Apple on the path of innovation. Although still, the Company has been working with the same batch of product innovation people, things are not happening like when Jobs was at the helm of Apple’s functions. The bungling of Apple Maps is proof of the fact that after the death of Jobs, the product innovation team at Apple caused losses than just not succeeding in innovating new products (Cohan “7 Reasons Apple is More Doomed Than You Think” 1).

Cohan has enumerated many reasons for the approaching doom for Apple, disagreeing with Blodget for presenting Apple as a buy. It is a wrong notion that the stock of Apple is cheap while traded as a P/E of 9, which is below the market average of 15. Apple is becoming costlier with its income reducing at the rate of 17% in the first quarter of 2013; it is heading for a reduction of 1% overall for the whole year of 2013. Product innovation had been boosting and sustaining Apple amid competition but lately, innovation has taken the back seat, as there are no new products in the offing. Samsung has been giving a tough time, inspiring customers to go for new products of Samsung rather than buying the latest versions of iPhone 5S and iPad Mini (“7 Reasons Apple is More Doomed Than You Think” 1).

Cost-cutting is not going to help Apple's leadership after Jobs maintains profit levels. At the time of Jobs, innovation was used as a strategic tool to develop a better version of the products, helping at the same time in reducing cost. Product differentiation was key during the management of Jobs; products were either cheaper than leading competitors or better than what the market offered, such as Apple’s MP3 players, smartphones, and tablets, resulting in investors and customers lining up for its products – that created Apple’s appeal for investors and customers soaring (Cohan “7 Reasons Apple is More Doomed Than You Think” 1-2).

Apple Corp. needs to position itself strategically because of not launching any new products and remaining for too long with its super-premium pricing strategy. Apple led the market under the command of Jobs through differentiation in product offering, which is evident from the fact that customers were willing to buy the iPhone4 at 44% premium, ensuring a gross profit of 71% (Cohan “7 Reasons Apple is More Doomed Than You Think” 2).

In the present scenario, if Apple is to remain and lead in the competition, it has to cut down on costs, relatively lower than the competitors’ product offerings. It is also true at the same time that former CEO, Jobs' charisma was the leading force behind the brilliant performance of Apple Corp. in developing products like the iPhone and iPad. Competition is presently causing a reduction in profits due to competition, as gross margins have come down in the latest quarter from 47.4% to 37.5% year-on-year along with shrinking net profits for the first time in the past 10 years from $11.6 billion to $9.5 billion (M.G. par. 4-6).

Conclusion

To remain ahead in the competition, Apple needs to compete with its leading rival, Samsung, emerging as a strong competitor in the smartphone market. Apple has to respond with a new product against Samsung’s “phablets”. Apple has to gain a hold in the China market by finalizing a deal with China Mobile for the distribution of Apple products. Apple can not succeed until it treads on the path of former CEO, Steve Jobs, in introducing new products. The incessant release of innovative products which used to be the trend during the time of Jobs is the only mantra for the success of Apple Corp. in the future (M.G. par. 8-11).

The idea of a replacement of the present CEO, Tim Cook with Jony Ive, assuming that Jobs's product design partner, Ive, can be a better alternative than Cook is farther from the truth. It is not the designation of a product designer heading Apple as CEO to be a guarantee that he would prove to be a relatively successful CEO than Cook (Cohan, “With Apple Profit Falling, Board Should Replace Tim Cook with Jony Ive,” par. 12-13). No other mantra will work for Apple, bereft of Jobs than incessant product improvement and innovation.