Monopolistic Competition: Samsung Mobile - Research Paper Example

Monopolistic Competition: Samsung Mobile ___________________________________________________________________________ Institution: City and State: Date: 1. Brief about the Mobile Phone Industry Mobile phones, also referred to as cell phones or cellular phones are the latest technologically advanced phones that enable users to make and receive calls over a wide geographic area. They also offer and support of other services such as text messaging, email, access to the internet, and features such as blue-tooth and infrared. Other features supported by mobile phones include photography and gaming. The first phone that was portable was developed in 1973 (Google, 2013). The first commercial cell phone, the DynaTAC 8000x, was introduced in 1983 into the market (Google, 2013). Since then, availability has increased across the world and the industry has grown with emergency and growth of new mobile phone companies because demand for cell phones has gone up. Currently, the smart phone market is the most sought after with players in the industry striving for a place in the market. Among the global leaders in the industry are Samsung, Apple, LG, Nokia, LG, and ZTE, while other minor companies tend to dominate their respective regions of operation. Samsung still leads in the smart phone market (Table 1 and Table 2). This paper discusses Samsung as a mobile manufacturer, and its relation to other players in the industry. Table 1: Mobile Vendor Shipments in Million Units Mobile Vendor Shipments in Million Units Samsung Nokia Apple LG Huawei Others 2013 106.6 61.9 37.4 16.2 11.6 139.2 2014 113.0 47.0 43.7 16.4 14.2 173.6 Source: Strategy Analytics, 2014. Table 2: Mobile Vendor Market Share in Percentage Mobile Vendor Market Share in Percentage Samsung Nokia Apple LG Huawei Others 2013 28.6 16.6 10.0 4.3 3.1 37.3 2014 27.7 11.5 10.7 4.0 3.5 42.6 Source: Strategy Analytics, 2014. 2. How Samsung’s Products are differentiated from Others in the Mobile Phone Industry As a manufacturing company in a highly competitive industry that thrives on innovation and technology, Samsung has perfected the art of customization in its efforts to differentiate its products from those of its competition. In a bid to avoid commoditization therefore, the company customised their production as much as they could. More than 50 percent of the company’s memory chips have been special orders for other manufacturers including Nokia, Microsoft and Dell. At one instance the firm undertook an effort that was aimed at converting its product line to a high end premium goods one from a previously low end commodity product line. In addition, the company has strived to lay an emphasis on hardware technology as opposed to its competition such as Apple and Samsung who concentrate on getting into proprietary content and software such as movies, music, and games. Though there are many mobile phones, each brand or company exhibits a high level of differentiation in the minds of consumers. This could be as a result of continuous usage and thorough advertising. Therefore, existence of a large number of sellers who sell close substitute products that are differentiated has led to monopolistic competition in the mobile phone industry. 3. How Samsung competes on the Basis of Price and Product Quality Samsung competes with other mobile phone companies by exercising its great freedom in fixing the price. The company is capable of fixing the price for its products without losing all the customers because it has made consumers to have a perception that it manufactures durable and high quality products. This means that Samsung ensures quality of its electronics and price competitiveness (Samsung, 2012, p. 43). Samsung focuses on the creation of high quality cell phones. These are meant to create good life conditions for people and businesses. Also, Samsung engages in, and leads the digital revolution by continually developing new products, which meet customer demand and anticipate it too (Burri, Maharramov, & Jankovic, 2012, p. 7). In addition, Samsung ensures that it engages in the provision of high quality products that respond to consumer needs and preferences. This enables the company to outpace its competitors. High quality of Samsung’s products is enhanced by the high process quality that the company has installed. In addition, Samsung has ensured that it is innovative and it seeks to create unique products, which offer the maximum value that is demanded by the consumers. Samsung offers high quality products, and it is capable of producing and availing the products to consumers at the right time due to excellent technology and right investment (Kang, 2010, p. 60). In terms of price, Samsung bears the whole of its production cost, and as a result the overall cost of Samsung is quite lower than the cost incurred by its chief competitors. This low cost results from the low cost of labour and the low cost of raw materials. However, the company makes consumers to pay a premium for its products because it differentiated its products both in physical and functional properties. Also due to high quality which fostered higher reliability the company charges more because it is justified to charge a premium. 4. Barriers to Entry and Exit Samsung faces very few barriers to entry, if there are any due to the fact that it leads in cost advantage because the company’s production technology is advanced. Greater production innovation has led to greater differentiation of Samsung’s product portfolio (Kumar & M.Syed, 2013, p. 6). For instance, in some countries such as Korea and Malaysia, there are very few barriers to entry. However, governments of these countries always try to protect firms from foreign competition. It is due to the combination of domestic competition and protection from foreign competition that brought about the emergency of global companies such as Samsung (Yusuf, 2003, p. 161). However, Samsung faced various challenges because the initial capital requirements of venturing into the mobile phone industry were very high. Given that Samsung was initially a small company, it faced great challenges in raising the required capital to enable the company enter the mobile phone industry. This is because Samsung began as a small business that sought to enter into the market with a no brand strategy. It found some large business customers to resell its products under their own brands because it began as a semiconductor business (Mohr, Sengupta, & Slater, 2010, p. 416). Secondly, due to lack of cross patent licensing, Samsung faced challenges initially. This means that since Samsung was not willing to offer access to its patented technology to other companies in the mobile phone industry, it was incapable of accessing patented technology of the other firms. However, in 2004, Samsung and Sony signed an agreement to share patents across major product lines (Gasnier, 2008, p. 192). This has enabled Samsung become a partner of international companies. 5. Influence of Product Development Samsung’s commitment to develop products with an advanced display has influenced the company’s successful performance in the market. The company has been increasing its investment for the manufacture of smart devices. Most of these funds have been allocated to research and development, which contributes to success in the mobile phone industry because the company is capable of manufacturing high quality products to meet the needs of consumers. Samsung’s Oracle value chain for hi tech business has been well linked to the company’s logistics. As a result, the company’s mobile devices are highly distinct. In addition, Samsung has made activities such as basic research, product development and design a primary activity. This means that technology development is designated to be part of product development as early as during the first step of value chain (Canadian Embassy in the Republic of Korea, 2012, p. 13). This adds more to value products, and as a result Samsung is a global leader in the mobile phone industry. Samsung is capable of improving existing products and developing new products (Canadian Embassy in the Republic of Korea, 2012, p. 13). The company’s ability to use integrated technology at every stage of product development, especially mobile telephony has enabled the company to break the boundaries of product design, making it a leading company (Canadian Embassy in the Republic of Korea, 2012, p. 13). 6. Influence of Advertising and Branding Samsung’s success is attributed to its consistent policy of basing all activities in line with its brand strategy. The company has managed and nurtured the Samsung brand efficiently. For instance, the company’s deliberate branding strategy has contributed significantly to its global success. In line with this, Samsung had to work hard in changing the perceptions that customers had, taking it for a company that manufactures cheap electronic goods. It has adopted an aggressive branding and advertising strategy. Branding is based on innovation, high technology, recruitment of people with best talents, internal branding and making designs that are of the world class. Therefore, by bringing out superior products, developed by using the latest advanced technologies, Samsung has been able to beat its market competitors such as Nokia (Roll, 2005, p, 153). Samsung has been able to manage marketing systematically. The company’s products have been positioned as multifunctional products that are new and cool. This enhanced image of Samsung mobile phones has contributed significantly towards the improvement of the company’s overall brand image (Chang, 2011). Conclusion Samsung has been able to dominate the mobile phone industry through its differentiation, innovation, branding and advertising capabilities. By changing the initial perception among consumers that Samsung produced cheap products to a perception that the company’s products are of high quality, Samsung was able to fix high prices without losing customers. The company has been able to manage its marketing systematically while its products have been positioned as multifunctional products that are new and cool. This has led to global success in the mobile phone industry. References Burri, E., Maharramov, O., & Jankovic, S., 2012, July 13. Samsung Analysis. [Online] Available at: [Accessed 19 June 2014]. Canadian Embassy in the Republic of Korea., 2012, February. Global Value Chain Analysis on Samsung Electronics. [Online] Available at: [Accessed 19 June 2014]. Chang, S.-J., 2011. Sony vs Samsung: The Inside Story of the Electronics Giants Battle For Global Supremacy. Hoboken: John Wiley & Sons Press. Gasnier, A., 2008. The Patenting Paradox: A Game-based Approach to Patent Management. Delft: Eburon Press. Google., 2013. Monthly Updated List of Mobile Handsets and Cell Phone Prices in USA. Online] Available at: Read More