Samsung Electronics and Apple Inc - External Business Environment and Market Positioning Strategy - Capstone Project Example

Capstone Project of the of the No. Contents Analysis of External Business Environment 3 PEST 3 Analysisof the Industry 4 Analysis of Market Positioning Strategy 5 Samsung Electronics 5 Business Vision and Mission 5 VRIO Analysis 6 Business Level Strategies 6 SWOT 6 Business Entrepreneurs Adopting Cultural Differences 7 Organizational Competency 8 New Business Level Strategy 8 Vertical and Horizontal Integration 8 Diversification and Strategic Outsourcing 8 Business Ethics 9 Recommendations for Future Organizational Change 9 Apple Inc. 9 Mission and Vision 9 Business Level Strategies 9 VRIO Analysis 10 SWOT 10 Business Entrepreneurs Adopting Cultural Differences 11 Organizational Competency 11 New Business Strategy 11 Vertical and Horizontal Integration 11 Diversification and Strategic Outsourcing 12 Discouraging Unethical Behavior 12 Recommendations for Future Organizational Change 12 References 13 Analysis of External Business Environment Apple Inc. and Samsung Electronics are two popular multinational companies conducting business in the global electronics industry. The external business environment of the two firms can be evaluated with the help of PEST model. PEST Political Samsung and Apple needs to strictly follow the legal rules established by the political authorities of different countries. The government bodies of emerging markets such as Russia and India encouraged the foreign direct investment made by these companies in their own economies. However in order to protect the interests of the domestic firms, the public authorities of these nations are now imposing greater restrictions on the foreign companies. For instance, Apple and Samsung pay additional taxes for business in China, under the rule of Foreign Income Tax Law PRC (Appleton, et al., 2004). Political issues in some countries such as Thailand adversely affect the business growth of these giant firms in their economies (Goldstein & Pusterla, 2010). Economic Being multinational in nature, the business revenue and profitability of Apple and Samsung are subjected to currency and exchange rate risks (Appleton, et al., 2004). Research reports show that the discretionary spending power of the consumers in most western economies such as Portugal, Greece and Italy have declined after the recession caused during the global financial crisis. The aggregate revenue generated by Samsung and Apple have decreased from these countries due to such adverse economic conditions. Apple, Samsung and other electronic companies are now expanding their business in several middle income economies (Goldstein & Pusterla, 2010). The demand for electronic products has substantially increased in the middle income countries such as Poland, India and Brazil because of the rise in the employability and per capita income levels in these economies (Appleton, et al., 2004). Social Over time, individuals are becoming before familiar with the usage of electronic products. Popularity of social media has augmented the demand for electronic goods such as samrtphones and tablets. Moreover, with the essence of increased per person income level and improvement of living standards, the individuals have increased their demand for entertainment and comfort products sold by companies such as Apple and Samsung (Appleton, et al., 2004). The impact of status symbol demand is high in the electronics goods industry, where the consumers create demand for expensive electronic products, for portraying their social status in the market. Rise in population density in all the countries have also facilitated in increasing the demand for Apple and Samsung’s products. Technological The state of technological knowhow has significantly improved in the electronic goods industry. In order to experience the benefits of such innovations, Samsung and Apple invest large sums of money for research and development purposes. With the help of new technological modernization, these companies designs and manufactures unique products that helps to differentiate their services in the market (Grover & Malhotra, 2003). However the companies incur large expenses for patenting these newly invented technologies in their business. Excessive investment in research and development has lowered the profit margins of these companies in the recent era. Analysis of the Industry Both the companies provide their services in the electronics industry. Bargaining Power of Buyers (Relatively Low) The consumers of the electronics industry experience low switching cost because similar types of electronic products are sold by several companies in the market. However giant electronic companies such as Apple and Samsung share high brand values and offers highly differentiated products to its consumers (Grover & Malhotra, 2003). These companies own a large share of market demand and hence the bargaining power of a single buyer in the industry is low for these two companies. Threat of New Entrants (Relatively Low) The threat of new entrants faced by the giant electronics companies is extremely low. This is because a new company in the market needs to make large investments for research and development purposes in order to commence its own business in this industry. Moreover, the new firms require time for establishing legal copyrights and patents for its newly invented technologies (Samsung Group, 2014). Bargaining Power of Suppliers (relatively high) The suppliers of electronic industry sell semi-finished electronic parts to the popular multinational companies of the industry. The cost price final products sold by Apple and Samsung are high because of the expensive semi-finished third party supplied electronic products. Apple and Samsung acquire certain rare semi-finished product parts from popular electronic supplying firms such as Broadcom (Grover & Malhotra, 2003). The bargaining power of these suppliers is relatively high because the companies offer rare products in the market. Threat of Existing Rivalry (High) Electronic companies such as Apple and Samsung experience cut throat competition in the market. Nokia, Google and HP are some potential rivals of the two firms. Profit making firms of the electronic industry experience monopolistic threats of market rivalry. Each company within this industry manufactures qualitatively differentiated products and services for its customers. Threat of Substitutes There are several close substitutes of the products and services offered by Apple and Samsung. For instance, close substitutes of Apple smartphone are the smartphones sold by Google, Samsung, Nokia and HTC in the market. However the products of Apple and Samsung experience no perfect substitutes in the electronic industry. Each company offers differentiated products to the prospective customers. Some product lines of Apple and Samsung experience far substitutes in the industry. Compact disks and digital videos are the far substitute products of Apple’s iPod (Peng & Litteljohn, 2001). Analysis of Market Positioning Strategy Through this strategy Apple and Samsung communicates about its pricing and product strategies with the help of perpetual mapping system. High Quality Samsung Apple Inc. Low Price High Price Low Quality (Source: Author’s Creation) The above positioning map shows that Apple Inc. sells high quality electronic products at relatively higher prices in the market. On the other hand, Samsung sells good quality products at economic or affordable prices. Samsung Electronics Business Vision and Mission The primal business mission of the company is to enhance its brand popularity in the global forum. By improving its brand reputation in the global electronics industry, Samsung desires to improve its revenue and profitability in the long run (Peng & Litteljohn, 2001). Under the regime of its primary corporate vision, Samsung desires to enhance the utility levels of its stakeholders and constantly introduces strategies with the help of which it can produce more creative products in the market (Peng & Litteljohn, 2001). The organization desires to sustainably expend the scale and scope of its business internationalization process. VRIO Analysis Capability and Resource Does it possess value? Are these rare? Are these imitable? Does the organizational structure facilitate its own resource and capability utilization process? Value and Supply Chain Yes Yes Yes Yes Technological Innovation Yes Yes No Yes Human Capital and Business Leaders Yes No Yes Yes Brand Value Yes No Yes Yes Business Level Strategies Differentiation Through the differentiation strategy Samsung utilizes non imitable technologies for manufacturing unique electronic gadgets for its potential customers (Madsen, Neergaard & Ulhøi, 2008). The company designs the features of its products according to the requisites of its niche markets. Cost Leadership By implementing the cost leadership strategy in business, Samsung tries to improve the proportion of its profit by lower its business operational cost. For instance, the company recruits labor resource from the countries experiencing lower wage rates, such as India (Peng & Litteljohn, 2001). It also outsources certain manufacturing processes over which it lack competitive advantage in the market (Peng & Litteljohn, 2001). Price Advantage The above position map has shown that Samsung tries to sell electronic products at affordable or economic prices. By establishing low prices for its produce, the company acquires greater share of market demand from the industry. SWOT Strength Shares high brand value in the electronics industry Owns a large share of market demand Sells rare and non imitable products with superior technologies such as TFT colored phone. Samsung owns the status of first mover advantage in business for launching products such as LCD screens. It offers diversified types of electronic products to its customers. Some popular product categories of the company are home appliances, mobile phones and television. Weaknesses Samsung owns superior hardware manufacturing technologies but the software related knowhow’s are weak for the firm. It procures software technologies form other third party companies. Under the regime of cost leadership strategy, Samsung tries to experience economies of scale in business. Majority of its products are sold in neighboring economies such as India and China. The market demand for the company’s LCD panels has significantly declined over time. Certain market analysts claim that Samsung copy’s the product designs of Apple Inc. Opportunities The organization can expand the scale of its operations in the new emerging economies of the world Increasing cost cutting initiatives among individuals can augment the demand for the less pricy products of the company Greater technological innovation can help to improve the revenue and profitability of the company. Threats The extent of market rivalry faced by the company is increasing over time and this might lower its business share in the near future. For instance, electronic products manufactured by Chinese companies are often preferred over the products of Samsung in the Asian markets. The organization is facing certain legal problems regarding imitation of its product design. Business Entrepreneurs Adopting Cultural Differences The business entrepreneurs of the company encourage differentiation and innovation in its production and business operational process. They train their workforce to provide customized services to the consumers in each market. The company tries to enhance the motivational level of employees. The efficiency and productivity of the workers of Samsung enhances with the essence of greater motivation (Pannerselvam, 2004). Organizational Competency Organizational Design Samsung maintains a participatory organizational design across all its global business branches. Under this regime, the productive perceptions and ideas of the company’s employees are considered for formulating the new business and corporate level strategies. Entrepreneurial Capabilities Lee Kun-hee and Lee Byung-chul are two popular entrepreneurial business leaders of Samsung (Samsung Group, 2014). These two personalities possessed superior leadership qualities and helped to improve the productive resource base of Samsung. The business and corporate level strategies of the company are successfully materialized with the essence of its unique entrepreneurial capabilities. Strategic Business Capabilities Adequate amount of product diversification, cost efficiency and sufficient business experience are the three major strategic business capabilities of Samsung. New Business Level Strategy Samsung should try to lower the extent of its trading collaborations in the market. This new strategy will make the company less dependent on other software firms in the industry such as Google. Samsung manufactures its electronic products with the help of traditional android operating system. However after implementing the new technology, the company will be able to produce products with its own software. Recently Samsung has declared to use the new Tizen software in its upcoming smart watches (Samsung Group, 2014). Vertical and Horizontal Integration Samsung experiences a broad structure of horizontal integration in business. In order to expand its horizontal integration process, the company has acquired other firms such as Rollei and Hanguk Jeonja Tongsin (Samsung Group, 2014). The vertical integration process of the organization concentrates in mid power LED market (Samsung Group, 2014). Core metals used in the electronic products of the company such as epitaxial wafers and phosphor, are manufactured by itself. Diversification and Strategic Outsourcing Samsung Group provides more diversified range of products and services than Apple Inc. Samsung offers its own insurance, hotel & resort, securities and medical services across different marketplaces. Samsung Electronics designs, manufactures and sells different types of electronic products such as television, air conditioner and smartphones (Gummesson, 2010). However it outsources approximately 37% semi-finished products from external suppliers (Ferri, Deakins & Whittam, 2009). The global business model of the company is made successful with the help of its efficient diversification business strategy. Business Ethics Reinforcing Consequences The company maintains its own corporate legal structure and strictly combats against any type of unethical practices in its workplaces. The accused workers, (who are found guilty) are legally penalized by the company (Homburg, Krohmer & Workman, 2004). Code of Conduct The company has its own customized code of conduct that elaborates the process through which its workers and entrepreneurs should demeanor their specialized activities. Employee Appreciation The organization provides incentives and rewards to its hard working employees. Such practices enhance the motivational level of its employees and make their more productive at work. Recommendations for Future Organizational Change Samsung should be less dependent over the software providing companies It should constantly implement new ways to differentiate its services and products in the market The future marketing and merchandizing strategies of the company should be practiced over internet media Along with the traditional Asian economies, the company should also try to expand its business internationalization process in some western countries of the world Apple Inc. Mission and Vision The primary corporate vision of Apple is to offer innovative products to its customers. The organization tries to manufacture unique computers and smart electronic gadgets with its own operating system. It pioneers the global digital revolution of music (Fadaei, 2014). Business Level Strategies Differentiation Through this technology, Apple produces rare and innovative electronic gadgets with non imitable technologies in the market (Ferrell, 2004). Focus The primary product, price, place and promotional strategies of Apple are targeted towards its niche market, the rich and upper middle income group of consumers (Gruiseri & Seppala, 2010). Cost Leadership Under the regime of this strategy, the organization tries to lower its operational and manufacturing cost by outsoaring products over which it lacks competitive advantage. VRIO Analysis Capability and Resource Does it possess value? Are these rare? Are these imitable? Does the organizational structure facilitate its own resource and capability utilization process? Value and Supply Chain Yes Yes Yes Yes Technological Innovation Yes Yes No Yes Human Capital and Business Leaders Yes No No Yes Brand Value Yes No Yes Yes SWOT Strengths It experiences demand from a large strength of loyal customers and shares high brand value in the market It owns rare non imitable technological knowhow It possess highly skilled employees and entrepreneurs in business Weaknesses The market share of the company is declining due to increased competition in the industry The profit margin of the company is declining because of increased innovation costs Its premium pricing strategy is making its products less competitive in the market Opportunities The company can expand its business emerging economies of the globe Increased scopes of vertical integration can help the company experience economies of scale in business Threats Increased innovation cost and lower profit and force the company to operate at the break even The commercial stability of the company can be disturbed due to an exchange rate or currency shock in the market Business Entrepreneurs Adopting Cultural Differences The corporate leaders of the company encourages implementation of more differentiated product, pricing, place and promotional strategy in business The entrepreneurs of Apple conduct regularized knowledge sharing and training sessions through which the existing skill set and productivity level of the employees of Apple can improve Organizational Competency Entrepreneurial Capabilities Steve Jobs, Ronal Wayne and other popular business leaders has helped to expand the capabilities and productive resource base of Apple. High quality innovation could not be experienced by the company without the superior leadership capabilities of these personalities (Drejer, 2004). Organizational Design Apple encourages participatory workplace atmosphere, where productive ideas of all its employees are taken into account. Strategic Capabilities Efficient workforce, non imitable technologies, adequate business experiences are the major strategic capabilities of Apple (Homburg, Krohmer & Workman, 2004). New Business Strategy Apple Inc. should change its current premium pricing strategy in business. Rather the company should establish competitive pricing strategy in business. This strategy will make the products of the company more affordable to a wider base of customers (Drejer, 2004). Vertical and Horizontal Integration Apple owns a wide network of horizontal integration for enhancing its power in the market and lowering the threats of business rivalry. Organizations such as Anobit, Embark Inc. are acquired by Apple Inc (Grover & Malhotra, 2003). It is now trying to expand the scale of vertical integration process. For instance, the company is producing software and operating chips by itself at present. Diversification and Strategic Outsourcing Apple outsources its semi-finished products from other electronic companies such as AAC Technologies Holding Inc and Sony Corp (Apple Inc., 2014). It is improving the extent of its product diversification over time (Drejer, 2004). Recently it has planned to launch its new i-watch in the market. With the help of strategic outsourcing activities Apple has gained greater competency in business. Discouraging Unethical Behavior Code of Conduct The company’s code of conduct provides instructions for ways through which its business leaders and employees would deliver their services (Ferrell, 2004). Motivation Apple has its own evaluation system through which it rewards and provides additional incentives to the hard working employees (Drejer, 2004). Hiring for Values The organization has a complex recruitment management structure, through which it acquires highly skilled workforce in business. Recommendations for Future Organizational Change The company should make its differentiation strategy more efficient in the long run and become more competitive in nature It should expand its business in the new emerging markets The product prices of the company should be lowered in the long run References Apple Inc. (2014). Apple. Retrieved from http://www.apple.com/. Appleton, S., Knight, J., Song, S. & Xia, Q. (2004). Contrasting Paradigms: Segmentation and Competitiveness in the Formation of the Chinese Labour Market. Journal of Chinese economic and business studies, 2(3), 185 - 205. Drejer, A. (2004). 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