Apple and Samsung: Business Strategies, Domestic and Global Environment, and Internal Capabilities - Assignment Example

Apple & Samsung Analyze the existing business strategies, domestic and global environments, industry, and internal capabilities for both Apple andSamsung. Assess the significant manner in which each company’s mission and vision aligns with the long-term goals and strategic direction of the organization Apple Inc. is the US-based technology company that offers personal communication devices, related software, and accessories. The company has a broad brand portfolio, comprised of the following brands: iPhone, iPad, Mac, iPod, the iOS and OS X operating systems, iTunes, and others (MarketLine Advantage, 2014). Apple has a high pricing power which enables the company to set prices higher than average market prices (MarketLine Advantage, 2014). The premium price is also maintained due to the firms’ strategy to focus on serial innovation and addictive product design (Heracleous, 2013). As of 2013, Apple’s mission was formulated in the following way: “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad” (Jurevicius, 2013, n.p.). Such a mission statement is recognized to quite poor. However, the firms’ vision statement adds an important focus on customer-orientation, and claims that “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings” (Jurevicius, 2013, n.p.). Both vision and mission statements of Apple indicate their alignment with the strategic direction of Apple. Samsung Electronics is a part of the Samsung group, which offers consumer electronics goods, varying from televisions, refrigerators, monitors and printers to smartphones and tablets (MarketLine Advantage, 2015). The company has three business divisions: Consumer electronics, device solutions, IT and mobile communications (MarketLine Advantage, 2015). In this specific case the analysis will be focused on IT and mobile communications division. Samsung’s business strategy is based on development of consumer-preferred products. In order to pursue this strategy, the company spends significant sums on the research and development (R&D) functions (MarketLine Advantage, 2015). Also, the company has established partnerships with outside research institutes. This strategic focus is definitely aligned with the corporate mission and vision. Samsung’s new vision is reflected in its new motto “Inspire the World, Create the Future” (Johnson et al., 2013, 9). The company has taken a course on the three elements, including innovative products, new technology, and creative solutions (Johnson, n.d.). 2. Analyze the business-level strategy of each company by conducting a swot analysis. Next, determine the fundamental way in which each sector influences its competitive position within the industry Apple – SWOT analysis Strengths: High consumer loyalty to the brand; Culture of premium service (for example, free in-store services, generous warranty); High average selling prices in an industry, where these prices are declining; Significant growth rates; Strong cash flow opportunity (MarketLine Advantage, 2014). Own proprietary Operating System (iOS) (MarketLine Advantage, 2015; Euromonitor, 2014). Weaknesses: High dependence on two product lines: iPhone and iPad; Sales model is slower because of focus on top-end locations and staff training (MarketLine Advantage, 2014; Euromonitor, 2014). Opportunities: Positive forecast for tablet and smartphone markets; Smart wearable devices segment as a robust growth opportunity; Adoption of Apple technology in the business segment (enterprises); Apple Pay as a robust growth opportunity (MarketLine Advantage, 2014; Euromonitor, 2014). Threats: Operating in fiercely competitive environment; Emergence of new brands-imitators (for example, Xiaomi Tech); Premium pricing strategy could be a limitation for business growth in emerging/developing economies; Cheaper Android service compete with Apple’s Operating System (OS) Smartphone subsidy cuts (MarketLine Advantage, 2014; Euromonitor, 2014). Apple’s Business-Level Strategy Based on the SWOT analysis of Apple it is possible to say that the company pursues differentiation strategy, whereas it differentiates its products from other brands by value added service and premium status of the brand. The company uses innovation as a building block for its competitive advantage (Hill & Jones, 2012). Samsung – SWOT analysis Strengths: Strong brand and market position; Diversified geographical presence; Innovation expertise in consumer appliances due to emphasis on Research and Development (MarketLine Advantage, 2015). Weaknesses: Dependence on Google’ Android platform; Patent litigations and investigation for trading practices weigh on the Samsung’s cash flow, profitability and brand equity (for example, litigation case of alleged patent infringement for Apple) (MarketLine Advantage, 2015); Opportunities: Positive forecast for tablet and smartphone markets; Improvement of mobile phone networks (such as 4G) offer an opportunity of increased sales of Samsungs’ smartphones (Euromonitor, 2014b); Threats: Increasing intense competition in the mobile sector; Foreign exchange risk as currency fluctuation in different countries (MarketLine Advantage, 2015; Euromonitor, 2014b). Samsung’s business-level strategy Based on the SWOT analysis of Samsung it is possible to say that the company pursues cost differentiation strategy, whereas the company offers lower cost of its mobile products maintaining a high quality status. Also, the company combines this strategy with geographical diversification strategy which enables it to gain greater market share and stay ahead of major competitors. Samsung also focuses on innovation as its building block for gaining its competitive advantage (Hill & Jones, 2012). 3. Analyse the central manner in which the strategies of each company’s business leaders have adapted to cultural differences in order to both facilitate effective operations within global markets and drive new strategic initiatives with improved innovation excellence. Provide 1 example of such strategies in use from each company to support the response Apple has focused on development of the products highly adaptable to customers’ preferences. As it has been stated in the Apple’s iOS developer Library, “The first step in the development of an internationalized application is to identify all culture-specific information in your application” (Wooten, 2013). Thus, for example, the company has offered the iPhone with applications and programming options. The company allows third-party developers access develop applications for iPhone (Moran and Keane, 2013). Apple adapts interface of its products for culture-specific text, sounds, and images, and thus, drives improved innovation excellence. In order to facilitate effective operations within global markets and drive new strategic initiative Samsung has set up manufacturing in local markets by opening new factories in South Africa, Venezuela, and Egypt. Thus, the company is capable not only to reduce production and logistics costs, but also to adjust products to local markets and to better understand local consumers (Euromonitor, 2014b). 4. Evaluate the superiority of each company’s organizational competencies in terms of entrepreneurial capabilities, organizational design capabilities, and strategic capabilities geared toward increased performance and profitability. Provide 1 example of such strategies in use from each company to support the response Organizational competencies of Apple In order to implement product differentiation strategy, Apple utilizes its key competencies which include the following: - Focus on innovation capability; - Strong HR strategy: recruitment of best talents and strong motivation (location base in Silicon Valley); -Strong branding strategy: high-street locations for Apple stores, unique design -Historical leadership of Steve Jobs –perfectionist, visionary, demanding leader - Efficient supply chain (reduced number of suppliers, less warehouses); - Organizational structure is flat, simplified and has no bureaucracy; -Distributed organizational design – manufacturing is outsourced to cheapest locations, while high value added functions are concentrated in California. For example, the company retains control of important functions that really matter (innovation and product design), but outsources many functions (such a manufacturing) to the locations where it can be done more efficiently (Heracleous, 2013). Organizational competencies of Samsung The key core competencies of Samsung Electronics are the following: Speed advantages (time-to-market and decision-to-action) In order to ensure speed of decision-to-action process, the company has designed organizational culture of ownership, empowerment, self-driving, and simple-decision making process. For speed of time-to-market process Samsung has integrated sophisticated IT infrastructures (Enterprise Resource Planning, SCM); adopted incentive systems (PI and PS), and cultivated passion of employees (Jung, 2005). Innovative learning (R&D capability; management innovation; manufacturing skills) For innovative learning culture, Samsung has introduced learning-oriented corporate culture, HR development system and created professional learning teams (Jung, 2005). Synergy: Economies of scope (cost efficiency, knowledge sharing, digital convergence) (Jung, 2005). For example, in order to drive innovation, Samsung has established partnerships with leading institutions and with outside research institutes (MarketLine Advantage, 2015). 5. Recommend one appropriate new business strategy for each company that may maximize profitability and improved competitiveness in the industry. Provide a detailed rationale for this strategy New business strategy for Apple As it has been discussed in the SWOT analysis Apple has adopted a premium pricing strategy, which helps to differentiate the company from other players. However, also it prevents a company from capturing greater market share in emerging/developing markets such as India and China. While switch to low cost strategy might not be a good option for the company’s brand, Apple should focus on market navigation strategy and try to secure its competitive advantage in existing geographic markets and product (Thomas, n.d.). The company should add more value to its services and complementary applications. New business strategy for Samsung Samsung should consider India and South American countries as potential growth markets and thus to focus on low cost differentiation strategy, offering consumers good combination of quality and price factors. As the SWOT analysis has shown competition in mobile market is growing and threatened with entry of new players. Samsung needs to strengthen its position on the global market in order to become a leader in the industry. With the improvement of mobile phone markets the company can pursue stronger diversification strategy as there are more opportunities for smartphone sales. 6. Evaluate the success of both companies’ corporate-level strategies in terms of horizontal integration, vertical integration, strategic outsourcing, or diversification. Next, determine the type of strategy that contributed most effectively to the creation of a successful and profitable multibusiness model/ Provide 1 example of such strategies in use from each company to support the response Apple’ corporate-level strategies Apple has successfully utilized both horizontal and vertical integration, and thus gained a formidable competitive advantage (MarketLine Advantage, 2014). By launching multiple associate devices the company has pursued horizontal integration. Nowadays, the company has various product lines across mobile and computing devices (smartphones, tablets, PCs, etc.). The company also has adopted vertical integration strategy in order to connect the user experience across Apple’s devices. The company offers software, media, hardware, application, and services. Some other key integration factors of Apple include its capability to design and develop own operating systems (iOS) and unique content offering (iTunes). The user dependence on iOS enables the company to offer all associated devices and to earn incremental profits. Also, Apple has adopted vertical integration to its retailing strategy (MarketLine Advantage, 2014). The vertical integration strategy of Apple is very complex to imitate or replicate, which makes the brand more formidable competitor on the market. For example, none of the Apple’s competitors has managed to replicate its vertical integration model. Apple’s products are more lucrative and desired on the market compared to Google’s Android OS smartphones. In the modern era when many consumers tend to switch from one brand to another, Apple’s strategy enables the company to gain sustainable competitive advantage (MarketLine Advantage, 2015). Samsung’s corporate-level strategies Samsung has adopted geographical diversification strategy, and thus, has gained a significant competitive advantage. Thus, for example, in FY 2013 the company has increased its share in America (30. 3%), Europe (23%), China (17. 6%), Korea (10%), the rest of Asia and Africa (19.1%). Samsung’s wide diversified geographic presence enables the company to gain sustainable competitive advantage and reduce risks associated with a specific country. Also, this strategy helps Samsung to develop close relationships with customers due to the proximity factor, and to achieve economies of scale (MarketLine Advantage, 2015). 7. Analyze the strategies that the internal leadership of both Apple and Samsung has taken to discourage unethical behaviors. Provide at least three examples of such leadership in action from both companies to support the response Strategies to encourage unethical behaviours Apple Inc. Apple’s management has introduced a Code of Ethics, whereas the company made a strong focus on Supplier Responsibility. As the company operates globally and has substantial supplier network, it aims to ensure thus that “each person is treated with dignity and respect” (Apple.com, n.d.). The company keeps it suppliers accountable by carrying out audits across the globe. By carrying out audits Apple ensures that suppliers treat their workers ethically and fairly. Thus, for example, Apple has already carried out more than 633 audits, covering 1,5 million workers in 19 countries. The company’s audit in China has revealed multiple cases of child labour in the supply chain, and some other unethical behaviours such as bonded labour and mandatory pregnancy tests (Garside, 2013). The company also has established strong social and environmental standards as well cultivating thus corporate social responsibility in Apple (Apple.com, n.d.). Apple also provides Supplier Employed Education and Development program and offers free training and education courses (Apple.com, n.d.). Samsung Electronics In order to discourage unethical behaviours in the company, Samsung has introduced the Samsung Code of Conduct, which prohibits discrimination in employment, promotion, assignment, and recruitment based on gender, race, religion or academic backgrounds. Also, the company has declared about prohibition to use child or forced/compulsory labour (Samsung Electronics, 2008). The company has developed the whole Samsung, supported with two pillars: Samsung values and business principles (Samsung Electronics, n.d.). Business principles indicate the company’s focus on ethical behaviour, and focus on ethical behaviour towards employees, shareholders, customers, society, and other stakeholders. Despite the existing codes of ethical conduct, Samsung the same as Apple has carried out audits of its suppliers, and discovered labour violations at Chinese Factories, including child labour and excessive overtime (2012, Samsung required from its suppliers to adopt ethical hiring and employment procedures, threatening by cancellation of contracts with suppliers (The Huffington Post, 2013). 8. Assume that both Apple and Samsung are in need of organizational change and must alter existing strategies. Recommend three specific ways in which Apple and Samsung could change functional, business, and corporate strategies, as well as organizaitonal structure and control in order to improve business performance and competitiveness in the industry. Assuming that both Apple and Samsung are in need of organizational change and must alter existing strategies, there should be taken into consideration three types of strategies: functional, business, and corporate strategies. Recommendations for Apple Corporate strategy For corporate strategy Apple should consider mergers & acquisition strategy. Even though the company has strong brand and great products to offer, it might be reasonable to acquire one of the competitors or a company offering supporting services/products, and develop new product lines. Apple can operate under the brand name of acquired company in order to avoid the risk of reducing its brand equity. Thus, the company can enter more smoothly developing markets by offering more budget versions of mobile/PC devices. Business strategy As it has been clearly identified in the SWOT analysis, Apple is highly dependent on its two major product lines: iPhone and iPad as they generate the highest share of company’s profits (MarketLine Advantage, 2014). The company should focus on focused differentiation strategy by focusing on enterprise segment. Concentration on this particular segment will enable Apple to find a new niche, gain good contracts and support its premium status on the market. Functional strategy In terms of functional strategy Apple can adopt new ways of working with its suppliers. The company is heavily dependent on its suppliers and the scandals associated with unethical treatment of employees by Apple’s suppliers might significantly threaten Apple’s brand equity. That is why the company is recommended to focus on modifying its supply chains especially in emerging countries and introduce tighter instruments for control. Recommendations for Samsung Corporate strategy Samsung the same as Apple is recommended to consider the strategy of M&A. The company can also buy out some company and run the business under existing or Samsung brand. The decision will depend on a number of factors, including: the type of business of acquired company, the markets where the company operates, etc. Business strategy Samsung is recommended to adopt integrated strategy, which includes both cost leadership and differentiation strategy. By adopting this strategy, the company will be able to leverage its core competencies more effectively, to adjust quickly to environmental changes, and to lean new technologies. Functional strategy For functional strategy Samsung is recommended also to focus on PR and marketing function of the company. The company has been accused in copying the Apple’s features of smartphones and this has threatened the company’s reputation. Therefore, it is highly recommended to focus on re-establishing Samsung’ brand position in the eyes of global consumers. References: Apple, (n.d.). Apple - Supplier Responsibility. [online] Available at: http://www.apple.com/supplier-responsibility/ Euromonitor, (2014a). Apple Inc. in retailing (World). Euromonitor, July, 2014. Available at: www.warc.com Euromonitor, (2014b). Samsung Corp in Consumer Appliances (World). Euromonitor, September, 2014. Available at: www.warc.com Garside, J. (2013). Child labour uncovered in Apples supply chain. [online] the Guardian. Available at: http://www.theguardian.com/technology/2013/jan/25/apple-child-labour-supply Heracleous, L. (2013). Quantum Strategy at Apple Inc. Organizational Dynamics, 42(2), pp.92-99. Hill, C. & Jones, G. (2012). Strategic Management: An Integrated Approach (10th ed.). South-Western: Cengage Learning. Johnson, G., Whittington, R., Angwin, D., Regner, P., Scholes, K. (2013). Exploring strategy 10e Text Only. Pearson Education. Jung, K. (2005). Samsung Story. Samsung Electronic Research Institute. Available at: www.gsb.skku.edu/upload/SamsungStory.ppt Jurevicius, O. (2013). Apple mission statement 2013 | Strategic Management Insight. [online] Strategicmanagementinsight.com. Available at: http://www.strategicmanagementinsight.com/mission-statements/apple-mission-statement.html MarketLine Advantage (2014). Company Profile: Apple Inc. Available at www.matketline.com MarketLine Advantage (2015). Company Profile: Samsung Electronics Co. Ltd. Available at www.matketline.com Moran, A. and Keane, M. (2013). Cultural Adaptation. Hoboken: Taylor and Francis. Samsung Electronics (2008). Respecting Global Diversity. Integrity Management. Available at: http://www.samsung.com/us/aboutsamsung/sustainability/integritymanagement/download/RespectingGlobalDiversity.pdf Samsung Electronics (n.d.). Samsung. [online] Available at: http://www.samsung.com/us/aboutsamsung/sustainability/sustainablemanagement/samsungvaluecodeofconduct/ The Huffington Post, (2013). Samsung Finds Even More Labor Violations. [online] Available at: http://www.huffingtonpost.com/2012/11/26/samsung-labor-china_n_2190246.html Thomas, J. (n.d.). Strategy Levels - organization, advantages, manager, definition, school, model, type, company, business. [online] Referenceforbusiness.com. Available at: http://www.referenceforbusiness.com/management/Sc-Str/Strategy-Levels.html Read More