Competitor Review and Organization Design Analysis: Samsung Electronics and Apple Inc - Case Study Example

Competitor Review and Organization Design Analysis: Samsung Electronics and Apple Inc. Competitor Review and Organization Design Analysis: Samsung Electronics and Apple Inc. Description of the Organizations Apple is an American multinational technology firm that is based in Cupertino, California. The company designs, manufactures, and retails computer software, personal computers (PCs), consumer electronics, and online services (Rao & Klein, 2013). Apple was established in 1976 by Ronald Wayne, Steve Jobs, and Steve Wozniak and is currently the most valuable brand in the world as well as the second largest information technology company in the world (Daidj, 2014). It is recognized as one of the most innovative companies in the world, a label that has been inspired by its revolutionary products. Samsung Electronics is Apple’s direct rival, as well as the largest information technology company in the world. It was founded in 1969 as Samsung Electric Industries, and produces all types of consumer electronics as well as products affiliated with consumer electronics (e.g., semiconductors) (Hasegawa & Noronha, 2014). The company is the largest semiconductor manufacturer in the world. As a matter of fact, it supplies the semiconductors Apple uses in its products. Together, the two firms lead others in the design, manufacture, and retail of mobile phones, tablets, PCs, semiconductors, and affiliate products. Understanding of the two Strategies and their impact on the Organizations Design Strategic Intent and Competitive Advantage Apple is a known “differentiator,” meaning it relies on the differentiation strategy to market its products (Rao & Klein, 2013). The company’s products are designed to make it look as unique as possible. Thus far, this strategy has worked effectively to Apple’s advantage because it has captured a market segment that other competitors have found extremely difficult to penetrate. Also, the differentiation strategy has allowed the company to develop a very strong brand loyalty, probably the strongest in the industry. This has been instrumental in its competitive advantage. Samsung Electronics, on the other hand, uses a hybrid strategy that combines virtually all three elements of Porter’s generic strategies. Contrary to popular belief, Samsung is not dependent on the low-cost strategy. As a matter of fact, the company would not have achieved as much success as it has enjoyed by relying on this strategy alone (Boutellier & Heinzen, 2014). Its “something for everyone” approach, which borrows from all three strategies, alongside its marketing ability, gives the company a significant competitive advantage, one so great that despite entering the mobile phone industry much later than some of its rivals, it has scale hitherto unimaginable heights to become the undisputed market leader. Where they fit within Porters Competitive Strategies Apple’s differentiation strategy ticks all the boxes in Porter’s description of the approach. Some scholars have even suggested that Apple has transcended the boundaries envisioned by Porter when he conceived the differentiation strategy. This is true to some extent because, in many respects, Apple is now considered to be the archetypical differentiated company (Daft, 2012). Previously, it was assumed that differentiation limited a company’s ability to successfully expand beyond its domestic market. This notion was aided by the fact that very few differentiated firms performed admirably abroad. However, Apple is now recognized as the most successful differentiated company in the world. Porter argues that the differentiation strategy, if successful, enables companies to post above-average profits, provides a buffer against competition because of brand loyalty, facilitates a compromise with cost position that is checked by research and design (R&D), product design, patenting, and high-quality components, creates an entry obstacle of uniqueness, allows better positioning versus substitutes, and increases profit margins (Rao & Klein, 2013). All these benefits are evident in Apple’s strategic and operational blueprint. Porter also claims that a differentiation strategy is suitable where the target market is not price conscious, competition is cutthroat, customers have highly specific needs that are probably only partially satisfied, and the company has unique resources and potential that allow it to meet those needs in a manner that cannot be replicated easily (Boutellier & Heinzen, 2014). These attributes are apparent in the way Apple targets the high-end segment of the industry, and how rivals have found it hard to replicate its innovations. Up to now, Apple’s products and technologies are still strictly synonymous with the company (Andersen & Poulfelt, 2014). Its design and animation pedigrees, allied to its professional and highly talented staff, are emblematic of its organizational culture and character, and customers are increasingly attracted to these qualities. Porter argues that successful differentiation is evidenced when a company acquires brand loyalty, achieves higher returns per unit, or achieves a premium price for its products or services. Although one of these qualities indicates successful differentiation, Apple has accomplished all three (Andersen & Poulfelt, 2014). Some companies (e.g., Starbucks and Nike) have demonstrated that they can create perceived uniqueness despite their physical products resembling those of competitors. Apple, on the other hand, has ensured that even its products are unique in physical appearance (design, color, feel, etc.). Samsung’s strategy is inspired by a hybrid of low-cost, focus, and differentiation strategies. This way, each of those elements fits within Porter’s competitive strategies. Samsung’s approach combines aspects of the traditional strategy and Porter’s three strategies. This is because it uses cost leadership and product differentiation, diversification concentrated within businesses, and a dependence on internal and external markets (Boutellier & Heinzen, 2014). Porter argues that successful cost leadership demands robust building of efficient-scale infrastructure with aggressive pursuit of cost reductions based on experience. Samsung has shown that it can exploit its highly efficient structure to drive its low-cost agenda. Porter also claimed that low-cost companies recorded above-average profits in their industries in spite of the presence of formidable competitive forces (Daft, 2012). This has been the case with Samsung, which has remained highly profitable despite operating in a sector that is typified by cutthroat competition. Samsung’s low-cost strategy cushions the company against intense competition and creates huge entry barriers with respect to cost advantages and scale economies. The company is also in a favorable position when pitted against substitutes offered by competitors. As Porter stated, cost leadership also requires high initial costs, advanced equipment and technology, and aggressive pricing (Andersen & Poulfelt, 2014). Samsung has achieved all three conditions. In terms of differentiation, the company has differentiated itself using successful marketing, new and different features, as well as large screens on its devices (to counter Apple’s usually smaller screens). Samsung’s high-end smartphones and tablets are now known for their larger screens when compared to Apple’s (Daft, 2012). This has made them popular with young people who like watching videos and movies on their portable gadgets. Finally, Samsung’s focus strategy, although it is a hybrid in itself, also satisfies Porter’s description of the approach. The company uses a diversification strategy that is focused on enterprises. For example, in its mobile phone division, Samsung focuses on producing more mobile phones to meet the needs of every consumer, in comparison to Apple, which manufactures phones for specific consumers (Rao & Klein, 2013). Samsung’s focus strategy revolves around serving the needs of every customer very well, regardless of their location or social status. This allows it to generate above-average returns in every market and lifts it above Apple when the two are compared in terms of overall revenue generated (Daft, 2012). Samsung’s focus approach is driven by impartiality, meaning if there is a need it will be satisfied. Some customers may not be interested in its products, but some are, and no matter how few they are or where they are located, the company will meet their needs. Centralization versus Decentralization In both companies, decision-making and structure are centralized but production is decentralized. At Apple, the chief executive officer (CEO) has always been the “face” of the company. Before Steve Jobs’ death, he was synonymous with Apple. He would launch products personally, conduct interviews, and release information to the media (Boutellier & Heinzen, 2014). This centralized policy was so entrenched that up to now, a majority of consumers do not know other members of the company’s hierarchy. Apple operates in a highly competitive industry that encourages centralization; it pools all its resources to support a hierarchical and systematic approach to decision-making and expansion. The new CEO (Tim Cook) has propagated this centralized approach to decision-making and public appearance (Andersen & Poulfelt, 2014). In terms of manufacturing, however, Apple is highly decentralized. It has plants in many countries around the world, with most of its components (e.g., displays, processors, and chassis) sourced from Europe, Asia, and the United States. Even its distribution is centralized because it is mainly controlled from the headquarters. Samsung is also centralized in its structure and decision-making, but its manufacturing is centralized (Andersen & Poulfelt, 2014). All decisions must be made with the approval of the CEO, Kwon Oh-Hyun, and the CEO is also representative of the company. Communication is also top-down, and all major announcements are made by the CEO (Daft, 2012). However, it is highly decentralized in its manufacturing. It has assembly plants in over 80 countries and, like Apple, sources parts and components from diverse places. External Relationships (e.g., supply chain, outsourcing, partnerships, etc.) Samsung’s external relationships outnumber Apple’s. First, Samsung has a larger and more flexible supply chain, which is necessary because of its hybrid strategy. While Apple targets high-end consumers, Samsung targets all consumers. It has retail partnerships in markets like Vietnam, where Apple is yet to enter because such markets add no value to its corporate strategy. Second, Apple outsources more than Samsung because Samsung has more plants to produce parts and components (Daft, 2012). Third, Samsung has a greater manufacturing ability, which is demonstrated by the fact that while it supplies all of Apple’s semiconductors and some displays, Apple does not supply it with any part or component. Lastly, Samsung, owing to its corporate strategy, has more partnerships than Apple. It collaborates with organizations in almost all continents while Apple’s partnerships are limited to Western Europe, Asia, and the United States (Gong, 2013). Samsung needs these partnerships to sell its products to as many consumers as possible while Apple signs partnerships with a limited number of entities to avoid diluting its brand and compromising its differentiation strategy. Internal Systems – including the use of Technology Samsung has better internal organization systems compared to Apple. This implies that it can conduct most of its essential operations internally; it does not have to outsource most of its manufacturing in comparison to Apple. Apple designs more than it manufactures while Samsung manufactures and designs in equal measure (Clarkson, Miller & Cross, 2014). In terms of technology, Apple innovates more than Samsung, which is why it has more patents in the information technology segment. It also has a richer, and more localized internal culture, with most of its employees, sourced from the United States. It is more American than Samsung is South Korean (Yu, Wai-Kee & Kwan, 2014). Finally, Apple’s internal organization systems are more flexible compared to Samsung’s, ostensibly because they are smaller and less structured. Possible Organizational Structures Apple has a functional-collaborative organizational structure, which supports its strategies of specialization and control (Andersen & Poulfelt, 2014). Apple is also bureaucratic to some extent because everything goes through the CEO. Samsung has a division organizational structure that also features aspects of bureaucracy. Organizational Control Strategies (e.g. bureaucratic, market, clan, etc.) Apple’s organizational control strategy is based on the clan approach while Samsung’s is based on the bureaucratic technique. Apple relies on shared norms, beliefs, informal associations, corporate culture, and values to control the behavior of its employees and aid the attainment of its objectives (Hitt, Ireland & Hoskisson, 2014). It assumes that once employees are given basic instructions they can perform well. It also encourages trust among its employees to enable the realization of organizational goals. Samsung’s bureaucratic style, on the other hand, relies on policies, formal procedures, rules, written documentation, a hierarchy of command, and reward systems (Andersen & Poulfelt, 2014). People Strategies Apple believes in hiring the right people for the right jobs. The company also has a high affinity for promoting the right people to the right positions. It does not follow the typical script that dictates that a deputy succeeds when his superior leaves the organization (Giachetti, 2013). Apple has always been keen on talent acquisition, development, and identification. The company successfully combines experience (old) with dynamism (young) to create a sound and sustainable organizational culture and structure. In terms of rewards, Apple places a lot of value on creativity. As a result, it offers monetary and non-monetary incentives that are performance and non-performance-related to keep its employees driven to be creative (Boutellier & Heinzen, 2014). Like Apple, Samsung values talent. In fact, its management method is inspired by a propensity towards talent, efficiency, timing, perfection, synergy, and business insight. The company has partnerships all over the world to support its identification and recruitment of talented individuals (Boutellier & Heinzen, 2014). Samsung uses a result-oriented rewards scheme, which has allowances for promotion and other incentives for employees depending on their performances (Giachetti, 2013). Most employees accept the company’s performance-based system and are given clear goals and chances to attain their individual goals. Conclusion This paper has demonstrated the differences between Samsung Electronics and Apple with respect to organizational strategy, design, culture, and external relationships. More importantly, this paper has also shown that there are various ways in which companies can achieve success. Samsung and Apple are two different companies that are immensely successful in their rights, but they employ different approaches to corporate strategy, structure, and culture. This proves that a sound foundation is not sufficient to drive organizational success; excellent management and sustainable cultures are equally significant. References Andersen, M., & Poulfelt, F. (2014). Beyond strategy the impact of next generation companies. Hoboken: Routledge. Boutellier, R., & Heinzen, M. (2014). Growth through innovation: Managing the technology-driven enterprise (Revised ed.). New York: Springer. Clarkson, K., Miller, R., & Cross, F. (2014). Business law: Text & cases (13th ed.). St. Paul: Cengage Learning. Daft, R. (2012). Organization theory and design (11th ed.). Cincinnati, Ohio: Cengage Learning. Daidj, N. (2014). Developing strategic business models and competitive advantage in the digital sector. New York: IGI Global. Giachetti, C. (2013). 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