Marketing Approaches Used by Apple and Samsung in the Australian Smartphone Industry - Example

Running Head: Individual Business report - Apple and Samsung Name: Lecturer: Course: Date: Executive Summary This report compares the marketing approaches used by Apple and Samsung in the Australian smartphone industry. It also examines the marketing strategies used by the companies to increase their marketing shares in Australia. Focus is placed on the Apple's brands such as iPhone 5S and Samsung's brands such as Galaxy Note 3. The Australian smartphone industry is one of the largest globally. It is however expected to decline in terms of constant value and volume in the next 5 years as smartphones are expected to reach their saturation point. Hence, demand for smartphone is expected to decline. This means that Apple and Samsung will have to change their marketing strategies. In addition, a range of economic pressures affect the smartphones industry, such as high inflations, high Australian dollar exchange rate, increased minimum wage in the labour market and levels of competiveness in the domestic market. While Apple has aimed to put quality and safety first, Samsung has put customers’ preferences first and hence sold at low-cost. Samsung’s weakness thus far is that it lacks a distinct brand image. The company needs to build its reputation by dealing in quality products and cleaning its image of patent infringements. This means focusing on product differentiation. On the other hand, Apple needs to expand to emerging markets and developing markets through acquisition. It also needs to sell at low prices to appeal to more customers. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Industry Background 4 Company Backgrounds 6 Samsung Electronics Australia Pty Ltd 6 Apple Pty Limited 7 Macro-environment 8 Economic forces 8 Social factors 8 Technological forces 9 Microenvironment 9 Customers 9 Suppliers 10 Competition 10 SWOT Analysis 10 Apple SWOT Analysis 10 Samsung SWOT Analysis 12 Market segmentation 13 Target Market 13 Targeting and Positioning Strategies 14 Recommendations and conclusion 14 References 15 Introduction The purpose of this report is to compare the marketing approaches used by two electronics companies in the Australian smartphone industry. This report compares the marketing strategies used by Apple and Samsung to increase their marketing shares in Australia. Indeed, Australia offers thriving markets for both companies due to its geographic and psychographic factors. Focus is placed on the Apple's brands such as iPhone 5S and Samsung's brands such as Galaxy Note 3. Both companies employ different marketing strategies and lead in terms of market share. Smartphone industry statistics show that Apple and Samsung’s brands are the most popular in Australia, taking more than 60 percent of the market share. In Australia, Samsung operates under the name Samsung Electronics Australia where it is registered as a proprietary company. The company generates its revenue from the sale and importation of mobile communication equipment, household electronics and IT systems. In Australia, the company employees some 270 workers and is situated in Homebush Bay in New South Wales. In Australia, Apple is registered as a proprietary company under the name Apple Pty Limited. In 2012, the company was ranked as the most valuable company globally (Lee, 2005). Industry Background The Australian smartphone industry is one of the largest globally. In terms of mobile phone sales, it tops the chart. Although the country has one of the smallest populations with only 22 million inhabitants, it has one of the highest numbers of smartphone ownership compared to other developed countries such as the UK, US and South Korea. According to Australian Mobile Phone Lifestyle Index the country’s smartphone penetration was at 84 percent in 2013, compared to 2007 statistics where the penetration was at 19 percent (BI Intelligence 2013). Indeed, Australians are adopting smartphones in their cultures faster than most developed countries. Australia’s mobile service industry volume is expected to pass $18 billion in 2013, with further growth expected in 2014. Among the reasons for the trend is Australia’s geography attributed to the thriving industry. According to AIMIA (2009; 2013), this is since the country is continent-sized with mobile communication offering consumers and businesses solutions in bridging the extensive geographic distance. Another explanation is that most Australian uses social media sites, with an estimated 65 percent using their smartphones to access the sites. Additionally, mobile marketing has taken shape in Australia. Currently, the country is ranked among developed markets such as Japan and Singapore in terms of mobile marketing. Regarding the industry’s competitive landscape, Samsung and Apple together control some 60 percent of the smartphone market in Australia. According to early 2011 statistics, Samsung controlled a larger market share than Apple at 49 percent of the market. Apple controls 36 percent (Russel, 2011). Apple’s iPhone brands are generally considered pioneers in the smartphone segment and has remained popular among the youth given its advance technology, premium design and marketing strategy. For instance, in 2012 the company launched iPhone 5 which was considered a success in terms of sale in the country. On the other hand, Samsung has employed a divergent strategy of launching a range of smartphone models at cheaper prices to consolidate its market share. In 2013, the company launched its flagship product Samsung Galaxy S4, which became iPhone 5’s major competitor in Australia (AIMIA, 2012). The smartphone industry is however expected to decline in terms of constant value and volume in the next 5 years as smartphones are expected to reach their saturation point. Hence, demand for smartphone is expected to decline. This means that Apple and Samsung will have to change their marketing strategies. In which case, price is likely to be the differentiator between the two companies other than smartphone quality. In any case, AIMIA (2012) and BI Intelligence predict that smartphones may experience renewed growth trend as next-generation technology such as tablets trigger revolution in the industry. Company Backgrounds Samsung Electronics Australia Pty Ltd Samsung Electronics is a Korean electronics manufacturer that was founded in 1938. With several subsidiaries operating across the globe, it is the largest electronics company in terms of revenue-base, while the fourth largest in terms of market value as of 2012. The company has had a powerful influence in South Korean politics and economy, with its affiliate companies generating nearly a fifth of Korea’s exports. The company’s revenue was estimated to be 17 percent that of South Korean economy in 2012, showing that the company has able financial resources. In Australia, the company operates under the name Samsung Electronics Australia where it is registered as a proprietary company. The company generates its revenue from the sale and importation of mobile communication equipment, household electronics and IT systems. In Australia, the company employees some 270 workers and is situated in Homebush Bay in New South Wales. The company imports and sells mobile phones, notebooks, tablets, camera, computer peripherals, home appliances, camcorders, printers and DVD players (Lee, 2005). Apple Pty Limited Apple Inc is a US-based electronics maker that was founded 1976 in Cupertino, California. The multinational corporation has several subsidiaries globally. In 2012, the company was ranked as the most valuable company globally, beating a record set in 1999 by Microsoft. The company’s share had reached a record high of $702 before it declining by 25 percent. In Australia, the company is registered as a proprietary company under the name Apple Pty Limited. The company directly employees some 1500 workers in Australia and is based in Sydney. The company has retail premises in Victoria, Queensland, Western Australia and New South Wales. The company imports and sales Apple brand of electronics such as mobile telecommunication devices, desk top computers, laptop and portable devices. The company also sells apps, music, games, films and online television programs. Among the flagship products include MacBook Pro, iMAc, MacBook Air, OS X Lion, Mac Mini. Others include iPods such as iPod nano and iPod shuffle. Others products include iPad and iPhones (Fadaei, 2013). Macro-environment The macro-environment presents a clear picture of factors in the external environment affecting the Australian automobile industry and ultimate performance of Apple and Samsung. These include economic, legal, environmental and technological forces. Economic forces A range of economic pressures affect the smartphones industry, such as high inflations, high Australian dollar exchange rate, increased minimum wage in the labour market and levels of competiveness in the domestic market. Presently, the industry is viewed to be at the maturity life cycle or specific phase. In the industry, due to saturation of smartphones, what enables Samsung to beat Apple is the price of its smartphone products. Samsung’s competitive strategy is based on reducing cost to meet the economic demands of Australia (Battaglia, 2013). While Apple remains vulnerable to risks of supply shortages and price reductions, Apple boasts of many suppliers, such as retail stores across Australia. Further, the strengthening of Australian dollar has negatively affected the two companies’ gross margin. Social factors Consumer preferences have critically shaped the Australian smartphone industry. Most consumers have preferred mobile phone communication because of the country is continent-sized. Mobile communication has therefore offered consumers and businesses solutions in bridging the extensive geographic distance. Additionally, most Australians prefer using the social media sites, with an estimated 65 percent using their smartphones to access the sites. Further, mobile marketing has taken shape in Australia. Currently, the country is ranked among developed markets such as Japan and Singapore in terms of mobile marketing. This has boosted the sale of Apple and Samsung’s smartphones in the country (Fadaei, 2013). Technological forces Australia is made up of a techno savvy population with more than 80 percent of the youth owning smartphones. Further, high internet penetration has driven the demand for smartphones, it has also placed pressures on technological innovations, which has further pressured the smartphone industry to generate products that can be used with online apps. Samsung and Apple have been at the frontline of revolutionizing the smartphone industry with their next generation handsets, such as Galaxy and iPhone series. Microenvironment Customers The need to increase market share has been the focus of both Apple and Samsung. Change in customer preferences and perceptions have in return affected the smartphone industry. The saturation of smartphones in the industry has made customers to begin viewing the price, with most going for cheaper alternatives. Samsung has benefitted more from the shift in customer preferences as its devices are cheaper. Suppliers Suppliers dominate the industry, whether they provide parts and components of smartphones. Hence, suppliers have had a greater bargaining power in the industry. For instance, iPhone uses a microprocessor cheap supplied by other suppliers among them Phillips and Samsung. While this has been beneficial to Samsung as it is also a supplier, it has affected Apple’s bargaining power in the market. Hence, maintaining a good relationship with Samsung has been critical for Apple, making it harder to stay ahead of Samsung (Lee, 2005). Competition Australian smartphone industry has become increasingly competitive and saturated, with cheaper handsets continuing to enter the market. This has continued to lower the cost of smartphones. The big players include Samsung, Apple, HTC, and Nokia. All the players are competing in improving their gadgets. However, price reduction has become a factor. This has improved the sale of Samsung’s smartphones, which are more affordable, and affected the sale of Apple’s phones, which are fairly expensive. Price reduction strategy has enabled Samsung to dominate the market and for Apple to lose its influence (Fadaei, 2013). SWOT Analysis Apple SWOT Analysis Strengths Apples’s core strength lies in its innovative culture. The company has a strong innovative culture mainly targeted on ensuring customer satisfaction. The company also has a brand reputation. In 2012, the company was ranked as the most valuable company globally, beating a record set in 1999 by Microsoft. The company has a large revenue base, meaning it has billions of dollars in reserve to finance research and development. The company also benefits from brand loyalty. Apple makes its phones easy to use, hence being a favourite of the young and old alike. Weakness The company also has weak presence in middle-income markets in developing countries. While its major markets are in developed economies such as Australia, the company experiences low sale of cars in developing countries such as India, Kenya, Nigeria, whose internet and mobile phone penetration is one of the highest among developing economies. This has made it difficult to compete with brands such as Samsung. Apple’s iPhone brands are also viewed as luxurious premium brands, hence experiences low sales among the middle-income individuals. Opportunities High internet penetration has increased sale of smartphones. The company also consistently introduces new models, hence satisfying varied consumer tastes and preferences. Threats The saturated smartphone industry means that there is high competition in the sale of smartphones, hence threatening the sale of Apple phones. Indeed, the company continues to face stiff competition in the Australian smarthphone industry from Samsung, HTC, LG and Nokia. The increase prices of raw materials and chips globally imply that there would be higher costs in producing smartphones, thus reducing the company’s profitability. High Australian dollar has affected the sale of Apple phone in Australia, which is among its prime markets. Samsung SWOT Analysis Strengths Samsung benefits from global brand reputation. The company has the largest share in smartphones globally. The company benefits from low production cost, as it manufactures own chips. Samsung has a large financial base and has the capacity to finance research and development. Weaknesses Samsung has been involved in patent infringement hence affecting its reputation. The company also experiences low profit margin as it sales products at low cost. The company has not benefitted from brand loyalty as customers have perceived Samsung brands to be weak. Opportunities The increasing internet penetration in emerging markets and Australia will increase preference for Samsung phones. The growth of mobile advertisement increases preference for smartphones. Acquisition of companies in developing countries will enable Samsung to expand globally. The company also consistently introduces new models to satisfy varied consumer tastes and preferences. Threats Saturation of smartphone industry implies that there is high competition in the sale of smartphones. This is threatening the sale of Samsung’s phones. The company also faces stiff competition in the Australian smarthphone industry from Apple, HTC, LG and Nokia. Market segmentation Both Apple and Samsung deal in importation and sale of range of models to tend for a range of market segments in Australia. The companies have concentrated on psychology behaviour, geographic and demographic segments. Samsung and Apple focus on urban customers with their smartphones that can be used in areas with internet penetration. They also deal in high-end phones to the customers in urban centres (Lee, 2005). The two companies also focus on demographics and geographic, where they focus on consumer behaviour and physiology to differentiate themselves. The companies also target customers who are tech savvy and who prefer using range of applications in the phones. Unlike Apple, Samsung focuses on directly interacting with its customers in a bid to influence their peers (Fadaei, 2013). Target Market Samsung and Apple’s marketing have targeted the youth for a range of their models. Samsung and Apple focus on youth aged between 20 and 40 years geographically located in urban areas. Samsung has generally focused on low prices for its high-end products, enabling it to compete for the target market where there is less penetration of smarthpones. Apple on the other hand has focused on creating reputation in its target market as a high brand value (Lee, 2005; Fadaei, 2013). Targeting and Positioning Strategies Samsung utilizes low-cost and differentiation generic strategies to consolidate its position in the market amid stiff competition in the Australian smartphone industry. Apple uses differentiation generic strategy. The market scope that both companies target are involved of various customers who have diversified needs, which unlike Apple, Samsung is able to satisfy because of its range of models that fit in every segment and for all ranges of price (Lee, 2005). The two companies however prefer using product differentiation by investing in innovative designs. Bothe companies have focused on superior quality and design. Unlike Apple, Samsung also uses low-cost to attain cost leadership through its lean production strategy, low cost of servicing and control of distributors and suppliers. Apple is however focused on having a definite positioning strategy. The company produced smartphones that are premium in quality. Unlike Samsung, Apple has made no effort to compete in every market segment (Glynn & Woodside, 2009). Recommendations and conclusion To conclude, Apple and Samsung’s marketing strategies have been generally developed from the companies’ philosophies of organizational cultures. While Apple has aimed to put quality and safety first, Samsung has put customers’ preferences first and hence sold at low-cost. Samsung’s weakness thus far is that it lacks a distinct brand image. The company needs to build its reputation by dealing in quality products and cleaning its image of patent infringements. This means focusing on product differentiation. On the other hand, Apple needs to expand to emerging markets and developing markets through acquisition. It also needs to sell at low prices to appeal to more customers. References AIMIA (2009). Australian Mobile Phone lifestyle index 2009. 5th edn. AIMIA Mobile Industry Group. Retrieved: AIMIA (2012). Australian Mobile Phone Lifestyle Index 2012. 8th edn. AIMIA Mobile Industry Group. Retrieved: Battaglia, R. (2013). The Smartphone Industry Towards A Dominant Design: An Empirical Analysis. Retrieved: BI Intelligence. (2013). Explaining The Mobile Industry's Boom In Australia. Retrieved from Business Insider Intelligence website: . Fadaei, R. (2013). Marketing Management: Apple iPhone Marketing Analysis. Retrieved: Read More