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Introduction

The mobile industry is one of the most dynamic marked with high innovations. It is highly competitive hence the interest to analyse the industry and two of the top companies in the industry; Samsung Electronics., Ltd. (Samsung) and Apple Inc. (Apple). Samsung is one of the leading manufacturers of consumer electronics among them home appliances, information technology products, telecommunication infrastructure systems, semiconductors, and digital media among other products (Hong, 2012; Apple Inc. 2013). It is one of the largest manufacturers in the world for mobile devices among them Smartphones and tablets. On the other hand, Apple is a multinational technology company with its headquarters in Cupertino California. The company designs, creates, and sells electronics, software, and online services to its consumers. Its products include the iPhonesmartphone, iPad tablet, and the Mac PC among others (Lashinsky, 2013).

Samsung and apple are two companies that have a wide variety of similar products, but this report focuses on the mobile and PC niche where the two companies have a variety of products: for the mobile niche, Samsung has the Smartphones while Apple has the iPhonesmartphones and for the PC niche, Samsung has the Samsung PC and Apple the Mac. Samsung and Apple are operating in the same industry, the mobile devices and PC industry, and are the two most popular in the industry, especially in the international importing market (Hong, 2012; Lashinsky, 2013). This essay is an in-depth analysis of the strategy used by the two companies as well as the characteristics of the mobile and PC industry they are operating in.

 

Industry forces and attractiveness

The mobile devices and portable personal computer manufacturing and sales industry is the focus of this section. Figure 1 below shows a summary of porter’s 5 forces analysis of the industry. There are many firms involved in the industry that produce, promote, and sale products internationally and considering the threats that are faced by these companies, the u\industry is moderately attractive generally (Denrell, Fang & Winter, 2003). Many of the industry involved in the industry have been able to thrive even though competition is very high and buyers and suppliers have moderate influence over the competitors. There are various avenues for new competitors to enter the market but that are considerably huge barriers towards establishment of a brand. Lastly, the treat of substitutes is credible but it doesn’t have the potential to usurp mobile devices and PC in the near future (Rasheed, Nawaz & Abbas, 2015).

 

Rivalry between competitors

The advent of the touch pad mobile device, the PC, and now, the tabloid has in a great way caused an explosion and has seen dozens of manufacturers in pursuit of the consumer. Mobile devices and PC has penetrated to everyday living at a personal level and in the business world, as a result, manufacturers are focusing mainly on convenience of the device to the consumer. Manufacturers are therefore pursing creation of products that are best-cost and low-cost strategies (Helfat & Peteraf, 2003). To drive this, Apple and to some extend Samsung, have invested heavily on innovation for the purpose of creating products that are revolutionary and convenient to the day to day personal and business uses. Given the high research and development costs required, Apple and Samsung have remained at the top in the industry, however, for the middle customer how is not considered with the ‘bells and whistles’ and is after low-cost products that deliver on business, then there is a high competitive rivalry. The competition between Apple and Samsung is and has been at the highest level and has often led to law suits by Apple for alleged Samsung copyright infringement (Hsin, 2010). In addition, the nature of the products in the mobile and PC industry imposes increased competition. These products are being constantly re-innovated to increase processing power, the capabilities per device, and sleek appearance. These needs put pressure on these companies to renovate and refresh their products at a rate that has never been seen.

 

Supplier power

Suppliers have a considerable power of mobile and PC device manufacturers. Many of the industry standards like the OS for mobile devices, the Universal Serial Bus (USB) and wireless technology for PC are supplied by independent institutions and therefore, these Apple and Samsung have to rely on privately owned standards which has to be licensed (Hong, 2012).  In addition, there are relatively many suppliers for the suppliers used especially for PC which puts pressure on competitors. For Mobile devices, the technological spectrum is rather constrained which puts pressure on competitors leading to the copyright suits by Apple on Samsung.

 

Buyer power

Just like in every other industry, the buyer has considerable authority and influence over the manufacturer. The mobile and PC industry has a variety of buyers with varying needs and preferences, therefore players in the industry must adopt accordingly and provide a wide variety of products. The industry is marked by buyers who want “the latest and the greatest” and others who want “just good enough”, and this present a barrier as manufacturers want to tap in as many buyers as possible (Rasheed et al., 2015). Samsung and Apple are benefiting from the high acceptance of PC and mobile devices which has led to high demand for their products. To this regard, brand loyalty and Proprietary systems are used for customer retention.

 

Threat of potential entrants

There are various avenues through which new players can enter the mobile and PC industry. However, there are equivalent barriers for new entrants to establish successful brands. New entrants cannot sustain the operations costs in the industry, especially research and development which the big companies, e.g. Apple and Samsung can effectively offset as a result of economies of scale. An opportunity for new entrants is through original equipment manufacturers (OEM) which can be used by lean starters for production (Rasheed et al., 2015).

 

Threat of substitutes

The mobile and PC industry has grown substantially in the past decade to the current Smartphones and tabloids. These developments have caused a substantial drift from PCs to Smartphones even though it is unlikely that Smartphones can diminish the position of PCs (Rasheed et al., 2015). The increased digital lifestyle for consumers only presents an opportunity for new and diverse products, a strategy that many manufacturers are taking.

Sustainable competitive advantage

Apple is able to create their competitive advantage through three key aspects; human, intellectual, and physical positioning. Apple’s employees see themselves as the ‘superstars’ of problem solving hence are motivated to deliver on their innovativeness, skills, technical competency, and marketing capabilities. Through aggressive research and development, apple is a frontrunner in technology revolution. The majority of the assets they have created through research and development are under patents and copyright e.g. their logo, software, and hardware which are the primary source of competitive advantage (Lashinsky, 2013). Success in innovation has led to a powerful brand appeal that Apple has built and sustained based on its value propositions and marketing strategies. Lastly, Apple generates its competitive advantage through its manufacturing and machinery assets and distribution channels which are acquired through its partners (Lashinsky, 2013).

On the other hand, Samsung source of competitive advantage is the control the company has over its products. Unlike Apple, Samsung has control over its manufacturing process therefore; the company can produce and distribute into the market any new products. In addition, through control to the manufacturing process, Samsung has a percent going back into their account for about 65% of all the Samsung parts and accessories sold. The other source of competitive advantage over Apple is the low-pricing strategy for their products which rank on average, at the same quality with Apple, based on specs (Vergara, 2012).

 

Key resource and capabilities

  1. Apple
Resource/capability Valuable? Rare? Imitable? Non-sustainable? Competitive consequence?

(1-competitive parity, 2 -temporary competitive advantage, 3-sustainable competitive advantage)

Performance implications?

(1-average, 2-above average, 3-above average profits

Steve Jobs Y Y Y Y 3 3
Apple stores Y Y Y Y 2 2
Relation with OEMs Y N Y N 1 1
Industrial design Y Y Y N 2 2
Innovation   Y Y N 2 2
Development teams talented Y N N Y 1 1
Tailored products Y Y Y Y 3 3
  1. Samsung
Resource/capability Valuable? Rare? Imitable? Non-sustainable? Competitive consequence?

(1-competitive parity, 2 -temporary competitive advantage, 3-sustainable competitive advantage)

Performance implications?

(1-average, 2-average/above average, 3-above average profits

Chairman Lee Y Y N Y 3 3
Hybrid system Y N Y N 2 2
High skilled personnel Y N N Y 2 3
HR management Y N Y N 2 2
Physical capital Y N N Y 1 1

 

 

It is evidence that the two personalities, Steve Jobs for Apple and Chairman Lee for Samsung have had major impact towards the current success of the two companies. While Apple main strategy is research and development and design of innovative products, Samsung strategy is the hybrid strategy coupled with high speed innovation. Apple’s research and development and design leads to the development of high quality and unique products that have led to the development of a very strong brand (Barreto, 2010). On the other hand, Samsung high speed innovation strategy has led to a broad array of products that fit the wide consumer preferences. Given the high dynamic in the industry as a result of research and development, it is suggested that Apple, which has its research and development geared towards the production of revolutionary products will in the new future be the strong brand with high competitive advantage.

 

Strategic challenges

Apple has over time established strategy or rather a trend of thinner, lighter, and more expensive products for both its Smartphones and Mac. Since the original game-changing products by Apple, the company is now more focused to making incremental improvements to the existing products. Since 2010 when the Apple released its first iPad, the mobile devices market is maturing and even though back then the first release of the iPad was a game changer, the game has changed fundamentally now (Rothaermel, 2012). Even though Apple’s Jobs had dismissed the 7 inch screen, it has through continued research for unmet needs came to be through other companies. This shows that, even though Apple i-series products are considered to be trend-setter in the industry, some of their strategic decisions aren’t holding hence a red queen effect. Even though Apple has been downsizing, it has also had to upsize to meet market needs, especially with the iPod (Leng & Nair, 2012).

On the other hand, Samsung strategic challenge has been slowing down of its high-end smart sales including in the Asian region, specifically in china. Apple has been flourishing with the high-end Smartphones which sale for over $500, Samsung competition strategy to product products at the same price-tag has back-fired with the company getting a decline in profits as a result of declining sales of its Samsung S5 which was the pioneer of the high-end Smartphones (Vergara, 2012; Hsin, 2010). Apple high-end products remain dominant in the majority of the markets where the two companies have their products.

For both Apple and Samsung, the choice of their software i.e. iOS for Apple and Android for Samsung is a strategically challenge. While for Apple it offers the company and their devices a competitive advantage and uniqueness, it is limited in that; it is a challenge to reach the section of consumers who don’t find the software convenient or suitable (Leng & Nair, 2012). On the other hand, Samsung uses android which is a product of Google Inc. and therefore, in addition to being constricted because of lack of independence on the software, there is also constriction, at least not until a new OS is developed, for both companies.

Lastly, litigation is the other strategic challenge that the two companies face. Being at the top of the industries, more often both Apple and Samsung have placed copyright and patent infringement suits for each other. The cost for litigation is the loss of hundreds of thousands of dollars in damages (Vergara, 2012).

 

Solution to the above strategically challenges

The first solution for Apple Red Queen Effect is coupling research and development and design with market research. Just like every other market/industry, consumer preferences reign supreme and they determine the direction of the market. In the mobile and PC industry, while R&D plays a critical role, it must be done to orient the products to known consumer preferences therefore not only enhancing sales, but also avoid loses through disoriented R&D (Barreto, 2010). Apples R&D department has without debate being the most successful in the industry, and even though it is research that determines the direction of future technology, the dynamics can only be determined through determination of consumer needs and preferences.

For Samsung, the diminishing sales for its high-end Smartphones could be solved through market research to determine consumer preferences for the company’s products and not merely as a competition strategy. Conducting a market survey periodically is a sure way to gather the high value data that the company can use not only to determine their next trend in the market, but also to determine how they can improve their existing products to better meet customer needs (Vergara, 2012).

The solution for the software used in their devices, especially their mobile devices, can only be solved through R&D to produce a better and more superior operating system that can deliver better usability to their customers.

Lastly, for both Apple and Samsung to avoid litigation, there are two solutions; first, each of the companies can purse completely new and unexplored fields for example, the recent venture into wearable technology by Apple, and second, acquiring international patents and copyrights to get any infringement dealt with before the products are released so as to avoid the costly litigations not only through the damage awards, but also through the affected products already at the final level of the production chain (Barreto, 2010).

 

References

  1. Apple Inc. (2013). Form 10-K Annual Report. Available from: http://files.shareholder.com/downloads/AAPL/2867919238x0xS1193125-13- 416534/320193/filing.pdf. [Accessed: 20th December 2012]
  2. Barreto, I. (2010). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36(1): 256-280.
  3. Denrell, J., Fang, C. & Winter, S. (2003). The economics of strategic opportunity. Strategic Management Journal, 24(10): 977-990.
  4. Helfat, C.E. & Peteraf, M.A. (2003). The dynamic resource-based view: capability lifecycles. Strategic Management Journal, 24(10), p. 997-1010.
  5. Hong, Y. S. (2012). Modes of Combinative Innovation: Case of Samsung Electronics. Asian Journal of Innovation and Policy, 1, 219-239.
  6. Hsin, C. (2010). The Innovation Strategy of Core Competence and Enterprise Growth–The Case Study of Samsung.
  7. Lashinsky, A. (2013).Inside Apple: How America’s Most Admired—and Secretive—Company Really Works.
  8. Leng, Q. & Nair, P. (2012). The Sweet and Sour Apple: The Case of CEO Strategies at Apple Inc. Vidwat: The Indian Journal Of Management. 5 (1). p. 21-24.
  9. Rasheed, R., Nawaz, R. & Abbas, Y. (2015).SAMSUNG ELECTRONICS AND APPLE, INC.: A STUDY IN CONTRAST IN COMPETITIVE ANALYSIS IN 21ST CENTURY. International Journal of Engineering and Advance Technology Studies, Vol. 3, No.1, 16-26
  10. Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGraw-Hill/Irwin.
  11. Vergara, R. (2012). Samsung Electronics and Apple, Inc.: A Study in Contrast in Vertical Integration in the 21st American International Journal of Contemporary research 2(9)

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