Capstone Project Essay
Apple has been known to be an inherently personal computer company. However, it is also well known that there is no better example of innovative strategic thinking and execution. Apple’s strategy has remained to creating and sustaining value for customers across the world. Jobs returned to Apple in 1997 and the company never looked back since. However, it is also said that Apple lost the pc business because of ignoring the trends in pc industry. Apple’s business strategy is primarily based on innovation for creating differentiated products. It has built products that are cool to use as well as simple and intuitive. Its products are best known for the amazing experience they provide. However, Apple kept taking calculated risks and entered new markets boldly. It was visible in the release of innovative products like iPod, iPhone etc. Inherently it is a pc company and uses its competencies in developing hardware and software for developing effective, efficient and innovative products. In fact, its iPad, iPod, iPhone and Mac are all computers. (Harris, 2010) Apple’s success is mainly the result of innovative technology and design innovation.
In this way we can see that Apple has enjoyed continued success in the market through innovation and matchless design. Apple’s vision is also based on continuous innovation which is visible in the products it makes. Its mission is also to be the leader in the digital revolution by making revolutionary products. We know that Apple is the market leader in terms of most innovative electronic products and the customers’ choice also. The business environment for Apple Company is highly competitive both domestically and globally. (Harris, 2010) However, its products qualify as global products and are preferred by customers all around the globe. In fact it is through innovation that the company has remained a global leader in terms of technology. Its iPhone took the world by storm in 2007. Apple has strong capabilities in product design and engineering as well. In fact the smart phone boom was sparked by Apple through its release of iPhone in 2007. Initially, the market was shaped by the customers in US and other developed markets. However, the growth for smart phone market is now coming from the Asian and developing countries mainly.
However, if anyone is challenging its position then it is Samsung which has emerged as a competitor for Apple. Till a few years ago, Samsung was just trying to catch up in the smart-phone market. Now, apart from being the world’s largest technology company by revenue, Samsung has set Apple on its back foot. It is now trying to overtake Apple. Samsung’s galaxy series became the customer’s preference soon after entering the market. In fact Samsung is considered to be the best when it comes to learning from its competitors. But they also remain customer centered at the same time. In fact Samsung keenly observes what its competitors are bringing to the market. It keeps a watch over the recent trends and does not take much time to release its own version of the innovation. (Nisen, 2013) Apple also has a huge cash pile, but when it comes to taking risks and putting the money behind it, Samsung appears to be far ahead of Apple. Apart from that Samsung also spends a larger part of its revenue on research as compared to Apple. It spends 5.7% of its revenue on research as compared to Apple’s 2.4.
Actually, Samsung is a diverse business that is made of chips, displays and a variety of other technology. Its main benefit to Samsung comes in the form of the ability to compete on price and offering features which others cannot. However, it is important to note that Samsung is more than just a smart-phone maker. It is a conglomerate, a manufacture as well as the world’s largest chip maker. These factors play in Samsung’s favor. Many of the components of the smart phones are made by Samsung itself which gives it a cost advantage. (Nisen, 2013) When we compare Samsung with Apple we can see that Apple relies on external partners, which sometimes also leads to difficulties and delays. Though Apple has a well-managed and futuristic supply chain, yet it does not have the cost advantage like Samsung. One important factor regarding Samsung is that it has provided many lower end options for the developing world. In case Samsung continues to bring game changing products to the market like its Galaxy series, it can move from a close second to being the market leader.
Samsung’s advertising expenditure is also quite high which has really paid it as well. Samsung has been successful domestically as well as globally. Its most products especially the galaxy series has taken the markets in the developing world by storm. (Nisen, 2013) Apple is considered to be the market leader in the computer software and hardware industry. The main reason behind its growth and success over years are the innovative products it has brought to the market. One of the most important strengths of Apple is its incredible brand loyalty. It has a very high number of brand loyal customers. These customers will even line up before Apple stores at night in freezing cold to be the first to lay their hands on a new released iPhone, iPad or Mac. Strong financial strength is also a major strength off Apple. Apart from these things Apple is also known for its strong brand reputation and strong advertising and marketing teams and its retail stores. We already know of Apple as the leading innovator in the mobile device technology. However, apart from the above mentioned strengths there are some weaknesses also.
As analysts have mentioned without Steve Jobs in leadership, the pace of innovation at Apple has slowed down a bit. Recently it also faced problems from its main supplier and producer Foxconn which led to unwanted difficulties and delays. So, its reliance on external suppliers gets to be one of its primary weaknesses. Apart from that Apple operates in a highly competitive industry and the competition sometimes affects its margins also. Its profits are also affected due to similar but low priced offerings from its competitors. Another important weakness which generally goes in the favor of its competitors is that its products are generally high priced. This all has also led to a decline in the market share of the company. However, despite all the above mentioned weaknesses it can certainly not be denied that Apple is a customer focused, futuristic and innovative company and it is certainly due to its focus on design and innovation that the company has a vast array of opportunities open before it.
Its main opportunity lies in the growth of smart-phone and tablet market. Increased demand for iPhones and iPad also brought new opportunities for Apple. With iPad mini the company has also set its foot in the small tablet market. Despite the innovations it has brought till now to the market, the company has still significant room left to innovate further. In fact its opportunities lie in continuous innovation. Release of the TV is also being seen as a great opportunity for Apple to amaze its customers which it does like no one else. However, it is not easy to be and remain the market leader and it holds true regarding Apple also. Apart from that its reliance on external suppliers has also proved a threat for it. Competitors like Samsung have the cost advantage since they produce their parts themselves. This is a major threat for Apple which it cannot afford to neglect. The company is increasingly threatened by the price pressure from Samsung over key components.
Samsung’s main strength lies in its diversified product portfolio. In fact the company has a really large product portfolio which includes mobile phones, tablets, TV, camera, pc, printers and many more items. In most of these product categories Samsung itself holds a significant market share. It is today the number two in terms of market share in the cell phone industry. Not just this Samsung was able to catch Nokia’s market share by superior innovation in smart phones. Apart from that Samsung has also remained ahead consistently in terms of design and innovation. A very important strength of Samsung is that it has been able to take advantage of the markets of growing economies. In fact it has been able to obtain a large market share in the growing economies because of its low end products. Another key strength of Samsung is that most of its products can easily be integrated with various software’s. It is not so with Apple and its devices are generally not compatible with different operating systems.
Apart from being known for its innovation and design, Samsung is well known for its relatively cheap products. Added to all this is Samsung’s global brand recognition. But apart from its strengths Samsung has some weaknesses also. Firstly, it is not as ahead in terms of software and hardware as Apple. It does not have either its specific operating system or software. It is a very important advantage for Apple and to become the number one in the industry Samsung would need to beat Apple. Apart from it, Samsung is focused on making too many products and its profit margins are also very low. Its competitors like Apple are the largest buyers for its electronic equipment’s also. Still there is a large pool of opportunities lying open before Samsung which is mainly due to increased demand for smart phones in the developing economies.
Its galaxy series has been a great hit globally. Apart from that demand for quality products from Samsung has also risen greatly. The expansion of tablet market has also brought new opportunities for Samsung and the company has also obtained large benefits from it. The main threat before Samsung is the fall in the prices of smart phones. Samsung faces increased threats from Apple because of its innovative technology and design also. Apple’s release of ITV is also being seen as a threat for Samsung. Technological change is happening rapidly and Samsung will also need to innovate consistently to remain at the position it is. Price wars as well as decreased margins also bring additional threats for Samsung. Generally companies have to adapt their business strategies and products to different cultures when they are trying to sell to various countries with different cultures.
This is referred to as globalization. However, this thing does not become very important for companies like Apple which sell nothing but innovation. English is a global language and Apple’s designs are generally simple and easy to use. As such Apple does not face great difficulties trying to adapt to various cultures and its strategy roughly remains the same across cultures. As we can see that cultural differences do matter in business. Yet, Apple sells the same iPad in Tokyo as it does in Toronto. (Jacobs, 2010) Instead of competing on localization, Apples competes on the pace of innovation across cultures and countries. It is due to its pace of innovation that today it is a global brand. However, the case is different for Samsung, which is said to design globally but adapt locally for success.
Every day it ships millions of products to customers around the world. Samsung believes that it is important t to understand the local culture to meet the local needs. It is necessary to understand the local culture to understand the customers’ preferences. One important example of its globalization strategy is its establishing of Lifestyle research labs in various countries including UK and India as well as Singapore and China. (Samsung, 2013) Apple has some distinct organizational competencies which differentiate it from others. Its competencies include its business model, corporate culture; focus on customer as well as control of the entire ecosystem. Why Apple is generally able to generate lots of buzz is because of its fastidious attention to design like its founder Steve Jobs. Most importantly it is the ability and practice of putting user experience first that keeps Apple ahead of others. Apple is known for being customer focused and it reflects in the success of its products.
Apple is known for its design and ease of use. Its iPhone is in fact a great example of the same. Apart from innovation and technology there is one other core competency that is the key driver behind Samsung’s success. Samsung believes in building an organizational culture of learning and development. Samsung has also established a work culture that promotes learning and development for its employees. The company has also established a Creative Development Research Institute System to provide its employees with the opportunity to pursue creative ideas. This initiative is aimed at encouraging the employees to develop creative ideas and be more entrepreneurial. Samsung has a highly diversified product portfolio and it is also in more places than Apple. But it sometimes also results in diverted focus. If possible Samsung should try to limit it so that it can focus on specifically important products. Apart from that Samsung would need to invest much more in innovation and design to pull customers off iPhones. It will also need to go beyond marketing and just bigger screens.
Samsung has been concentrating on offering cheap products for the markets in developing countries. Yet it remains to do more on innovation as the technological market keeps changing rapidly. Samsung will need to specifically concentrate on design and better technological innovation. Apple has been winning due to its focus on innovation and design. However, it is not having a very significant advantage which is of producing the components for its iPhones. It is also relying on external suppliers and it leads to difficulties and delays. Apple should especially concentrate on its suppliers. In this backward integration can be highly helpful for Apple. In this way it will be able to have better control over its suppliers which will minimize delays and other difficulties. Apart from that it will also provide Apple with significant cost advantage.
Apple has in fact used forward vertical integration to reach closer to its customers. It has opened Apple stores in multiple countries around the world. Apple is thinking of opening newer Apples stores in the markets it has tapped newly. In fact it does not just bring Apple closer to its customers but is also an example of effective corporate level strategy. The popularity and demand of Apple’s products is high. As a result Apple is trying to reach a larger number of customers through its own stores, since scalpers jack up the prices. However, the strategy that worked in the favor of Apple was that of diversification. Apple diversified itself from computers to consumer digital lifestyle and entered the mobile phone market also. Since then it also brought a vast range of game changing products to the market which became highly successful. In case of Samsung the backward vertical integration strategy has worked. Many of the components that go into the smart-phones are made by Samsung itself and the company also gains significant cost advantage due to it. Apart from that this strategy also benefits it by allowing it higher flexibility in terms of what and when it produces.
In fact Samsung’s business model is based to a great extent on this competency. The corporate governance structure of Apple is designed keeping in mind effective decision making as well as appropriate monitoring of compliance and performance. The board of directors at Apple oversees the CEO and the senior management. This monitoring is done in order to ensure ethical and operation of Apple Inc. In fact it is an efficient method to monitor that the top management is working ethically and properly. Apart from that this method also ensures that there are no frauds or manipulations as well as prevents any problem at the corporate level. Apart from that the board also conducts a self-evaluation to find if the board and its committees are working properly. The compensation committee does an annual review of the executive performance including the CEO. This review is also evaluated by the board to ensure the CEO is providing effective leadership to the company.
The board of directors at Samsung is composed of seven members of which four are external directors. This ensures the independence and transparency of the board’s decisions. The board of directors also meets regularly to discuss management issues and other important things. The directors are not allowed to engage in business activities in the same industry without approval from the board. It has been done especially to minimize any risk of conflict of interest or unethical behavior. Samsung is a company considered to be over hierarchical and also to be dominated by its founding family. There has been significant criticism of its governance structure. Firstly, the company should stop its owner centered managing system since due to it the company cannot remain independent of its chairman. The rights of minority shareholders as well as economic justice get eroded in this system. Samsung will need to change this structure. (Kim, 2012) The company should follow a structure where there is more transparency related to ownership.
Apart from that to improve its profitability and sustain its position, Samsung will need to invest more and move further in terms of innovation. It will also need to move its focus from products to customers. In case of Apple, it will need to adopt its business strategy to obtain cost advantage like Samsung. One major drawback of Apple is that its products are very costly generally. In this regard Apple should go for backward integration to obtain significant cost advantage. Apart from that the company should continue to focus on innovation and design to remain competitive. Apple has been using forward vertical integration successfully but it also needs to use backward integration for further success and managing costs. Pressure from competitors like Samsung is rising and company will need to be focused on managing the price issue to beat the competition. The smart phone market is currently driven by two factors.
These include large screens as well as cheap products. However, Apple currently provides none of these. Despite not being the most attractive segment cheap devices still drive the sales volume. A number of second tier Asian brands have also started eating into Apple’s market share. The fight between Apple and Samsung is going to be really hard. Apart from it both companies will also have to fight hard for their respective positions in the market against the emerging challengers. Apple’s target continues to remain the high end market. It has still held itself from releasing a low cost product since it may eat into its profitability. Currently, Apple and Samsung are the only vendors who have their market shares in double digits.
Yet, their combined market share fell in 2013 which denotes that the road ahead is going to be tough. Still, the two are the most dominant players in the global smart phone market. In fact the decline was largely due to inability of Apple to grow according to the broader smart phone market. However, it is still the market leader. (Osawa & Grundberg, 2014)
But on the other side it cannot be denied that Samsung has been inching closer through its strategy of innovation and price competition. In fact if Samsung is able to manage its winning spree as it did in case of Galaxy smart phones, it will grow at faster pace than Apple. Apple would have to pay attention to certain other things also apart from differentiation through design and innovation to retain its leadership position. Still, taken together these companies seem to be dominating the smart phone market and will continue to for the coming years.
Nisen, M. (2013). Samsung Has A Totally Different Strategy From Apple, And It’s Working Great. In Business Insider. Retrieved September 6, 2014, from http://www.businessinsider.in/Samsung-Has-A-Totally-Different-Strategy-From-Apple And-Its-Working-Great/articleshow/21250813.cms
Jacobs, E. (2010). Navigating cultural differences. In Financial Times. Retrieved September 6, 2014, from http://www.ft.com/cms/s/0/f3e2f464-937e-11df-bb9a 00144feab49a.html#axzz2w9RbDZqJ
Samsung Designs Globally and Adapts Locally for Worldwide Success (2013). In Samsung. Retrieved September 6, 2014, from http://global.samsungtomorrow.com/?p=28148 Osawa, J., & Grundberg, S. (2014). Apple’s Smartphone Market Share Drops as Samsung’s Edges Up. In Wall Street Journal. Retrieved October 16, 2014, from http://blogs.wsj.com/digits/2014/01/28/apples-smartphone-market-share-drops-as-samsungs-edges-up/ Harris, M. (2010). New Product Markets…create and dominate them Apple style! In Harconllc. Retrieved September 6, 2014, from http://harconllc.com/wordpress/wp- content/uploads/2013/04/DominateMarketsAppleStyle.pdf
Kim, L. (2012). Samsung’s family battles over corporate governance, will it be a risk? In Quamnet. Retrieved September 6, 2014, from