Current competitive strategies of Samsung and Apple

Categories: Apple Inc Business Mobile Phone

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Both Samsung and Apple are the largest manufacturers of smart phones in the world.

Combined, the two technology giants’ account for more than half of the Smartphones sold world wide. Traditional cell phones had very limited computing abilities. Many of them were designed to offer basic services like making and receiving calls. As time went by, the need for mobile devices with superior computing abilities increased as technology became a major part of modern life.

More importantly, there was demand for mobile phones that could offer the same services as a computer.

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Although the mobile phone market was traditionally ruled by companies like Nokia and Motorola, Apple took over the market when it launched its iPhone Smartphone in 2007. This product became very popular with customers due to its large touchscreen and multi-touch user interface.

Even though the company dominated the Smartphone market for some time, it has come under increasing competition from Samsung through its Samsung galaxy product line (Apple, 2013). Through massive advertising coupled with unique features, the Samsung galaxy has overtaken the iPhone to become the most popular Smartphone brand in the world. This fierce competition between these two technology giants has resulted in endless court battles in the United States and Europe, among other places. This paper will look at the current competitive strategies used by each company and what each of them needs to do to improve their competitive position in the future.

More importantly, there was demand for mobile phones that could offer the same services as a computer. Although the mobile phone market was traditionally ruled by companies like Nokia and Motorola, Apple took over the market when it launched its iPhone Smartphone in 2007. This product became very popular with customers due to its large touchscreen and multi-touch user interface. Even though the company dominated the Smartphone market for some time, it has come under increasing competition from Samsung through its Samsung galaxy product line (Apple, 2013). Through massive advertising coupled with unique features, the Samsung galaxy has overtaken the iPhone to become the most popular Smartphone brand in the world. This fierce competition between these two technology giants has resulted in endless court battles in the United States and Europe, among other places. This paper will look at the current competitive strategies used by each company and what each of them needs to do to improve their competitive position in the future.

The current competitive strategy of each company

On top of being bitter competitors in the Smartphone market, Apple and Samsung use different competitive strategies. As the pioneer producer of Smartphones, Apple uses the blue ocean strategy. In the early 2000s, the cell phone market was mainly made of phones with basic applications. This meant that companies assessed what their competitors were doing and strived to improve on it so that they could gain a competitive strategy. Such a strategy was not good for business because it meant trading off cost and value (Mourdoukoutas, 2012). However, Apple decided to create a new demand in a market that no any other company ventured into. This was done through the use of the blue ocean strategy.

As noted above, there was no any other company that was producing Smartphones at that time Apple was in total control of the Smartphone market. Within a short time, Apple became one of the most profitable companies in the United States and the world at large (Gustin, 2012). However, Steve Jobs and other senior managers at the company were well aware of the fact that the company was under threat of new entrant due to its profitability. This strategy made the company immune from the porter’s five forces. The main competitive strategy of Apple Inc is developing new and innovative products that blend technology and art.

Unlike Apple Inc, Samsung uses the red ocean strategy. In this type of strategy, a company gains competitive advantage by venturing into an existing market and building on the weaknesses of its competitors. As noted above, Apple was the pioneer company in the manufacture of Smartphones. Through its flagship iPhone product line, Apple rose to become the largest cell phone company in the world. Unlike Apple, the main competitive strategy of Samsung is flooding the market with many products that are developed within a short time. This is very different with Apple which takes a lot of time before it launches a new product into the market. This strategy has been made possible by the fact that Samsung develops many of the components that are used in making its Smartphones. This gives it a huge cost advantage over Apple which relies on external suppliers. However, the red ocean is disadvantageous because it makes a company vulnerable to the porter’s five forces.

What each company is doing to improve its current competitive position

There are a number of steps that both Samsung and Apple are taking to improve their current competitive strategies. As noted earlier, Apple Inc dominated the Smartphone market for many years before it was eventually overtaken by Samsung. The loss of market share to Samsung has forced the leaders at the company to come up with ways of improving its competitive strategy. The first step that Apple is taking to improve its current competitive position is focusing more on improving the existing products compared to coming up with new ones (Gustin, 2012).

In the past, Apple invested huge sums of money in research aimed at coming up with new and unique products. Moreover, it would take a lot of years before the company released any new products into the market. However, the company pays more attention to improving its existing products. For example, the iPhone 5 did not have any tangible innovation. Instead, the company improved iPhone 4 by increasing its size among other innovations (Travlos, 2012). In addition, the company is investing in developing its components instead of buying from external suppliers. This will help Apple come up with products with unique features compared to their competitors.

As noted above, the main competitive strategy of Samsung is building on the weaknesses of its competitors. In this strategy, the company waits for its competitors to come up with a product after which it develops its own with improvements on the one of its competitors. The first step that Samsung is taking to improve its current competitive position is investing more money in research. Compared to Apple Inc, Samsung invests 5.7% of its total revenues in research. This strategy is aimed at ensuring the company comes up with unique products so that it may not be seen as a copycat. The second action that Samsung is taking to improve its competitive advantage is investing heavily in advertising. As noted earlier, the main competitive strategy used by Samsung is flooding the market with different types of products that are targeted at different types of consumers. This is a huge contrast to Apple Inc. which releases few but highly anticipated products. To improve its current competitive advantage, Samsung has raised its advertising budget to $401 this year compared to $78 last year. This is $68 more than Apple Inc.

Likely moves or strategy shifts that Samsung and Apple Inc will make

In the coming years, both Samsung and Apple Inc. are likely to witness shifts in their competitive strategies. Such changes will mainly be necessitated by heightened competition in the Smartphone market and the dynamic natures of the mobile phone market. As noted earlier, the main competitive strategy of Apple Inc. is developing new and innovative products that blend technology and art (Stein, 2012). The company controls the release of new products into the market unlike its main competitor, Samsung. Although this strategy helped the company rise to dominance of the Smartphone market in the early 2000s, there is need to institute a strategic shift. On top of investing heavily in research and coming up with unique products, Apple is likely to start developing a variety of products to meet the needs of different types of consumers. One of the main weaknesses of the current competitive strategy used by Apple Inc. is that it results in products for the rich in the society. This makes the company miss on the remaining portion of the cell phone market. Moreover, Apple will also need to invest more in advertising.

Samsung has overtaken Apple Inc. as the largest Smartphone manufacturer in the world. This growth can be attributed to the company’s competitive strategy of flooding the market with many products that are developed within a short time (Haydn, 2013). Moreover, the products of the company are relatively cheap compared to those of its main competitor, Apple Inc. As pointed out earlier; the other main competitive strategy of Samsung is building on the weaknesses of its competitors. In this strategy, the company waits for its competitors to come up with a product after which it develops its own with improvements on the one of its competitors. However, this strategy may backfire in the future because it will make the company to be seen as a copycat. With this in mind, Samsung is likely to shift its competitive strategy from playing second to its competitors to a dominant force in research as well (Powell, 2001). This means that the company will need to invest more in research and come up with products that are revolutionary and game changing. However, measures should be put in place to ensure that products don’t take long before being released into the market.

Where each company is most vulnerable

The first major weakness of Samsung as a company is lack of innovation in its products. As noted earlier, Samsung thrives by waiting by for its competitors to come up with a product after which it develops its own with improvements on the one of its competitors. This strategy makes the company vulnerable because in future, people may begin to see it as a copycat. The technology industry is very competitive and customers love companies that develop new technologies compared to those that improve on what is already in the market (Powell, 2001).

However, this should not be confused to mean that Samsung does focus on innovation, instead it means that the company is less proactive in coming up with new products. The other vulnerability of Samsung is that serves a mass market compared to Apple Inc. which caters for a niche market. The need to attract a large market forces it to set low prices for its products compared to Apple Inc. and this pricing strategy makes the company vulnerable. Although low pricing has helped Samsung win over a large share of the market, it makes the company vulnerable to being seen as offering low quality product by some customers.

Many customers, especially in the United States and other developed countries, usually perceive low priced products as of low quality. Finally, lack of creativity makes the company vulnerable (Haydn, 2013). Many of Samsung’s Smartphones do not have a user friendly interface compared to those of its competitors. This may make consumers in places like the United States demand for lower prices therefore affecting the profitability of the company.

As noted earlier, Apple Inc, Apple Inc. does not target the mass market but rather a niche market. The majority of the company’s products are mainly meant for the affluent in the society. Based on this, the first weakness of Apple Inc. is lack of product diversification. Apple has only one product line, the iPhone. This makes the company vulnerable to saturating its small market. Moreover, the failure by the company to segment its market also makes it vulnerable. Some of the most successful companies in the world have products for every segment of the market including the wealthy and the poor.

What competitive moves will provoke the greatest and most effective retaliation by each company?

As pointed out earlier in the paper, both Samsung and Apple Inc. have unique competitive strategies. The competitive strategy used by a company is important because it determines its position in the market as well as its profitability. The first move by Apple Inc. that would provoke the largest retaliation by Samsung is the production low end products. As noted earlier in the paper, Samsung has mainly survived by producing different products for different sections of the market (Powell, 2001). Based on this, any move by Apple Inc. to come up with products for the low end market would provoke retaliation from Samsung. The second move by Apple Inc. that would provoke retaliation by Samsung is lowering the prices of its products. Apple Inc. is famous for producing innovative products that blend technology and art. These products are sold at a premium price.

On the other hand, any move by Samsung to come up with revolutionary and game changing products is likely to provoke retaliation from Apple (Haydn, 2013). As pointed our earlier, Apple Inc. has been depending on this strategy since the time it was founded. Any move by Samsung to invade this territory would attract a serious technological retaliation from Apple Inc. Moreover, Apple survives by serving a niche market. Based on this, any move by Samsung to do away with its mass market strategy and adopt a niche market strategy is likely to provoke a serious retaliation from Apple Inc.

My recommendation on whether the two companies should continue with their current competitive strategies or should modify them

The current competitive strategies used by both Samsung and Apple Inc. have both advantages and disadvantages. As noted earlier in the paper, Apple Inc. was the largest producer of Smartphones in the world before being overtaken by Samsung. Based on this I would suggest that Apple Inc. modifies its current competitive strategy so that it can retain its rightful place in the Smartphone market. First, Apple Inc. should consider conducting market segmentation to ensure that they serve all segments of the market (Mourdoukoutas, 2012). Currently, the company only serves one section of the market. My second recommendation for Apple Inc. is that it should consider instituting product diversification. At the moment, the company offers the iPhone product line only. Finally, the company should invest in producing its own components so that it can shorten the time it takes to develop new products.

Likewise, Samsung should consider modifying its current competitive strategy. This is despite the fact that it has propelled the company to the position of number one Smartphone manufacturer in the world. To begin with, Samsung needs to modify its current strategy and lay more emphasis on innovation. If nothing is done, the current strategy puts the company at risk of being seen as a copycat by customers. Secondly, Samsung should modify its current competitive strategy and revise its prices upwards because some customers associate low prices with low quality.

References

Erica Olsen (2012). Strategic Planning Kit for Dummies, 2nd Edition. John Wiley & Sons, Inc.Gustin, Sam (2012). Why Apple Is Winning: Innovation, Opportunity and Execution. TIME.com. TIME, 25 Apr. 2012. Web. 05 Nov. 2012. <http://business.time.com/2012/04/25/why-apple-wins-innovation-opportunity-and-execution/>.

Haydn, Shaughnessy (2013). What Makes Samsung Such An Innovative Company? . Forbes. Retrieved from < http://www.forbes.com/sites/haydnshaughnessy/2013/03/07/why-is-samsung-such-an-innovative-company/ > .Web

Mourdoukoutas, Panos (2012). Can Microsoft Adopt Apple's Business Model? Forbes. Forbes Magazine, 10 Oct. 2012. Web. 15 Oct. 2012. <http://www.forbes.com/sites/panosmourdoukoutas/2012/10/10/can-microsoft-adopt-apples-business-model/>.

Powell, Thomas C. (2001). Competitive advantage: logical and philosophical considerations. Strategic Management Journal 22 (9): 875–888

Stein, Scott (2012). IPhone 5 Review: Finally, the IPhone We've Always Wanted." CNET. CNET, 4 Oct. 2012. Web. 05 Nov. 2012. <http://www.cnet.com/iphone-5/>.

Travlos, Darcy (2012). Apple: Product Commoditization? Forbes. Forbes Magazine, 15 May 2012. Web. 15 Oct. 2012. <http://www.forbes.com/sites/darcytravlos/2012/05/15/apple-product-commoditization/>.

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