Comparing Strategic Marketing of Samsung and Apple - Essay Example

RUNNING HEAD: Samsung and Apple Student Name Degree Title Module Code Word Count [2553] Table of Contents Table of Contents 2 Executive Summary 3 Introduction to Companies 4 External Environment 5 Factors influencing the level of industry attractiveness 5 PESTEL ANALYSIS 6 Political 6 Socio-Cultural 6 Technological 6 Economic 6 Environmental 6 Competitive Strategy 7 Porter five forces 7 The threat of potential new entrants (Low) 7 The threat of substitutes (High) 7 The bargaining power of buyers (High) 7 The bargaining power of suppliers (Low) 7 The intensity of competitive rivalry (High) 7 Resource-based View 8 Strategic Rationale For Global Development 8 Ansoff Growth 8 Product Diversification 8 Market Development 9 Product Development 9 Market Penetration 9 Methods Used To Expand Globally 9 Conclusions and Recommendations 12 Summary of the current strategic position of the companies 12 SMART recommendations 12 Specific 12 Measurable 12 Achievable 12 Realistic 13 Time Scale 13 List of References 14 Executive Summary With improved technology, the mobile world industry has always been going through rapid changes and expansion and is currently serving over 4.5 million people across the globe. The increase in need of communication and the need to define class has seen people wanting to own gadgets that are of high-end technology. This is also in line with the fact that mobile phones and other related devices are nowadays becoming increasing used for business, communication, and entertainment purposes. The industry grew rapidly after Motorola Company first developed a mobile phone device that would successfully pick signals and work efficiently outside a vehicle in 1973. Later on in 1979, Japan launched its first countrywide mobile phone network before United States followed suit later in 1983. Since then, players in the mobile phone industry engaged in serious marketing strategies, expanded their production to other devices like televisions and cameras, and developed new technologies to always come up with products of high quality and more enhanced features. This is for the intend of controlling more market share. Globally, Samsung and Apple Inc. are among the largest world players in the electronic industry. Although Nokia and Motorola are major partners in the mobile industry, Samsung and Apple companies produce products that touch across several industries and therefore would be impossible to analyze them with Nokia and Motorola, which only major in mobile phone industry. This analysis will focus comparison of strategic marketing of Samsung and Apple with more concern to the former. This research involves the analysis of external environmental factors that affect the attractiveness of the industry, competitive strategy, rationale for global development, and expansion. Introduction to Companies Samsung Company boasts of being among the world leaders in the production and distribution of consumer electronics and is among various household names across the globe. The company was founded in 1939 as a family business name and been run as a family business since then. Although its management is based on family, its management has been successful and is a good definition of the business landscape across the globe. Although its headquarters is based in Seoul, the company has business stores and outlets in over 100 countries across the world. The company also forms the largest group of conglomerate group of companies in the world, contributing approximately 20% of South Korea’s exports (Hovers, 2006). Likewise, on the other hand, Apple is also among the most successful corporations in the world that focuses on the design and manufacture of household electronics. In addition, of all its products for instance, the most successful product for Apple is the iPod, which sold over 170 million products within 7 years (Jeffrey et al, 2005). After its foundation in 1976 by Steve Jobs and others, has undergone various changes that have seen the company now boast of being the world’s second largest IT company after Samsung and the world’s third largest mobile phone supplier after Samsung and Nokia respectively. The success of Apple is attributed to its consistency and effectiveness of its marketing strategy (Jeffrey et al, 2005). However, Samsung has developed serious and effective marketing strategies that see more successful than Apple. External Environment Factors influencing the level of industry attractiveness Across the globe today, as US Federal Communications Commission reported, the use of landline phones has sharply decreased by close 30 million users in the last five years. This is majorly because individuals can get more minutes on the cell phone than landline. The use of domestic electronics is offering users a number of opportunities that were earlier unforeseeable. Cell phone technology, without mention, has greatly infiltrated the teenage population like bush fire. Teenagers across the globe are thirsty of new technologies and super designs of handsets that define their ego and stance, not to forget the need for fashion and identity. This means that the cell phone and electronic industry are attracting new markets in the teenage population (Jonathan & Chung-Shing, 2006). The new culture of Short Message Service is also becoming a popular way of communication. PESTEL ANALYSIS Political Samsung faces significant political risks in the countries where it operates though in the majority of the countries, the political situation is conducive to the operation of the country. Socio-Cultural Despite being a South Korean based company, Samsung has managed to integrate itself well in the emerging markets where it does business. This has resulted in a think global, act local mindset that has effectively bridged the cultural and social gap between its home country’s business landscape and the markets where it operates (Hovers, 2006). Technological As has been mentioned elsewhere in this paper, the company prides itself on its innovative approach to technology and harnessing the same for rolling out products that use cutting edge technologies in their design and features. Economic Samsung certainly follows good strategies in the markets it operates based on the economic size and the strength of the consumers in terms of variables like disposable income (Porter, 2008). Environmental The Company has started to be conscious of its environmental and social obligations as evidenced in its approach to CSR and “green policies”. Competitive Strategy Porter five forces The threat of potential new entrants (Low) Entry to the domestic electrical industry is quite expensive and needs a lot of capital before one enters it. According to Chang et al (2012, p. 12), it is not an easy task for a new firm to enter into an industry when the existing firms are already operating under high costs. However, it is possible that consumers can easily find alternatives of domestic electronics because of the rapid commoditization of parts. Market differentiation is another factor for consideration. The threat of substitutes (High) For Samsung, almost domestic electronics and cell phones that perform the same functions and possess features such as those installed in Samsung phone products could be considered a substitute and thus threaten the success of the corporation (Porter, 2008). The bargaining power of buyers (High) Just like buyers of any other commodity, buyers of domestic electronics usually have good leverage and high bargaining power resulting from first-hand information of available products and their competitive nature (Sangmoon & Youngjoon, 2006). Buyers therefore can easily switch brands according to the prices of the market or when looking for a specific feature that may be new in the market. The bargaining power of suppliers (Low) In Samsung’s case, does not pose any serious threat to the success of the corporation. The corporation supplies also its main raw materials. The intensity of competitive rivalry (High) There are many competitors in the domestic electronics industry. This therefore implies that Samsung Corporation faces a lot of rivalry from its competitors (Lero, 2010). Resource-based View The company’s potential resources include rare earth materials used in making Smartphones and other electronic devices. Although the resources are equal to those of competitors, Samsung does not invest much on its resources and hence reduces its production cost. Therefore, it can be argued out that its resources are valuable. This supported by the fact that such resources are also rare. Samsung also controls a wider source of its resources and thus making it a good competitive advantage (Peteraf & Barney, 2006). Furthermore, it is not possible for Samsung’s competitors to imitate its resources to a point of offering serious competition to the company. However, although the company’s resources are valuable, rare, and inimitable, it is possible that it is non-sustainable. This is because it is possible for companies to acquire substitute resources to counter the company’s value-creating strategy. Strategic Rationale For Global Development Ansoff Growth Since most of Samsung products exist in an existing market, the use of Ansoff’s Growth would help unravel growth dimensions such as proposed in the tool. Product Diversification The product range of Samsung corporation is from contemporary products to high-tech products The corporation also ensures product diversification to ensure that all market segments are covered Market Development Product Innovation is facilitated by the use of high-end technology Market development is also achievable through customer satisfaction Upgrading technology helps in market development The corporation also tweaked its technology to concentrate on the middle class market segment (Lero, 2010) Product Development Samsung Corporation has research and development center situated in Noida RT 25 and RT 28 models of high tech refrigerator are among the company’s latest development (Cho & Pucik, 2004) Features offered by these are Cool Pack, toughened glass shelves and high versatility compressor Market Penetration Samsung company aims at reaching wider markets The company’s Dream Home Road Shows are also an important component to improve market penetration Samsung strategy to expand its sale networks also helps in improving market penetration Finally, the Samsung Marketing Academy Is another important strategy for market penetration Methods Used To Expand Globally The first approach adopted by the Samsung Corporation is its ability to build layers of advantages, which helps the corporation to have a continuous expansion of competitive advantage, that include the addition of global brands. The corporation has been adopting this approach successfully for the past three decades. With a poor endowment of resources, Samsung’s primary strategy was to develop a platform for growth, which highly differs from that of Apple and other competitors. In 1970 for instance, the corporation aimed at acquiring companies in the Western and Japan markets that invested in technology and production of systems (Sangmoon & Youngjoon, 2006). This allowed the corporation to acquire some competitive advantage. To achieve these platforms, Samsung decided to widen its production progressively in systematic “reverse order”. This is even supported by the corporation’s ability to enter new market segments that can enable it to compete comfortably in technology. For example, Samsung entered the television segment after it realized that it was in the declining trend in most developing countries before taking advantage of its cheap labor cost. The company later entered the color television market, which was already in its advanced stages. In the color television market, Samsung narrowed down its production into VCRs and microwave ovens that was in high demand in the early 1980s (Lee & Dick, 2006). Another important strategic move was in 1990s when the company chose to enter the DRAM and DVDs industry, which was at their introductory stage. The second approach to competitive advantage by Samsung is to concentrate research on loose bricks and surprising rivals by controlling large and undefended territories of theirs. To company also went through reverse engineering to ensure that it acquires the necessary technology for its products. This is evident with a period when Samsung entered joint ventures with various computer companies; in 1971 the company has a successful joint venture that saw it join efforts with Sanyo to produce the first set of televisions; microwave oven production resulted in a joint venture with Toshiba late in 1981 (Lero, 2010). It is therefore important to note that Samsung uses an approach of carefully studying and exploring the critical technologies used by key competitors to enrich the company’s productivity and development in the global arena. Along this process, Samsung decided to strategically position itself as a low-end commodity product supplier, since its first commodity, monochrome televisions was a very dormant brand in the market but highly price-elastic. Throughout its expansion into color TVs, VCRs, Microwave segments, and DRAMs, Samsung maintained its low-end commodity product supplier. This approach is an indicator that the Samsung Corporation aims to set a base for attack outside the market where competitors are highly concentrated to foster its growth globally (Cho & Pucik, 2004). The third approach adopted by Samsung is its idea to redefine the rules of engagement with its competitors in the market. Samsung refuses to define the industry and market segments involved in the same way its competitors do. For instance, the television segment was a very wanting declining trend by the time Samsung entered it. It was therefore a risky idea to join a market segment that was already declining. However, Samsung chose to create space for itself within the television industry by joining it far much earlier than its competitors join. Furthermore, Samsung was quick in making investments in the LCD market segment in the early 1990s when it realized that its Japanese competitors were unwilling to invest in the segment (Sangmoon & Youngjoon, 2006). Until to-date, Samsung maintains the global lead in LCD revenue and distribution. The final approach adopted by Samsung for its competitive innovation is a strategic measure that aims at calibrating competitor’s strengths and weaknesses. Surprisingly, it is a fact that the company entered the consumer electronics industry with little experience with technology and little knowledge. However, due to a strategic move to sign agreements with the then competitive companies such as Philips and Toshiba that controlled the manufacturing and distribution patent rights, Samsung introduced reverse engineering and integrated its competitor’s technology for its benefits. The company also acquired already successful companies and formed some strategic alliances with its key competitors to speed up the rate of innovation and global growth. For example, in 1994, Samsung acquired 100% of LUX of Japan and has technology sharing agreements with other competitors like Motorola, Toshiba, and Philips among others (Jonathan & Chung-Shing, 2006). The company also improved its levels of technology in the 1990s to match those of competitors. This would allow the company to have an improved opportunity for negotiations with other competitors on an equal basis and removed the company’s image of “junior company”. Conclusions and Recommendations Summary of the current strategic position of the companies The market positioning reveals that Apple and Samsung are key players in the domestic electronics industry, while competitors fight over the leftovers. However, Samsung holds a larger share of the market when compared to Apple. This market dominance by Samsung is attributed to its progressive strategic marketing plans that put the company above its competitors. The production of high quality products and Samsung’s ability to control its raw materials such as scandium, cerium, terbium, neodymium, and yttrium, offers a great competitive advantage to the company. Research indicates that Samsung is strategic in entering new market segments that its competitors would otherwise consider risky. 3D gaming for instance is a market segment that is now picking up strong among the youth and is likely to be more profitable. In fact, Microsoft Corporation was quick to sign partnership with Samsung for the market segment. SMART recommendations Specific It is recommended that Samsung Corporation should continue expanding its markets to new market segments instead of concentrating on profitability. This is possible since the corporation has the resources and ability to do so. Measurable Expanding its market share to at least 30% in the industry would be very sufficient for the company. By attaining this percentage of market share, the company is certain to achieve its goals and objectives. Achievable Before setting a 12-month period for the company to achieve its objectives, it should conduct research and review of its resources, employees, competitors, and the current market share so that increase to 30% can be achievable. Realistic Marketing strategies of the company and its past trends of expansion are a good indicator to show that the objectives and targets of the company are realistic. Time Scale With the past growth and development of the company in the global arena, the achievement of 30% market share is achievable within 12 months. List of References Chan, J et al., 2006, Cell Phone Industry Analysis, viewed 11th April 2013 from http://www.csus.edu/indiv/h/hattonl/industryanalysis.doc Cho, J & Pucik, V 2004, Reliability and validity of the Fortune Reputation Survey: measuring innovativeness and quality, Working paper 2004-6, IMD. Hoovers 2006, “Samsung Electronics Co., Ltd, viewed 11th April 2013 from http://hoovers.com/samsung-electronics/--ID__55277--/free-co-factsheet.xhtml Jeffrey, S et al, 2005, icon Steve Jobs: The Greatest Second Act in the History of Business, New York, John Wiley & Sons. Jonathan, C & Chung-Shing, L 2008, The DNA of Industrial Competitors, Research Technology Management, vol. 51, no. 4, p. 17-21. Lee, T & Dick, J 2006, Samsung, Others Adopting Value Innovation, Research Technology Management, vol. 49, no. 5, p. 5-8. Lero, N 2010, A Brief History of the Samsung Company, viewed 11th April 2013 from http://www.articleclick.com/Article/A-Brief-History-of-the-Samsung-Company/990103 Peteraf, M & Barney, J 2003, Unraveling The Resource-Based Tangle, Managerial and Decision Economics, vol. 24, no. 4, p. 167-89. Porter, M 2008, The Five Competitive Forces That Shape Strategy, Harvard business Review, Vol. 86, no. 1, p. 78-93. Sangmoon, P & Youngjoon, G 2006, How Samsung Transformed Its Corporate R&d Center, Research Technology Management, vol. 49, no. 4, p. 24-28. Read More