Apple vs Samsung: Competitive Dynamics
Synopsis
When Apple Inc., unveiled its latest smartphones iPhone 6 and iPhone 6 Plus in September 2014, industry experts, opined that Apple might finally have the right ingredients to sap the advantages of Samsung’s Galaxy line of smartphones and reverse Samsung’s fortunes. Devices that combined telephony and computing – the mobile phones/smartphones – were first predicted/conceptualized by the legendary inventor and electrical engineer, Nikola Tesla in 1909. In 1996, Nokia launched its ground-breaking product, the Nokia 9000, which was the first smartphone. Since then, the smartphone market has been growing rapidly. The Nokia 9000 Communicator was a combination of an HP-made PDA (Personal Digital Assistant) and a Nokia-made traditional phone.
Apple redefined the modern smartphone, when it launched its iPhone in 2007. It also created a new ecosystem of ‘inclusive’ suppliers. However, since 2010, Samsung’s share of the smartphone market zoomed to 31% past Apple’s 15%. The fight between these two giants had rewritten the rules of the smartphone industry and made the other companies’ (like Nokia, Motorola and BlackBerry) products irrelevant. While Value-driven Apple’s market share (in terms of handsets sold) is lesser, the margins are industry-highest. The Volume-driven Samsung’s market share is highest (at 21% in Q2, 2015) while its margins are way below Apple’s. However, with Apple’s iPhone 6, Apple is expected to regain the lost ground. Can iPhone 6 reverse the market share trend in favor of Apple?
This case flyer helps the students/participants to understand the competitive strategies of two of the biggest players (Apple and Samsung) in the smartphone industry and their influence on the industry’s competitive dynamics.
Prerequisite Conceptual Understandings/Before the Classroom Discussion
The participants/students should be conversant with the following concepts/business ideas that can help understand the underlying learning outcomes of this case flyer.
• Andrew S. Grove’s Segment Zero
• Technology Life Cycles and ‘S’ Curve
• The ingredients of a smartphone
Case Positioning and Setting
This case flyer can be used in an MBA Program for Business/Corporate Strategy for either of the following concepts/theoretical constructs/discussion modules:
- • Industry Analysis – How smartphone industry’s competitive dynamics are shaped up largely by two dominant players and with low entry barriers and easily accessible operating systems, etc., how the innovations, etc., have altered the smartphone industry’s landscape
- • Firm’s Strategy – How a focused and clearly positioned strategy can create an unique position
- • Strategy vs Structure – To debate on whether structure shapes the strategy or whether strategy can shape the structure
Suggested Orchestration
Smartphones have become an integral part of our lives because of its ubiquitous nature – it, practically, is a device that enables a multitude of functions. In addition, the technological developments in the smartphone industry and the demand for better smartphones had triggered a stiff competition among the players. There are many players, but Apple and Samsung, which have developed different manufacturing ecosystems for themselves that gives them a competitive advantage, dominate the industry. The case flyer questions try to analyze the competitive strategies of these two players and their strategies that have shaped the industry dynamics. The classroom discussion was carried out as presented in Exhibit (TN)-I..............
Case Flyer Analysis and Discussion
I. Smartphones: Personal Preferences and Patronage
Before taking up analysis of CSF’s of the smartphone industry, the industry dynamics, and the competitive strategies of Apple and Samsung, the students/participants, thorough this section, could be sensitized to the perspectives and preferences of the smartphone users.
1. What is the first thing on your mind (or you use) as soon as you wake up in the morning – is it the washroom, wardrobe, TV remote control, smartphone, coffee or anything else?
Out of the 56 students/participants present in the class, 45 said that their smartphone was the first thing they would check as soon as they wake up in the morning. They use it for checking/sending messages from/to their family and friends, make calls, browse information, etc.
2. How many of you use smartphones? If yes, which brand and model?
Almost all the students/participants present in the class said that they use smartphone. Samsung Galaxy, LG, Lenovo, Microsoft Lumia, Micromax, Sony Experia and Motorola were the most-used smartphone brands and models. However, only a few used iPhones.
This shows that the students/participants or the consumers of this generation (the millennial) were very much brand conscious. It was also observed that, even if they had brought smartphones from lesser-known brands, they used the latest model available in that brand.
3. Why did you choose to buy the particular brand/model?
The following were the reasons the students’/participants’ chose to buy that particular brand/model:
• Brand image
• Features (hardware, software and applications capabilities)
• Price
4. What were the most important deciding factors to buy the particular brand/model?
The following were the factors that influenced the students’/participants’ decision about the brand/model they brought:
• Usage/performance of the phone to accomplish the needed tasks
• The social status
• Fear of loss (who brought the low-end/cheaper smartphones)
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Exhibits
Exhibit (TN)-II: Differences between Smartphone and Feature Phone
Exhibit (TN)-III: Competitive Dynamics of the Global Smartphone Industry
Exhibit (TN)-IV: Market Shares of Smartphone Vendors (in %)
Exhibit (TN)-V: Apple’s Operating Margin 2013
Exhibit (TN)-VI: Apple Pay vs Android Pay/Samsung Pay
