Samsung and Apple are the giant companies in the mobile phone industry, with each of them engaging in all the measures possible to outdo the other in terms of market share. At a point, the two have been found locking horns in law suits concerning infringement of patents among other issues. Both companies are very careful in the strategies they employ to ensure that they meet the needs of the consumers and improve their profitability. It is clear that Apple’s target market majorly comprises of the affluent, while Samsung aims at meeting the needs of the mass market, which constitutes both the affluent and the low income earners. As such, apple majorly focuses on product differentiation in order to meet the needs of the target market, which have not yet been met by other companies. On the other hand, Samsung has embraced both differentiation and cost leadership in ensuring that the needs of its customers are met at a reasonable price. This paper involves the analysis of the strategies of the two companies using the Bowman’s Strategy Clock, Porter’s Generic Strategies, and McKinsey’s 7S Framework.
Porter’s Generic Strategies
Porter’s three generic strategies were developed to help companies in attaining competitive advantage by leveraging their unique competencies. These strategies include cost leadership, focus, and differentiation. These strategies provide three dimensions through which different companies approach the market environment in the view of outdoing their competitors and gaining a larger market share and improved sales. This strategies can also be used as tools of analysis in determining the approaches used by different companies in gaining market control. In this paper, this strategies will be applied as tools in evaluating the differences in marketing approaches between Apple Inc. and Samsung Mobile in the mobile phone industry.
Cost Leadership strategy
The cost leadership strategy involves the gaining of market share by a firm through appealing to price-sensitive or cost-conscious customers (Bordean, et al., 2010 , p. 174). In this case, the company lowers its prices as compared to the competitors in the same market segment or directs its focus to the achievement of the lowest possible price to value ratio. In order to achieve high investment returns and profitability with such low prices, the firm is forced to operate at a lower cost as compared to its competitors. In order to facilitate this strategy, companies ought to achieve a high turnover of assets, achieve low indirect and direct operating costs, and attain control over the supply chain in order to ensure that low costs are incurred in the procurement process.
The internal strengths of the firm are also important in the success of this strategy. Such strengths include access to the required capital for investing in production assets; skills in designing efficient products for effective manufacturing; high expertise in engineering of the manufacturing process; and efficient distribution channels. However, this strategy is associated with various risks that may not be overcome by some organizations, thus form barriers of entry (Kumar, et al., 2011, p. 40). For instance, other companies are likely to lower the costs of their product that limiting the profitability. In addition, the constant changes in technology may cause competitors to adopt advanced production capabilities and thus mitigate the competitive advantage earned by this strategy.
This strategy involves the development of products or services that provide the consumers with unique experiences and attributes that contribute to added value and points of difference as compared to the competitors (Hwy-chang, 2010, p. 9). Development of a variety of attributes that are marketed differently allows firms that apply this strategy to desensitize the prices offered for their products and base on their unique attributes to charge their products and services higher than their competitors. However, this strategy is only applicable in the case where the customers are not sensitive to price and the market is competitive. This is especially applicable in the case where the consumers have specific needs that are not well satisfied by the available products and the company has unique capabilities and resources that enable it to address such needs.
However, there are various risks that are associated with this kind of strategy, with the most prominent one being imitation by competitors. This provides the consumers with alternatives and thus leads to a reduction in the market share. Changes in the tastes of the consumers is also a risk as it may lead to the drifting of consumers towards other products and also requires constant changing of the product designs to meet the consumer needs (Sehgal, 2011, p. 37). Competitors pursuing focus strategies are placed at a more advantageous position in terms of achieving differentiation in their specific market segments.
This strategy involves the directing of focus by a company to a narrow segment of the market with specialized needs (Eldring, 2009, p. 11). In this view, differentiation of products and services or offering of lower prices is dependent on the specific needs of the segment of focus and the capabilities and resources of the company. This strategy is based on the assumption that focusing marketing strategies on narrow segments of the market and establishing a marketing mix that is best suited for these narrow groups allows for a better understanding and meeting of the consumer needs. As such, firms that apply this strategy aim at gaining a competitive advantage through brand marketing and product innovation as opposed to efficiency.
This strategy is also associated with various risks which affect its effectiveness. One important risk is the changes in the segments that are targeted by a firm and imitations by competitors (Fortenberry, 2010, p. 244). This calls for frequent product development and thus increased investment in the product development process. In addition, other focusing companies are most likely to establish sub-segments that will give them an upper hand in competing in the market.
The Generic strategies at Samsung Mobile and Apple Inc.
Samsung and Apple differ in a way in terms of their strategic approaches to the market in relation to Porter’s generic strategies. As opposed to Samsung, Apple employs the differentiation strategies, where it has high invested in the development of unique product with distinguished attributes, which form its points of sale. In the mobile phone industry, Apple’s iPhone is among the most expensive phones. However, the iPhone is still the leading smartphone in terms of the market share in the smartphones market. The iPhone has been developed based on Apple’s Multi-Touch™ user interface, allowing it to have robust high tech features including web-browsing, desktop-class email, maps, and searching, and the phone is compatible with not only the Mac computers, but also Windows-based computers (Horrigan, 2012). The phone also provides for an automatic sync of content form the contacts, email accounts, bookmarks, and iTunes libraries of the users. iPhones also allow the customers accessibility to the iTunes Store. Here, the customers are able to download video and audio files, among other digital applications and content. The company has also partnered with other third parties to provide consumers with iPhone compatible third-party accessories through Apple retail and online stores (Horrigan, 2012). This is to provide an experience away from the company’s iPhone accessories. These differentiating features mitigate the chances of any close substitutes that allowing the iPhone to be charged premium with a high market share. Apple also employs the focus strategy by targeting the broad scope of the mass market, coupled with the differentiating strategy to meet the needs of customers in this segment.
On the other hand, Samsung employs both the cost leadership and differentiation strategies in attaining most of its market share in the mobile phone industry (Mosley, et al., 2011, p. 124). The company has a diverse range of cheaper phones as compared to the iPhone, which are offered to price-sensitive consumers thus allowing for increased sales and brand awareness. On the other hand, the company has a highly competitive team of researchers who have come up with various differentiating attributes that have elevated the company above other competitors in the market. In the view to ensure differentiation, Samsung has been able to command a higher selling price for its phones, especially the smartphones due to its ability to offer memory chips that have been customized, and which cannot be offered by other manufacturers, better control of quality which promoted reliability of their products (Mosley, et al., 2011, p. 124). In facilitating the cost-leadership strategy, Samsung has achieved better margins of operation as compared to its competitors due to accessibility to cheap Chinese labor; application of new rules of design, which allowed production of more chips per wafer; and better sourcing, which has allowed it to access raw materials at lower costs as compared to its competitors due to a better bargaining power and volume discounts.
Bowman’s Strategy Clock
The Bowman’s Strategy Clock was developed based on Porter’s generic strategies. This clock provides different strategies adopted by organizations in meeting and outdoing competition in the market environment. The clock provides eight positions that the companies can adopt in the market and thus succeed. The first position is the low price and low value strategy, which allows the company to lower the prices of their products in order to sell large volumes, yet such products are not differentiated (Thomson & Baden-Fuller, 2010, p. 184). The second position involves the low price strategy. This strategy involves minimizing the prices of the products to increase sales while reducing the cost of production to increase the profit margin. The third position is the hybrid position which involves establishing moderate prices for its products and moderate differentiation of its products to attract more consumers (Jacobsen, 2009, p. 143). Another position that could be adopted by organizations is the differentiation strategy which involves investing in innovation and technology in order to develop unique products in order to attract customers and increase sales. On the other hand, focused differentiation allows for focusing on a narrower segment of the market, thus creating high perceived value of the products and thus increasing prices (Obitz, 2009, p. 56). The sixth position involves increasing the price of the products while maintaining the standards of the products. Another position involves high prices and low value of the products. This is applicable in situations where the company of reference has monopoly min the market. The last position involves low value and standard prices, which is less likely to succeed as low value products can only be marketed using low prices (Utrilla, et al., 2012, p. 52).
Samsung applies the ‘hybrid’ strategy in meeting competition in the market and gaining increased market share (Samsung, 2014, p. 36). The company employs standard and low pricing on its products. However, the company also differentiates most of its products through adopting ideas born of innovation within the organization and increased technology. On the other hand, Apple utilizes the focused differentiation strategy which allows the company to focus on the needs of a narrow market segment and thus differentiate its products to meet the needs of the consumers (Hill & Jones, 2013, p. 177). This has created a high perceived value of the company’s products among its consumers and thus allowed the company to charge premium for its products.
McKinsey’s 7-S Framework
McKinsey’s 7S framework is a management model comprising of seven base factors that describe how a company can be organized to ensure that it competes effectively in the market. For organizational success to be facilitated, these seven factors under the model have to be aligned. The seven elements are categorized into two, ‘hard’ elements and ‘soft’ elements (Joseph, 2009, p. 59). Hard elements can easily be identified and influenced by the management. These elements include strategy, structure, and systems. On the other hand, the soft elements are more difficult to define and can only be influenced through cultural change as they are intangible. Soft elements include skills, style, staff, and shared values. The hard and soft elements are intertwined in functionality and require equal attention in the view of facilitating organizational success. The 7S framework is also an important tool in the evaluation of organizational success. In this section, this framework is applied in the analysis of Samsung and Apple.
Based on its mission and vision, Apple has excelled in providing its customers, ranging from each man, woman, students, educators, home users, and corporate professionals with the best phone that is easier to use through improved innovation, state of art software, and various internet offerings (Miller, 2012, p. 203). On the other hand, through its vision and mission, Samsung upholds its shared values of respect for each individual, empowerment of each employees to pursue independent innovation for the sake of product development, and pursuit of new technology in order to meet the changing consumer needs (Samsung, 2014, p. 35). These shared values have allowed the company to promote collaboration among its employees and facilitate greater synergy.
Apple’s applies the intensive strategy, which involves differentiation of its products while focusing on the needs of the of its target customers, which is the niche market (Wells, et al., 2011, p. 253). This type of strategy has also allowed the company to its existing products into new markets in different geographical regions, especially in the developing regions such as Asia, the Middle East, India, and Africa. The company has also intensified its efforts in marketing in the view of increasing its market share in the markets that already exist such as Europe and in the US. Apple’s strategy is aligned with its mission and vision as the company utilizes its technological power to explore different avenues of product development with the focus being on meeting the specific needs of its target consumers. On the other hand, Samsung utilizes the diversification strategy where it explores technological advancement to develop and add both new but related products and new unrelated products to the market (Samsung, 2014, p. 36). This involves developing a better understanding of the consumer in order to develop differentiated products that suit the lifestyles of the target market, at reduced prices. The company targets the mass market.
Apple has a matrix organizational structure headed by the CEO, to whom vice presidents of different departments report (Lashinsky, 2012, p. 43). This structure is a combination of the divisional organization structure and the functional organizational structure. The matrix structure is highly beneficial for the success of the company as it allows for a more specific and rapid response to the needs within the organization. On the other hand, Samsung employs a functional organizational structure, where the organization has been divided into different departments that work independently and respond to different markets (Samsung, 2014, p. 34). This is a sufficient structure especially in the view of departmental growth as each department maximizes on the knowledge and talents of its workers to ensure development and proper response to market needs. However, both the matrix structure and the functional structure are disadvantageous in terms of restricting communication and coordination between different departments as such departments work separately.
At apple Inc. integration control systems have been established in order to mitigate miscommunication between the company’s divisions and functions. These control systems allow for functional coordination and consultation between the departments, creating openness within the organization for the employees to contribute towards development of products that are in other departments that they are not directly involved in (Sehgal, 2011, p. 114). such openness, enables managers within the company to work close with each other in relation to solving the problems within the organization and handling other strategic issues. The company has also combined retail and online distribution channels for their products, an aspect that has allowed them to reach both power users and first time customers, who are interested in customized and sophisticated products.
On the other hand, Samsung has a flexible working system that maximizes the efficiency of employees while working by allowing them to choose what time to work (Samsung, 2014, p. 35). Almost all divisions have incorporated this flexible work schedule, where employees are allowed to arrive at work at any time before 6 p.m. and attend work for eight hours since then. This allows the employees in the organization to strike a balance between their personal life and work. In addition, the company introduced the ‘mobile office’ system in 2011, which allowed the employees to check emails on their phones while in the office. This allows for more freedom while in the office. The flexible work system helps the company to establish trust, to promote well-being, and to boost creativity among its employees.
Samsung Electronics has 300,000 employees on a global scale (Samsung, 2014, p. 35). The firm’s recruitment process has been transformed in a way that allows it to be more diversified and flexible, allowing it to attract only top talent. The firm has established a membership system that allows it to review creative talents thus fostering the leaders of the next generation through providing them with a creative environment and specialized education. The company has also partnered with different universities in the development of courses for the purpose of educating students who have prospects of being important assets of the company. The company has also established a family friendly environment by allowing for more employment opportunities for the females. The female employees in the company make up 27 percent of the total employees in Korea and 47 percent of the total employees globally within their firms (Samsung, 2014, p. 35).
Contrary to this diversity, Apple’s 98,000 employees global workforce is 70 percent males (Lashinsky, 2012, p. 15). Considering the leadership roles, the percentage increases to 72 percent and to a further 80% in the view of technical positions. Unlike its competitors who employ more individuals in the technical positions, most of the employees at apple work in the Apple stores. The company’s employees are trained to focus more on selling the product to the consumer and identifying the consumer needs in order to facilitate product development. The company’s recruitment process allows for the selection of individuals who are well familiar with technology and marketing, and who are bound to propel the organization forward. On the other hand, the company does not tolerate mistakes among its employees when it comes to handling customers, an aspect that has greatly contributed to the developed intimacy between the company and its customers and the high level of brand loyalty among its customers.
Apples style has focused more on cultural adjustments as compared to employee motivation. As compared to other giants such as Google and Facebook, Apple provides its employees with a less relaxing and comfortable work environment. The management at apple pays less attention to employee comfort and there are no advanced facilities that would ensure freedom at the company such as a gym and the perks offered to the employees are much lower as compared to other large companies (Lashinsky, 2012, p. 88). In reference to Maslow’s hierarchy of needs, the company fails to provide its employees with safety needs. In addition, the working conditions at the company have contributed to employee dissatisfaction with related hygiene factors in accordance with Herzberg’s Two-Factor Theory. However, the company has established a culture of secrecy that has protected its information from the public, thus shielding it against tough competition. Only a few privileged employees know about a product during its development process, while the rest only know about it after it is launched (Lashinsky, 2012, p. 89).
On the other hand, the management at Samsung has allowed for an environment that promotes good employee relationships and one that fosters creativity. Initiatives such as the Idea Open Space encourage different employees within the organization, regardless of their positions to submit their ideas and concepts in line with the improvement of the products (Samsung, 2014, p. 34). The company has also established a clean organizational culture that does not tolerate any form of unlawful activities within the organization. The employees undergo are taken through education programs concerning various cases of unlawful practices and they are able to identify the proper way to avoid or get out of scenarios that may expose them to such practices.
Apple’s competency is within its innovation power. The company has increasingly invested in the R&D department allowing for the employees to employ their technological expertise (Kumar, et al., 2011, p. 38). This has yielded in terms of development of unique features and attributes within its products, which has provided for selling points. Likewise, Samsung has also embraced innovation within the organization, incorporating all its employees in the innovation process. The company has established the Creative Lab (C-Lab), which provides for the budget and personnel required to support any proposed ideas (Samsung, 2014, p. 34).
It is evident that strategic approaches are highly important in the development of organizations and sustainability of such organizations in the current globalized market. It is clear that apple utilizes its capabilities and resources to facilitate product differentiation and thus development of products that meet the discovered and undiscovered needs of the customers, an aspect that creates selling points for them and thus allows them to offer premium prices for their products without faltering brand loyalty. On the other hand, Samsung has embraced both differentiation and low cost to increase its market share and also to meet the needs of customers from the narrow segments, thus selling some of its products at high costs without compromising the trust and loyalty of its consumers. As much as Apple may fail to provide a good environment for its workers, the company has embraced a secrecy culture that hold all the employees responsible for the secrets of the company, an aspect that has limited competition. On the other hand, Samsung believes in creating an open environment for all the employees to participate in innovation without limitations.
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