Samsung and Apple mobile free essay sample

Introduction The aim of this comparative analysis is to use different value creation theories and strategies approaches to analyse Samsung mobile and Apple, as two most named brands in mobile phone industry. In detail, this article compares the value creation strategy of these two firms in the respect of value proposition and delivery system, value discipline strategy, in addition with value chain analysis, customer benefit and industry environmental analysis to give an understanding of current value creation strategies that both companies implemented in global market. Value Proposition Samsung, giant of electronic industry, has applied two major value propositions in the mobile phone market. One is technology innovation, mainly in mobile phone hardware development; the other one is to offer a large variety of mobile phone products to meet various customer demands. Apple is widely considered as one of the most innovative company in the world. The critical value proposition of Apple is to provide their customer great overall phone operating experience combined with fantastic customer services. We will write a custom essay sample on Samsung and Apple mobile or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In fact, Apple focuses on both hardware and software innovations. For iPhone users, iPhone is not just simply a phone; it is the tool to install and accesses most creative and innovative mobile phone systems and applications carrying by Apple‘s own multi-media information carrying and sharing platforms, which is called ITunes and App store. Comparison of value proposition Samsung clearly focus more on mobile phone hardware development, since most of its operating system is Android which is developed mainly by Google. While, Apple spend large amount of resources on their own mobile phone operating system development and its information sharing platforms. With more, Samsung has very clear product differentiation strategies comparing with Apple, which only lunched one type of mobile phone each year, before they recently announced the cheaper iPhone 5C. Value delivery system The value delivery system is a method of how companies implement and provide their value to customers. It has been divided into three parts, choose the value, provide the value and communicate the value. Samsung Choose the value The one of the values Samsung is trying to deliver to their customers is to first experience the most advanced mobile phone on the market. Also, Samsung is trying to create values by fulfilling different customer demands by launching different products to meet their requests, such as demand of appearances and functionalities. Provide the value To effectively deliver the values, Samsung has very efficient supply chain system. They have their own factories, skilled labors, and capital equipments located around the world. The most important components inside their mobile phone manufactured directly by Samsung. As a result, Samsung can quickly start their mass production of their new released and high demanding mobile phone. That is very important, because it helps Samsung to release its smart phone in more countries to fulfill their demand quickly. Also, commitment to RD is one of the main driving forces under Samsung‘s value delivery system. Each year they invest at least 9% of their sales revenue into RD activities. Samsung have many RD centres around the world. They spend vast amount of money on developing the most advanced Chips, screen display and flash memory. They also hire local talents to investigate the local technology trends to be able to match their product with different local requests. In fact, investing in RD has lower risk and cost on average comparing to other companies, because Samsung manufactures TV, laptops and other high technology devices as well. The technologies related to these products can also be used into Mobile Phones with slightly modifications. Communicate the value Samsung Electronics‘ sales outlets serve as an informed product manager that offer best possible product solutions for customers. For greater customer satisfaction, Samsung has also implemented an innovative customer management platform that provides services like membership card, bonus point accumulation, and three-year warranty on major products. Meanwhile, Samsung also upgraded Samsung Electronics website to improve ease of use. Apple Choose the value The value that Apple is trying to deliver to their iPhone user is stylish outlook with simpleness and effortless operations. iPhone offers an innovative experience by intimately understanding and anticipating what people wanted to do with their smart phones. Since Apple releases only one type of iPhone each year for the last several years, Apple is targeting the customers who have specific characteristics. 1) Middle/Upper income people who are willing to pay a bit more for a better user experience 2) People who like to have fun with technology. No other platform offers as many entry level tools. And people who like to shoot a lot of digital photos or video. 3) Music enthusiasts and fans ages 12-35. 4) Professionals in media and design. Provide the value Since Apple products have to be intuitive and easy to understand and learn. The task of keeping things simple is important, but sometimes difficult, because technology has become more intricate and users want more features, And Apple creates tools for power users and rookies, which can mean a broad range of ease-of-use issues. To able to fully deliver this value to customer, innovation has been applied extensively across the entire organization by various approaches. a) Innovative System Apple‘s commitment to innovation is cultural, not process driven. The most successful products at Apple were started with only a few people with no formal structure or hierarchy and little corporate oversight. Yet, ? to turn really interesting ideas and fledgling technologies into a company that can continue to innovate for years, it requires a lot of disciplines,? says Steve Jobs. Apple has built an effective innovation system to boost creativity in its people, stimulate new ideas, streamline the design process, and launch successful, profitable new innovations. b) Innovative business models Apple created many stylish innovative products that propelled the company to the top of its industry. But the shift was not only a matter of product innovation. Innovation lies also in Apple‘s innovative business models – new ways to create, deliver, and capture value. For instance, the iPhone would not have had nearly as much impact if they hadnt been matched with iTunes and the App Store respectively. Systemic innovation integration is the heart of Apple‘s successes. Another example, the App Store offers millions mobile phone applications for Apple customers to improve their iPhones. ITunes, which is innovative software designed mainly for music uses, shows that people would pay for music if the price is right and the interface is simple enough. Apple pioneered into a new business space and defined a workable business model for downloading music. c) Innovative Partnerships Apple leverages its diverse culture, innovation processes, partners and networks to seize the new opportunities in the marketplace and grow its business exponentially. Innovative partnerships are an important part of the Apple‘s innovation strategy. Communicate the value Apple is offering great customer service and in store experiences. Apple has most exciting display stores across the global. They provide very friendly staffs to assess customers with any problems. They help customer to understand how powerful and simple iPhone is, which attracts huge amount of customers inside their stores everyday. Comparison When we compare the value delivery system of Samsung and Apple‘s mobile phone sectors, they both invest large amount of resources on technology innovations and developments to offer their customer more exciting and fascinating operating experiences. However, Samsung mainly focus on their hardware performance developments and their mass production infrastructures. As a result, Samsung is able to manufacture different mobile phone models according to market demands, while Apple , its energy has been used on both hardware and software innovations at the same time. The operating system developed by Apple is users friendly and innovative. Also, Apple pays more attention towards customer services, since they have their own Apple stores and service stations around the world, which gives their customer great accessibility to product service and instructions. Identify and analysis Value Discipline of both Samsung and Apple In Samsung‘s value discipline, it has taken different strategies for different products. For those highend mobile like GALAXY Note and GALAXY S4, Samsung adopts Product Leadership as the main strategy. The objective is to provide a non-substitutable, rare, and value creating product to their consumers. To achieve this, Samsung keeps itself as innovative as possible and commercialized ideas quickly. Specifically, application of the new functions such as Air View and Popup Note is the embodiment of constantly renewing and innovative. The second Value Discipline that Samsung adopted is Customer Intimacy. Samsung is a master at giving consumers choices. They have various types of mobile phones, which suit customer‘s different requirements at different price ranges and on various operating systems. For example, in the US alone, Samsung offers 153 different cell phones. In Apple, both Product Leadership and Customer Intimacy also have been applied for its value discipline. Apple appears to their customers as innovative, cutting edge and market-leading. Great product companies do not follow the market, they lead it. Apple is usually so far out in front that customers do not realize they needed it until they see it. From customer intimacy perspective, Apple is also doing a good job. All of Apples products have the same basic operating architecture. Because of this consistency, customers who already own Apple products have a good idea of what they will be getting before they make a purchase. They know that it will be easy to adapt. In terms of customer services, Apple stores offer Apple a chance for personal connection. Customers can get their products fixed, learn about the technology or gain customizations that are tailored for what they want to get done with the products. The Apple store offers a retail angle on intimacy, and meanwhile, the stores allow Apple to learn a great deal about how customers are using its products. In all, Comparison When comparing these two companies‘ value discipline, they both adopt product leadership and customer intimacy. For product leadership, they both want their top product to lead the market and provide their customer with the function they desired. However, they pursuit the different paths when they approach customer intimacy. Samsung provides more choices for their customer, give them the ability to choose the one suit them the most. Apple has a unique strategy here for getting close to customers, providing value by focusing much more on customer service and product experiences. Value Chain Analysis Value Chain Analysis helps identify Samsung and Apple‘s core competencies and distinguish the activities that drive competitive advantages. Samsung 1. Inbound Logistics: Knowing that Samsung has its own operations and activities in the manufacturing processes of their smart phones, most activities involved in inbound logistics are heavily refined and highly efficient. 2. Operations: Great economies of scales and scope. Because Samsung has invested on its own manufacturing infrastructures to produce mobile phone components for itself and other companies as well, such as Apple. Also the compatibility of these components is very high, which can be installed in different types of mobile phone accordingly. In addition, Samsung‘s own Research Development helps it to continuously come up with attractive products. 3. Outbound Logistics: Current outbound logistics are very solid on Samsung‘s end. Because it has most of its operations localized within Samsung Town in Seoul, all activities related to the gathering, storing or distribution of their finished mobile phones (and all other products) are done effectively, with little delay and with a streamlined logistics methodology. Customers are likely to pay more when Samsung has a quick responds time. 4. Marketing and Sales: Samsung has invested a great amount of money in advertising. At Samsung, all of advertising activities are designed to provide the public with accurate information on who they are and what they make through fair and high-quality advertisements, thus building their brand image and helping customers with their buying decisions 5. Service: Most of the customer complaints can be applied through the website; a) Contact support through live chat, emails, and twitter b) Registering product warranty online through website c) Providing online service request, and online service tracking 6. Firm infrastructure a) Perfectly executed financial support b) Good Corporate Governance c) Having well-established infrastructure to support new investment 7. Human Resources Management a) Focus on high skill employees in Engineering, IT and management areas b) Improving training either for local employees or global employees Having talented and well trained employees helps Samsung delivery higher value to customers. 8. Technology development of Samsung a) Having RD centers around the world b) Invest at least 9% of their sales revenue into RD activities. High cost, but also high value (benefits) to the customer. 9. Procurement a) Creating opportunity for Local Procurement and Global Procurement b) Opportunity for global procurement will give competitive advantage for Samsung to secure good suppliers c) Establishing well managed functions to maintain relationships with suppliers and partners Value Chain of Apple 1. Inbound Logistics a) Automated receiving systems Apple has implemented sophisticated automated receiving systems to speed up the receiving process and reduce facility footprint and storage space requirements. b) Delegate raw materials acquisition Apple works with its OEM partners to delegate the raw materials acquisition process but provides some supervision for quality control purposes. 2. Operations a) Utilize OEM‘s economies of scale Apple outsources production to third-party OEM partners to utilize their economies of scale while removing the burden of production management from the firm. b) Internal design The design of current and future products is done internally at Apple, utilizing talented and innovative design teams and engineering knowhow. 3. Outbound Logistics a) Economical packaging In order to save money on shipment and attract customers Apple uses eye-catching packaging that takes up less physical space and weighs less. This reduces shipping costs and environmental effect while attracting customers to the iPhone. (Apple Inc. (2013)) b) Apple Stores/Authorized retailers To control the firm‘s brand image Apple sells through first-party retail establishments and through authorized retailers. Apple Stores act as advertisements for the brand and provide a platform of contact between the firm and its customers. 4. Marketing and Sales Apple uses a series of television advertisements comparing the firm‘s products to competitors using a variety of direct and indirect methods to build a lifestyle brand image. The ads are humorous and do not emphasize cost or feature-by-feature comparisons, but focusing on developing the firm‘s image. 5. Service a) Apple Genius Apple stores house the ? Apple Genius Bar‘ where customers can talk with an Apple specialist known as a ? genius‘ about problems with their device. This human interaction with a first party service provider builds a superior relationship with customers and offers a stark contrast to endless phone service calls. (Apple Inc. (2013)) b) Free consultation Customers can bring in their device for a free consultation regarding issues problems with no commitment, whether it is in or out of warranty. The customer then has the option to pursue different avenues of resolving the issue without an upfront charge. 6. Firm Infrastructure a) Horizontally integrated structure. b) Strong cash position – Apple maintains a large cash reserves and carries a comparatively small amount of long-term debt. This enables Apple to finance expansion, capital purchases, and development internally relatively easy compared to its competitors. 7. Human Resources Management a) Selective hiring process Apple follows selective hiring practices to recruit and hire talented individuals. b) Generous employee benefits program Apple offers a variety of attractive employee benefits to complement direct wages. (Apple Inc. (2013)) 8. Technological Development a) Heavily investing on the research and development for the innovation b) Patent filing Apple believes in the importance of protecting its intellectual capital by filing patents in the United States and worldwide for its inventions and innovations. (Apple Inc. (2013)) 9. Procurement a) Positive relationships with suppliers Apple works closely with its key suppliers to benefit all partners involved. Apple has also developed its own Supplier Code of Conduct to govern the actions of its suppliers. These beneficial steps foster positive relationships with suppliers. (Apple Inc. (2013)) In summary, by providing these value creating activities, both Samsung and Apple have a differentiation business level strategy, which is an integrated set of actions designed by a firm to produce or deliver goods or services that customers perceive as being different in ways that are important to them. How these value being delivered the final customers Benefit Customer Customer value can be defined as the benefits that customer can get from the trade-offs via the costs that customer has to pay for acquiring this product/service (Onaran, At? l Bulut, Ozmen, 2013). Samsung: According to Samsung‘s value discipline which builds customer loyalty based on product innovation and differentiation. Samsung benefits their customers by following approaches: 1. Customer orientated. Samsung Offers the market leading products and large variety of mobile phones with different functionalities at different price range. Taking the most marketable product as a example, Galaxy series for instance, the main characteristic of the Galaxy is to deliver a significantly superior hardware combining with powerful Google Android system. In hardware respect, the latest developed new generation Galaxy utilizes the expansive 5. 5? HD Super AMOLED Display with 1920? 1080 screen resolutions (Samsung Galaxy, 2013), which most likely to attract customers who demand high entertainment performance. 2. The speed of lunching new mobile phone. Each serious of the mobile is designed to provide customers new experiences. Samsung launched the first Galaxy Note at the end of 2011; however in September of 2013 Galaxy Note 3 came out. The upgrading speed of models satisfies the customers who like to experience newest technologies. On the other hand, the new release phone will decrease the price of previous vision, which makes the old phone more affordable to some customers who cannot afford it before. 3. Performance Improvement. The actions Samsung took in more recent years are not only about innovation, but improved durability. For example, Samsung‘s newest flagship Galaxy S4 Smartphone shows us just how durable Galaxy S4 really is in a new stress test released by Samsung. They test the mobile phone‘s durability by dunking the phone in water, a number of drop tests, tumble tests, dropping a metal weight on the glass face of the phone and even baking it in an oven. In general, Samsung benefits their customers by its excellent performance and up to date innovative features. Apple: Apple strongly focused on both of delivering a superior product with advanced soft and providing high quality customer service. Especially, the software, the greater functional App Store makes IOS system rapidly developed into a full competitor with the Android system. In addition, customer service that Apple offers is even better. The superior customer service can be come down to several ways: 1. Distribution and retailing. iPhone has its own retailing and online store along with other Apple‘s products around the world, almost in every main cities. Having this approach, consumers can easily access the product without spend much time looking for it. 2. Training and consulting. Employees in retail store are well trained on customer-centricity to make sure that what they have is not only accurate information, but also problem solving skills, good judgment and positive attitude. After training, most staff is empowered, particularly customer facing staff for proactive relationship building. More importantly, well trained staffs can emphasize some key features of product based on consumers special needs. 3. After sales customer service. iPhone customer can easily access to Apple‘s online support system on Apple‘s website. They can also go to local App stores to ask staff to help. Most of the problems can be solved very quickly by replacement and fast in store repayment. Comparison In comparison, in terms of retailing, iPhone has its own retailing store with well trained staff in main cities around the world, unlike Samsung and other mainstream brands, It facilities interaction between customers and the products, at the same time, provide greater after sales service, since customers know what to expect and where to go. Unlike Apple which approaches their customer by providing high quality customer service, Samsung emprises more on product itself. Such as, large product ranges and high speed of upgrading models. They have attracted massive amount of customers who love differentiation and to experiences new features and looks. Industry environmental analysis Porter five forces analysis has been applied into these two companies. In terms of industry environment, Samsung and Apple are quite similar. The threat of potential new entrants (Low) High capital is required to enter into the mobile industry. It is difficult to start up in an industry where the existing firms already operate on cost and differentiation strategies (Chan et al, 2006). Also, new entrants would have to invest in their own RD to create a unique product if new entrants have issues with overcoming patent issues . The costs of having these make a very strong barrier to entry. The threat of substitutes (High) Almost any phone that performs the same functions as a Samsung and Apple phone could be considered a substitute. This includes other devices running the Android operating system and not made by Samsung. All of these are in high abundance with similar cost and highly competitive. The bargaining power of buyers (High) Buyers have great ability to access market information and understanding of how competitive the mobile phone industry is. Buyers have great bargaining power with so many similar products from other brands. In terms of switching costs, it can be quite high in some cases. Usually a phone comes to a buyer with a 2 or 3 year contract with a service provider. Terminating the contract before the contract ends; extremely large fees can be incurred by the customer. However, if there is relative low switch cost for buyers, they will switch to those who have better features or price points. The bargaining power of suppliers (Low) In Samsung‘s case, the bargaining power of suppliers is low because Samsung is its own supplier of most components. Samsung also happens to be its own supplier for raw materials. In terms of bargaining power of supplier, Apple does not really manufacturing their components itself like what Samsung does. However, Apple has more than 150 suppliers globally. Apple is buying from their supplier in such large quantities, which can exercise significant leverage over suppliers. This leverage enables Apple to negotiate favourable terms and prices. They also invest billions dollars into their suppliers. Therefore, the bargain power of supplier for Apple is also quite low. The intensity of competitive rivalry (High) The smart phone industry has many competitors ,thus rivalry is high. Samsung and Apple are both main competitor of themselves. The market for smart phones has slowed in growth since its boom, so pressure to take customers from competitors is also high. Also, sustainable competitive advantage through innovation is an unknown. While Samsung and Apple have been doing great keeping up with the industry and both leading in some areas, everything is short-lived due to the extreme level of competition. Emerging problems As we can see from the graphs below, Samsung has captured a large proportion of the smart phone market; it has the No. 1 smart-phone shipments. Apple has lost some of its market share in 2013. Even though, during last few years, Apple is making profits in smart phones than Samsung ( Jay Yarow (2013)), this year Samsung‘s estimated $5. 2 billion in profits from phone sales compares favourably with Apple‘s estimated iPhone profits of $4. 2 billion in second quarter of 2013. More worrying for Apple than losing its profit crown is its relative weakness overseas. Sales in Chinese market were actually down $3. 6 billion quarter-to-quarter, with Europe and the rest of Asia also weaker. Without introducing less-expensive alternative versions of its iPhone, it is likely Apple‘s international market share will continue to erode as less-expensive Android phones continue to improve in functionality. For Samsung, even though Samsung has already passed Apple becoming the most profitable brand in mobile phone industry, the balance between marketing budget and total profits needs to be considered. Samsung‘s brand is going strong in Asia-Pacific, according to a Campaign Asia/Neilsen survey. But despite the Korean firm‘s home-field advantage and massive marketing advantage, Apple has closed the gap, and spent much less in the process. The cost of dominating the branding tables, however, varied drastically. Samsung spent $1. 3 billion on Asia-Pacific marketing in 2012, much of it on promoting its flagship Galaxy S4 handset and more than double Apple‘s budget. But Apple has steadily climbed the ranks since 2004 with its iconic iPhone—surging from the region‘s 127th best brand in 2004 to second place this year. (Jake Maxwell Watts 2013) Source: Apple vs Samsung by Asia-Pacific brand ranking. Campaign Asia / Nielsen Since Samsung‘s massive marketing expense has also eroded its profit margins, the cost of being the ? best? brand in Asia may no longer be worth the diminishing returns. Reference Chan, Joshua, Zhisui Chen, Irene Cormane, Nou Her, and Renie Thomas (12 May 2006) Cell Phone Industry Analysis. Retrieved 3 October 2013 from Jay Yarow (6 August 2013), Chart of The Day: Samsung Is Stealing Smartphone Profit Share From Apple Retrieved 3 October 2013 from Strategy Analytics (2013), Global Smartphone Shipments Hit Record 230 Million Units in Q2 2013 Retrieved 3 October 2013 from Apple Inc. (2013) Apple Retail Store: Genius Bar. Apple Inc. Retrieved 3 October 2013 from . Apple Inc. (2013) Apple Supplier Code of Conduct Retrieved 3 October 2013 from . Apple Inc. (2013) Jobs at Apple: Benefits. Apple Inc. Retrieved 3 October 2013 from . Apple Inc. (2013) Apple and the Environment. Apple Inc. Retrieved 3 October 2013 from . Jake Maxwell Watts(2013). Samsung‘s brand is top in Asia, but Apple has closed the gap by spending less Retrieved 3 October 2013 from