Apple and Samsung Companies: Strategic Management

Abstract

Apple Inc. and Samsung Group are multinational corporations, which have dominated computer and electronics industries owing to the innovativeness, creativity, and novelty of their products. These multinational corporations have expanded their operations into different countries in a bid to expand their market share. Apple Inc. came into existence in 1976 as an American company, which dealt with computers only. As Apple expanded its operations and ventured into electronics and software industries, it gained a multinational stance. Currently, Apple has become one of the leading corporations in the computer, electronics, and software industries due to its ability to create innovative, unique, and novel products. Comparatively, Samsung Group is a conglomerate, which comprises diverse affiliates and subsidiaries. Although Samsung Group started in 1938, as a South Korean trading company, it has grown and become a multinational corporation that has penetrated global markets and exploited diverse industries, including electronics, computer, insurance, and construction industries. In this view, the research paper analyzes the business strategies of Apple Inc. and Samsung with a view of giving appropriate recommendations, which would boost their profitability and competitiveness in various industries.

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Existing Business Strategies

Business strategies that Apple employs have boosted its global presence significantly because they have made it competitive in the computer, electronics, and smartphone industries. According to Jinjin (2012), product differentiation, direct sale model, branding, and customer-focused services are the four business strategies, which Apple has used in dominating global markets. Apple has continually changed its mission and vision in response to the prevailing market conditions. Currently, the mission of Apple is to create “innovative hardware, software, and the Internet offerings” that bring about a new experience to users in various industries (Apple Inc., 2015, para. 2). The mission statement is in line with the long-term goals of dominating hardware, software, and Internet platforms in creating novel, innovative, and unique products, which are very competitive. The vision of Apple is to set high standards in the industry by producing quality products and providing quality services (Apple Inc., 2015). Since the quality of products and services in the computer, electronics, and smartphone industries determines the competitiveness of a company, the vision aligns with the long-term goals and strategic management of becoming a leading technology company that offers quality and unique products.

Comparatively, Samsung has outstanding business strategies, which have enabled it to wither competitive global markets and emerge, as a leading digital company in electronics, computer, smartphone, and software industries. The three business strategies that Samsung employs are new technology, creative solutions, and innovative products (Samsung, 2015). Samsung’s mission and vision statements effectively align with the established strategies and goals. The mission of Samsung is to devote technology and talent in creating quality products and offer quality services that can improve global society (Samsung, 2015). This mission is in line with long-term goals and strategies of producing quality products, which meet the diverse needs of customers and improve the lives of people globally. The vision of Samsung is to “develop innovative technologies that create new markets, enrich people’s lives, and continue to make Samsung a digital leader” (Samsung, 2015, para. 3). The vision is in tandem with the business strategies of creative solutions, new technology, and innovative products. Moreover, the vision is in tandem with the goals and strategies of augmenting the lives of people, diversifying into new markets, leading in the digital industry.

SWOT Analysis of Business Level Strategy

Apple’s SWOT Analysis

Analysis of the business level strategy of Apple in terms of strengths, weaknesses, opportunities, and threats (SWOT) shows its competitiveness in the digital industry. Product differentiation is the major strength of Apple that has contributed to its success in the digital industry. Fundamentally, Apple applies innovative and creative technology in the production of its unique products. The operating system, iOS, is unique to Apple, and thus forms the basis of its product differentiation strategy. Jinjin (2013) argues that Apple concentrates on innovating novel and unique products that outcompete other products in the global markets. The existence of established brand reputation and customer loyalty are other strengths that have enabled Apple to curve a robust niche in the electronics, computer, and smartphone industries. Given the quality of Apple’s products, high-end customers are the most loyal customers. However, the weaknesses of Apple are high premium prices and limited market share. Since Apple offers its product at premium prices, only the high-end customers can afford. Moreover, Apple has limited market share globally owing to its limited line of products and target customers.

The increasing demand for smartphones, iPad, and tablets is an opportunity that emerges from Apple’s strengths. The major factors that have enhanced demand for the products of Apple are customer loyalty, quality products, and brand reputation. Moreover, the increasing demand for new and unique products is an opportunity that Apple has in the electronics, computer, and smartphone industries. Unique products such as smartphones, tablets, iPad, iTV, and iTunes amongst others reflect the uniqueness of Apple in the global markets. Apple utilizes mobile advertising and online stores for they are robust opportunities that promote the marketing and distribution of products directly to customers. However, advancement in technology increases competition in the industry for the emergence of substitute products threatens the market share that Apple enjoys (Jinjin, 2013). Nokia, Dell, Sony, and Samsung are some of the fiercest competitors that threaten the survival of Apple. Imitation of technology is another threat that Apple is struggling to overcome globally. To achieve a competitive position, Apple focuses on the production of novel and unique products in smartphone and software industries

Samsung’s SWOT Analysis

The strengths of Samsung are innovation, talented human resources, friendly prices, extensive market share, and diversified businesses. Samsung has devoted itself to the production of innovative and unique products, which meet the diverse needs of customers. The ability to create innovative products is possible because Samsung has talented human resources. Samsung treasures the talents of its employees because it uses a lot of funds in training them to acquire appropriate knowledge and skills, which are essential in the production of competitive products. Samsung offers friendly prices to customers, unlike Apple, which offers premium prices. Owing to the friendliness of prices, the products of Samsung are affordable in diverse markets globally. Extensive market share and diversified businesses are two related strengths of Samsung. According to Vergera (2012), diversified businesses have enabled Samsung to have an extensive market share due to established brand and customer loyalty. However, the two major weaknesses of Samsung are biased global presence and hasty development of new markets. Samsung is dominant in Asia and African countries but has a limited presence in Europe and the United States. Regarding hasty development of new markets, Samsung appears to be only keen on establishing new markets, while neglecting present markets.

Samsung has an opportunity of venturing into new industries because it has established brand reputation and customer loyalty among its customers globally. The diversity of products gives Samsung a competitive advantage in both vertical integration and horizontal integration (Vergera, 2012). Moreover, the emerging markets in developing countries offer immense marketing opportunities for Samsung to exploit. Enormous competition in the electronics, computer, and smartphone industries threatens the existence of Samsung in the current markets. Apple, Nokia, Dell, Toshiba, and Techno are fierce competitors, which provide substitute products. Therefore, Samsung influences its competitive position by focusing on the electronics industry and diversifying into new industries and markets.

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Adapting to Cultural Differences

To enhance operations in the global markets, Apple has adapted its marketing strategies and products to diverse cultures globally. Essentially, Apple needs to offer customized products, which meet the diverse tastes and preferences of customers. The complex aspect of a marketing strategy regards understanding the needs of the target customers in a given market segment. Teenage culture has proven to have a marked influence on the marketing of Apple’s products. Since teenagers comprise a significant part of market share, Apple has successfully adapted its marketing strategies and the nature of products to their tastes and preferences globally. For example, advertising on social sites, such as Facebook, YouTube, and Twitter using comedy and catchy music in adverts effectively captivates teens. Akcay 2012) reports that Apple adapted its adverts to teens by using social sites and teenage adverts resulting in increased sales of iPad and iPhone by 31% and 40% respectively. In this view, the understanding of the unique needs of the teens is central in adapting marketing strategies and the nature of the products.

Given that Samsung has an extensive market share in electronics, computer, and smartphone industries, it has adapted to the cultural differences of global markets by designing products that support diverse languages. Communication is not only important in marketing products but also in operating devices or using products. Companies have to break communication barriers by designing products that are not only user friendly but also support diverse cultural languages. In this case, the adaptation of product design and operation manual to cultural languages is key in promoting the usability of Samsung’s products. To overcome cultural barriers, which emanate from cultural language barriers, Samsung designs products that support diverse major languages across the world such as Japanese, Chinese, Arabic, French, and Portuguese languages amongst others. An example of a management strategy that the company has undertaken to overcome the negative impact of language barriers is to train employees. According to Sodhi and Lee (2007), Samsung has a training center, where expatriate employees train multinational courses such as language and culture of diverse countries. When staff members train multinational courses, they develop the capacity to handle cultural conflicts that emanate from cultural differences.

The superiority of Organizational Competencies

The organizational competencies of Apple lie in its business strategy to create unique and quality products. The entrepreneurial capabilities of Apple are product differentiation and innovation. Owing to increased competition, product differentiation and the creation of innovative products have made the products of Apple to stand out in the competitive markets. Essentially, the technology and design that Apple employs in the manufacture of its innovative and creative products are matchless in the electronics, computer, and software industries. The organizational design capabilities of Apple are leadership performance, innovative employees, and effective organizational structure. The leadership performance of chief executive officer, Tim Cook, is commendable for he has instituted numerous development projects, which have boosted the stance of Apple globally. Product differentiation strategy has become an innovative spirit among employees (Jinjin, 2013). Organizational structure is an important capability, which drives leadership performance and innovative spirit in Apple. The strategic capabilities of Apple lie in the design of products, marketing, and distribution. For example, the superiority of Apple is evident in the smartphone industry because the iPad and iPhone are innovative products, which emerge from entrepreneurial, organizational, and strategic capabilities.

Samsung has superiority organizational competencies that have made it withstand the fierce competition in the electronics and computer industries. The entrepreneurial capabilities of Samsung are innovation, creativity, and technology. Owing to these entrepreneurial capabilities, Samsung has been able to create unique products, which are not only cheap but also meet the diverse needs of customers. Adaptability, corporate culture, and employee motivation are the organizational design capabilities of Samsung. In the global markets, Samsung is very versatile because it can venture into new markets and adapt to the competitive environment easily (Sodhi, & Lee, 2007). For Samsung comprises subsidiaries and affiliates, it has a corporate culture that mobilizes them to increase performance and augment profits in diverse industries. In the aspect of employee motivation, Samsung motivates its employees by training and equipping them with appropriate knowledge and skills. Given that Samsung enjoys extensive market share, it employs a product differentiation strategy and pricing strategy in penetrating and maintaining global markets. For example, Samsung exhibit superiority of organizational competencies in the production of smartphones and televisions.

Recommended Business Strategies

To maximize profits and enhance competition, Apple should employ product differentiation as a new business strategy. Apple relies heavily on the smartphone industry, which is shrinking gradually owing to the increased competition and threats of substitute products. The substitute products that Samsung, Nokia, and Techno offer in the global markets are quality and affordable, and thus, threaten the competitiveness of expensive Apple products. In this view, the diversification strategy allows Apple to create both high-end and low-end products. These products would compete effectively with substitute products, which are predominantly low-end products. Jinjin (2013) argues that the incompatibility of Apple’s software with other hardware limits the sales of software. In this case, diversification of software to allow compatibility would increase sales of software. Moreover, diversifying into novel markets such as health, construction, and education industries through mergers and acquisitions, Apple can effectively venture into new industries and diversify its products. Therefore, product diversification is a strategy that would enable Samsung to maximize its profits and at the same time remain competitive in electronics, computer, and smartphone industries.

The recommended business strategy for Samsung is a value-creation strategy. Given that Samsung has established markets in various industries, majorly computer, electronics, and smartphone industries, it enjoys the largest market share when compared to other companies such as Apple, Nokia, and Dell. Samsung has ventured into diverse industries such as construction, insurance, computer, and smartphone industries, and has gained competitive advantage due to the innovativeness of products. As the increasing competition in diverse industries threatens the market share that Samsung enjoys, value-creation would enhance the competitiveness of Samsung and maximize profitability. Sodhi and Lee (2007) state that the diversification of products is an important business strategy that has expanded the market share of Samsung globally. Although Samsung currently enjoys extensive market share, it is predictable that increasing competition is a harbinger of declining market share. Thus, value-creation is a timely strategy that Samsung requires to maximize profits and enhance the competitiveness of its products in diverse industries globally.

Evaluation of Companies’ Corporate-Level Strategies

Evaluation of Apple shows that it employs horizontal integration, vertical integration, and strategic outsourcing as corporate-level strategies, which have contributed to its success in the computer, electronics, and smartphone industries. Horizontal integration is evident in the software unit because Apple offers unique software that is only compatible with its hardware. Software services such as iBook, iCloud, iTunes Store, iOS Store, App Store, and Mac App Store are integral in horizontal integration for they are all Apple’s products. Apple also employs vertical integration in the production and sale of its products. Vergara (2012) perceives that Apple comprises four companies, namely, a hardware company, software company, services company, and retail company, which link through horizontal integration. These four companies form an integrated chain that allows Apple to manufacture products, provide services, and distributes products to customers directly. Since Apple is unable to produce all of its electronic components, it outsources chips, applications processor, and flash memory from Samsung (Vergara, 2012). Analysis of the corporate level strategies indicates that horizontal integration contributes mostly to the success and profitability of Apple. Through horizontal integration, Apple can control its patented products by designing and distributing them to diverse markets.

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Evaluation of corporate-level strategies indicates that Samsung employs horizontal integration, vertical integration, and strategic outsourcing. In horizontal integration, Samsung is a conglomerate due to mergers and acquisitions that it has made with diverse companies in different industries. Samsung has diversified into electronics, computers, automobile, smartphone, insurance, and construction industries. Vertical integration is also a corporate level strategy that Samsung employs in managing its products in assorted industries. For instance, in the electronics industry, Samsung supplies raw materials, manufactures electronic components, and assembles electronics. Vergara (2013) asserts that vertical integration enhances the efficiency of production and makes Samsung achieve economies of scale. Regarding strategic outsourcing, Samsung outsources contractors to manufacture smartphones and other low-end galaxy phones. The outsourcing reduces the cost of production and relieves overwhelmed employees due to increased demand for smartphones globally. Comparative analysis of these corporate-level strategies shows that horizontal integration contributes mostly to the success and profitability of Samsung. Integrated subsidiaries, such as Samsung Electronics, Samsung Heavy Industries, and Samsung Engineering, are the leading contributors to the profits and success of Samsung in the global markets.

Discouraging Unethical Behaviors

Apple has developed diverse strategies, which it employs in discouraging several unethical behaviors. The first strategy that Apple uses in improving the quality of its products is quality control. Following complaints from customers regarding poor network reception on iPhone, the internal leadership of Apple decided to improve the quality of its products through continued research and development. The establishment of the recycling program is the second strategy that internal leadership uses in discouraging pollution of the environment. Since Apple constantly upgrades its products, it generates electronic wastes. The recycling program allows consumers to trade their old smartphones and computers with upgraded products at discounted prices. The third strategy that Apple uses in discouraging patent infringement is through vertical integration. Apple has ensured that it entirely controls its supply chain from production to retail stores to prevent competitors from imitating or adulterating its products (Vergera, 2012). Hence, vertical integration enables Apple to protect its patented products from imitators in the markets. Aggressive ligation of companies that infringes on its patents is the third strategy that Apple uses in discouraging imitations. Apple has already instituted litigations against Samsung, Motorola, Kodak, and HTC for infringing on its patents (Raffoul, & Brion, 2011). Hence, severe penalties emerging from the aggressive litigation discourages other companies from infringing on patents of Apple.

As an influential company, Samsung employs different strategies in discouraging unethical behaviors. Quality of products is the first strategy that Samsung employs in protecting consumers from damages owing to privacy and health issues. For smartphones can infringe on personal privacy, or cause undue health effects, Samsung has designed its products with a view of protecting consumers from any potential harm. Reformation of Human Resources Policy is another strategy that Samsung has employed in discouraging unethical treatment of employees. Following reports, which shows that Samsung violates labor and human rights, internal leadership has reiterated its compliance with regulations of the International Labor Organization through its Human Resources Policy. Samsung prohibits child labor, forced labor, and discrimination of employees, according to the stipulations of the International Labor Organization and the Korean government (Samsung, 2015). The policy has enabled Samsung to address issues related to labor and human rights. Aggressive litigation is the third strategy that Samsung has employed in protecting its patents. Samsung has sued Apple, Sony, and LG for infringing on its electronics patents.

Recommendations to Improve Performance and Competitiveness

To improve its performance and competitiveness, Apple should design software that is compatible with different hardware for it to increase its sales and profits. Jinjin (2013) maintains that the incompatibility of Apple’s software is limiting its sales and market share. Therefore, if Apple designs compatible software, it will have to cooperate with other companies, which manufacture hardware. In this view, Apple will change its businesses and functions. Moreover, Apple needs to expand its operations beyond its supply chain by establishing mergers and acquisitions. As a corporate strategy, Apple requires to apply horizontal integration to reduce risks associated with specialization because it majorly focuses on vertical integration. According to Jinjin (2013), learning institutions and governmental organizations are potential customers of Apple because they have a huge demand for computers. In this view, Apple needs to create a partnership, which would enable it to exploit the existing markets globally. Ultimately, Apple needs to streamline its organizational structure to ensure that there is a seamless integration among hardware, software, services, and retail units because they are disparate units. As a consequence, Apple will be in a position to control its operations effectively and efficiently.

Likewise, for Samsung to improve its performance and competitiveness, it should transform its functions, businesses, corporate strategies, and organizational structure. Even though Samsung enjoys extensive market share globally, its functions are still limited to certain regions. In this case, Samsung needs to venture into diverse geographical regions to increase its competitiveness. Raffoul and Brion (2011) state that the restrictions imposed on Samsung owing to patent infringement have limited its operations. Hence, Samsung should comply with patent regulations to avert unnecessary restrictions on its operations. Regarding corporate strategies, Samsung mainly employs horizontal integration because it is a conglomerate; however, vertical integration is necessary for it to minimize costs, maximize its profits, and gain control of its operations (Vergera, 2012). The organizational structure of Samsung requires changes to streamline the operations of diverse affiliates and subsidiaries. To align the mission and vision of Samsung, disparate companies need central leadership, which steers operations efficiently and effectively.

References

Akcay, O. (2012). Marketing to teenagers: The influence of color, ethnicity, and gender. International Journal of Business and Social Science, 3(22), 10-18.

Apple Inc.: Apple Info. (2015). Web.

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Jinjin, T. (2013). A strategic analysis of apple computer Inc. & Recommendations for the future direction. Management Science and Engineering, 7(2), 94-103.

Raffoul, N., & Brion, A. (2011). Reasons for patent protection and cost-effective patent filling options for SMEs. Technology Innovation Management Review, 1(1), 29-33.

Samsung: Values and Philosophy. 2015. Web.

Sodhi, M., & Lee, S. (2007). An analysis of sources of risk in the consumer electronics industry. Journal of the Operational Research Society, 58(1), 1430-1439.

Vergera, R. (2012). Samsung Electronics and Apple, Inc.: A study in contrast in vertical integration in the 21st century. American International Journal of Contemporary Research, 2(9), 77-81.

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