Apple and Samsung are the world’s front smartphone companies. They are often compared and often mentioned together in various articles. However, except for the similar design of some devices, Apple and Samsung do not have much in common. These are two corporations with entirely different strategies, capitalization, and market behavior. For a more in-depth study of these companies, were reviewed their diversification and vertical integration strategies.
Diversification of Apple Company
Diversification is most often found in economics, finance, and investments. In economics, diversification means expanding the products and services provided, entering new markets, and developing new technologies and productions to improve business efficiency and benefit and improve financial condition (Ketchon & Short, 2012). There are two types: related diversification and unrelated diversification. Apple presented new devices that will still be released in the foreseeable future despite the pandemic and a slight delay. A key theme of the recent event was the diversification of the company’s product line (Clover, 2021). This diversification is related because it expands the business’s scope by extending the product line.
Unrelated diversification considers the expansion of new areas and spheres of business. There is an entry into a radically new market, which is in no way connected with the past business. Originally Apple’s main product line included computer software and consumer electronics, such as iOS, macOS, smartphones, iPhone, iPad. Apple is adding new lines of business to the existing ones and now offers different types of computer software products, consumer electronics, and consumer online services.
To summarize, diversification is one of the best ways to reduce and nullify risk, whether it’s enterprise, business, investment, or anything else. Each company chooses the most appropriate strategy for it, depending on its target audience and expected results. Apple is focusing more on related diversification and expanding the range of products available.
Samsung Company Diversification
Diversification is one of the most solid directions to take production, economy, or business to a new market and level. Diversification increases competitiveness strengthens self-sufficiency and improves efficiency and profit (Ketchon & Short, 2012). Samsung is actively pursuing unrelated diversification and is focusing on this very strategy. The company currently has assets in various industries, from light manufacturing and services to manufacturing.
Samsung’s interests include semiconductors and chemicals, construction and shipbuilding, defense technology development and building security management, hotels, advertising and fashion, investment banking, insurance, and theme park development. At the same time, the company engaged in the renewal of the portfolio of existing businesses; that is, it turned its attention to related diversification (IANS, 2021). Thus, Samsung began a restructuring based on prioritizing and strengthening its core competencies through internal competitive cooperation.
Apple and Vertical Integration
Vertical integration is a company’s activity aimed at scaling its business, increasing its influence on the market, reducing its costs, and fighting its competitors. Depending on the focus of integration and the company’s position in the production chain, two forms of diversification integration: forward and backward (Business Integration, 2011). Apple’s business model, which uses software to differentiate its non-software products, is designed to remain out of competition. Over the years, the company has profited from the sales of its devices running proprietary operating systems.
Apple is engaged to a greater extent in forwarding vertical integration: the company’s policy is to increase authority over the connection between the firm and the end consumer. This type of strategy is used when the company cannot find intermediaries with a quality level of customer service or seeks to know its customers better. At the same time, the organization plans to supply products with chips for its production (Pressman, 2021). It means that there will be backward integration; accordingly, the company revises its policy based on the prevailing market circumstances and its needs.
Samsung and Vertical Integration
When a firm can increase its profitability, and controls strategically crucial sections in the supply chain, production, and trade of goods, integration strategy is considered competent and necessary. Vertical integration helps the group strengthen the competitiveness of the business ecosystem (Stengel, 2012). Samsung is a highly specialized and competitive company in its core industries, while at the same time, it is a highly diversified business with a vertically integrated unit. Vertical integration, in which critical parts and components are manufactured in-house, is one of the leading factors in Samsung’s success. The company emphasizes backward vertical integration and is engaged to a less extent in forwarding integration. The company’s strategy is to join functions that suppliers previously performed. By inventing, producing, and owning its cutting-edge products, Samsung can stay ahead of competitors who rely on third-party suppliers.
Samsung and Apple are the competitors responsible for some of the world’s most anticipated smartphones. Over the past decade, they have repeatedly stood at the top of the global rankings of mobile device manufacturers. At the same time, they are different companies with different approaches to what smartphones should be and how business should be conducted. Samsung focuses on unrelated diversification while leveraging backward vertical integration. Apple, on the other hand, emphasizes related diversification with forwarding vertical integration.
Despite their different approaches to doing business, companies are using both diversification and integration based on their needs, the requirements of their customers, and the economic situation. Companies consider other ways of doing business and making their management policies more flexible to get the desired results and increase profits.
Clover, J. Apple’s 2021 Event Plans: New Products and Software Coming in 2021. MacRumors. Web.
IANS. (2021). Samsung working on a web dashboard for SmartThings. ETCIO. Web.
Ketchon, D. & Short, J. (2012). Strategic Management: Evaluation and Execution. Flat World Education. Web.
Pajholden. (2011). Business Integration – vertical, horizontal and conglomerate [Video]. YouTube.
Pressman, A. (2021). The global chip shortage may be hitting Apple. Fortune. Web.
Stengel, D. (2012). Managerial Economics Principles. Flat World Education. Web.