Competitive Analysis and Dynamics

Date: Nov 3, 2017
Category: Review Category

Strategic Competitiveness of Apple and Samsung

Strategic competitiveness of both Apple and Samsung depends on successful strategy formulation and implementation. Their external and internal business environment shape an organization’s vision and mission, for example, Samsung becomes aware of its business environment and then institutes objectives that will be achieved within a certain period of time. Strategies are then formulated and implemented. Samsung’s competitive strategies seek brand superiority in tablet computers and smartphones markets, while Apple’s strategies seek to defend brand superiority. Samsung also seeks to dominate the television sets market with its superior brand of LED TVs. In order to implement these objectives, both Samsung and Apple engage in strategic entrepreneurship, corporate governance, organizational restructuring and strategic leadership. Success in the strategy formulation and implementation lead to strategic competitiveness.

Strategic competitiveness has advantages and disadvantages. For Apple, it has led to increased market and profit share. For Samsung, it has led to the same level of competition with the Apple Company. In general, strategic competitiveness has kept the two companies far above others in terms of market share. In 2012, Samsung made the largest number of mobile phone sales, beating Apple, the company associated with the original designs of generational mobile phones and tablet computers (Rougeau, 2013). Whatever the strategic outcome, both firms are continuously involved in more strategic actions and reactions aimed at improving their competitive position. An action by one of them triggers a response by the other firm. For example, price wars have led to a great fall in prices of tablet computers. Such scenarios indicate the characteristics of a firm’s internal and external environment, and they eventually lead to the formulation of new objectives, thus the cycle continues.

Competitive Analysis

In competitive analysis, there are various things that need to be considered. First, the nature of competitive rivalry needs to be evaluated. Apple and Samsung have similar levels of awareness about each other. Each responds to the actions of the other based on the perception of the existing competition; for example, both companies invest heavily in research and development to ensure that a firm is always ahead of others in terms of innovative and advanced products. Apple’s motivation to compete is mostly influenced by the intention to maintain the industry leader position. Samsung is mainly motivated to become the industry leader.

Assessment of awareness and motivation helps understand why both firms spend millions of dollars in research and development and marketing. It helps understand the nature of countermeasures, for example, Apple has been a first mover while Samsung has been a second mover. First movers introduce innovative new products. Second movers respond to the actions of the first mover by imitating and also conducting quick product and market analysis.

In competitive analysis, it is important to study market commonality and resource similarity. The former is concerned with the number of markets in which firms in an industry compete against each other and the degree of importance of individual markets to each firm. Samsung has mainly responded to actions of Apple in order to affect same market or another market. For example, its good performance in mobile phones and computer sales in 2012 would make consumers worldwide perceive that it has more advanced technology in other products that it competes with other technology companies. This may help Samsung secure a perception of superior quality, enabling it control the market. Apple Company has been keen to defend its original ideas in order to sustain its well established markets in Europe and America. Resource similarity refers to the extent to which Apple and Samsung’s resources are comparable, in terms of type and amount. Both companies exhibit comparable strengths and weaknesses. For example, they are financially endowed to invest heavily in research and development but are prone to price wars.

Drivers of competitive behavior are awareness, ability and motivation. Awareness refers to the extent to which competitors identify the degree of mutual interdependence arising from resource similarity and market commonality. It has helped Apple and Samsung to be aware of each other’s resources, actions and consequences. Lack of awareness can make a firm have a disadvantaged position compared to competitors. Motivation refers to the incentive to respond to a competitor’s actions. It can be reinforced by perceived gains or losses and the likeliness of the competitor acting aggressively in another market. Ability refers to resources that enable a firm initiate action or respond in a timely manner. As pointed out earlier, both Samsung and Apple have enough resources to engage in competitive marketing.

Strategic Actions and Responses

Competitive rivalry involves strategic and tactical actions. Strategic actions and responses are moves that are market-based and involve large investments in specific strategies or objectives and are difficult to implement.  Tactical actions and responses are moves that fine-tune a specific strategy; they require fewer resources and are easy to implement, for example, competitive pricing.

The likelihood of an attack by a firm depends on the first mover, organizational size and quality. First movers, such as Apple, are aggressive in product innovation and invest heavily, thereby enhancing brand recognition and loyalty, survival rate and future competitiveness (Enderle, 2004). Samsung, a second mover, performs a quick product and market analysis, learn from the mistakes of the first movers and respond with a superior product. Organizational size affects action and response in a business environment. Both Samsung and Apple have resources to invest in many responsive responses. Quality also affects likelihood of attack. Since products of both companies are quality, the firms are comfortable to engage in competitive strategies.

In understanding competitive rivalry and predicting a response, it is important to determine the kind of action by individual firms. Strategic and tactical actions trigger different responses. A strategic action involves a large investment and much time for implementation. Tactical responses are common since they require fewer resources and less time. The nature of competition between Apple and Samsung ensures that each other’s consumer base is targeted. This makes both companies initiate both strategic and tactical responses quickly and with ease.  Samsung and Apple study previous responses, enabling their next course of action to be an informed one. The prediction they make on future responses determines whether they will respond to actions of the competitor. The likelihood of a response also depends on a firm’s dependence on specific markets. Market dependence refers to the extent to which revenues and profits are derived from a particular market. The Samsung Company responded to the introduction of tablet computers and smartphones by the Apple Company on the basis of the latter’s reputation and superiority.

Competitive Dynamics

Competitive dynamics are the current actions and responses taking place among firms competing for an advantageous position in the market. In slow cycle markets, competitive advantages are sustainable and imitation is costly. Market leaders almost enjoy all of the monopoly advantages. The growth of Apple in 21st century was reinforced by sustainable advantages. These advantages were gradually eroded when the market changed to be standard-cycle markets, In standard-cycle markets, a firm’s competitive advantages are fairly shielded from imitation and imitation is fairly costly. They are continuously upgraded. Brand loyalty is enhanced by brand names. A consistent experience for the customer is maintained.

Background of Apple and Samsung

The Apple Company, based in the United States, was incorporated in 1977 as a computer company. In 2002, it introduced the first portable audio player. It was an innovative product since it had the capacity for 1000 songs while the existing flash-based players held 20-30 songs. More iPod brands have been introduced since, and they have increasingly high capacity. These products have been introduced in other countries, such as Germany, and have been designed to fit customer language needs. The company signed many major record companies when it introduced the on-line iTunes Music Store, enabling iPod’s consumers to download music at a reduced cost. Music downloads accessible through the iTunes Music Store in 2003, would only be purchased through Macintosh computers which The Apple Company makes. The service offered flexibility when compared to other on-line music services. In 2007, the company introduced Apple TV and iPhone. The phone was the first mobile device with visual voicemail. The phone had a browser and its design made Apple Company establish itself as a technology giant. The company has not only succeeded in producing multi-touch iPods but has introduced the iMacs and MacBooks. They have sold considerably mostly as a result of increased sales of iPads. Tablet computers and smartphones have enabled the company to be a leader in the markets for these products. The company also creates computer software and commercial servers.

Samsung Company is based in South Korea. The company started in 1938 as a grocery business. Its business was later expanded to insurance, securities and retail. The company entered the electronic industry in 1960s. The first products were television sets. By 1992, it had become the largest producer of memory chips. Today, it is the second-largest chipmaker after the Intel Company. The company’s products include TVs, mobile phones, semiconductors, refrigerators and other household items.  It has invested heavily in other sectors such as construction, airline and pharmaceutical industries.

Market Commonality and Resource Similarity of Apple and Samsung

Samsung and Apple companies are direct competitors in the phone and tablet markets. They sold more than half of all smartphones sold in 2012. They are directly and mutually acknowledged as competitors as evidenced by the 2011 legal case over Samsung’s alleged violation of Apple’s smartphone technology and intellectual property: trademarks, patents, user interface and style (Levine, 2013). Cases have been filed in Australia, Germany, Japan, South Korea, United States, France, Italy, Holland and Britain. While Apple won the case in the United States, Samsung won in Britain, Japan and South Korea. There is increased dominance of the mobile phone and tablet computer market by the two companies in these countries. Samsung’s vision is to lead the digital convergent movement (Seongjae, 1998). However, Apple has emerged superior in technological innovations. Samsung has focused its sales to all countries of the world. In 2012, it made the most mobile phone sales, outdoing the global leader since 2008; the Nokia Company. This was facilitated by a product differentiation strategy.

Apple has been at the forefront in innovations and product improvement. The company has superior technology. Samsung has successfully imitated Apple’s products and improved some in areas such as user-friendliness. Apple invests heavily in product marketing. Most promotional material seeks to tell consumers how products improve their lives. Samsung has always responded with increased and superior advertising, focusing on the inclusion of influential celebrities in order to increase the appeal. Both companies have numerous resources that are used in research and development and marketing. Apple relies on its superiority in computer and software revenues while Samsung relies on numerous revenues arising sale of home appliances and from investment in other industries. Samsung has recently focused on design, for example, the company is known for its flashy and slick mobile phones.

Apple and Samsung control about 40% of the total market (Egham, 2013). Their competitiveness is based on unique and recognizable brands. Other companies thrive because some computer and phone consumers prefer a cheaper product to a brand. Apple’s competitive advantage is not sustainable as companies such as Samsung may find it difficult to imitate its products without following the same process Apple went through.

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