Apples major threat / competition - Samsung

IDENTIFICATION OF APPLE’S TARGET COMPETITOR

Apple competitors range from a wide list of brands. Looking at the 4 key competitive areas where Apple plays (PC, Smartphones, Tablets, MP3 Players), the main competitors include the likes of HP, Dell, Microsoft, Samsung, Google, HTC, LG, etc.

When looking at the key threats for Apple, 4 of them fit perfectly for the sake of this exercise, namely:

1.     Rapid technological change

2.     Android OS growth

3.     Price pressure from Samsung over key components

4.     Competitors moves in online music market

Taking into account that if we look at Apple’s gross margin level, the company is mainly fuelled by the sales of both iPhone and the iPad, accounting to more than 80% of their gross margin, it is sensible to say that their main threats would come from a competitor who could undermine these areas. 

As such we have identified 2 of Apple main competitors being Samsung (supported by Google).

THE SOURCE OF SAMSUNG COMPETITIVE ADVANTAGE

1.     Hardware integration flexibility with Open Source OS and Software

2.     Excellence in Engineering and producing hardware parts and consumer 

        electronics

3.     Innovation and design

4.     Low production costs

5.     Ability to market the brand

HOW STRONG IS SAMSUNG OFFER TO THE MARKET?

1.     We do have offerings for all segments in the smartphone market 

(contrary to our main competitor), and we can provide offers to first time smartphones’ users in low end countries.

2.     With the flexibility of using Open Sources OS, we provide solutions to different consumers looking for experience in different OS platforms (Android, Windows…)

3.     With the recent hardware innovations, there is more vertical integration from consumers, on how they experience their connectivity (personal and professional)

4.     Taking advantage of an Open Source OS (Android), Google Play is growing faster and has more apps than the Apple’s App Store

5.     Solid and steady growth YoY with increased shipments on our smartphones globally. Q1 2013 indicates a 33% global market share (6% growth over SPLY, growing nine times faster than Apple), followed by Apple who shares fell to 17.9% compared to 22.8% SPLY.

SAMSUNG’S COST POSITION

We have set up our production facilities in low cost countries. This allows producing goods with low production cost and benefit us, as it can offer lower price and earn higher margins.

SAMSUNG FINANCES

1.     Q1 2013 sales revenue increased to $47.6 billion

2.     Audited operating profit shows an impressive $7.9 billion (3% budget).

3.     Net profit of $6.4 billion (44% YoY)

4.     Nevertheless, our growth decelerated (percentagewise) compared Q4 2012, when our profits grew by 54% and revenue rose nearly 17%.

SAMSUNG SWOT

FEEDBACK FROM SAMSUNG’S CUSTOMERS

Knowing that for a satisfying user experience of our products, it is important to a powerful handset and built-in OS which is easy to use, yet with flexibility to be customized for individual needs and taste, we believe there is still plenty of room for improvement in the consumer satisfaction ratings of all our range of solutions on offering.

Recent J.D. Power and Associates Reports  for Q1 2013 in the U.S. indicates that for the ninth consecutive study, Apple ranks highest among manufacturers of smartphones in customer satisfaction, performing particularly well in physical design and ease of operation. In this study, our brand was rated forth in the list behind Study Average, and Nokia.

Although we believe it might have to do with the OS system in use rather the hardware on offering, the fact that a recent Barron’s report illustrated that iPhone users are “apparently” much more likely to buy an iPhone again (77%) than Android users (48%), clearly indicates that we still need to do much more to understand and create the kind of experience our consumers have not yet even “dreamed” about.