Abstract:
This essay analyzes the Samsung Mobile company using Porter’s Five Forces. Each factor will be compared to Apple and Nokia, which are competitive companies in the mobile industry, and the strength of Samsung’s strategic position will be demonstrated.
Introduction:
Samsung Electronics, Apple, and Nokia are competitive mobile companies. Samsung was chosen to compare each company’s strategic position. Although many components are needed to make mobile phones, this essay will primarily discuss semiconductors and the operating systems (OS) that companies use because these factors affect the function of a mobile phone.
Therefore, this essay analyzes Samsung’s strategic position compared to Apple and Nokia.
The threat of new entry:
The mobile phone industry has high capital requirements to produce a large volume of products (Husso, 2011). According to Porter (1996), the higher the required capital, the higher the entry level, which makes it difficult to enter and survive the market without significant capital.
Samsung, Apple, and Nokia have also existed in the industry for a long time and have strong distribution channels (Huvard et al., 2006). Even if a new company enters the market, it is expected that they would be affected by incumbents and find it hard to survive. Because of this, the threat of new entry will be low, and expected retaliation will be high.
Rivalry among existing rivals:
Competition in the mobile industry is high (Parnell, 2009). As can be seen from Table 1, Samsung’s sales numbers are at the top above the other companies. It is suggested that Samsung’s smartphones have attractive hardware design, improved features, and strong support systems, making them a market leader (Awal, 2012).
Samsung Semiconductor is a subsidiary company of Samsung Electronics that provides semiconductors to Samsung Electronics used in mobile and central technology (Shaw, 2011). They, therefore, have a strong distribution network.
Unlike Samsung, Apple and Nokia do not have this subsidiary company, allowing Samsung to have an advantage as it gives them a better profit per unit of sale. Table 1 shows the sales figure of cell phones in 2012.
| Company | Percentage of sales 2012 (%) |
|---|---|
| Samsung | 31.3 |
| Apple | 15 |
| RIM | 4.3 |
| ZTE | 4.2 |
| HTC | 4 |
| Others (Nokia included) | 41.2 |
| (Source: adapted from Mello, 2012) |
The power of providers
Samsung, Apple, and Nokia use an assortment of providers for mobile components (Husso, 2011). As some mobile components of Samsung Electronics are provided by their subsidiary company, it seems that they have a low power of provider.
Besides, the subsidiary company, which is Samsung Semiconductor, was ranked second in the number of sales throughout the world in 2012 (Leachman et al., 2002). This means that their semiconductors could be delivered for a low price in high quality.
The most interesting factor is that Apple and Nokia chose Samsung Semiconductor as their provider (Leachman et al., 2002). Therefore, Samsung Semiconductor could reduce the fixed cost as they produce large amounts of semiconductors to supply to two big companies.
In the case of the operating system, except for Samsung, Apple and Nokia use their own company’s OS, which is iOS and Symbian, respectively. In the OS market, Android accounts for over 50% market share, which means they provide the OS to many mobile companies (Fernandez, 2009). Therefore, Samsung, which uses Android OS, has a higher level of power of Operating System providers than Apple and Nokia comparatively.
Table 2. The Market Share of Operating System in 3Q 2011
| Operating System (OS) | 3Q 2011 Market Share (%) |
|---|---|
| Android | 52.5 |
| Symbian | 16.9 |
| iOS | 15.0 |
| The other | 15.6 |
| (Source: adopted from http://www.gartner.com/it/page.jsp?id=1848514) |
The power of purchasers
As there are many smartphones with similar features, customers can easily choose and switch to a different smartphone depending on the price, design, or operating system. Therefore, switching cost could be low, and the power of purchasers is high (Porter, 2008).
However, Samsung has chosen a different strategy than Apple. The strategy Samsung chose is to produce a variety of smartphones that have slightly different designs and features to meet customers’ different needs (Awal, 2012).
In the case of Apple, even though they produced the smartphone first, they have 20 times fewer smartphones than Samsung (Mello Jr., 2012). Therefore, Samsung could reduce the power of purchasers by producing many types of smartphones than other companies.
“The Daintiness of Replacement. As engineering develops and consumer demands alter, companies produce merchandise with similar functions but different means (Porter, 2008). In the mobile industry, tablets and laptops could be considered as replacement products.
However, in the case of a laptop, it is uncomfortable to transport in everyday life, so most people prefer to use tablets instead of smartphones. Samsung, Apple, and Nokia also produce tablets, but Samsung and Apple have higher sales figures in the tablet industry.
Unlike the sales figure of smartphones in Table 1, Apple has the highest sales figure among them in Table 3. Therefore, it is suggested that Samsung needs to analyze competitive products and invest in research and development to be successful in the tablet market as well.
Even if the power of replacement is low within the mobile industry, because companies that sell smartphones also produce tablets, the competitive replacement with each mobile company is high. Table 3 shows the Global Tablet Prognosis in 2012.
| Tablet | The number of sales (million) |
|---|---|
| Apple (iPad) | 65 |
| Samsung (Galaxy Tab) | 12 |
| Nokia (N810) | 4 |
(Source: Adopted from Decision)
In the intense mobile industry, Samsung has maintained a high rank among the competitive competition. Due to high capital demands, the threat of entry was low. Although the power of clients within the mobile industry is high, Samsung could reduce that by producing many types of smartphones.
Samsung can get an advantage as their subsidiary company supplies semiconductors to them. However, in the Operating System market, they seem to have a relatively high level of power of suppliers compared to the two companies. In the case of replacement, it is suggested that they need to invest in research and development to progress their tablet.
References:
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- Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 79-93.
- Leachman, R. C., Kang, J., & Lin, V. (2002). SLIM: Short Cycle Time and Low Inventory in Manufacturing at Samsung Electronics. Interfaces, 32(1), 61-77.
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- Mello, J. P. (2012, October). Samsung, Apple phones lead sales while Nokia sags. Macworld. Retrieved from https://www.macworld.com.au/news/samsung-apple-phones-lead-sales-while-nokia-droops-77847/
- Huvard, S., Salcedo, R., Tuppince, L., Wentz, M., & Zolad, L. (2006). Vodafone Air Touch: The Acquisition of Maanesmann: Virginia Commonwealth University, 1-29.
- Husso, M. (2011). Analysis of Competition in the Mobile Phone Markets of the United States and Europe.”
