Overview of the two companies
Samsung and Apple are the two world’s largest producers of Smartphones. These companies have adopted operational strategies that are different from each other. They operate at the international level with branches in numerous countries. According to Barnes (2008), a proper operational strategy is essential for operating in the global market. The following is an overview of the two companies.
Samsung
Samsung is a South Korean giant Smartphone manufacturer with its headquarters in Samsung Town, Seoul. The company has expanded to become the leading Smartphone maker in the world. When Samsung joined the market, its main strategy involved maximising on the weaknesses of rival companies to gain an edge. In addition, Samsung has relied on sheer volumes of products in the past where it releases numerous models in the market at the same time. Samsung has been accused of stealing the technology of the companies. Apple, particularly, successfully sued Samsung for patent infringement (Cusumano 2013). This situation arises from the fact that Samsung has been capitalising on the existing innovations in the market to devise better products under its name.
Apple
Established in 1976, Apple Inc. is an American company that manufactures a wide range of consumer electronics. Steve Jobs is the company’s co-founder, which has its headquarters in California. The other founders are Ronald Wayne and Steve Wozniak. Apple has managed to maintain a niche in the consumer electronics field by producing Smartphones that address the needs of the population. Apple has launched a myriad of products that have done exceptionally well in the market, key among them being the iTunes Store.
The companies’ operations
Samsung
According to Slack and Lewis (2008), the processes used by organisations to manufacture and make timely deliveries are defined as operations strategies. It is imperative to have all processes synchronised to achieve full benefits. Samsung employs the red ocean strategy, which involves observing the existing competitors, identifying their weaknesses, and building on the faults (Chandrakala & Devaru 2013). As a result, Samsung can release a variety of products to the market at the same time. Samsung can effectively apply this strategy because it develops most of the components it uses on its Smartphones.
This strategy is unlike Apple, which outsources its Smartphone components. Samsung has also employed cost leadership as its strategy. According to Chandrakala and Devaru (2013), through cost leadership, Samsung has managed to employ a low-cost competitive strategy aimed at reducing the cost of its products. Cost leadership has also enabled the use of vertical integration in all its production facilities. Vertical integration is used to achieve control over the production chain of a facility. It also reduces the possibilities of outsourcing some processes to different suppliers.
Samsung has achieved vertical integration through manufacturing components such as NAND, Mobile DRAM, and Application Processor among others (Vergara 2012). Most companies that employ vertical integration always start with manufacturing the product before finishing with producing the internal components. Samsung started with producing the product and finalised by producing the internal components. Samsung applied this strategy when entering the television market. Despite joining the television bazaar, Samsung even today treats the mobile phone and television components of its business as separate entities.
This situation has proved successful since Samsung continues registering more profits relative to other global companies. Vergara (2012) asserts that the company has also used product differentiation to maintain a competitive advantage in the Smartphone market. Customised Android OS and display screen evidence this strategy. The Galaxy S and Note are Samsung’s products that have different features and hence their high prices in the market. Samsung’s Omnia and Wave evidence the cost leadership strategy that targets the developing countries. The company has managed to employ both the cost leadership and differentiation strategies to increase profitability and/or achieve a higher market share.
Apple
Apple employs the blue ocean strategy as a competitive plan to beat its rivals such as Samsung. Through the strategy, Apple can avoid flooded markets by innovating unique products (Buisson & Silberzahn 2010). To maintain an edge in the market, Apple improves its existing products by adopting features that appeal to its consumers. For example, it improved iMac, which led to the introduction of iTunes and iPod. The two products were met by competition from companies that employed the red ocean strategy.
As a complement to iTunes, Apple introduced the iTunes Music Store as an improvement to its internal processes. In 2007, Apple launched the iPhone model, which enabled the functioning of iTunes. Apple attracted a wide consumer base due to its multi-touch user interface and a large touch screen. As a result, Kapferer (2012) asserts that Apple’s market share increased by $143 million. In line with the blue ocean strategy, Apple launched the App store, which helped it to control the Smartphones market. The iTunes music store fed the demand for digital music to the company’s consumers by offering a selection of music at an affordable price.
Apple has also used research and development as a competitive strategy (Gershon 2013). The company realised that its Smartphones required frequent upgrading, which could only be achieved by investing in research and development. As a result, Apple reported an increase in its annual sales. The blue ocean strategy supposes that consumers are in constant need of mobile phones that bear unique features. To achieve this goal, it is imperative for Apple to invest in research and development. According to Kushida (2015), research and development have enabled the company to launch the iPad, which is a redefinition of the use of portable devices. Apple recognises the key role played by technology in maintaining a competitive edge in the Smartphone market. As a key concept of the blue ocean strategy, technology has revamped the whole customer experience by making life simple, easy, and successful.
How the competitive priorities are implemented and reflected in the companies’ operations management practices and processes
Samsung relies on being a fast follower to compete effectively with rival companies. Barry Jaruzelsky describes the company as being great at learning from its competitors (Nisen 2013). This approach has led Samsung into trouble in the past days, losing the case to Apple where it was accused of stealing the latter company’s design. Samsung adapts quickly to market changes, producing products even faster, an approach that has enabled the giant company to release a high supply of its products in the market while demand is still high. The rapid release of Galaxy s4 mobile phones, for instance, enabled the company to maintain its position in the market, even increasing sales and profits. Samsung has also been described as an avid spender. According to Yektan, Nayebzadeh, and Rabbani (2014), the company is usually willing to invest colossal amounts of money in marketing a new product. This case is slightly contrasted from rival companies who are seen as cautious when investing in new technologies.
Samsung’s massive spending can be witnessed in the company’s advertising campaigns when it is marketing a new product. In the US, for instance, Samsung used $401 million in 2012 to promote its Android commodities (Nisen 2013). This figure was considerably higher when compared to what rival companies such as Apple had spent as their advertising budget within the same period. Diversification is also part of Samsung’s competitive strategy. The company maximises on various technologies such as chips and displays to outsmart its rival companies. The result is often that Samsung can compete regarding price by selling at a lower cost relative to its rivals (Chen & Ann 2016). Other mobile phone manufacturers have to purchase these chips from elsewhere, raising their operational costs considerably above the fee charged by Samsung. Therefore, Samsung’s strategy can be said to be strategic, operational, and tactical in addressing the company’s needs.
Apple
Apple focuses on pricing and marketing to compete with its rivals. Additionally, the company works to remain a formidable force in the global market. By maintaining a high reputation, the company is able to sell many products at a relatively higher price relative to its competitors. Therefore, brand reputation is a key strength in maintaining Apple’s market presence. Because of its reputation, Apple commands a large base of loyal customers. Apple’s generic strategy is designed according to Porter’s Model, which falls in line with the company’s intensive growth strategies (Ximénez & Sanz 2014).
The intensive growth strategy has been strongly attributed to Apple’s success. An intense growth strategy focuses on key areas such as market penetration, development, alternative channels, and devising new products for new customers (Slack, Brandn-Jones & Johnson 2016). Sometimes, market dynamics may require a company to create new products to suit new customers. Apple implemented this approach by introducing the iPod (Briggle 2013). The product became a success because it could be sold as a brand independently of the existing brands. At the same time, iPod served to market the existing Apple’s products.
Differentiation is another way that Apple implements its strategy. The company relies on high-end technology and innovation to set its products apart from those of the competitors. The result has often been that Apple stands out in the market where it maintains a lead position against its rivals in terms of product quality. Additionally, Apple focuses on relentlessly attempting to expand its market reach. Apple avoids focusing on a single market segment. Instead, it targets a broader market. In fact, Apple’s products are designed for everyone. It relies on continuous research to implement this approach. Research is also important to stay ahead in a market where innovations are easily copied by competitors. Therefore, Apple’s strategy is operational, tactical, and strategic.
The two companies’ processes and competition
Both companies have undertaken various steps to remain competitive in the market. Apple has arguably been placed at a point of disadvantage by Samsung’s subsequent dominance of the market. For Apple, its strategy is currently designed to regain the lost market leadership. According to Gustin (2012), Apple is currently engaged in developing the existing products as opposed to creating new ones. In the past days, Apple invested colossal sums of money in innovation aimed at creating new products. After following the path of intensive innovation, it would take years before the company launched any new product in the market. The challenge with this approach is that customers are often impatient and may be attracted to competitors who are fast in integrating new technology (Kelton, Sadowski & Zupick 2014). Apple has adapted to the situation. It currently releases new models without major changes. For instance, iPhone 5 was only a slight improvement of iPhone 4 (Travlos 2012). Apple has also changed from purchasing various components to developing its own as a way of minimising operational costs.
As observed earlier, Samsung’s chief strategy involves capitalising on the weaknesses of its rivals. As such, Samsung awaits competitors to launch products before making its product that is essentially an improvement of the competitor’s product (Kang, Chang & Song 2013). Previously, this approach has enabled Samsung to avoid investing heavily in research since move may appear to competitors as a rather sleazy tactic. Nevertheless, Samsung is currently investing more resources in research to create its unique technologies. This plan is expected to remedy its reputation as a “copycat” (Kang, Chang & Song 2016). Nisen (2013) observes that Samsung filed numerous patents in the US in 2012, coming only second to IBM. This observation demonstrates the company’s changing approach from being a follower to being a leading innovator. Samsung’s management understands that a formidable reputation for the company will depend on its ability to produce new products that are differentiated from those of its competitors.
Conclusion
Samsung and Apple apply different strategies in their management. Apple’s blue ocean strategy is associated with in-depth innovation that has led to new products such as iPhone and iPod. Samsung for its part has relied on the red ocean strategy where it improves the already existing technology in the market. Both companies are engaging in efforts to shift their strategies to compete in the end. Samsung is attempting to become more innovative while Apple is spending less of its resources in researching new products.
References
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