Free Essay On Samsung Mobile Segment- Competitive Strategy
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As economists would suggest, conglomerate strategy is the best technique that can shield a company from imminent market loss or economic downturns. This is due to the diversification of products that capture different market segments with varying determinant factors. Samsung Electronics is a real proof of the case since its establishment in 1938 by Lee Byung –Chul. The South Korean company has expanded its product segmentation in Consumer electronics, information technology, and Mobile Communications Industry.
Samsung Electronics ventured into the mobile manufacturing industry following an acquisition deal with Hanguk Jeonja Tongsin and has since grasped a huge market share across the globe. Samsung mobile has invested heavily in research and development –a strategy that drives its innovation pace especially in the smartphone market segment. Their unique marketing strategy of low-priced and differentiated products have earned the company steady income remarkable customer loyalty over its main rival, Apple Incorporation.
Samsung mobile market structure
Samsung mobile market is a monopolistic market structure where many mobile manufacturing companies have been venturing every other day to tap the varying consumer tastes and preferences to mobile phones. Over the years, the telecommunication sector has recorded significant growth with the evolution of smartphones, tablets and iPods. In this market structure, consumers have access to information regarding gadget function ability, durability, and market price. Moreover, the market price is determined by the forces of demand and supply and, for this reason, market players such as Samsung capitalize on product differentiation strategy to influence the consumers’ decision. In an economic perspective, consumers would be rational in product selection and, therefore, would consider product flexibility and value for the price in their decision strategy.Key market players include Nokia, LG, Motorola, Apple, Sony Ericson and Blackberry. Additionally, the recent past has witnessed several market entrants including Google, Techno, Huawei and other small market players. This indicates the medium ease of entry of new players thus posing a threat to existing companies.
Surprisingly, the mobile telephone industry used to be an oligopolistic structure involving several firms that would collude in setting the market price at the expense of the consumers.
However, the low-price strategy fronted by other firms such as Techno and Huawei has expanded the consumer’s market variety prompting major firms to re-strategize their operation culture. Entry of new firms aggravates intense competitive rivalry whose impact favors the consumer.
The mobile market players lost the price setting strategy and reverted to quality and differentiation strategy. Samsung mobile has reacted to the market approach by establishing research and development hubs such as Samsung R& D center in China. According to the company’s 2013 annual report, open innovation system culminated in over 100milionunits of smartphones sales and a 32.8% global market share (Samsung Electronics annual report, 2013).
Samsung mobile segment association with organizations in the same industry that are an oligopoly, perfect competition, monopoly, or monopolistic market structure.
Michael Porter noted that bargaining power of suppliers is a core factor that defines the competitive capacity of a firm in an industry. Any company that monopolizes source of raw materials has a greater competitive advantage over its rivals. In this case, Samsung produces most of its mobile components including software and microchips. The Chief executive officer notes that the operation strategy has significantly reduced cost of production in the entire industry especially the mobile manufacturing plant (Samsung Electronics annual report, 2013). The Samsung mobile may collude with small mobile operators to supply mobile components- a strategy that could boost its revenue and act as a marketing tool for its mobile market.The bargaining power of suppliers in the market would reduce in favor of the company
In another perspective, Samsung mobile could tap the recent launch by Amazon.com to create a customize business application for clients. Amazon has had a significant growth across the globe and installing the application in Samsung mobile smartphones would further strengthen their marker advantage. The recent launch of Samsung Note + Gear is an appropriate platform to blend the operating system with the Amazon application. The innovative technique will extend the market share towards the business segment that demands convenience, flexibility and efficiency operation platform.
Despite the mobile market shifting to a monopolistic structure, the smartphones, and the tablets sector operates partly as an oligopolistic market. The sector requires firms to invest extensively in research and development, high skilled workers as well as employ high-tech capital equipment to counter the varying technological change. For that reason, only a few firms such as Samsung, Apple, LG, Nokia, and Blackberry have offered the sophisticated products to the consumers. Samsung and Apple have taken market the lead in price determination for smartphones retaining a consistent production of smartphones. In such market structure, Samsung and Apple may jointly collude to maximize a particular output at a certain price so as to strengthen their market dominance and deter further competition from new entrants. High asset base and infrastructure are the critical success factor in collusion strategy thus only the market dominated firms survives in that sector. The market technique could prove positive to the company’s revenue path especially if the price floor is high.
Competitive strategy and their efficacy
Competitive strategies encompass a systematic operation structure that an enterprise use to maximize profit expand customer base and succeed in responding to the consumers’ tastes and preferences. Quality production, efficient supply chain system, and product marketing are the core reference factors to a company’s competitiveness in an industry. Samsung mobile believes in innovation, flexibility and customer satisfaction as the strategic drivers of the company’s success. Samsung has structured and utilized the following competitive strategy to become the unrivaled mobile enterprise:
Overall Cost /Differentiation strategy
This is an integrated approach that accommodates the rationality of consumers in quality products at an affordable price. Companies enforce an innovative culture that optimizes production costs and delivers quality products. Samsung has adopted the strategy by launching different types of smartphones at slightly lower prices than their rivals. For instance, iphone5 traded at $650 in China, Indonesia, and Indian markets while Samsung offered similarly differentiated smartphones at an average price of $100 (Worstall, 2013). The company has maintained a continuous launch of various Galaxy S5 smartphones, each with an additional feature to suit consumers’ preference. Michael Porters pointed out that product differentiation at an affordable price in response to market demand subside the internal competition rivalry in an industry.
The strategy strives at increasing consumers’ switching cost to alternative substitutes as well as captivating new customers hence boosting revenue.
Technological advancement strategy
Investment in technology steers firms ahead of their rivals by producing market-oriented goods and services. Samsung has been critical in technology by establishing the Samsung Institute of Advanced Technology (SIAT) that incubates product ideas before they are applied to the products. The company collaborates with high tech consultants for quality, efficiency and cost-related information. In addition, the marketing department seeks information from consumers on their expected product efficiency. The annual report for 2013 highlighted research and development centers as the critical success factors for the company’s differentiation strategy. High skilled manpower and capital resources are necessary to attain an equivalent of the invested technology. At Samsung, employees are recruited on merit basis and delegated to specialized jobs that match their expertise.
Under this strategy, a firm produces goods and services that match the economic capacity and the unique tastes and preferences of customers. The efficacy of this approach is that it inhibits market entry by other rivals and sustains consumer loyalty. The approach demands cost –efficiency production through an integrated value chain supply management system. Samsung operates its production factory for most mobile inputs such as screens – an operation strategy that has significantly reduced production cost. Reduced cost has enabled the company to ceil mobile prices at a level lower than Apple and other market rivals. For instance, BD Park introduced a unique two-part sales strategy: sales to distributors, Samsung brand stores and Multi-brand stores (Mukherjee, 2012). The approach has recorded remarkable market penetration in India market surpassing the dominance of Nokia Company. Low-cost pricing and differentiated smartphones have satiated the Indians preference.
Despite Samsung mobile industry securing a substantial competitive advantage, it should worry about the entry wave by small market players who are capitalizing on low-pricing strategy to attract customers. The recent market entrants such as Techno and Huawei pose a threat to the company if they do not refine their strategy. Therefore, the management should advance its differentiation strategy not only in the smartphone segment but also in the low-cost mobile phone sector. The company’s skimming price strategy applied in selling smartphone gadgets may be unsustainable to the company’s future revenue considering the slow pace of customer base increase.
Differentiation strategy would only succeed if the management invested more resource in research and development and adopted the Business to customer(B2C) marketing approach to consolidate consumer varying preferences and loyalty.B2C marketing strategy require direct and virtual marketing of products to cover the demographic distribution in the target market. For example, the recent market entry of China’s Xiaomi smartphones adopted direct selling to customers to reduce cost and increase market penetration (Worstall, 2013). The line of attack will increase consumers switching costs and shield the company from the adverse effects of intense competitiveness.
Another recommendation is for the management to uphold the market-based segmentation especially in developing countries in Africa. Africa has indicated a rise in GDP and the same reflects an increase in the consumers’ real income. The opportunity is prime especially in the company’s intention to globalize its mobile sector. The management should establish mobile clinics in developing and developed markets as a social approach to addressing technically oriented defects on their phones. Finally, technology, qualified manpower, and efficient production will help the company remain a global icon in mobile telephone industry.
The Samsung mobile segment competitive strategy portrays a definite advantage over other companies especially in their commitment to apply technology as a tool for market penetration and value-based pricing to its customers. In summary, the management should integrate its value supply chain system to eliminate idling and lead cost that often derails a company’s revenue target and profitability.
Worstall, T. (2013, September 9). Why Samsung beats Apple or perhaps vice versa.Forbes.
Mukherjee, W. (2012, July 27). Samsung adopts mobile phone business strategy for consumer durables. The Economic times.
2013 Samsung electronics annual report. (2013). Retrieved from Samsung website: http://www.samsung.com
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