Samsung Mobile Phone

Abstract
This essay analyses the Samsung Mobile company by applying Porter’s Five forces. Also each factor will be compared with 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 the competitive mobile companies. To compare each company’s strategic position Samsung was chosen. Although many components are needed to make mobile phones; semiconductors and the operating systems (OS) which companies use will be mainly discussed because these factors have an effect on the function of a mobile phone. Therefore this essay analyses Samsung’s strategic position in comparison with Apple and Nokia’s.

The threat of new entry.
The mobile phone industry needs high capital requirements to produce a large volume of products(Husso, 2011). According to Porter (1996), the more capital that is required, the higher the entry level which means it is difficult to enter and survive the market without large capital. Samsung, Apple and Nokia have also existed for a long time in the industry 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 difficult to survive. Because of this, the threat of new entry will be low and expected retaliation will be high.

Rivalry among existing competitors.
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 so these factors make them a market leader(Awal, 2012). Samsung Semiconductor is a subsidiary company of Samsung Electronics which provides semiconductors to Samsung Electronics used in mobile and key technology(Shaw, 2011). They therefore have a strong contribution network. Apple and Nokia unlike Samsung do not have this subsidiary company thus allowing Samsung to have an advantage as it gives them a better profit per unit of sale. Table1. The sales number of cell phone 2012.

Company| Percentage of sales 2012(%)|
Samsung| 31.3|
Apple| 15|
RIM| 4.3|
ZTE| 4.2|
HTC| 4|
Others(Nokia included)| (Source: adopted from Mello, 2012)

41.2|
The power of suppliers
Samsung, Apple, and Nokia use a variety of suppliers for mobile components (Husso, 2011). As some mobile components of Samsung Electronics are provided by their subsidiary company, it seems that they have low power of supplier. Also, 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 the Samsung Semiconductor for their supplier (Leachman et al, 2002). Therefore Samsung Semiconductor could reduce the fixed cost as they produce large amounts of semiconductors to provide to two large companies. In the case of 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 OS to many mobile companies (Fernandez,2009). Therefore Samsung which uses Android OS has high level of power of Operating System suppliers than Apple and Nokia relatively.

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 buyers.
As there are many smartphones and they have similar function each other, customers can choose and change the smartphone depending on the price, design or operation system easily. Therefore switching cost could be low and power of buyers is high (Porter, 2008). However Samsung have chosen different strategy with Apple. The Strategy Samsung chose is to produce a variety of smartphone which have slightly different designs and functions each other to meet customers’ different needs (Awal, 2012). In case of Apple, even if they have produced smartphone first, have 20 times less the number of smartphone than Samsung (Mello Jr, 2012). Therefore Samsung could reduce the power of buyers by producing many kinds of smartphones than the others companies.

The treat of substitute.
As technology is developed and the trend of consumer’s needs changes, companies produce products with similar function but different means(Porter, 2008). In the mobile industry, tablet and laptop could be considered as the substitute products. However in case of laptop, it is not uncomfortable to carry in everyday life so most of people prefer tablet to use instead of smartphone. Samsung, Apple and Nokia produce tablet as well and Samsung and Apple have high sales number in the tablet industry. Unlike the sales number of smartphone in Table 1, Apple has the highest number of sales number among them in Table 3. Therefore it is suggested that Samsung needs to analyze the competitive product and invest to Research and Development to be successful in the tablet market as well. Even if the power of substitute is low within the mobile industry because companies which sell smart phone also produce the tablets, competitive of substitute with each mobile company is high. Table 3.Global Tablet forecast in 2012.

Tablet| The number of sales (million)|
Apple (iPad)| 65|
Samsung (Galaxy tab)| 12|
Nokia (N810)| 4|
(Source: adopted from
Conclusion
In the intense mobile industry, Samsung has maintained the high rank among the competitive rivalry. Due to high capital requirements, the threat of entry was low. Although the power of customers within the mobile industry is high, Samsung could reduce that by producing many kinds of smartphone. Samsung can get advantage as their subsidiary company supplies semiconductor to them. However in the Operating System market, it seems that they have relatively high level of power of supplier than the two companies. In case of substitute, it is suggested that they need to invest in the Research and Development to tablet to be progressed.

Reference

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