Week 1 assignment
see attachedhed
Read Case 1-3 Apple versus Samsung: The Battle for Smartphone Supremacy Heats Up on page 37.
Write a 700- to 1,050-word paper in which you discuss the key elements of Apple’s innovation strategy until 2014 and answer the following questions:
· Discussion Question 1-21: Do you think Apple can continue to grow by developing breakthrough products that created new markets, as it did with the iPod, iPhone and iPad?
· Discussion Question 1-22: How has Samsung’s global marketing strategy enabled it to compete so effectively against Apple?
· Include data in your paper to support your analysis.
Cite at least three outside references in addition to your textbook.
Format your paper consistent with APA guidelines.
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Case 1-3 Apple
versus Samsung: The Battle
for Smartphone Supremacy
Heats Up
When Steve Jobs died in October 2011, the world lost one of the towering
figures of the modern business era. Apple, the company Jobs cofounded,
was a pioneer in the consumer electronics world; key product introductions
included the Apple II (1977), the Macintosh (1984), the iPod and iTunes
(2001), the Apple Store (2001), the iPhone (2007), and the iPad (2009). At
the time of Jobs’s death, Apple was the most valuable tech company in the
world. By September 2012, Apple stock had soared to record levels, briefly
rising above $700 per share. In addition, Apple had amassed more than
$100 billion in cash, most of it held abroad as foreign earnings. Meanwhile,
once-dominant tech industry giants such as Nokia, Sony, Dell, and
BlackBerry were struggling.
Despite strong 2012 sales for the iPhone 5, however, industry observers
began to wonder whether Apple’s hot streak of hit product introductions
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was starting to cool. Apple’s reputation was based on its proven ability to
disrupt existing markets (e.g., the music and telecommunications
industries) and create new markets with technical and design innovations.
However, some viewed the 2012 launch of the iPhone 5 as an evolutionary
step rather than a revolutionary breakthrough. In fact, many consumers
opted to buy the slower, cheaper iPhone 4 or 4S rather than upgrade to the
iPhone 5. Without Jobs, considered by many to be the heart and soul of the
company, were Apple’s best days behind it?
The Competitive Threat
As growth in the key smartphone sector began to slow, Apple’s most
formidable competitor was Samsung Electronics, a division of Korean
industrial giant Samsung Group, whose products range from
semiconductors to household appliances to smartphones. Samsung’s
popular Galaxy series of phones are powered by Android, an operating
system developed by Google. Some Galaxy models, including the Galaxy
Note (also known as a “phablet”), have larger screens than the iPhone, a
point of difference that has helped drive sales. The rivalry has been heated,
with the two sides squaring off in court over alleged patent infringement.
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Exhibit 1-14
Apple cofounder Steve Jobs wore many hats during his illustrious career,
including inventor, entrepreneur, CEO, and visionary technologist. He was
also a master showman, a storyteller, and marketing genius. His
appearances at product launches are the stuff of legend, and under his
guidance Apple’s must-have products—including the iPod, the iPhone, and
the iPad—were, simply put, the epitome of “cool.”
Source: Paul Sakuma/AP Images.
China and Europe are two of Samsung’s key markets; in 2012, Samsung
launched the Galaxy S III in Europe. In 2013, Samsung staged a lavish event
at Radio City Music Hall in New York to launch the Galaxy S4. Why the
change? As J. K. Shin, the executive in charge of Samsung’s mobile
business, noted, “We’re a global player in the smartphone market and a
global company, and the U.S. is an important market for us . . . I’m not
satisfied with our U.S. market share.”
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In many developing countries, there is strong demand for inexpensive
mobile phones. Some Android-based models from Samsung and other
companies sell for much less than the iPhone 5. For many years, Apple did
not offer a lower-cost version of the iPhone. In the United States, wireless
carriers such as Verizon and AT&T usually subsidize the price of the iPhone
for consumers who sign a multiyear service contract. That’s why an
American iPhone 5 sells for $199. By contrast, in other countries
consumers pay the full, unsubsidized price of the iPhone but are not tied to
a contract. Moreover, the iPhone 5 was the same in every world market. By
contrast, Samsung makes several versions of the Galaxy S4—using
different processors, for example—to suit the needs of different regions.
Not surprisingly, smartphone makers are setting their sights on China, India,
and other emerging markets. For example, Greater China, which includes
China, Hong Kong, and Taiwan, is now Apple’s second-largest market. While
Apple currently commands almost a 50 percent share of the market for
phones selling for $480 and up, CEO Tim Cook is not satisfied. Distribution
is critical, and Cook is aggressively expanding the number of outlets in
China that sell iPhones. In 2013, Cook announced that China Mobile, the
largest carrier in the region and the world’s largest carrier overall, would
begin selling the iPhone.
As growth in China and Europe slows, India, the number 3 smartphone
market, is becoming increasingly important. Here, however, Apple lags far
behind Samsung in terms of smartphone shipments. Samsung offers an
Android phone for about $100; by contrast, Indian consumers pay $500 for
an iPhone 4 and about $850 for the iPhone 5.
Famously, Steve Jobs downplayed the importance of formal market
research, saying that consumers don’t know what they want. By contrast,
Samsung Electronics relies heavily on market research; 60,000 staff
members work in dozens of research centers in China, Great Britain, India,
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Japan, the United States, and elsewhere. Samsung designers have
backgrounds in such diverse disciplines as psychology, sociology, and
engineering. Researchers track trends in fashion and interior design. Also,
Samsung spends more on advertising and promotion than Apple. For
example, Samsung has a major presence at the SXSW Interactive, Film, and
Music conference held each March in Austin, Texas. In 2013, Samsung
sponsored the TechSet Blogger Lounge and presented a concert showcase
by Prince; Samsung users got preferred access to tickets. Although many
SXSW attendees use iPhones and iPads, Apple had no visible corporate
presence at the conference.
The Post-Jobs Era Begins
In the months following Jobs’s death, Cook made a number of key
strategic decisions. For example, Cook authorized the introduction of the
iPad mini, a product that Jobs had opposed. It quickly became a bestseller.
In fall 2013, in conjunction with the launch of the iPhone 5s and iOS 7, a
long-rumored lower-priced iPhone model was unveiled. The iPhone 5c
featured a plastic case and was available in several colors; the price was
about $100 lower than the new iPhone 5s. The 5c was designed to appeal
especially to consumers in emerging markets who could not afford a top-
of-the-line smartphone.
China in particular represented a major opportunity; estimates of the
market’s potential were tempered by the rapid emergence of low-cost
handsets from Chinese manufacturers such as Xiaomi. As Cook noted in an
interview with Bloomberg Businessweek, “We never had an objective to sell
a low-cost phone. Our primary objective is to sell a great phone and a great
experience, and we figured out a way to do it at a lower cost.”
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Cook made key personnel decisions as well. Scott Forstall, the executive in
charge of iOS mobile software, was fired. In his place, Cook named chief
designer Jonathan Ive and software executive Craig Federighi. Going
forward, Ive, who had been Senior Vice President for Industrial Design, will
be responsible for the “look and feel”—in other words, the user interface—
for iPhone and iPad. When Cook, Ive, and Federighi appeared together on
the cover of Bloomberg Businessweek in fall 2013, commentators noted
that Steve Jobs would have never shared the spotlight in this manner. In
another key appointment, Angela Ahrendts, the highly regarded CEO of
Burberry PLC, was recruited to take over Apple’s retail operations.
In 2014, Cook announced that Apple was acquiring Beats Electronics for $3
billion. The deal brought two more key personnel into the Apple fold,
namely hip-hop star Dr. Dre and music mogul Jimmy Iovine. The two had
founded Beats in 2006 to market premium headphones; by the time the
deal was announced in May 2014 the duo had also launched an online
music streaming service, Beats Radio. Both Dre and Iovine were added to
the roster of Apple executives; it was expected that their close ties to the
music industry would be an asset. Moreover, the deal reflected the growing
importance of wearable technology; many believed that “fashion
electronics” products such as Beats’ $399 headphones were poised for
explosive growth.
Apple’s Marketing Communications
Problem
Finally, Cook and his team addressed the issue of Apple’s marketing
communications. It was widely reported that Phil Schiller, Apple’s Senior
Vice President for Global Marketing, was concerned that Apple’s
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advertising had lost its edge. Apple had a long-standing relationship with a
single agency; Los Angeles-based Chiat/Day had created the legendary
“1984” television spot that launched the original Macintosh. In the 1990s,
the agency, now known as TBWA/Chiat/Day, created the iconic “Think
Different” campaign. However, a “Genius Bar” campaign timed to coincide
with the 2012 Olympics was deemed a failure. In a subsequent e-mail to
TBWA, Schiller admitted that he was impressed by arch-rival Samsung’s
2013 Super Bowl ad; by contrast, he noted, Apple was “struggling to nail a
compelling [creative] brief on iPhone.”
The marketing issue was pushed to the forefront during the Academy
Awards broadcast in spring 2014. Oscar host Ellen DeGeneres took a star-
studded selfie (featuring Bradley Cooper, Jennifer Lawrence, and Brad Pitt,
among others) with a Samsung Galaxy phone and posted it on Twitter. The
post then made social media history after being retweeted more than 3.5
million times. It turns out that DeGeneres is an iPhone owner; however,
Samsung had paid $20 million to sponsor the broadcast. Although there
was some disagreement among industry insiders about the monetary value
the publicity the stunt generated, most agreed that Samsung had gotten the
better of Apple. Writing in Advertising Age, Mark Bergen summed up the
situation bluntly when he noted, “Samsung is simply out-innovating its
archrival when it comes to marketing.”
Spurred into action, Cook and Schiller authorized the formation of an in-
house advertising agency at Apple. The company is hiring top talent from
some of the ad industry’s best agencies to staff it. The in-house team has
been tasked with creating new ads; the team will compete against
TBWA/Media Arts Lab, as TBWA is now known, in a process known as a
“creative shootout.” Schiller has also beefed up Apple’s roster of agencies
that specialize in digital marketing.
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CEO Tim Cook Asserts Himself
By early 2014, it was clear that CEO Tim Cook was stepping out of the
shadow of his legendary predecessor. In a move designed to make Apple’s
common stock more affordable to investors, Cook authorized a seven-for-
one stock split. Simply put, if an investor held 50 shares of the stock at a
price of, say $500 per share before the split, after the split the investor
would have 350 shares of stock priced at $71.43 per share.
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Source: Justin Sullivan/Getty Images.
By mid-2014, word began circulating that Apple was preparing to launch
several key new products. In September, CEO Cook and his team
introduced the iPhone 6 and iPhone 6 Plus; both featured larger screens
than earlier iPhones. Apple Pay, a key feature of the new devices, promised
to usher in a new era of secure mobile payments. Cook also announced
that a new wearable device, the Apple Watch, would be introduced early in
2015.
Discussion Questions
1-19. Do you own a smartphone? If so, which brand did you buy, and
why?
1-20. In 2013, Apple introduced the iPhone 5c to attract consumers
who were not willing or able to pay a premium for an Apple device.
The price was about $100 less than the top-of-the-line 5s. Was this
the right pricing decision?
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Sources: Ann-Christine Diaz and Maureen Morrison, “For Apple, Marketing Is a Whole New Game,” Advertising Age (June 9, 2014),
pp. 12–14+; Sam Grobart, “What, Us Worry?” Cover Story, Bloomberg Businessweek (September 19–25, 2013); Sam Grobart, “Think
Colossal: How Samsung Became the World’s No. 1 Smartphone Maker,” Cover Story, Bloomberg Businessweek (April 1–7, 2013),
pp. 58–64; Yun-Hee Kim, “Samsung Targets Apple’s Home Turf,” The Wall Street Journal (March 15, 2013), pp. B1, B4; Dhanya Ann
Thoppil, “In India, iPhone Lags Far Behind,” The Wall Street Journal (February 27, 2013), pp. B1, B4; Brian X. Chen, “Challenging
Apple’s Cool,” The New York Times (February 11, 2013), pp. B1, B6; Anton Troianovski, “Fight to Unseat iPhone Intensifies,” The
Wall Street Journal (January 25, 2013), pp. B1, B6; Rolfe Winkler, “Apple’s Power Within,” The Wall Street Journal (December 7,
2013), p. C1; Josh Tyrangiel, “Tim Cook’s Freshman Year,” Cover Story, Bloomberg Businessweek (September 10–26, 2012), pp. 62–
75.
Writing Assignments
1-21. Do you think Apple can continue to grow by developing
breakthrough products that create new markets, as it did with the
iPod, iPhone, and iPad?
1-22. How has Samsung’s global marketing strategy enabled it to
compete so effectively against Apple?
1-23. Assess the prospects for the global success of Apple Pay and
the Apple Watch.
1-24. Discuss the differences between the global
marketing strategies of Harley-Davidson and Toyota.
1-25. UK-based Burberry is a luxury fashion brand that
appeals to both genders and to all ages. To improve
Burberry’s competitiveness in the luxury goods market,
CEO Christopher Bailey recently updated the marketing
program put in place by his predecessor. The strategy
addresses key markets that Burberry will participate in,
as well as the integration and coordination of
marketing activities. Research recent articles about
Burberry and discuss Burberry’s GMS.
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