Following the American Psychological Association’s Guidelines
The industry producing electronic home appliances, computers, cell phones, tablet phones and some other home electronics is a monopolistic competition market. The companies in theindustry produce very close substitutes; and to be able to sell more they need to differentiate their products to attract customers and create a addiction. A strategy of differentiating products from other brands' products requires R&D works at higher level. This R&D works do not necessarily require inventions but some new properties to attract customers.
There are a few leading companies which invest in R&D and innovation in the industry and many follower companies which try to copy what the leading companies do. Subsequently, the leading companies benefits from being the first company doing and selling an innovation for a certain time until the following companies figure out how to copy and commercialize it.
In this industry, Apple and Samsung are the leading companies and there is a high level competition between these two companies. Other companies are following these leading companies. In this essay, we will anayze these two companies' balance sheet and see how they are operating financially.
Apple's name have become synonymous with innovation. Starting from Ipads to Iphones, every year Apple is bringing new products to the market with new properties. Even though the prices of Apple devices are higher than other products, most people still prefer Apple's products to other substitute products. However, recently, Samsung has succeeded being a strong rival against Apple with S line cell phones and other new products. Both of the companies are investing in R&D works and they are trying to produce more innovation for the customers. Subsequently, it looks like there will be a high level competition in the industry and these two companies will protect their leading positions.
Apple has been the leading company in the industry, however, nowadays its position is not safe anymore due to another strong rival, Samsung. Samsung is better position financially in the industry now and Apple has to face this new situation. In 2012, Samsung 63 million Samsung Smartphones and made more money than many other technological companies. Apple have sold 5 million Iphone 5 at a weekend. These numbers show that these two companies are the biggest ones in the industry.
Apple could increase its profit numbers in last five years: Total revenues from 4.9 billion USD in 2009 to 156.5 billion USD in 2012, Net income from 8.2 billion USD in 2009 to 41.7 billion USD in 2012. Apple could manage to increase its revenue 31% in last years, while Samsung's revenue growth is relatvely slower. Samsung numbers are as following: Gross margin: 39.49%, Net profit margin: 13.05%, and Operating margin 15.91%; while Apple's statistics as following: Gross margin: 38.63, Net profit margin: 23.99%, and Operating margin: 29.46%. These numbers are showing that Apple is still the leader in the country.
Apple is continuing a healthy state financially for last five years with a 145 billion USD cash pile and 50 billion USD cash flow from operations in 2012. Apple have been charging higher prices for its products, however, there is a strong rival, Samsung, in the industry and it is expected that Apple might follow a new lower pricing strategy after that.
Apple's leverage ratio is 1.49 while Samsung's leverage ration is 1.52 in 2012. Both companies leverage rates are high showing that when they borrow money they are being able to produce good profits based on the companies' debt.
Consequently, financial ratios indicates us that Samsung and Apple are financially strong companies also. They are using their own capitals and beside this, they are using some other resources. Their financial tables show that they are selling the most number of phones in the market and they are also giving big importance to R&D which could be seen easily just by checking the expenditure on R&D in their financial tables.
Apple was much stronger before Samsung's rise in the industry and could sell its products at higher prices. After Samsungs' appearance, Apple and Samsung are expected to be two top companies. They have different lines of products, however, their products are close substitues, thus whoever makes better innovations early will be one step ahead in this competition. It is not expected that other companies would be able compete against these two companies in the near future.
The other companies other than that Samsung and Apple need to analyze what would be the next innovation in the cell phones' market, or maybe what product could be developed, or what new product could attrack people to be in the competition. In the technology markets, we mostly say this is the last point in the technology, however, each time we see that there truly exists further points in the technology that we could not imagine before seeing it.
Another important point for the companies in the technology markets is that to find new ways of presenting ideas into business. Following the same strategies with the previous successful companies might not work. Therefore any company wants to be leader needs to figure out what could be the next. The best way to learn this is to analyze people's demands or wishes about technology and that is what Apple and Samsung is doing now.
GuruFocus . (2013). Samsung vs. Apple: A Financial Comparision. NASDAQ, retrieved from http://www.nasdaq.com/article/samsung-vs-apple-a-financial-comparison-cm270771.
Worstall, Tim. (2013). Samsung v. Apple: Two Fascinating Numbers. Forbes, retrieved from http://www.forbes.com/sites/timworstall/2013/03/17/samsung-v-apple-two-fascinating-numbers/.