Lee Byung-Chull established Samsung in 1938. The Samsung group started as a trading company centered in Su-dong. At the beginning, it acted as a grocery in the city. In 1947, it expanded its services to Seoul but moved after declaration of the Korean War. The founder ventured into the textile industry in Korea. In 1960, Samsung penetrated in the telecommunications hardware industry. Later on, the company started to produce Telecommunications equipment, semiconductors and home appliances. Since then, it has expanded its services to more than 68 countries and it has more than 285 operations across the globe. The company’s revenue is US $1, 43,069M and it has generated an approximated profit of US $ 14,878M. The company has more than 221,700 employees. Apple Inc. is an American multinational corporation established in 1976 by Steve Jobs. The company deals with the design and marketing of electronics, personal computers and computer software. The company also deals with computer hardware including Mackintosh computers, iPhone, iPod and the iPad. Apple Inc. has more than 65,000 employees, it has recorded a profit of about US $ 34,205, and it has revenue of US $ 1,008,249 M.
The principle of profit maximization states that, the purpose of any firm is to maximize profits and this is achieved by maximizing the income of the shareholders. Samsung Company has increased their output and at the same time increasing the marginal profit (Young & Simon, 2005:14). Samsung have ensured that they capitalize on maximizing revenue compared to apple Inc. In the process of increasing revenue, Samsung has developed a large market share increasing its sales. The company continues to generate profits because it has increased its marginal revenue.
The apple Inc. innovation strategies create a competitive advantage because of its unique design. The company has succeeded to redefine the industry by introducing iPhone and iPad. Compared to Samsung, they have incorporated a unique design component in their products (Young & Simon, 2005:9). The design attracts more customers, thus, sales increases leading to profit generation. On the other hand, Samsung has concentrated with the way they operate the market to create a large customer base (Chang, 2008:34). Samsung operates on a notion that tech industry requires copying and duplication of ideas. Therefore, they duplicate ideas and come up with their design, which they distribute to their established markets maximizing on their profits.
The sales of Samsung are higher compared to Apple Inc. but does not imply that their profits are higher those of Apple Inc. Samsung uses the penetration price strategy to win customers that are more loyal and at the same time increase their profits. Contrary, Apple Inc. has developed a skimming price strategy whose effect has led to increased net profits and profits margins compared to Samsung (Cravens & Piercy, 2006: 14).
The findings from a Market research Firm IDC reflected that Samsung shipped more than 71millions smartphones in the 1st quarter recording a 34% market share. Apple Inc. sold more than 38millions iPhone and this showed that the market share had dropped by 5% of the previous year (O'Grady, 2009:3). In the 4th quarter of 2012, the Apple’s iPhone 5-smartphone model sold more than 27.4millions unit did. The model has been successful since it occupied more than 13% of the smartphones market share and emerged the best-selling model in the market. Apple Inc. focuses on maximizing revenue by offering high-priced products for the early consumers of the new product.
This study utilized primary and secondary data available in books and other published journals and articles. Internet sources company policy documents such as Samsung strategic plan and Apple Inc. Strategic plan. Other publications and reports from international agencies such as World Trade Organization were used. These sources further proved good sources of information both to the country of study and to the researcher. Data obtained from these sources was then tabulated in tables for further analysis and presentation. The data was then analyzed using various analysis methods mainly comparing and contrasting of the facts obtained. Hence, a qualitative approach was used to analyze and interpret data.
Sources of Data
The main sources of data for this research were the secondary sources which were readily available in the library as written books and other WTO publications as well as economic and marketing journals. The following books and publications served as the main sources of data for the study:
- Internet sources and other search engines like Google Scholar.
- Samsung marketing and strategic reports and documents.
- Apple Inc. marketing and strategic reports and documents
- Marketing Textbooks
- Newspaper articles and magazines
- Marketing surveys and Journals
A pilot study was used to assist in the further development of a larger study, and in particular to test study measures, estimation of questioners, testing validity of tools and estimation of outcome variables. Researcher benefited from carrying out a pilot study prior to the main study as it allowed for the identification of any weaknesses in the plans and allows time to rectify any necessary amendments before carrying out the remainder of the study.
Samsung and Apple Inc. both adopt a strategy of maximizing revenue to maximize profit. Total revenue of any given firm is given as a product of price and quantity. Therefore, a firm may decide to concentrate on increasing price to maximize profit or increasing the quantity to maximize revenue, or increase both. However, in the scenario of Samsung and Apple, Samsung concentrates more on the quantity than price. On the other hand, Apple Inc. Focuses more on price than the quantity.
In other words, Samsung adopts a penetration pricing strategy while Apple Inc. uses price-skimming strategy. In this case, Samsung Company launches their relatively low-priced products into the market with the aim of securing a market share. For instance, Samsung in the developing countries uses penetration-pricing strategy to attract potential customers from their main competitors and use this strategy to discourage new competitors in the market. By lowering the prices of their products, customer tends to flock into the new product, hence increase in sales. As a result, the firms that cannot produce their product at a price similar or lower to that of Samsung avoid the market.
On the other hand, Apple Inc. focuses on maximizing revenue by offering high-priced products for the early consumers of the new product. Gradually, they lower the price to attract spendthrift consumers. Apple launches their product with an initial higher price to capitalize on the consumers who are willing to purchase premium for cutting edge technology. When the company experiences low sales or competitors emerge into the market, Apple gradually decrease its price, scanning each level of the market until the low price dominates even prudent buyers.
Samsung Financial position
Apple financial position
Explanation about the table
Even though Samsung’s sales are higher than that of Apple, net profit and profit margin is less relative to Apple Inc. This is as a result of Samsung trying to penetrate into the market through higher sales at a lower price. Therefore, the firm aims at acquiring market share by selling as much as possible hence maximizing revenue. On the other hand, Apple maximizes revenue by selling less relatively to Samsung, but charging higher prices compared to Samsung. As a result, the profit maximization strategy adapted by apple is more profitable than that adopted by Samsung Inc.
It is evident that the different approaches used by the two firms provide different results. The most effective strategy is the one that applied by the Apple Inc. compared to Samsung. Therefore, Samsung seems to undertake certain strategies to help in increasing marginal profit. The problem with Samsung Company is not to increase sale but to increase the net profit. The following are the recommendations.
- Since, the company has already been penetrated in several and important markets, it needs to invest heavy on the cutting edge technology so that they can sell their new products at relatively higher prices that will increase the net profit
- Samsung Company should strive to create customer loyalty in their customer base. Increasing customer loyalty involves offering more improved products especially in the line of the technology
- With the enhance customer loyalty, Samsung can be able to apply skimming pricing strategy similar to Apple Inc.
- Samsung should reduce cost by dropping the project that have low or insignificant rate on investment
- Samsung should also enhance the technological aspect of their product so as they can reduce the rampant cases of piracy
- Apple Inc. should add new marketing channels so that it can increase its sales hence revenue maximization
- In order to increase sales, Apple Inc. should encourage promotion of their products to increase its customer base
- Samsung should formulate a strategy of selling higher margin profit
As illustrated in the table above, Samsung Company records more sales compared to Apple Inc. It should also be noted that, their net profits and net margins are lower than apple. As a result, we conclude that Samsung believes in the concept of Revenue maximization, whereas their competitors’ apple operates depending on the concept of Profit maximization. The performance of Apple reflects higher profits and earnings compared to Samsung. The presented facts show that Samsung occupies the largest market share than Apple Inc. Profit maximization is attained at the point where MR=MC. In maximizing revenue, Samsung Company has increased the number of its products to cover a huge market share (Kim, 1998:67). Profit maximization is also attained through selling and production since it is a subject of revenues and costs. There is need for both companies to maximize on their revenues since the managers are not in a position to control the costs incurred. The top management should create a good relationship with the employees so that they can build a loyal customers base. Profit maximization goal can only be achieved when through hard work and co-operation.
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