COLOGNE BUSINESS SCHOOL (CBS)

Competitive Analysis of Apple

Computers

Term paper for Competitive Intelligence

Winter Semester 2015
Lecturer: Mr. Von Glasow

Teodor-Dragos Grozavu
BA Erasmus Exchange program
Student-No. 1159095028

Table of contents

1) Introduction..................................................................................................................1
2) Samsung a brief history............................................................................................1
3) Apple, Samsungs biggest competitor.........................................................................2
4) Internal analysis Apple.............................................................................................2
4.1 Resource-Based View...............................................................................................2
4.2 BCG Matrix................................................................................................................3
4.3 Generic Strategy.......................................................................................................4
5) Porters 5 Forces Smartphone industry...................................................................4
6) SWOT.........................................................................................................................5
7) Conclusion..................................................................................................................6
8) References..................................................................................................................6

1)Introduction
Competitive Intelligence is one of the most important parts of developing a business
strategy for any company, in any industry, no matter how big or small it is. CI provides
the user with informations about competitors, the market or the industry in which the
company operates, its dynamics and challenges.
For this topic I have chosen Samsung, so my paper will be based on the analysis of its
biggest competitor, Apple.
I will start by presenting a brief history of the two companies. Afterwards, I will continue
with the internal analysis of Apple, its core competencies and resources together with
an analysis of its portfolio, by using Boston Consulting Group Matrix (BCG Matrix).
The external analysis will be next and for this part I will use Michael E. Porters 5
Forces analysis which will focus on the smartphone industry.
The next two steps are the most important, because I will put everything together in a
SWOT Strenghts, Weaknesses, Opportunities and Threats analysis, followed by a
more in-depth form of TOWS, which will interconnect everything.
Finally, I will briefly present all my findings in the Conclusion.
2)Samsung a brief history
Samsungs foundations were put by Byung-Chull Lee in 1938 in South Korea,
specifically in the city of Taegu. Although many of the people dont know the early
history of the company, it was actually a food exporter firm, shipping various items from
South Korea to China.
In 1950s, the enterprise expanded in life insurance and textiles businesses and at the
end of 1960s it went straight into the TV market. Samsung went to manufacture
washing machines, refrigerators and microwaves during the 1970s.
The real shift in strategy came around 10 years later, when the South Korean firm
started producing personal computers, tape recorders and video recorders. 1995 came
with the launch of the first Samsung mobile phone, which was a flow, its sales plumbing
in the first couple of months(History corporate profile about Samsung, 2008). After
a couple of years of focusing on different business units like televisions, the South
Korean manufacturer launched its first Android phone, the Galaxy S.
This point represented the beginning of the rivalry with the American producer of
Smartphones, Apple company which I will analyze in the next pages.
3)Apple Samsungs biggest competitor
As I have mentioned before, my competitor analysis will be focused on Apple,
Samsungs biggest rival to date and the market leader in the smartphone industry.

Apple was cofounded in 1976 by Steve Jobs and Steve Wozniak in Palo Alto, California
in Jobs parents garage. It was started with the vision of building the worlds best
personal computer and it started with Apple 1 (a motherboard plus a processor plus a
bit of a memory). Its price was a staggering $666.
A few months later, the third employee, Mike Markkula invested $250,000 in the
company. In 1977, Apple II was launched and this brought an innovative software that
dealt with spreadsheets. The first business-focused computer was Apple III, presented
in 1980. The real groundbreaking product was the MacIntosh, used especially by
design professionals.(Weinberger, 2015)
The start of the rivalry between Samsung and Apple was in 2007 when Jobs
launched the famous iPhone.

4) Internal Analysis Apple

4.1 Resource-based view is one of the most well-known management theories in
history. It is an approach to analyze and achieve competitive advantage. Its supporters
say that it is better to look inside the company to find exactly what makes the firm
unique in business, rather than looking for the competitive environment to achieve
further succes and develop new strategies this actually makes sense even for
companies without huge turnovers who still want to gain market share without investing
a large capital in acquiring new skills for each potential opportunity that will arise.
Apples key resources are splitted in two big parts, according to this model tangible
and intangible resources.
Tangible or Physical resources we should start with the manufacturing base situated
in Huaian, China, with more than 30,000 employees to date. Apple stores are spread
all over the world, providing the clients with proximity on every continent in 2014,
worldwide sales were around $190 mil(Apple Inc. annual report, n.d.), from these
stores only.
Intangible resources(Sun and Tse, n.d.) are the most important part of Apples strategy
and represents the biggest obstacle in Samsungs path of acquiring a bigger market
share. Starting with the intellectual resources, of which the most important are the
patents, the brand quality and the partnerships and ending with the human resources
part of which the engineers and the product designers are the most valuable in the
world, probably. Their capability to create new, innovative products every 6 months
represents a huge danger for Samsung.

4.2)Boston Consulting Group/Porftolio share Matrix

BCG Matrix was invented by one of the biggest management consulting companies,
Boston Consulting Group and it was used by about 50% of the Fortune 500 companies
in the 1970s. Business units or products are classified as high or low performers in a
company depending on their market growth rate and relative market share. It mainly
analyzes the portfolio of a certain company, dividing their products in:
Cash cows high profit and huge cash generation. These products generate
more cash than they consume and provide cash for the company as a whole,
covering various costs, dividends for the shareholders, investments in the

Research and Development.

Stars generate large amounts of cash and they have a strong market share,
but in the same time are big consumers of money if a star maintains its

market share will become a cow when the market growth declines.
Dogs have a low market share, a low market growth and should definitely be

avoided because it is really hard to make a profit out of them.

Question marks 80% of the strategic business units or products start as
question marks. There is a good posibility for them to become cash cows and
stars but in the same time there is a possibility for them to become dogs(The
BCG Matrix revisited: a computational approach, n.d.).

Adapting the BCG Matrix to Apples products, the model will look like this:
The cash cows are definitely the iPhones, in my opinion. As stated before, since
launched in 2007, the iPhone has evolved not only in design and capabilities, but also
in sales, boosting Apples revenues sky high.
The stars are represented by the MacBook Pro/Macbook Air. Still a long way to go to
become real cash cows, the MacBook is gaining even more market share so in the
next 10 years I dont see this product becoming a real cash cow for Apple, especially
because of its big price compared with the one of its competitors.
Dogs are represented here by the iMac and by the iPod. Launched with big
investments in marketing, they have a real tiny market share and market growth and
they are not likely to recover in the next period of time.
Question marks the situation here is pretty complicated, but I think that the latest
invention of Apple, Apple TV integrates here. Its potential is huge, due to its capabilities
of streaming videos on every smart TV.

4.3 Generic strategy

Apples generic strategy is definitely differentiation. The Palo Alto company asks for its
products a premium price. This happens due to its minimalist design, unique user
experience, the service at Apple stores and its product performance, offered mainly by
its virus free operating system.

5) Porters 5 Forces Smartphone market

This is one of the most recognized frameworks and it is used to analyze the
competitiveness of a company and of the industry in which operates. It was invented by
Harvard Business School professor, Michael E. Porter.
Applied to the smartphone industry, in which Samsung and the company that we are
analyzing, Apple, operate, the framework looks like this:
a) Competitive Rivalry The competitiveness of the smartphone industry is highly
known, with companies like LG, Sony, Blackberry and our own company,
Samsung, being involved in this business. Sales of smartphones grow up in the
first months of launching the product and stumble in the first year this makes
the rivalry even more complex because the phones need to be sold fast. Also,
Apple is constantly avoiding competition based on the price by not going in low
end markets.
b) Supplier Power This is largely determined by the uniqueness of suppliers
products. While the hardware market has a lot of producers, the chip producer
with 85% market share is Intel. The software in the industry is developed only
by a few companies, like Microsoft, Google and Apple (Windows, Android and
OSx). Apple, as you have noticed, produces its own software in house so this
brings the overall bargaining power of suppliers at a medium level. Also, the
Palo Alto company is having a big control over its supply chain, by striking a
deal only with AT&T in America and through its branded Apple Stores.
c) Buyer Power This is an easy one for Apple, due to its big number of
customers. Smartly, Apple does that by syncing all the operating systems
features only among their own products (iPhone, iPad, MacBook). So I assess
the buyer power as low, because Apple doesnt depend on some buyers.
d) Threat of new entrants is low in the smartphone industry. Due to its position as
a market leader, Apple invests almost 40% of its revenues in marketing and
R&D. This industry brings a lot of profits to the big players such as Apple and

our company, Samsung, so it is really hard for other companies to enter the
market, due to the necessary investments.
e) Threat of substitutes is quite hard to describe in this industry, because of the
advancements in technology. Our company, Samsung, could provide a threat of
substitute for Apples iPhone, with a certain breakthrough in innovation and
technology.

6) SWOT Analysis for Apple

Strenghts: Apples strenghts are making it the biggest player in this industry and the
most valuable company in the world. Marketing and Advertising represent the strongest
point right now, with huge investments being made in order to increase the awareness
and further improve the demand for the product. Also, its control over the Supply Chain,
and its flagship Apple stores represent a good foundation. Nonetheless, customer
loyalty and the flawless operating system represent really strong competencies.
Weaknesses: A potential weakness for Apple could be its high pricing in comparison
with its competitors, including Samsung. The decreasing market share and the
incompatibility with other operating systems are also some points to consider by
Apples management.
Opportunities: The launch of Apple TV, mentioned before in the BCG Matrix represents
a strong opportunity for the American firm. Since Apple is investing a lot in the cloud
based services, the opportunities in this area are huge. Nonetheless, the mobile
advertising has growth at a staggering rate.
Threats: Android is taking a bigger chunk of the OS market and the technological
change needs to remain the same for Apple in order to keep their market leadership.
Also, the iTunes could be badly hit due to the movement towards the online streaming
market.

7) Conclusion
In this term paper I have analyzed Apple Computers, as being Samsungs biggest
competitor. After using SWOT analysis on the American company, I found what a big

opportunity Samsung has in the smartphone industry if it takes all the opportunities that
will arise by the growth of Android OS usage in the world.
8) References

Apple Inc. - annual report. Retrieved November 26, 2015, from

http://investor.apple.com/secfiling.cfm?filingid=1193125-11-282113&cik=

History - corporate profile - about Samsung. (2008, November 11). Retrieved

November 26, 2015, from
http://www.samsung.com/us/aboutsamsung/corporateprofile/history06.html?
cid=uk_affiliate_webgains_54264_20151123&source=webgains_uk

The BCG Matrix revisited: a computational approach. Retrieved November 26,

2015, from
https://faculty.unlv.edu/phelan/Research/BCG.pdf

Sun, M., & Tse, E. Resource-based view of competitive advantage in two-sided

markets. Retrieved November 26, 2015, from
http://down.cenet.org.cn/upfile/47/2005717173924107.pdf

The BCG Matrix revisited: a computational approach. Retrieved November 26,

2015, from
https://faculty.unlv.edu/phelan/Research/BCG.pdf

Weinberger, M. (2015, August 24). 32 photos of apples early days before it

ruled the world. Retrieved November 26, 2015, from
http://uk.businessinsider.com/history-of-apple-in-photos-2015-8?r=US&IR=T