Samsung vs. Apple – The Next Generation Of Rivalry

Last night, 14th March, Samsung launched the next generation of smartphone, the Galaxy S4. The event was held in New York, which is significant as they are a South Korean based company – the purpose was to topple Apple’s iPhone dominance in the USA. Samsung are growing in confidence, which showed last night at an impressive launch.

The S4 has many new software and hardware features. For example, the hard drive has three possible sizes (64GB being the biggest), it is thinner and slimmer than its predecessor and it has a bright 5″ touch screen with better capacity battery. What’s more, perhaps the most impressive aspect of the phone lies in the innovative new feature in terms of the camera; if someone turns away from watching a video, it will pause. This is all very impressive.

Samsung are already the largest manufacturer of Android-based smartphones with the S3 being the most popular Android-based smartphone to date. So if their new phone reaches the target of 10 million sold in the first month, predicted by analysts’, they are going to be making significant strides ahead of their Android rivals, HTC and Nokia, who have themselves recently released new phones. Morevoer, Samsung are taking advantage of Apple’s lack of recent innovative products. However, another significant point to make is that around this time each year, March/April, Apple have consistently released a new version of their prestigious  iPad. This year is different. Could it be a signal for something special in the waiting, or have they ran out of ideas? They are famous for keeping everything they are working on very secret. Therefore, they very well could have something very impressive in the making or being developed. Yes, they have not released an innovative product since the iPad, but that’s what they pride themselves on, so who’s to say they have not got something very special planned. Only time will tell. For the mean time, it is clear that Samsung have seen an opportunity to overhaul the dominance of Apple, and they may well do it. Ultimately, the sales figures for the phones will see who comes out on top. In literal terms, that could show the winner anyway.

Apple pride themselves on not only being innovative, but people ‘loving’ their products. Are Samsung trying to do the same? The vast majority of people with an Apple product have an attachment to their Apple products, or at least, used to – Apple are increasingly seen as becoming ‘boring’ as many people now own an iPhone. But Apple will already know that. That’s why I am predicting that they will more than match anything Samsung do. Well at least I would have said that with Steve Jobs at the helm. So the question is, will they?

Over time people get bored of using the same device. There are many alternative smartphones on the market, but in reality, it is becoming increasingly a two-horse race between Apple and Samsung, so many people end up choosing between the two of them.

The S4 will be released early next month. It will be interesting to see the price of three versions of the phones (dependent on the memory) as Apple have always had higher prices in comparison, but people are still willing to pay more to have one of their products. Will Samsung go for a high price and follow the same path as Apple, or will they stay with lower prices as a way to further entice consumers to have one of their products? It depends on where they see themselves in the eyes of the consumer.

A Significant Time For The Future Of The Computer Market

The last 6 months has seen significant changes in the technological environment. Apple started it all off with the introduction of the iPad Mini and iPhone 5, Microsoft followed suit with their new operating system “Windows 8″ which coincided with the launch of the Windows Phone 8, leaving Google, who introduced their latest Chromebook just last month, the third generation of their Chromebooks since their inception in 2011.

A couple questions must be asked…  What market share do their operating systems have in the desktop and mobile/tablet markets? and Who is going to come out on top in the long term?

It seems essential to give a bit of background to each new product/system. Firstly, Windows 8 is designed for tablets and PC’s, which gives it more options as people are slowly transferring over from using PC’s to tablets, therefore it seems that Microsoft are moving in the right direction. Sales for the system after the first 90 days are equal to that of its predecessor, Windows 7, and at a time where the market is much more crowded in comparison to a time where Windows 7 and the iOS operating systems were leading the way, it could show that they are doing well. Next, Apple introduced the iPad Mini and iPhone 5. As I have said before in previous posts, it just shows that they are trying to crowd the market, whilst relying on the dedicated Apple fans to purchase their newest releases. Finally, Google have countered the others by introducing the latest Chromebook, which has enabled the Chrome operating system to be used on touchscreens. The whole purpose, or intention, is for Google to make deeper inroads into Microsoft’s core business, Windows.

In terms of current market share (as of February 2013), Windows are completely leading the way with desktop operating system market share of 93%, with iOS holding 5% and the others representing the last 2%. One thing that needs to be pointed out; 39% of that market share is represented by Windows XP, which is becoming very outdated as people are deciding to shift over to using tablets instead of updating their operating system on their PC’s. In terms of the mobile/tablet operating system market share, iOS are leading the way at 55%, with Android at 25%, whereas Windows Phone currently holds just over a 1% share. This is a fascinating find. Clearly, the new Windows 8 operating system for mobiles/tablets have only been in circulation for 4 months, but it just shows that Microsoft have arrived too late to the party. They are moving in the right direction, they are just a couple of years too late.

In the long term, I can see Google leading the way. Apple are currently leading the way, as the tablet/mobile market is becoming the biggest, but the loss of Steve Jobs is a huge one. Microsoft, as I said, have arrived too late to the party. They may hold the overwhelming majority of market share in the desktop market, but it is slowly shrinking. They have tried to counter this with Windows 8, but Google and Apple got there first, which is everything. iOS and Android are leading the way in the mobile and tablet markets, with many people loyal to one of them. Yes, people do like a change, but not enough to give Microsoft much of chance. I can see Google leading the way due to the lack of initiative shown by Microsoft and the current way Apple are headed, a stalemate. They need an inspirational leader to drive the company on what has made them what they are today, innovative.

Google are a brand everyone is familiar with, and with many people liking the Android software and through the slowly declining Apple, Google would seem to be in the best position.

The Value Of The Brand – Market Capitalisation

Market Capitalisation is a tool used to distinguish the net worth of a company. It is the total value of the issued shares of a publicly traded company and can be calculated by multiplying the share price by the outstanding shares. A fascinating point to make is that many companies such as Facebook, Google and Apple have very high brand value in comparison to their revenues. This begs the question; why?

Firstly, it seems appropriate to distinguish their revenues from their Market Capitalisation. The most up-to-date revenues recorded by Facebook are of $1.26 billion but they have a Market Capitalisation of just under $46 Billion, which shows that the amount they are actually making and how much the brand is perceived to be worth is hugely different. Google had revenues of $14.4 billion in Q4 of 2012, however their current Market Capitalisation is $261 billion. Apple achieved revenues of $36 billion whereas they have a Market Capitalisation of $418 billion. Each of these three companies have something distinctly in common; they are all leading the way in the technological market where the possibly for future development and expansion is high due to technological innovation. Therefore, even though Facebook is actually worth 37 times more than they are making, with Google at 19 and Apple 12, it shows that people are wanting to invest in these brands as they believe they will keep growing and make them more money. Ultimately, there is always someone who has the choice of either investment or saving and if these companies are providing potential for a lucrative return, they are going choose that option. Furthermore, it will then cause a knock-on effect, with others choosing to invest in them as well.

On the other side, there are companies such as IBM, Hewlett Packard and Nokia whose revenues and Marketing Capitalisation are at a very similar level. IBM have a Market Capitalisation 2 times that of their revenues, HP have a Market Capitalisation of just 1.2 times that of revenues and Nokia have the same ratio as IBM. These huge companies were all once in the same position as Facebook, Google and Apple so it just shows the shift in brand power.  For example, Nokia’s Market Capitalisation has fallen from $150 billion to $14 billion in just 5 years, showing how much the brand has diminished in value and the lack of willing investment into the brand.

For the last decade Microsoft have been valued higher than Google, but finally Google have managed to overturn the power of Microsoft. Ultimately, Microsoft are falling behind and Google are finding new niche’s on the internet and exploiting them. The way technological companies now much run is changing, due to the ever-changing global environment.

Getting there first is everything, which is something Facebook, Apple and Google have all achieved, as did IBM, Nokia and HP, but the way companies now play the market has changed, so it is imperative they adapt. Innovation is the key.

A Missed Opportunity For Microsoft

In late October 2012, Microsoft released ’Windows Phone 8′ coinciding with the launch of Window 8, the latest operating system released by Microsoft. The phone software was introduced to rival other competitors strong market positions in the mobile phone industry; Apple’s iOS and Google’s Android system. The system is being used by Nokia, Samsung and HTC devices, which brings severe competition to Android.

The phone burst onto our televisions with many adverts showing off their phone. Ultimately, the main difference between their system and others is the enlarged ’tiles’ that fill the screen and the fact that it can be customised to anyone’s preference.  However, when I first caught a glimpse of the phone, it did not impress; I did not see how it was better than the iPhone or was more appealing. Many people I have spoken to agree, insisting that the advertising does not serve its purpose; to entice consumers to buy their phone, which is fascinating as the phone seems to be targeted at the younger generations. Instead, I believe that it shows Microsoft lagging behind their main rivals; they should have introduced this system at least 2 years ago if they wanted to develop brand loyalty in the way Apple have managed to, as even though at that time Apple were building in momentum, if Microsoft offered an alternative that matched the iPhone but at a cheaper price they would be at a strong advantage. Now the problem is that many people are hooked on the iPhone or Android phones, making it extremely difficult for Microsoft to build a large customer base. Granted, some consumers may be getting tired of the iPhone and may want to try out the Windows Phone but will it be enough to allow Microsoft to create a more even playing field on the mobile phone market? I have my doubts.

Microsoft have not introduced something completely innovative and new, they have just introduced a similar alternative. If the phone was significantly better than the iPhone or Android phones then I could see it having a impact on the market. The phone has only been out for a few months, so it will be interesting to see whether sales accelerate or whether it is far from the success that Microsoft hope for. The latter is what I have my money on.

Fundamentally, Microsoft have had Windows phones in circulation in the past, but they have never taken off in the way that others brands have. It is a missed opportunity for Microsoft because they have introduced the new phone far too late. The other phone brands have such strong brand loyalty and because the phone is not superior to the latest phones, it makes it even more difficult for the brand to progress. The compatibility with the Windows 8 PC software is clever but it still does not make it stand out as consumers need to have the Windows 8 software, of which many currently do not. Furthermore, it is debatable whether the software is appropriate for Desktops and Laptops, which further hinders its potential.

Starbucks in 2012

Starbucks UK were caught avoiding corporation tax this year, as I’m sure you are all aware of. Tax avoidance is not illegal, unlike tax evasion, but even though they have not broken the law, it has bruised their reputation. BBC Business Corespondent Theo Leggett explains how they have avoided tax; “Much of the money it earns in this country is transferred to a sister company in the Netherlands in the form of royalty payments, leaving the UK division to report regular annual losses”. Corporation tax is set relatively high in the UK, currently at 24%, falling to 23% in 2013 (HMRC) which is the main reason why Starbucks, but also Google and Amazon have been avoiding tax.

The question that I believe needs to be asked is; How much has the tax avoidance affected the customer levels at Starbucks?

Starbucks is my favourite coffee shop and this has not stopped me going. However, they have slightly damaged my perception of the brand which has resulted in visits to Costa. This is the same for some people I have spoken to who are big lovers of Starbucks. From observation, talking to people and doing some research, my theory is that the loyal customers who frequently visit Starbucks have not stopped visiting Starbucks, as they have a love for the coffee and so this ‘unethical’ behaviour is not enough to put them off. The customers that choose Starbucks over Costa or others may have started to put Costa over Starbucks, and the customers that will go to any coffee shop, who do not have loyalty to a chain, may be put off having Starbucks in their list of possible coffee shops to visit. I’ve noticed that the Starbucks stores have had less custom than a few months ago, while the Costa’s I have visited have been flourishing in business. Therefore it is clear that this tax avoidance has affected customer levels, but I am unsure to how much, and whether the tax issues are the sole cause of this drop in customers.

My love for Starbucks was further dampened the last time I visited a store; the service was very bad, resulting in a miss order for one of my family members. This may be a rare occurrence but the store was practically empty at busy lunch time period, with only the truly loyal customers present. A fundamental point I must make is that coffee chains are fairly similar in what they offer, differentiating on taste of the coffee, which is why this unethical behaviour has hit Starbucks, as for some people, the taste of the coffee simply is not enough. It is imperative that they start paying Corporation tax in the UK to regain trust from their customers and potential customers, as Costa are planning on almost doubling their number of outlets due to their continued success.

Starbucks may be the biggest coffee brand in the world, but McDonald’s have superseded Starbucks in becoming the biggest retailers of coffee in the world. Therefore, Starbucks need to push forward in 2013 in order to regain their No.1 position.

McDonald’s; one of the biggest corporate disasters?

During the 1990’s, a group of 6 activists met together to write a booklet entitled “What’s wrong with McDonald’s”. The publication was full of allegations against the way McDonald’s was handling the different areas of its business, and the effect they were having on the environment. For example; they sell unhealthy food, exploit their workforce and are cruel to animals.

It is clear that a booklet outlining the flaws in McDonald’s would severely damage their reputation, that is, if the whole world became aware of the booklet. McDonald’s decided to sue the activists, of which they all pulled out, apart from 2, Mr Morris and Miss Steel. This could be seen as one of the biggest mistakes the corporate world has seen, a huge error of judgement. Firstly, the case took 7 years to be resolved (the longest in British history) which enabled the book to be translated into 26 languages. Secondly, McDonald’s had to pay in excess of £100 Million in legal fees and even though they won the case, they did not receive any compensation as Morris and Steel did not have any money. Finally, the reason they won the case is because two of the facts in the booklet were found to be untrue, one claiming that McDonald’s was at least partly responsible for destroying the South American rain-forests, which was clearly far-fetched but the fact that the rest of the information was found to be true really harmed McDonald’s.

The fact of the matter is, even though they won the case, the only winners here are the activists. If they had just left the booklet to be distributed around London (where it was created and launched) it is likely that it wouldn’t of had much reach, but instead it was made known to the world due to incredibly bad judgement.

It just goes to show the potential power of a few people and how determination goes along way.

In business terms, this was a disaster for their reputation and brand perception, and even though they are still the 7th biggest brand in the world (Interbrand 2012) it shows that even the biggest corporate and worldwide brand can have its weaknesses. McDonald’s have come along way since this disaster but the blunder is unlikely to be forgotten anytime soon.

A new strategy for Apple?

Over the last 2 months, Apple have released the iPhone 5, iPad mini and new Mac with retina display. Sales for the iPhone were less than anticipated and I expect the iPad mini to sell far less than its predecessor.

Apple are moving away from the core foundation Steve Jobs laid down. They are trying to saturate the market with products and are looking for short term solutions instead of coming up with the next best product, which is having an adverse effect on the business. Last month, they introduced the iPad mini in an aim to compete with their rivals, which is a rarity for Apple as normally they are the ones leading, not following. Steve Jobs said himself that ‘7″ tablets are too small’ clearing showing that Apple are changing. They have stated that they are targeting schools to use the iPad mini, which gives it some differentiation, but ultimately, the iPad mini is almost exactly the same as the new iPad but is just a few inches smaller and a little less expensive.

The iPad mini is £100 more expensive than rival tablets, such as the Amazon Kindle Fire and the Google Nexus 7. This shows that they are sticking to their higher price strategy, but are changing their strategy to respond to what their competitors are doing. In time, this could have a negative effect on Apple as they could be seen as less innovative and more generic, resulting in a major damage to their prestigious brand, meaning consumers will not be willing to pay higher than what they need to for a very similar product.

They are now the second biggest brand in the world, behind Coca-Cola, climbing 15 places in just 2 years, but to remain at the top surely they need to remain loyal to their core values and foundations? as that is what has made them what they are today.

Steve Jobs was all for pushing boundaries. Apple are now starting to follow the crowd. Is the power of Apple weakening?