SAMSUNG MOBILE: MARKET SHARE AND

PROFITABILITY IN SMARTPHONES
Team C:
Nabilla Irawan – 040214353009
Umar Rizki Kusumo Widayu – 040214353062
Andrawina Kartika Sari – 040214353053
Jefri Agustiawan Casano Go – 040214353047
Erlita Kusuma Wardani - 040214353034
Profitability VS Market Share
1. In December 2015, Samsung announced a new head to its mobile division, a 54-year-old engineer
named DJ Koh.
2. The announcement of Koh’s appointment came on the heels of a challenging year for Samsung,
Samsung's forecast of market demand was inaccurate -> mobile division income at Samsung for
the Q2 of 2015 dropped 38%.
3. Even so, at the end of the second quarter in 2015, Samsung accounted for 21.4% of all new
smartphones sold versus Apple at 13.9%.
4. The situation was reversed when it came to profitability, Samsung accounting for approximately 14% of
smartphone profits while Apple held the remaining 86%
 GROWTH RATES IN SMARTPHONE
OWNERSHIP AND USE
• Prior to 2007, early models of smartphones layered limited connectivity and functionality on
top of a wireless phone, providing abridged access to the Internet and apps
• At the end of the second quarter of 2015, there were 7.6 billion mobile subscriptions in the
world. Smartphones accounted for 3.4 billion subscriptions or 45% of all mobile devices.
• Samsung dominated the overall market share of smartphone, while Apple ruled the profitable
high-end market
 Developed Economies & Developing
Economies
Developed Economies
Developed economies like the United States and United Kingdom experienced modest growth in smartphone users
at the lower end of the market.
AT&T and Sprint had heavily subsidized consumer purchases of phones in exchange for contract extensions,
paying up to $500 of the cost of a new phone and leaving the consumer to pay the remaining $100 to $250.
Importantly, these carriers were not subsidizing these purchases but adding $25 to $30 to their monthly bill to
pay for the phone.
A survey of more than 15,000 U.S. smartphone users revealed that only 2 per cent of users planned to upgrade
their phones when a new model was released -> 44% said they would upgrade when permitted by their carrier
and 54 % said they would upgrade their phones only when the devices were no longer functional
Developed Economies & Developing
Economiesa
Developing Economies
Developing economies were forecast to be the major source of new smartphone customers -->
customers being overwhelmingly value-driven, the lower-cost Android phones were leading the
way
But Apple could still be found dominating the top end of the market, increased revenue by 71%
compared to the previous year

Competition in the Asia-Pacific Realm

At the end of the second quarter of 2015, the top three selling smartphone brands in China were
Xiaomi (16.6%), Huawei (15.9%), and Samsung (10.8 %). At the same time, in India, the top three
selling brands were Samsung (23%), Micromax (17%), and Intex (11%)
 Developed Economies & Developing
Economiesa
Device Upgrades and Platform Switching
A key driver in device upgrades and platform switching
was the release of new phones
Operating System
Samsung did have some phones with
Microsoft’s Windows operating system, but
Samsung phones predominantly featured
Android. According to branding agency
Interbrand™, Apple was the top brand in
the world in 2015, the agency ranked
Google second and Samsung seventh
Porter’s Five Forces
 Porter’s Five Forces
Threat of Bargaining Threat of Rivalry Among
Bargaining
New Power of Substitute Existing
Power of Buyers
Entrants Supplier Products Competitors
• Smartphone companies Depends only on one
require large capital to Other companies can • Camera for • Apple
enter and remain in the Operating System:
market Android Google sell at a lower price Photography • Huawei
• Dependent on high-end it is easy for
technology and innovation with the same specif • Landlines • Xiaomi
• Users face relatively high companies to switch
switching cost from one to another if Buyers have a lot of • Laptops • LG
• The Government Policy in the prices of the
Indonesia is now growing choices in the market • Tablets • Asus
to be even more products from one
supportive of supplier become too high income people • Lenovo
technological
high
developments in tend to choose iOS • OPPO
Indonesia, including Samsung is its own
support towards the supplier for most of Operating System
smartphone industry
its components
 P
The Five Competitive Forces
That Shape Strategy
by Michael E. Porter
The Five Forces That Shape Industry Competition
 If the forces are intense, almost no company
earns attractive returns on investment, as they
are in such industries as airlines, textiles, and
hotels.
 If the forces are benign, many companies are
profitable as they are in industries such as
software, soft drinks, and toiletries.
 Industry structure drives competition and
profitability
 A myriad of factors can affect industry
profitability in the short run—including the
weather and the business cycle—industry
structure, manifested in the competitive forces,
sets industry profitability in the medium and
long run
 
Forces That
The strongest competitive force or forces determine the
profitability of an industry and become the most important to
strategy formulation.

Shape
For instance, are the result of a superior substitute product—
as Kodak and Fuji, learned with the advent of digital
photography. In such a situation, coping with the substitute

Competition
product becomes the number one strategic priority.
 Industry structure grows out of a set of economic and
technical characteristics that determine the strength of each
competitive force.
Forces That Shape
Competition
1) Threat of Entry

 New entrants to an industry bring new capacity and a desire to gain market share that
puts pressure on prices, costs, and the rate of investment necessary to compete.
 The threat of entry puts a cap on the profit potential of an industry. When the threat is
high, incumbents must hold down their prices or boost investment to deter new
competitors.
 The threat of entry in an industry depends on the height of entry barriers that are
present and on the reaction entrants can expect from incumbents.
 If entry barriers are low and newcomers expect little retaliation from the entrenched
competitors, the threat of entry is high and industry profitability is moderated.
Forces That Shape
Competition
Barriers of Entry
 Forces That Shape Competition

Supply-side Demand-side Customer Switching Capital

Economies Of Scale Benefits Of Scale Costs Requirements
These economies arise when firms Network effects arise in Switching costs are fixed costs The need to invest large
that produce at larger volumes enjoy industries where a buyer’s financial resources in order to
that buyers face when they
lower costs per unit because they willingness to pay for a change suppliers. compete can deter new
can spread fixed costs over more
units, employ more efficient
company’s product increases Example: Enterprise resource entrants.
technology, or command better with the number of other buyers planning (ERP) software is a Example: For aspiring air
terms from suppliers. Example: In who also patronize the product with very high switching carriers, financing is available to
microprocessors, incumbents such company. Example: online costs. purchase expensive aircraft
as Intel are protected by scale auction participants are because of their high resale
economies in research, chip attracted to eBay because it value, one reason why there
fabrication, and consumer offers the most potential trading have been numerous new
marketing
partners. airlines in almost every region
 Forces That Shape Competition

Incumbency Unequal Access To Restrictive

Advantages Distribution Government Policy
Independent Of Size Channels
Incumbents may have cost or The new entrant must secure Government policy can hinder
quality advantages not available distribution of its product or or aid new entry directly, as
to potential rivals.t service. well as amplify (or nullify) the
Example: Upstart discounters Example: Upstart low-cost other entry barriers.
such as Target and Wal-Mart airlines have avoided Example: Licensing
have located stores in distribution through travel requirements and restrictions
freestanding sites rather than agents (who tend to favor on foreign investment
regional shopping centers where established higher-fare carriers)
established department stores and have encouraged
were well entrenched. passengers to book their own
flights on the internet.
 Forces That Shape
Competition
Expected Retaliation

 Incumbents often use public statements and responses to one entrant to send a
message to other prospective entrants about their commitment to defending market
share.
 Newcomers are likely to fear expected retaliation if:
• Incumbents have previously responded vigorously to new entrants
• Incumbents possess substantial resources to fight back
• Incumbents seem likely to cut prices because they are committed to retaining
market share at all costs or because the industry has high fixed costs
• Industry growth is slow so newcomers can gain volume only by taking it from
incumbents
 The challenge is to find ways to surmount the entry barriers without nullifying,
through heavy investment, the profitability of participating in the industry
 Forces That Shape
Competition
2) The Power of Suppliers

 Powerful suppliers capture more of the value for themselves by charging

higher prices, limiting quality or services, or shifting costs to industry
participants
 For instance, Microsoft has contributed to the erosion of profitability among
personal computer makers by raising prices on operating systems. PC
makers, competing fiercely for customers who can easily switch among them,
have limited freedom to raise their prices accordingly
Forces That Shape Competition
 Forces That Shape Competition
3) The Power of Buyers

 Buyers are powerful if they have negotiating leverage relative to industry participants, especially if they are price
sensitive, using their clout primarily to pressure price reductions.
 A customer group has negotiating leverage if:
a. There are few buyers, or each one purchases in volumes that are large relative to the size of a single vendor
b. The industry’s products are standardized or undifferentiated
c. Buyers face few switching costs in changing vendors
d. Buyers can credibly threaten to integrate backward and produce the industry’s product themselves if vendors
are too profitable
• A buyer group is price sensitive if:
a. The product it purchases from the industry represents a significant fraction of its cost structure or procurement
budget
b. The buyer group earns low profits, is strapped for cash, or is otherwise under pressure to trim its purchasing
costs
c. The quality of buyers’ products or services is little affected by the industry’s product
d. The industry’s product has little effect on the buyer’s other costs
Forces That Shape Competition
4) The Threat of Substitutes

 A substitute performs the same or a similar function as an industry’s product by a different means. For
instance: Videoconferencing is a substitute for travel. Plastic is a substitute for aluminum. Email is a
substitute for express mail.
 Sometimes the threat of substitution is indirect. For example, lawn-care products and services are
threatened when multifamily homes in urban areas substitute for single-family homes in the suburbs.
Software sold to agents is threatened when airline and travel websites substitute for travel agents.
 When the threat of substitutes is high, industry profitability suffers.
 Substitutes not only limit profits in normal times, they also reduce the bonanza an industry can reap in
good times.
 Strategists should be particularly alert to changes in other industries that may make them attractive
substitutes when they were not before
Forces That Shape Competition
The Threat of Substitutes
 Forces That Shape Competition
5) Rivalry Among Existing Competitors
The intensity of rivalry is greatest if:
 High rivalry limits the profitability of an
industry
 The degree to which rivalry drives
down an industry’s profit potential
depends (1) on the intensity with
which companies compete; (2) on the
basis on which they compete
 The strength of rivalry reflects not just
the intensity of competition but also
the basis of competition
Price Competition Is Most Liable To Occur If:
 Factors, Not
Forces
Industry structure, as manifested in the strength of the five competitive
forces, determines the industry’s long-run profit potential because it
determines how the economic value created by the industry is divided—
how much is retained by companies in the industry versus bargained
away by customers and suppliers, limited by substitutes, or constrained
by potential new entrants. It is especially important to avoid the common
pitfall of mistaking certain visible attributes of an industry for its
underlying structure. Consider the following:

● Industry growth rate.

● Technology and innovation.
● Government.
● Complementary products and services.
 Changes in Industry Structure
Shifting Threat
Of New Entry
Changes to any of the seven
barriers described above
can raise or lower the threat
of new entry
Shifting Threat
Of Substitution
The most common reason
substitutes become more or
less threatening over time is
that advances in technology
create new substitutes or
shift price-performance
comparisons in one direction
or the other
1st
Changing Supplier
Or Buyer Power
2nd As the factors underlying the
power of suppliers and
buyers change with time,
their clout rises or declines
3rd
New Bases Of Rivalry
4th Rivalry often intensifies naturally over
time. As an industry matures, growth
slows. Competitors become more alike as
industry conventions emerge, technology
diffuses, and consumer tastes converge
Understanding the forces that shape industry competition is the starting point for developing strategy.
Every company should already know what the average profitability of its industry is and how that has
been changing over time. The five forces reveal why industry profitability is what it is. Only then can a
company incorporate industry conditions into strategy.
- Positioning the company.
- Exploiting industry change.
- Shaping industry structure.

Implications for Strategy

To capture more profits for industry rivals, the starting point is to determine which force
or forces are currently constraining industry profitability and address them. A company
can potentially influence all of the competitive forces.
To neutralize supplier power, for example, a firm can standardize specifications for parts
to make it easier to switch among suppliers. It can cultivate additional vendors, or alter
technology to avoid a powerful supplier group altogether. To counter customer power,
companies may expand services that raise buyers’ switching costs or find alternative
means of reaching customers to neutralize powerful channels.

Redividing Profitability
 Expanding The Profit Pool
Hen overall demand grows, the industry’s quality level rises, intrinsic costs are
reduced, or waste is eliminated, the pie expands. The total pool of value available
to competitors, suppliers, and buyers grows. When soft-drink producers
rationalized their independent bottler networks to make them more efficient and
effective, both the soft-drink companies and the bottlers benefited. Overall value
can also expand when firms work collaboratively with suppliers to improve
coordination and limit unnecessary costs incurred in the supply chain. This
lowers the inherent cost structure of the industry, allowing higher profit, greater
demand through lower prices, or both.
 Defining The Industry
The five competitive forces also hold the key to defining the relevant
industry (or industries) in which a company competes. Drawing
industry boundaries correctly, around the arena in which competition
actually takes place, will clarify the causes of profitability and the
appropriate unit for setting strategy. A company needs a separate
strategy for each distinct industry. Mistakes in industry definition made
by competitors present opportunities for staking out superior strategic
positions.
The competitive forces reveal the drivers of industry competition.
A company strategist who understands that competition extends
well beyond existing rivals will detect wider competitive threats
and be better equipped to address them. At the same time,
thinking comprehensively about an industry’s structure can
uncover opportunities: differences in customers, suppliers,
substitutes, potential entrants, and rivals that can become the
basis for distinct strategies yielding superior performance.

Competition and Value

 12
CHAPTER 12
Addressing Competition
and Driving Growth
  Growth Strategies
Building your market share International expansion

Developing committed Acquisitions, mergers, and

customers and stakeholders alliances

Building a powerful brand Building an outstanding reputation

for social responsibility

Innovating new products,

Partnering with government and
services, and experiences
NGOs
 GROWING THE CORE 
Make the Drive Offer the
core of the distribution core product
brand as through both in new
distinctive existing and formats or
as possible new channels versions.
  Competitive Strategies
for Market Leaders
Expending total market Market Leader
demand 40%

Protecting market share Market

30% Challenger

Increase market share

20% Market Follower

10% Market Nichers

EXPANDING TOTAL MARKET DEMAND

New Customer More Usage

 PROTECTING MARKET SHARE

Proactive Marketing Defensive Marketing

Defensive strategy is to reduce the
 Responsive probability of attack, divert attacks to less
anticipation threatened areas, and lessen their intensity.
A leader would like to do anything it legally
 Creative anticipation and ethically can to reduce competitors’
ability to launch a new product, secure
distribution, and gain consumer awareness,
trial, and repeat.
PROTECTING MARKET SHARE
Defensive Marketing
Increasing Possibility of
provoking Economic
Market Share antitrust action Cost
The cost of buying higher market
share through acquisition may far
exceed its revenue value

Pursuing
Wrong Increased
Marketing Market Share
Activities Effect On
Quality
 MARKET CHALLENGER STRATEGIES
Defining the strategic
objective and
opponents
A market challenger can attack
 The market leader
 Underfunded firms its own
size
 Small local and regional firms
 The status quo
Other Competitive Strategies (Market Follower)
 Product Life-Cycle
Marketing Strategies
● Most product life cycles are portrayed as bell-
shaped curves, typically divided into four
stages: introduction, growth, maturity, and
decline. We can use the PLC concept to
analyze a product category (liquor), a product
form (white liquor), a product (vodka), or a
brand (Absolut).
Style, Fashion, and Fad Life Cycles
1 We need to distinguish three special categories of product life
cycles: styles, fashions, and fads

A style is a basic and distinctive mode of expression appearing

2 in a field of human endeavor.

3 A fashion is a currently accepted or popular style in a given field.

4 Fads are fashions that come quickly into public view, are adopted
with great zeal, peak early, and decline very fast.
Marketing Strategies: Introduction Stage
and the Pioneer Advantage
Because it takes time to roll out a new product, work out technical problems, fill
dealer pipelines, and gain consumer acceptance, sales growth tends to be slow in
the introduction stage. Profits are negative or low, and promotional expenditures
are at their highest ratio to sales because of the need to (1) inform potential
consumers, (2) induce product trial, and (3) secure distribution in retail outlets.
Prices tend to be higher because costs are high, and firms focus on buyers who
are the most ready to buy. Consider the challenges Zipcar faced in trying to
establish itself in the hourly car rental market.
 Marketing Strategies:
Growth Stage
The growth stage is marked by a rapid climb in sales. Early adopters like the product, and
additional consumers start buying it. New competitors enter, attracted by the
opportunities. They introduce new product features and expand distribution. Prices
stabilize or fall slightly, depending on how fast demand increases. To sustain rapid market
share growth now, the firm:

● improves product quality and adds new features and improved styling.
● adds new models and flanker products (of different sizes, flavors, and so forth) to
protect the main product.
● enters new market segments.
● increases its distribution coverage and enters new distribution channels.
The maturity stage divides into three phases: growth, stable, and decaying maturity. In
the first, sales growth starts to slow. There are no new distribution channels to fill. New
competitive forces emerge. In the second phase, sales per capita flatten because of
market saturation. Most potential consumers have tried the product, and future sales
depend on population growth and replacement demand. In the third phase, decaying
maturity, the absolute level of sales starts to decline, and customers begin switching to
other products.

Marketing Strategies: Maturity Stage

Marketing Strategies:
Decline Stage
Sales decline for a number of reasons, including technological advances, shifts in consumer

tastes, and increased domestic and foreign competition. All can lead to overcapacity,

increased price cutting, and profit erosion. The decline might be slow, as for sewing machines

and newspapers, or rapid, as it was for 5.25 floppy disks and eight track cartridges. Sales may

plunge to zero or petrify at a low level. These structural changes are different from a short-

term decline resulting from a marketing crisis of some sort. “Marketing Memo: Managing a

Marketing Crisis” describes strategies for a brand in temporary trouble.

 Evidence for the Product
Life-Cycle Concept
The PLC concept helps marketers interpret product and market dynamics,
conduct planning and control, and do forecasting. Another study by Golder
and Tellis of 30 product categories unearthed a number of interesting findings
about the PLC:

● New consumer durables show a distinct takeoff, after which sales

increase by roughly 45 percent a year, but they also show a distinct
slowdown, when sales decline by roughly 15 percent a year.
● Slowdown occurs at 34 percent penetration on average, well before
most households own a new product.
● The growth stage lasts a little more than eight years and does not
seem to shorten over time.
Marketing in a Slow-Growth Economy
Here are five guidelines for improving the odds
for marketing success in a slow-growth
economy

● Explore the Upside of Increasing

Investment
● Get Closer to Customers
● Review Budget Allocations
● Put Forth the Most Compelling Value
Proposition
● Fine-Tune Brand and Product Offering
THANKS
MAACIH