Smartphones are on the cutting edge of current technology. Firms are constantly competing in an effort to corner this market. Creators and innovators such as: HTC, Apple, and Samsung appear to be paving the way as consumers grapple over which product suits them the best. These companies battle constantly for market share whether it is on the ground of the consumer’s desires or in the court system with lawsuits. These smartphones are rapidly evolving into one in all personal computers with seemingly unlimited communication and organizational capabilities. One of the companies that will be the main focus of this paper is Samsung. Although Samsung has a grip in many electronic markets including: televisions, appliances, personal computers, and more; the focus appears to be on their smartphone Galaxy series. There are many challenges that Samsung has faced and most likely will continue to face within this market.
The current structure of this market lies in the overlapping of competition though oligopoly and monopolistic competition. Many companies share in this industry including: Apple, Motorola, Sony, Microsoft, LG, HTC, Nokia, Blackberry, Huawei, and more. This reflects the monopolistic competition border of the market structure. There are many competitors producing similar products within the market. However, the quality of smartphones being produced is extremely diverse with some products containing the appearance of innovative technology, but lacking the practicality and efficiency of the true smartphones. These upper echelon smartphones boast efficiency, speed, and diverse capabilities with the ability to deliver these assertions to the consumers.
As previously stated these companies are: HTC, Apple, and Samsung. These three companies, and occasionally one or two more, form the oligopoly shaded area of the smartphone market as they pave the way of innovation. This dualistic market structure is apparent to users of the smartphone. As HTC, Apple, and Samsung create, and sometimes copy each other, new technology, other companies attempt to mimic their successes. Keeping these aspects in mind, how could Samsung increase their competitiveness and increase profits? There are three strategies that will help Samsung stay on high end of the smartphone slope: creating additional value in their product, raise the price of the product and monitor consumer’s reactions, and lower their prices without really lowering their prices (Colander, 2010).
By creating additional value in their smartphones, Samsung can entice more consumers and possibly lure them away from their original taste preferences. How is this possible? By teaming up with companies such as Dropbox, Evernote, and tech-magnate Google, Samsung has been able to mainstream smartphone efficiency. Keeping track of the current trends as well as up-and-coming technology software is what keeps companies alive today, especially in an oligopoly-monopolistic hybrid market. Acting too slow could result in the deterioration of the handle that Samsung currently has in this market. Some of the features that deter consumers from Apple are their limited storage capability, irreplaceable battery, and lack of user friendly buttons. If Samsung listens to the people on these issues and applies them to their products, they can easily earn consumers’ preference (“Gsmarena”, 2013).
Raising the price of a product does not guarantee more profit. However, people are willing to pay more for a tool that has more than one use. If Samsung can continue to cultivate relationships with other mainstream tech companies it can justify the raising of their product price. Conversely, just because one is able to justify something does not necessarily make it right or true. Therefore, it is necessary to monitor consumers’ reactions to this price raise. This increase in price should not be added to products already on the market but products that are just entering the market. If Samsung proceeds with the first of the three strategy plans, it would make sense to both the producer and the consumer to have a higher price. This is because the product has more functionality. If people had the option of buying two separate tools for $100 each or one tool that had the functionality of the two tools combined but priced at $150 or even $175, most people would choose the multifunctional tool. Obviously some people will not need both tools or choose to spend extra to have the brand or logo or their choice.
However, in this new world of globalization, especially with regards to technology and communication, multifunctional equipment has evolved from a want to a requirement. This next, and final, strategy may sound as if it is in opposition to the previous strategy but in fact it is not. The two, if manipulated properly, can benefit each other. The strategy is known as lowering prices without really lowering prices. Although at first glance this sounds contradictory it is widely seen within the cellular phone market. It first involves partnering with a cell phone carrier company such as Verizon for example. The price of the phone, when bought from Verizon, is less expensive than when bought from a regular retailer provided the buyer also purchases a contract with Verizon.
When consumers see the price of the smartphone when bought through a regular vendor and compare it to the less expensive price of the same product that is sold in conjunction with a service they already need, they feel as if they are getting a good deal. That is how a company can lower the price without lowering the price, by allowing the service carrier to absorb some of the cost. All three of these strategies work best when used together. If Samsung has a product with multifunctional capabilities that other manufacturers do not have yet, or cannot have due to legal positioning, then Samsung can raise the price of their product. By raising the price of their product when sold alone it can entice consumers to want to buy a package deal including service and the smartphone.
This does two things. First, it lures consumers to purchase the product from the service provider, strengthening the relationship between Samsung and the service provider. Second, it allows Samsung to offer a discount rate to their service provider without really offering a discount rate since they have already raised their prices. When executed properly, this three part strategy gives the impression of a win-win-win situation. It is a win for the consumer since they are getting a discounted rate on a product they feel they need. It is a win for the service provider because they are signing contracts. Finally, it is a win for Samsung because they are pushing smartphones out the door at a profit maximizing price (Colander, 2010).
Colander, D. C. (2010). Economics (8th ed.). : McGraw-Hill.
GSMARENA. (2013). Retrieved from http://www.gsmarena.com/samsung_i9500_galaxy_s4-5125.php