There is quite a lot of news this week about Apple’s fight with Samsung in court. Nevertheless, I think the ongoing legal battle obscures a bigger problem. Clearly, Samsung is kicking Apple’s butt in the broad market, albeit with some help from Google.
In any case, the legal battle pales against the fact that Samsung is on track to do to Apple what the corporation recently did to Sony, namely forcing them out of the smartphone segment. Samsung clearly wants to take Apple out and I’m not talking about a date.
The problem with Apple is that Cupertino is basically fighting Samsung’s fight, with the latter corporation executing a variant of the strategy used to take Sony out of the TV market. If successful, Apple will have to exit smartphones and tablets in a few years much like Sony just did TVs. The basic mistake Apple is making? It is fighting as Samsung wants them to, not with the amazing tools that Steve Jobs created but with the economic tools Samsung is best at using. If Apple doesn’t alter its strategy, Cupertino will follow Sony and lose this fight.
Samsung’s Strengths and Weaknesses
Samsung is the most powerful Korean manufacturing company, building relatively high-quality products at high volumes and aggressive prices. The industry heavyweight has learned to market well over the years and is actually better at throwing mud than Apple once was with its PC vs. Mac campaign.
Samsung's commercials painting iPhone users as stupid actually did a nice job damaging the perception that iPhone users were smarter, an image Apple had painstakingly built over the years. Given Apple first did this to Microsoft, one would think the firm would have thought through a defense, but apparently not. Truthfully, Samsung is really good at copying but when it innovates, like it did with the Galaxy Gear Watch, the company seems to have no idea what the customer wants and ends up with a product that doesn’t sell well.
Samsung is also particularly weak when it comes to customer relationship and service. The company uses Android on its most competitive phones. Yet it doesn't own the platform, lowering Samsumg's ability to differentiate from other Android selling firms except through limited UI overlays (which have never worked that well). Plus, it doesn't maintain Samsung-specific stores in the US, while their support is rather famous for sucking. For services, Samsung primarily relies on Google as well so they don’t control the user experience.
So Samsung is powerful on price and in an ability to copy, yet the company doesn't lead well with innovation and is relatively poor with customer engagement and loyalty.
Apple’s Strengths and Weaknesses
Apple is almost the polar opposite of Samsung. It outsources manufacturing and isn’t set up to compete on price. Like Samsung, Apple spends a lot on marketing but, Samsung was shelling out nearly three times what Cupertino had spent over the last several years - suggesting that Samsung is the stronger player here.
However Apple is strong on relationships, with loyalty scores typically topping the market and by a significant margin. Cupertino maintains its own stores with genius bars for customer support and they often just replace your device free of charge when you have a problem.
So Apple is powerful on relationship, user experience and customer loyalty. It isn't set up to compete on price, meaning Samsung can outspend them on demand generation. I should add that Apple has larger cash reserves, but can’t use them without being pummeled by the stock market. Steve Jobs designed Apple the way it now exists and was uniquely suited to run it. Tim Cook is more of a manufacturing/operations specialist and likely knows Samsung’s model best so running Apple the way it is isn’t his strength.
Apple’s Recommended Strategy
Apple marketing should be reminding people why they live Apple and painting Samsung as a low quality, uncaring, copy. They should be focused on the high end phones with distinctive Apple designs which showcase Apple’s customer relationship advantage. The Amazon Mayday feature should likely be emulated in Apple devices to help scale the Apple relationship.
Investment should be in back end services and features that are hard to copy and in designs that are distinctively beautiful and uniquely Apple. They should ignore Samsung’s pricing moves and respond to Samsung’s marketing by showcasing that the most influential people use Apple phones. In addition, the folks Samsung are using as advocates often still, secretly, use iPhones (which most apparently do). In other words, Apple should fight Apple’s fight and not Samsung’s.
Wrapping Up: Losing a Market
Typically, big powerful companies like Apple lose a market by getting tricked into fighting the challenging firm’s fight or by forgetting what they are best at. That’s how Samsung took Sony out, they got Sony to compete on price and gutted them. For Apple to survive and prosper it has to focus on what it does best - delivering high customer satisfaction and loyalty with high-end devices wrapped with Apple services that users love. If it doesn't, Sony’s present will be their future.