Discuss about the Competitive Strategy of Samsung and Tesla.
Samsung was incorporated in 1938 as a South Korean international company. It operates in various industries including electronics, insurance, manufacturing and war equipment. The organisation had revenue of US$173.36 billion in 2016 financial year. The organisation sold more than 90 million smartphones and 8 million tablets in 2016. The reason for selecting Samsung is that the company has captured more than 23 percent of world’s smartphone market. The company sold a mixture of luxury and low-cost smartphone which provides them a competitive advantage over its competitors such as Apple or HTC.
According to Russell (2017), Samsung’s strategy is based on red ocean strategy in which a company bases their business on the weaknesses of their competitors. Unlike its biggest competitor Apple, who sells limited luxury products, Samsung flooded the market by their products. In 2015 the company had launched 56 phones and in 2016 they have launched 31 phones in the market. This allows them to target all the section of customers through their products, unlike Apple who targets just rich customers. The company also invest in other electronic products such as refrigerator, television, home security software, and web services. This allows them to create an electronic products chain which is integrated with each other.
Samsung applied a vertical integration in their products, meaning they own and operate all the function of smartphone manufacturing process. Applying this strategy increases the efficiency and quality of products. Samsung keeps updating their products with new innovations which help them in selling a large number of products. The company refreshes their product chain in one or two years with the latest features. According to book of Michell (2010), this allows Samsung to gain a competitive advantage over its competitors.
Business Model Innovation
Samsung business model helps the company in creating a large number of products and targeting each section of the smartphone market. The key elements of the business model are (Khanna, Song and Lee 2011):
- Unlike its competitors, Samsung manufactures products for all type of customers. Their phones range from US$140 to US$800. This allows them to sell more products than its competitors.
- The company applies vertical integration in their product manufacturing, meaning they own and control each part of phones manufacturing process. This enhances the quality and efficiency of their products and reduced the costs.
- The company manufactures many electronics items such as refrigerators, television, batteries and much more. This enables the company to integrate all their products, so they work better with each other, which eventually increase Samsung’s sales.
Samsung is a global company with more than 23 percent market share in smartphone market. The company analyses and evaluate various cultural, administrative, geographic and economic factors of countries, before formulating their policies. For example, they study Indian markets and launched a line of low-cost smartphones (J and On series) because demand for low-cost smartphones is high in Indian markets. This approach helps the company enhance their market share and sustain their future growth (Chang 2011).
Tesla is an American automotive organisation, founded in 2003. Tesla manufactures electric cars and devices that store energy. The company crossed a milestone by selling 200,000 cars worldwide, making them second largest electronic vehicle manufacturer. Elon Musk, the CEO of the organisation announced revenue of US$7 billion in the fiscal year of 2016. The purpose of choosing Tesla is that they have made electric car popular for the average consumer. The company has transformed the electric car industry by introducing their lithium-ion batteries. Tesla has gained a unique reputation in the market by creating a positive environment around their brand.
Tesla has changed the electric car industry with their lithium-ion batteries. The company strategy is to use these batteries in order to gain a competitive advantage over its competitors. Tesla batteries allow the vehicle to store more charge and increase the efficiency of the vehicle. These batteries allow the vehicle to deliver high mileage, compared to other batteries in the market. The performance of Tesla’s electric car cannot match by its competitors. Tesla has established a unique and strong value chain environment around their brand, which motivates customers to select Tesla over its competition (Karamitsios 2013).
According to Grover and Sahai (2010), Tesla’s strategy is to invest in software research, which allows their car’s software to be better than its competitors. The organisation provides a constant update to its software and adds new capabilities which attract customers. Tesla has introduced supercharging station throughout North America which allows customers to charge their vehicle in between trips. The overall customer’s satisfaction rate of Tesla is above its competitors.
Business Model Innovation
Mangram (2012) has said that Tesla has implemented a unique business model to achieve their objective, which was to manufacture an electric car for average customers. The key elements of the model include:
- Tesla manufactures an expensive electric car called The Roadster (2008), to target high wealth customers. The quantity of Roadster was significantly low.
- They manufacture another electric car with the income of Roadster. It was called The Model S (2012) and it was targeted for wealthy customers. The company manufactured a medium quantity of this vehicle.
- Model S income is used by the company to manufacture a low-cost electric car called The Model 3 (intended for 2017), which will be manufactured in high quantity for average customers.
- Tesla has implemented a straight to consumer sales model that reduce the cost of their vehicle significantly by removing the middle firm. The company updates their business model according to market conditions.
To achieve the target of other car manufacturers, Tesla has to extend their business in different countries. The company’s reputation has already created a demand for their vehicles in various countries. Tesla is required to evaluate cultural, administrative, geographic and economic factors of different automotive market, to formulate policies of their international expansion. By capturing international electric car market, Tesla can become world’s largest electric car manufacturer and sustain their future development (Chatsko 2015).
Chang, S.J., 2011. Sony vs Samsung: The Inside Story of the Electronics Giants' Battle For Global Supremacy. John Wiley & Sons.
Chatsko, M., 2015. The Tesla gigafactories are coming. can global lithium supply keep up. Motley Fool.
Grover, P. and Sahai, A., 2010, June. Shannon meets Tesla: Wireless information and power transfer. In Information Theory Proceedings (ISIT), 2010 IEEE International Symposium on (pp. 2363-2367). IEEE.
Karamitsios, A., 2013. Open innovation in EVs: A case study of Tesla Motors.
Khanna, T., Song, J. and Lee, K., 2011. The paradox of Samsung’s rise. Harvard Business Review, 89(7/8), pp.142-147.
Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), pp.289-312.
Michell, T., 2010. Samsung Electronics: And the Struggle For Leadership of the Electronics Industry. John Wiley & Sons.
Russell, J., 2017. Samsung record highest profit jump in 3 years. TechCrunch. Retrieved from < https://techcrunch.com/2017/01/23/samsung-q4-2016/ >