MICRO & MANAGERIAL ECONOMICS REPORT
8/22/2014
Production Function Analysis on SmartPhones Apple & Samsung have been rivals for years in the SmartPhone industry. We will be analyzing the Short Term and Long Term effects on the production function of both these companies. Samir Saleem, Sidrah Rehman, Ali Hassan & Moen Sabzwari
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Micro & Managerial Economics Report
Micro & Managerial Economics Report APPLE VS SAMSUNG ON PRODUCTION FUNCTION OF SMARTPHONES
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Micro & Managerial Economics Report
HISTORY OF APPLE
Apple, listed as AAPL, is a global technology powerhouse which has its headquarters in Cupertino, California. The company was founded by 3 technology / computer savvy enthusiasts Steve Jobs, Steve Wozniak, and Ronald Wayne on April 1, 1976. The company designs & develops both hardware and software technology products from Operating Systems such as the MAC to Smartphones and tablets such as the iPhone and iPad respectively. Other products include cloud technologies such as the iCloud, Music gadgets such as the iPod and much more.
Apple is ranked today after Samsung Electronics as the 2nd largest information technology company by revenue. The current CEO Apple Inc is Tim Cook who replaced Steve Jobs after his death in 2011.
It was incorporated as Apple Computer, Inc. on January 3, 1977, and was re-branded as Apple Inc. on January 9, 2007, by Steve Jobs to focus on being a technology company.
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Micro & Managerial Economics Report
HISTORY OF SAMSUNG
Samsung was found in South Korea and is the biggest company in the country headquartered in Suwon. It is a part of the Samsung Group and brings the group about 70% o its revenue. It also beat Apple Inc in 2011 as the world's largest information technology company. For 2012 the CEO is Kwon Oh-Hyun.
Samsung is considered as the king of consumer electronics and has clients such as Apple, Sony, HTC and Nokia. The company is a leading Smartphone manufacturer fueled by the popularity of its Samsung Galaxy line of devices including tablets and phablets.
Samsung Electronics was found in 1969 and made electrical appliances including televisions, calculators, refrigerators, air conditioners and washing machines.
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Micro & Managerial Economics Report
SMARTPHONES ERA BACKGROUND
It’s become fashionable lately to whine about how “boring” smartphones have become, especially among Wall Street analysts who insist on telling us that Apple/Samsung/Microsoft/Everyone is “doomed” if they don’t come out with the “Next Big Thing” soon. This sort of absurdity reached amazing new heights recently when Global Equities Research analyst Trip Chowdry said that Apple only had 60 days left to release an “iWatch” before the company disappeared forever.
What most of these analysts don’t understand is this: Major disruptions in the computing market are very rare and typically only happen once in a decade at most. In the late ’70s and early ’80s you had the Apple II and the first IBM PC duking it out for supremacy. In the 1990s you had the triumph of Windows. In the late part of the 2000s, you had the rise of the iPhone and Android. Really, those are the three major epochs in personal computing history: The first personal computers, the rise of Windows as the world’s dominant computing platform and then the rise of smartphones led by iOS and followed shortly after by Android. Every other innovation over this time period has done little to alter the basic landscape of personal computing in the same way that these three once-in-a-decade game-changers did. Even tablets, which have certainly become very popular computing devices and have eaten into traditional PC sales, are basically just the aftershocks of the original smartphone earthquake. And simply put, there’s no way that tablets would have been as successful as they were if smartphones hadn’t already laid the groundwork for them by fostering huge mobile app ecosystems. What does all this mean? It means we’re probably stuck with smartphones as the most exciting and compelling computing devices for at least another few years. I can say this with some confidence in part because I write about new kinds of technology every single day and I know that nothing still generates more interest and enthusiasm among gadget fans than details about new smartphones, whether it’s the iPhone 5s, the Galaxy S5, the HTC One (M8), or new Nokia Lumia and BlackBerry models.
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Micro & Managerial Economics Report
Tablets, meanwhile, do generate interest but only for the major brands: The iPad, Google’s Nexus series and, to a lesser extent, Amazon’s Kindle series. As for smartwatches, nothing I’ve seen so far makes me think that there’s any significant enthusiasm for them even among gadget geeks. The basic sentiment I’ve picked up is that smartwatches are seen as cool but not an essential part of personal computing like smartphones are, and unless something changes they’ll strictly be niche products. Just because there won’t be another major game-changer over the next few years doesn’t mean that we should see smartphones as boring, however. The market for smartphones is still incredibly competitive and Apple, Google, Samsung and Microsoft will all be trying their best to one-up each other to create the coolest smartphones the world has ever seen. “There won’t be another iPhone, not even if Steve Jobs were still running Apple, not for many years to come,” Rene Ritchie smartly writes. “But there will be many, many things that, taken together, make the iPhone much more valuable. There won’t be anything as big as the iPhone but there will be things that, taken together, make the iPhone bigger.”
MARKETSHARE ANALYSIS WORLDWIDE
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Micro & Managerial Economics Report
COMPETITION ANALYSIS Samsung snagged 36.1 percent of smartphone shipments in the second quarter, compared with 29.7 percent for Apple, new data from Counterpoint Research shows.
According to latest research from Counterpoint’s Market Monitor quarterly tracker program, USA smartphone shipments have begun to saturate as it grew a modest 2% annually and represent roughly 9 out 10 handsets shipped in the US market in Q2 2014 Some highlights during the quarter for the US smartphone market include: • Samsung topped both the overall mobile phones and smartphone segments capturing 37% and 36% share in Q2 2014 o The demand for Samsung’s smartphones and especially Galaxy S5 was healthy generating 50% more volumes than what Galaxy S4 witnessed last year o This was pretty ironic compared to the the softer and dipping global demand for its flagship which depicts that Samsung’s marketing has paid off to some extent in the US market o US market was thus the lone bright spot for Samsung this quarter as market shares slipped globally and especially across key markets such as India and China o Samsung performed well in one of its stronghold markets – USA - in what we can call a “Samsung” quarter o However, the upcoming holiday season quarter Q4 as usual would certainly be an “Apple” quarter as it unveils its new iPhone in September which means Samsung will have to pull off a feat with the upcoming Galaxy Note 4 to maintain share as Galaxy S5 demand begins to taper off • Apple’s iPhone volumes dipped 5% annually in its home market, as more consumers began to hold their purchases for the upcoming iPhone o However, Apple grew share and volumes in many other key markets globally (e.g. China)
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In terms of carriers, Apple was the leading smartphone brand at AT&T but lost the top spot to Samsung at Verizon and Sprint