Stuck in the Middle Blues


Samsung’s profits are down by a whopping 25% and they put the blame firmly on Chinese competitors entering with cheaper smartphones (see this NYT article). Companies like Xiaomi and Huawei have increased market share in China over the last year as they sell good products at break-even prices. Now, they have turned their sights on western markets that eat into Samsung’s bread and butter. Pressure on Samsung to respond with lower prices? Perhaps but Apple continues to compete effectively at the high end. It’s proprietary operating system keeps rivals from fully imitating many of the most important product attributes. For now, Samsung is signalling that it will accelerate efforts to differentiate their products — an innovation war more than a price war. The real winner may be Google which gains as Android dominates growth in this market. As you can see, this “live” case allows one to explore the complexities of how different strategies play out in the market. It also pushes us to explore how a sequence of strategies might unfold leading to a longer term competitive advantage. This case might go nicely with the HBS case on Samsung’s dual (cost/differentiation) advantage in memory chips and the threat of Chinese rivals. Of course, in the race for new features, one wonders what they will think of next…

Heard Through Michael Leiblein

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