Im a tech enthusiast, and have been for decades. Im sort of a grumpy old man of tech. Ive been following the tech/ cellphone industry from before smartphones were mainstream, and Im old enough to think that most tech blogs are run by kids who are proficient in tech, but ignorant of industry trends and strategies, and half blinded by cultish platform loyalties. Please note that my main phone is a Blackberry, and my Android phone is a Samsung. Anyway, heres my opinion on recent reports of Samsungs catastrophically shrinking profits: Samsungs bubble has burst. Their success was driven by four main strategic ventures: (1) Genuinely excellent hardware (2) Better distribution networks than anyone else in the Android ecosystem (3) Copying Apple designs without shame (4) A marketing budget as big as the rest of the industry put together— far outstripping Apple or Microsoft. Unfortunately, this strategy has proved to be a poor differentiator for Samsung over time. • Theyre not alone in having excellent hardware. Motorola, Sony, HTC… there are many great phones out there. • Everyone else has been growing their distribution networks too. Samsung still has a lead over most, but its not enough to generate huge profits. Further, Apple dwarfs them in this arena on the high end; and Xaomi/ Lenovo are looking to crush them at the low end in China. • Samsung cant really compete with Apple with regard to design. They are making the error of competing with one of Apples great strengths; this is a huge strategic error. • Marketing works best in conjunction with a genuinely appealing product. It cant sustainably paper over weaknesses. The numbers are increasingly clear: Samsungs bid to challenge Apple for space at the high end of the market has failed miserably. Samsungs Galaxy series sold reasonably well, but never really challenged iPhone sales, and they arent generating sustainable profits. Its not a matter of stretching themselves too thin; Samsung is a ginormous company, with an operating budget bigger than many countries. The problem is simply overreach. In addition, Samsungs traditional foundation in low-cost, low-quality craphones is being creamed by low-cost phones of ever-increasing quality from Chinese vendors like Huawei. Chinese phones are undercutting Samsung on price, and crushing them on quality— and people prefer stock Android to Samsungs modified version. Drama! Further, Google has already announced frameworks aimed at helping low-end vendors from China and India increase the quality of their offerings. This will have the effect of further eroding Samsungs melting profitability at the low end. Samsungs best hope at present, in my opinion, is to ‘retreat’ to high-quality high-midrange phones. They should give up on challenging Apple directly, and should focus instead on underselling them with phones that are good enough without being expensive flagships. Theyre also trying to further differentiate themselves from the Android competition with a new Samsung OS Tizen, but everything I see suggests that this is more overreach. Samsungs strength is not in software. Its my opinion that one can really only become informed about tech industry happenings by reading seasoned tech-specific analysts. CNN and other mainstream websites offer only very shallow, sensationalist reports, and most tech sites are run by youthful platform advocates— usually Android fans who are totally ignorant of the history and strategic patterns of non-Android companies. Emphasis on Apples cult following is often repeated by Android-focussed websites. Its plainly and simply false. Apples brand loyalty is a result of Apples strategic victory, not an ingredient; and when Apple has made significant missteps, their buyers have refused to buy flawed products. If youre interested in accuracy, its a good idea to ignore every single word that Android websites say about Apple. Every word. Im hoping that Samsung loses mindshare and profit share, making room for other quality vendors like Sony, Motorola, and HTC to generate sustainable profits. Apart from that, though, I want Samsung to continue and find new success as a smaller Android OEM. I still like their hardware… especially after I put a custom Android ROM on it.
Posted on: Tue, 07 Oct 2014 20:48:35 +0000
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