Tag: smartphones

OM in the News: How Samsung Survived the $5 Billion Galaxy Smartphone Recall

samsungSamsung’s recall of overheating Galaxy Note 7 phones attracted global scrutiny and hurt its brand image. But even with the $5 billion October disaster, Samsung’s 4th-quarter earnings were the highest in 3 years. “The reason,” writes The Wall Street Journal (Jan. 7-8, 2017): “competitors’ growing demand for Samsung components, a reminder of the company’s central role in the global technology supply chain.”

While Samsung’s smartphone results took a hit, the company thrived on sales to Apple, Dell, HP, and Sony, whose smartphones, laptops and TVs rely on parts Samsung manufactures. As recently as 2014, Samsung’s phones were the cash cow. But with consumers no longer snapping up new phones every year, the company—which is the world’s biggest maker by shipments of both smartphones and memory chips—has shown there is plenty of profit to be made in the parts of devices not visible to most consumers.

Even when smartphones were selling strong, Samsung poured tens of billions of dollars into semiconductors and display panels to enable phones to run faster, hold more storage and offer crisper images. Recent advances have made its components more powerful than those of competitors—positioning Samsung as an essential parts supplier for many of its rivals. This friend-and-foe dynamic means Samsung can profit even when a consumer ditches a Galaxy phone for a competitor’s product.

As its reliance on smartphones has diminished, Samsung has looked to build on its dominance in electronic components by expanding its capacity as a chip and display-panel manufacturer. It is investing over $1 billion in its Austin, Texas, semiconductor factory to beef up production of processor chips for smartphones, and $10 billion to expand its production of organic light-emitting diode displays that are thinner than traditional liquid-crystal displays.

Classroom discussion questions:

1.What is Samsung’s core competence?

2.Compare this industry to supply chains for auto makers.

 

OM in the News: Churning Out Smartphones Like Fast Fashion

Micromax's HQ in Gurgaon, India
Micromax’s HQ in Gurgaon, India

In Chapter 5 (Design of Goods and Services), we discuss the importance of new product development. Industry leaders derive almost 50% of their sales from new products–those created in the past 5 years. But the smartphone market is a world apart–and India’s Micromax, writes The Wall Street Journal (June 5, 2015), sits at the bleeding edge of the global wars.

Early last year, Micromax decided consumers wanted a handset that could be operated in many of the country’s 20-plus official languages. Four months later, it unveiled the $110 Unite, which let users label their apps, type, send messages and interact on social media in 21 different scripts—rather than just English and Hindi, as is common for Indian phones. Many handset companies wouldn’t have released another smartphone for months. But the Unite was one of several handsets Micromax unveiled within weeks of each other, including the $150 Canvas Win, and the $131 Canvas Doodle 3, featuring a 6-inch screen.

While Apple launches only two new iPhone models a year and Xiaomi around four, Micromax shipped more than 30 new smartphones last year ranging in price from $50 to more than $300. The frenetic pace has made Micromax the smartphone equivalent of “fast fashion” chains like Zara or H&M, which refresh their shelves regularly with inexpensive clothes that reflect what is on fashion-show runways. Micromax says it can now take a phone from concept to store shelves in 3 months, 4 times as fast as when it first started. It does this by slapping together off-the-shelf hardware from China, making adjustments to follow fast-moving consumer trends, and shipping out a new model every few weeks. (The average selling price for smartphones world-wide fell to $299 last year versus $427 in 2010.)

Classroom discussion questions:

1. What is Micromax’s product strategy?

2. Why is it important for firms to continually introduce new products?