Business

Is Samsung the winner of the Tech Olympics?

SSL in the Money

Sutanya Chedda

Wednesday, August 01, 2012    

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The London Olympics kicked off to a grand start last Friday, living up to Pierre de Coubertin's depiction as "the quadrennial celebration of the springtime of humanity". The four year interval makes it so exhilarating that people are no longer content waiting for the games to air on TV. Thanks to technology, they don't have to. Social media and smartphone apps are making a statement of their own. Already, Facebook and Twitter are exploding with patriotic cheers.

Given the alarming growth of technology, this all shouldn't come as a surprise. Truth is, the technology sector is inescapably huge. While it ably facilitates the novelties of the games, there is a bigger picture at hand as the industry in effect presents a 'game' for itself — which I have coined, 'The Tech Olympics'.

Analogous to Yohan Blake's victory over Usain Bolt in the Olympic trials, Samsung ousted Nokia to become the world's largest mobile phone vendor, and unseated Apple as the world's largest smartphone vendor in the first quarter of 2012. Is Samsung the new gold medal winner of the Tech Olympics? Let's not jump the gun as only time can tell.

So how did Samsung rise to this coveted spot? For starters, some of the company's competitive advantages revolve around fairly simple economic factors — price and selection. While Samsung offers a wider variety of phones with a wider array of features and prices, Apple maintains an affluent price.

However, it is not yet established that Samsung is indeed abating Apple's business. If Samsung's volume growth is in fact primarily attributable to lower-priced, lesser-featured phones, I am sure Apple won't mind as they have never shown any particular proclivity to compete at lower prices. Isn't that what older generation iPhones are for?

In May, Samsung announced plans to open retail stores in Canada. If you are wondering why this seems like déjà vu, it's because Apple pulled this move already prior to the launch of its iPhone 4S. Nonetheless, while it may not have been the most original tactic, Samsung may finally be embarking on a more focused retail strategy. However, with high initial costs and continuously high overheads, is it wise for Samsung to venture into brick and mortar?

This does not seem to faze Samsung however, having seen the success of Apple's stores across the globe. Apple's retail stores increased approximately US$15 million each in the space of two years but not all companies can reap this feat. For instance, back in 2007, Research In Motion, the 'Bolt' in the industry at the time, opened its first retail store in North America with plans to open about 100 more throughout the US and Canada. The company however, failed to rollout any others due to loss of market share to competitors like Apple and Google. Notably, although it halted this retail strategy, the company recently opened stores on the other side of the globe in Dubai and India with plans to open some in Thailand and Indonesia. Though Research In Motion has fallen to seventh place for global market share, it is the silver medalist in Southeast Asia.

Samsung has proven to be a prevailing contender in the smartphone industry. Without a doubt, it has the quality products to feature in a retail store and, if it duplicates some of the successful aspects of Apple's stores, such as the genius bar and product workshops, Samsung could maintain its spot on the medal platform.

Over in the tablet market, with the recently announced release of Microsoft's "Surface" tablet, it is worth questioning whether the company is adapting to market changes or merely riding Apple's coattails. The hybrid device appears to be fairly novel though as it offers a keyboard and boasts superior functionality than other tablets on the market. If it works as advertised, this could be the tablet that will make Apple's iPad look like a toy.

It may seem absurd to suggest that Apple should worry about Microsoft's entry into the tablet market or its partnership with Nokia in the smartphone market. While Apple may be safe for the time being, companies like Samsung, Nokia, Dell and Hewlett-Packard have more to worry about. However, if Microsoft's mobile operating system happens to be as good as, or better than Apple's, will there be a repeat of the PC market evolution?

Some may argue that Apple is starting to look like a regular tech company, given its performance last quarter. Additionally, anticipation of the next iPhone is suppressing sales, allowing Samsung to gather momentum on the higher end of the track. Also, with Microsoft getting directly involved in the tablet market, even if it cannot replicate the PC-versus-Mac race of the late 1900s, the possibility exists for increased competition in coming years. However, as companies such as Coca-Cola and NIKE have demonstrated, that is hardly a 'dropped baton' as solid margins and returns can turn out to be as persistent as Asafa Powell.

So will Apple's run eventually end? Will Microsoft start to 'Think Different'? Will Samsung take it 'to di worl'? Truth is, only time can tell. The Gap may have been the gold medalist of the retail world, but eventually it lost its title to more innovative companies. Likewise, Microsoft was the software champion until the computing world changed. Even The Walt Disney Company has faced its fair share of competition. The bottom line, as Pierre de Coubertin, the "Father of the Modern Games", rightly said, "The most important thing in the Olympic Games is not winning but taking part; the essential thing in life is not conquering but fighting well." Investors can capitalize accordingly by looking past face value and current market share to find nimble, well-managed pioneers positioned for longevity and growth.

Sutanya Chedda is a Wealth Advisor at Stocks and Securities Limited and can be contacted via schedda@sslinvest.com

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