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Battle of the universe: Samsung vs Apple
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Based on the news
"Samsung wins court order lifting Galaxy Tab 10.1 Sales Ban" reported by Malaysia Reserve, it reported that Samsung and Apple have been fighting patent battles
against each other since the smartphone technology is introduced. Apple accused
Samsung’s Galaxy Tab 10.1 is a copy of the iPad. Recently Samsung won the
court order and the sales ban on Galaxy Tab 10.1 has been lifted. The jury
found out that Samsung didn't infringe a design patent that had been
the basis for the Tab 10.1 sales ban and cause the competition between the two
giant firms to be more intense. After my analysis, I came out with few opinions
that would happen in the upcoming future.
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| Oligopoly Market of Smartphones |
In the
smartphone market, it’s actually an oligopoly market. An oligopoly market is a
market consisting giant firms from the number of 2 to 10. Examples of oligopoly
players in the smartphone markets are Samsung, Apple, HTC and Blackberry.
Non-price competition happens all the time in an oligopoly market, consumers wouldn't mind the price of the product but it is the product itself that matters.
It’s all about the technology, design and branding that matters. Products in an
oligopoly market are usually homogeneous or differentiated products like the
iPad from Apple and Galaxy Tab 10.1 from Samsung. In the oligopoly of
smartphone market, there is a high barrier of entry due to the patents on
products. Like what is faced by Samsung and Apple. I think in a few more years,
other firms like HTC, Blackberry, Nokia and Sony Ericsson would have a tough
time in surviving in the market due to the patents done by Apple and Samsung.
They might have a low chance of surviving unless they come up with a different
product and patent it before other does.
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| What is the question? |
So here is the big question right
now, what happens if Samsung did not win the recent court order on the sales
ban of the Galaxy Tab 10.1? Samsung’s sales on Galaxy Tab 10.1 in the market
would then drop till zero. The law forbids Samsung to supply Galaxy Tab 10.1 if
they were to lose the court order. There would then be a very high barrier of
entry for all the other firms as Apple patents most of the designs. Eventually,
Apple would monopolize the market and no one would be able to win Apple. This
would then causes the quantity demanded for the iPad to increase because of the
substitution effect. It is due to the substitution effect because consumers
turn from Galaxy Tab 10.1 to the iPad.
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| What happens if Apple becomes a Monopoly? |
But what are the
effects on Apple when it monopolizes the smartphone market? Recently in the
Budget 2013, our Prime Minister Najib Tun Razak states that there would be
RM 200 rebate on smartphones. Let us all assume that Apple manage to win the
court order of permanently banning the Tab 10.1 and eight Samsung smartphone
models. Consumers would then all be rushing to the store to get a smartphone
because it’s RM 200 cheaper. However, Consumers have no close substitute for
smartphone and they will choose to buy the iPhone. This would actually cause
the demand curve for Apple products to shift to the right because the number of
buyer increases.
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| Back to Reality! |
But back to reality, Samsung won the
court order and lifted the ban of Galaxy Tab 10.1. What would really happen is
there would be a competition between Apple and Samsung. With the RM200 rebate
on smartphones, both the Galaxy Tab 10.1 and iPad demand would be shifted to
the right. This would both cause a shortage in the Galaxy Tab 10.1 and iPad
market. However, even though there is a RM200 rebate given by the government,
it might not really affect the market. What if the consumers have do not think
that having a smartphone is essential? Besides, if consumers already have a
phone, they would not bother buying a phone even there is a RM200 rebate. There
would also be other promotion which is better that attracts the consumer than
the RM200 rebate.
There would also be other factors
that would affect both Samsung and Apple products in the market which is the taste
of the consumers (their preference). If consumers prefer Samsung products over
Apple products, then demand curve of Samsung product would shift to the right
and Apple’s product market would be affected and it would shift to the left or
vice versa. Consumer’s expectation also plays an important role in the sales.
Let’s say that if the new iPhone 5 didn’t reach the expectation of the
consumers, they might turn to other smartphones like the Samsung Galaxy SIII
which might offer the technology and functions that they were expecting in
iPhone 5. But it all depends on brand
loyalty as well because when a person is loyal to a brand, it is hard to
persuade them to change into another brand even if the brand’s product didn't meet its expectation.
Both Apple and Samsung products are
actually luxurious goods. They both have a PED more than one which means it’s
an elastic demand. Apple and Samsung have a very elastic demand because they
both have many close substitutes. There are a lot of substitute products for
the iPhone such as the Samsung Galaxy Series, Blackberry smartphones, HTC
smartphones. When a product has a high elastic demand, a change in the price
will bring about a more than proportionate change in the quantity demanded.
Let’s say if the price of Apple products increase by 10%, there would be a
decrease in quantity demanded and it would be above 10%. Therefore, if price of
Apple rises, there would be a dramatic decrease in quantity demanded in Apple
products.
After my analysis on both markets,
these are the different possibility of what would happen if the court order is
lost by Samsung. However, when the iPhone 5 is launched on the market, Samsung
began its investigation of the product to see if Apple has infringes the
patents done by Samsung. If Samsung launched a court order against Apple and
Samsung won, there would definitely be a change in the market again.
Hopefully neither any of the smartphone suppliers would monopolize the phone. because they would make take charge of the price and set it at high to gain more profit
ReplyDeleteIt would definitely be a bad for all of the consumers of smartphone if Samsung loses the sales ban. Not saying I'm a huge fan of Samsung but if Apple manage to arise as a monopoly, the market would be very unhealthy
ReplyDeleteVery interesting article! Please continue analyzing on more markets! I've learnt a lot from this article. Good read,keep up the good work!
ReplyDeleteI definitely agree with you that the RM 200 rebate on smartphones wouldn't make much a different in the market. There are better and interesting promotions out there which attracts customers to buy smartphones
ReplyDeleteSamsung forever! I wouldn't want to see the smartphone market filled with only Apple products. Less variety and expensive
ReplyDeleteHey I find this article pretty helpful for my project! Thanks for the interesting article =)Now I have an idea on how I should start on my project!
ReplyDeleteThanks everyone for the comments! Would definitely do better in the upcoming future!
ReplyDeleteArticle ini best giler! Would like to read more articles from you ^_^
ReplyDeleteAndrew! Such a long article! but good read haha, good luck writing more good articles man!
ReplyDeleteGAHAHAH! Nice job man! you did well on this man!
ReplyDelete