Samsung and Apple – Contrasting Value Creation Models

Apple and Samsung are the leading global smartphone brands. They sell products that essentially do the same things. But ask just about any consumer and they’ll tell you that the companies are radically different. This post explores these two companies using an integrated capital model to explore how and why these differences exist.

This post draws on analyses I’ve made over the the past couple weeks of the value creation systems used by Samsung and for Apple based on publicly-available information. I chose these two because everyone knows them and they are the dominant players in the Smartphone market. This article and Bloomberg, puts it well:

When it comes to mobile hardware, today there’s only Apple, Samsung, and a desperate crowd of brands that can’t seem to rise above being called “the rest.”

Yet even though Apple and Samsung sell similar products, they use dramatically-different value creation systems. I’ll use the integrated model to highlight some of the similarities and differences (and along the way, hopefully provide some examples for those seeking to create their own models):

Production – Samsung is a global manufacturer with factories (structural capital) and land (natural capital) while Apple relies on other companies to produce its products (relationship capital). Nevertheless, Apple does own some of the tooling in its outsourced manufacturers’ facilities (structural capital).

Operating system – Samsung phones use the open Android system(relationship capital) while Apple has its own closed system (structural capital).

Apps/Content – This means that Apple also has direct relationships with app developers and content providers. Samsung doesn’t have the same relationships but the offering is much greater because Android is a more open system (in both cases, relationship capital–but different kinds)

Distribution/Sales – Both companies sell through cell phone companies and retailers (relationship capital). However, Apple also has its own retail stores (structural capital).

Business model – The differences in production strategy, operating systems and distribution/sales systems all lead to differences in business models (strategic capital) of the two companies.

Design – Both companies have in-house design capability (structural capital). This is a core part of Apple’s identity. But this HBR article highlights the importance of Samsung’s decision to build its own design capacity. This may be a crucial difference with many of the smartphone makers that are lagging behind Apple and Samsung.

Employees – Neither company reports on the makeup of their workforce (human capital) but the differences in their business model and culture ensure that there are significant differences in the employee base in the two companies.

Resources and Waste – Neither company lists their specific raw material inputs although both do issue sustainability reports that highlight specific issues. Although the products are small, this article asserts that it takes many pounds of “raw materials to manufacture one cellphone and over 8 gallons of water to produce one microchip.”

Culture – This is clearly an area where consumers and business people have very clear ideas about the differences between the two companies. Both companies mention their values which is not the same as culture. But it’s an interesting starting point.

For me, the beauty of the integrated model is that it provides a classification system to help us see businesses holistically. It’s used for individual businesses. But the power of the model becomes even clearer if we use it to compare two businesses (and for me, points to the possibility of a standard reporting framework in the future)

Hope this helps you in creating your own model! Feel free to use our free worksheet to get started.

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