Is Samsung's Success All Marketing, or Something Else?

In the mobile world, there are really only two companies that make every other smartphone maker envious -- Apple (NASDAQ: AAPL  ) and Samsung. Samsung is the world's largest tech company by revenue, and holds 41% of the Android market share. And, according to researcher Juniper Analytics, the company shipped twice as many smartphones as Apple, and grew nine times faster in Q1 2013.

While Apple's success story has been chronicled in many news articles, books, and a forthcoming biopic, Samsung's advancement is a little more elusive and probably less dramatic -- but the impact on the smartphone market has been just as important.

Good artists copy, great artists steal
Pablo Picaso's oft-quoted phrase was one Steve Jobs used himself. Jobs once added to the phrase in an interview saying, "We have always been shameless about stealing great ideas." In an ironic twist, that's the same approach Samsung took shortly after the iPhone launched.

Apple's smartphone popularity had already been solidified at that time, and Samsung did its best to capitalize on it. In a 2010 Samsung document -- which surfaced during a trial last year between the company and Apple -- Samsung appeared to copy iPhone designs and functionality. Last year, AllThingsD wrote about the document saying: "In each case, it comes up with a recommendation on what Samsung should do going forward, and in most cases, its answer is simple: Make it work more like the iPhone."

You can contrast Samsung's response to the iPhone with other tech companies at the time.

Microsoft (NASDAQ: MSFT  ) CEO Steve Ballmer said in 2007: "There's no chance that the iPhone is going to get any significant market share. No chance." The company failed to recognize what consumers wanted, and Microsoft has been paying for it ever since. Windows Phone made up just 3.2% of all global smartphone shipments in Q1 2013.

Reports that leaked years after the iPhone initially launched showed that BlackBerry (NASDAQ: BBRY  )  -- formerly Research In Motion -- was in disbelief over the iPhone. RIM's CEO at the time, Jim Balsillie, said this just after the iPhone launched: "It's kind of one more entrant into an already very busy space with lots of choice for consumers ... But in terms of a sort of a sea-change for BlackBerry, I would think that's overstating it."

These two companies are the easiest examples to pull from, because they not only didn't notice what consumers wanted -- or stubbornly chose to ignore it -- but they also went in a decidedly non-Android direction.

Meanwhile, Samsung sought to directly compete with Apple using Android. Part of copying Apple's design and usability lead to years of lawsuits and back-and-forth accusations between Apple and Samsung that most of us are all too familiar with. But, despite rulings on either side, Samsung's similarities with the iPhone at the beginning have paid off  for the company.

But Samsung's initial follow-the-leader approach is only one small part of its meteoric rise. You have to dig inside the company's deep pockets -- and its devices -- to really get at the heart of its success.

Components and commercials collide
Samsung manufactures its processors, handset displays, and internal flash memory -- giving it control over major areas of its smartphone production. This gives the company a significant advantage over its competitors by not having to pay other companies to build main components for its devices, or wait for them to catch up to Samsung's production needs. Which is great for the company, considering it cranked out 215 million smartphones last year.

Samsung's component advantage has helped the company flood the market with variations of its devices. While other companies may find it difficult to create multiple versions of smartphones and phablets at different sizes, Samsung can utilize its production to bring a slew of devices to market at many different price points.

The other side to Samsung's manufacturing success is making components for other companies -- including Apple. Over the past few years, Samsung has made applications processors, flash memory, DRM memory, and displays for the company. For obvious reasons, Apple has attempted to move away from Samsung for some of its components, but even now, the difficult relationship remains between the two.

Aside from component manufacturing, Samsung also has marketing prowess that's helped propel the company to the top of the mobile market. The company spent $402 million marketing its smartphones in the U.S. last year -- beating Apple's $333 million for iPhone marketing. Consequently, it was hard getting through 2012 without seeing at least a handful of Samsung commercials.

The company's advertising has helped solidify its brand into the minds of mobile consumers, and has helped push the company into the top smartphone spot. In the first quarter of 2013, Samsung captured 32.7% of the global smartphone market share, with Apple following with 17.3%. One of Samsung's ads -- famously mocking a line of Apple fanboys -- was the most-viewed tech ad in 2012, and has been viewed more than 17 million times on YouTube.

No simple answer
Samsung's smartphone success comes from much more than its marketing budget -- though that's a big part of it. The company has the capability to create lots of products, adapt Android's operating system to its liking, throw gobs of money marketing its devices, and make money creating components for its competitors at the same time.

Add to all that the foresight Samsung had to mimic Apple's products at the opportune time, and you have the beginnings of Samsung's success. For now, it seems the company will continue to enjoy its status in the mobile world -- at least until someone else comes along and parrots what Samsung's doing.

Though the company is on top of the mobile world, there's a list of tough tech competitors waiting to take on Samsung. They know fighting for the top spot is the only way to survive. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.


Read/Post Comments (12) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 29, 2013, at 8:05 PM, yahoouser4529 wrote:

    LG cell phones are good too. I am using the nexus 4 as I type here

  • Report this Comment On June 29, 2013, at 9:44 PM, joverclock wrote:

    I signed up to say this is the dumbest article I have ever read. 4 wheels on a car.. sounds good.... swimming pool without spikes on the bottom...I like that idea. Enough with THE APPLE is so great crap. Everyone has their favorites but an article a day is kind of overboard. I like what is best at the time and gives me the most freedom to do what I want with it.

  • Report this Comment On June 29, 2013, at 10:23 PM, SRNoyes wrote:

    @joverclock

    Too bad it seems you failed to even tead the article. Your comment makes no sense in the light of this article.

  • Report this Comment On June 29, 2013, at 10:25 PM, webguy76 wrote:

    Well, here is the problem with this article and everyone who compares Samsung to Apple: Samsung does not make the OS, Google does. What the phone does is rather insignificant because it is the OS that we use most. Sure the camera and placement of the buttons is important, but why compare hardware to software? Apple makes the (or designed the phone anyway) and created the OS. Samsung just makes the phone. This is coming from an old iPhone 3G user and now I have the S3. I will never go back to Apple because there are way too many restrictions on the device and Apps. Samsung is "winning" because of good marketing, but also because the product is solid and Android has come a long way, especially with the Jellybean release.

  • Report this Comment On June 29, 2013, at 10:26 PM, le2o wrote:

    Apple has the greatest products!! Yeah I posted just to cheer you up iHater.

  • Report this Comment On June 29, 2013, at 11:17 PM, applefan1 wrote:

    webguy76

    Which version of Jelly Bean? They have so many different versions. The S3 doesn't have 4.2.2 on it, yet.

    Now, let's look at Google Android. They have a lot of market share with products that aren't running the latest version OS. Still most are running Gingerbread, followed by Ice Cream Sandwich, followed by 4.1.x and then lastly, with only 4% 4.2.x.

    Ouch. Android is marketed by more carriers and mfg in more countries. Apple obviously can't move as fast as a bunch of other companies, but they manage to hold their own if comparing mfg to mfg. Obviously, Apple should have removed Forstall a while back, which is why iOS 7 looks a lot better.

    Now, with all that said, Android platform has the most malware for two distinct reasons.

    1. It's too easy to write malware for Android because it's open.

    2. Because it's too easy to distribute malware.

    If you want to take a chance with malware, go right ahead, a lot of people don't. There are some forms of malware that can't be written on iOS, because of how they work the OS. It's impossible to have an OPEN architecture and not having malware. Sorry, but that's the downfall of Android. It's just a matter of time until it catches up to it.

    Restrictions? What restrictions do you not like?

    Samsung is winning because they are selling a LOT of $150 unlocked phones. Apple doesn't go after low margin, no profit phones. Apple's makes more profit than the entire smartphone industry. Imagine that. And you think Samsung is winning? Winning what? Market share of cheap phones sold into countries or to people that don't have any money?

    The S3 is a POS, it's had tons of problems like bad battery life, spotty cell reception, sudden death syndrome, processor security problems, NFC security problems and you are more concerned with restrictions? Maybe the restrictions are to keep the device SECURE. It's like a house, if you have all of the doors and windows locked with pickproof locks, it's restricting the home owner because they have to have the key. Hmm... I'll take a more secure OS/platform any day of the week.

  • Report this Comment On June 30, 2013, at 12:23 AM, kevins71 wrote:

    And Applefan1 nails it!

    And my two cents, samsung is not winning, they are "giving away" a lot of cheap phones to people that can't afford the higher end phones. Buy One get One free gimmicks, .0.99 cents or $99.00 incentives and the fact that according to the Wall Street journal, carriers push Android phones because the subsidies are higher and they are making more money. So, you tools that are be "sold" an Android phone are basically pawns to the carriers. Your just another schmuck with a cheap plastic phone that made them money.

    As for the Android OS, nothing but garbage, to fragmented and the latest OS adoption is pathetic and sad. Only what 4% are running the latest version of Android. Meanwhile Apple enjoys a cool 97% adoption of the latest OS.

    And for those who think that Android OS is "open" you are all fools and you were sold on the idea that it was open, it's not in any way shape or form. What it is, is unsecure and vulnerable.

    And for those who think Android is Enterprise ready, Not. No native MS Exchange support, no IT tools for remote management and remote wipe, no data safe guards in place to protect the network it is on.

    Basically Android is a cluster f**k for the retarded wannabe techie user. It's the same perception people get when they buy a Windows machine. Just because you bought a PC makes you a techie and some how this make you think you know more than a person who uses a Mac. Windows PC's can do two things really well, play games and a paper weight.

    Meanwhile, Mac users dominate the creation of every media publication, tv, movie and web site on the face of the earth and Mac users tend to actually know more about their computer than the average windows user who bought theirs at Walmart. Why do you think there are so many "windows repairs shops"?

    Grow up people and use quality products and stop buying crap like Android and Windows. Yes it's cheap and plastic and can mimmick a Mac or iPhone but it isn't the real thing. And the quality is really never there either.

    I'd rather buy from an American company doing business in California than some Chinese or Japanese company that's known from copying everyone and their mother.

  • Report this Comment On June 30, 2013, at 12:25 AM, FlyingPigNJ wrote:

    It's rare that I'm in agreement with a fool article. This article is in its typical useless fashion, so useless that I can barely disagree with it.

    And guys, why do you bother to comment if you have can't even admit the success of Samsung product? What's in question is "what" made Samsung successful in the current mobile device market.

    I can't tell you I have the right answer. I bet Samsung's CEO doesn't know either. But he obviously know what his strategy is.

    You don't have to agree with it, but the way I see is it that those factors contribute to their success.

    1. years of collecting knowledge of know-how and observing the market's successes and failures

    2. extremely dirty tactics....it's only business, and they do it well. It's handy against smaller companies. Even apple gets tripped up with it at times.

    3. incredible market...I think the marketing success surprised even Samsung

    4. competition failures by apple, htc, Motorola in varying degrees

    5. good products, deny this and you don't have a place in making comments here

    This is a ever changing market. Prophecy about future success or impending doom of Samsung at this point is just pointless. Samsung will have to adjust their strategy to ride the changing and likely saturating market faster than you can write an article. What's undeniable is their current success. There is no point in dwelling on how their stock have fell. I'm just interested in seeing where the market goes and how they would respond to it.

  • Report this Comment On June 30, 2013, at 3:53 AM, ghicks09 wrote:

    The writer of the article must be an iPhone fanboy. Apple is nothing compared to Samsung and we've been seeing that since the Samsung Galaxy S3. Which by the way, beat the iPhone 5 for the title of most sold smartphone in the United States. Now look at the sales of the Samsung Galaxy S4, toppling the iPhone 5 yet again. Samsung is the heavyweight contender, Apple is the old washed up fighter.

  • Report this Comment On June 30, 2013, at 3:59 AM, ghicks09 wrote:

    Apple does nothing but sell devices with the same tired ass OS, plastered on a glass piece of crap, with sub-par hardware in it.

  • Report this Comment On June 30, 2013, at 11:33 AM, webguy76 wrote:

    @ Applefan1

    Wow I really struck a nerve there huh? All I said was why compare Samsung to Apple when Google makes the OS which is what we use. I said the hardware plays an insignificant role (button placement, camera, etc..). I didn't say anything either way about the OS's other than I prefer Android. Both have pros and cons. Both have ups and downs, neither is perfect. And Apple does restrict a ton of apps, just Google it.

    And @Kevins71

    I am a software engineer, Java programmer, and web developer. Yep I'm a "techie wannabe". How about some actual facts as opposed to personal attacks?

  • Report this Comment On July 01, 2013, at 8:17 PM, le2o wrote:

    @ghicks09 Samedung pays you well for such a useless comment.

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