The Impact of Macroeconomic Factors on Samsung
Shaquirra Mayo
Regent University
The Non-existent Comparative Advantage of Samsung Against Apple
Comparative advantage is the ability to produce a good or service at a lower opportunity cost than another producer. (Cowen, et al., 2020) At Samsung, the opportunity cost seems to be higher than its leading competitor: Apple. When looking into opportunity cost, we analyze the value of opportunities lost with regards to Samsung. (Cowen, et al., 2020, pg.xxxii) One instance in 2011 marks an example where Samsung sought after an opportunity to profit based off of the technological design of their Galaxy phones, and because of this choice it landed them in a lawsuit.
“On April 15, 2011, Apple filed suit against their client 5Link to the text of the note and mobile phone market competitor 6Link to the text of the note Samsung Electronics Co., Ltd., 7Link to the text of the note Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC, alleging that Samsung's product line of Galaxy cell phones and computer tablets infringe Apple's trade dress, trademarks, and utility and design patents.”. (Coughlin, 2017)
Where this could have been an opportunity for Samsung to have a comparative advantage over Apple, it ended with Samsung being held liable for the total profit of infringing products. (Coughlin, 2017)
Supply and Demand for Samsung Smartphones
Samsung is a consumer electronics giant with global reach and loyal customer bases. (Ross, 2021) In analyzing the supply and demand for the key product at Samsung, we will analyze the most in-demand product offered by the company: their smartphone. Currently, Samsung is experiencing the impact of an imbalance in the global microchip shortage, even though the company is responsible for making it’s own microchips, they are heavily reliant upon third-party components for their smartphones. (Gilbert, 2021) This shortage is directly impacting their supply, driving up the demand of their smartphone.
The GDP of Samsung’s Home Country and China
“Samsung was first incorporated in 1938 by Lee Bung‐Chull, and its main business line was trade. The trading function has continued to be important, first with imports, and later exports, starting in the mid‐1970s. Samsung had become one of Korea’s top ten firms by 1950.”. (Kim, 1998) Samsung is a South Korean company that is one of the world’s largest producers of electronic devices. (Bondarenko, 2021) When analyzing GDP, or gross domestic product, an observance takes place that analyzes the market value of all finished goods and services produced within a country in a year. (Cowen, et al., 2020, pg.4) The market share of Samsung smartphones in South Korea is 65.92%. (Statista, 2022) In comparison, China has a market share of just over 2% in Samsung smartphones. (Statista, 2022) In 2018, Samsung’s revenue was almost $212 billion, or 13% of South Korean GDP. (Buchholz, 2019)
The Impact of Fluctuations in GDP, Economic Growth, Investments and Patents on Samsung Profitability
“Globalization and advances in technologies have made the global market extremely dynamic and competitive.”. (Jang, et al., 2019) It is because of this that we can see fluctuations in GDP from country to country when analyzing the market value of Samsung smartphones from country to country. When analyzing GDP, it is important to analyze the economic growth, or the growth rate of real per capita GDP to see the true impact that fluctuations have on this product. (Cowen, et al., 2020, pg. 4) As far as investments, or the purchase of new capital goods, Samsung plans to invest in its technological capabilities for the future. (Cowen, et al., 2020, pg.600)
“In AI, Samsung plans to significantly expand its research capability, increasing the number of advanced AI researchers to 1,000 across its global AI Centers. It will also invest aggressively to become a global player in the advanced markets for 5G chipsets and related devices and equipment.”. (Samsung Newsroom, 2018)
Patents increase the incentive to research and develop new products, which is why Samsung could profit largely by patenting their products, giving them more of a comparative advantage in the market for smartphone technology. (Cowen, et al., 2020, pg. 582)
References
Bondarenko, P. (2021). Samsung. Encyclopedia Britannica. Retrieved from https://www.britannica.com/topic/Samsung-Electronics
Buchholz, K. (2019). How Much Money Does BTS Make for South Korea? Retrieved from https://www.statista.com/chart/19854/companies-bts-share-of-south-korea-gdp/#:~:text=In%202018%2C%20Samsung%E2%80%99s%20revenue%20was%20almost%20%24212%20billion%2C,5%20percent%2C%20not%20unusual%20for%20major%20high-tech%20companies.
Coughlin. (2017). Apple, Inc. v. Samsung Electronics Co.: economics of design patent trolling. Cardozo Arts & Entertainment Law Journal, 35(1), 209–.
Cowen, T., & Tabarrok, A. (2020). Modern Principles of Economics (5th Edition). Macmillan Higher Education. https://mbsdirect.vitalsource.com/books/9781319329464
Gilbert, B. (2021). Samsung warns a 'serious imbalance' of microchips could wreak havoc on smartphones, and it demonstrates why Apple making its own chips is a brilliant move. Retrieved from https://www.businessinsider.com/samsung-warning-smartphone-supply-issues-global-chip-shortage-2021-3
Jang, Lee, S. M., Kim, T., & Choi, D. (2019). Planting and harvesting innovation - an analysis of Samsung Electronics. International Journal of Quality Innovation, 5(1), 1–16. https://doi.org/10.1186/s40887-019-0032-x
Kim. (1998). Technological capabilities and Samsung Electronics’ international production network in East Asia. Management Decision, 36(8), 517–527. https://doi.org/10.1108/00251749810232592
Ross, S. (2021). Samsung vs. Apple: Comparing Business Models (AAPL, SSNLF). Retrieved from https://www.investopedia.com/articles/markets/110315/samsung-vs-apple-comparing-business-models.asp
Samsung Newsroom. (2018). Samsung Steps Up Investment for Future Growth, Takes Initiative to Build Innovation Ecosystem. Retrieved from https://news.samsung.com/global/samsung-steps-up-investment-for-future-growth-takes-initiative-to-build-innovation-ecosystem
Statista. (2022) Market share of Samsung smartphones in the Asia-Pacific region as of February 2022, by country. Retrieved from https://www.statista.com/statistics/1254665/apac-samsung-smartphone-market-share-by-country/