Professional Documents
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Apple and Samsung
Apple and Samsung
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
Key issues in
understanding
Apple vs.
Samsung
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
get some idea how to analyze the battle between Apple and Samsung in
the smartphone market using game theory (of course, there are other
perspectives )
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
AGENDA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
economics
management
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
management
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
AGENDA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
10
WILLINGNESS TO PAY
The willingness to pay
describes, how much
money an individual
would pay at the
maximum to purchase
some product
maximum
willingness
to pay
number of
individuals
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
11
price p
quantity q
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
12
p = p(q ) = a bq
p A = a A bA q A
pS = aS bS qS
-b
quantity q
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
Price demand
schedule can be
identified doing
market research
13
REVENUES
R = R(q ) = pq =
revenues R
(a bq )q = aq bq 2
Revenue is income
that a company
receives from its
normal business
activities, usually from
the sale of goods and
services to customers
Revenue is often
referred to as the "top
line" due to its position
on the income
statement not to be
mixed up with profits,
which is bottom line
-b
quantity q
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
14
COST STRUCTURE
costs C
C = C (q ) = cq + F
costs C
variable costs cq
fixed costs F
quantity q
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
15
revenues R
costs C
= R C =
revenues R
aq bq 2 cq F
costs C
in managerial
economics, profit is just
revenues minus costs
(cash flow
perspective)
in business, there are
lots of other profitconcepts (Earnings
Before Interest, Taxes,
Depreciation, and
Amortization EBITDA,
Earnings Before Interest
and Taxes EBIT, etc.)
mainly for tax and
depreciation issues
= R C
0
quantity q
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
16
profits
shareholder
value
which achieves competitive advantage for the organization through its configuration
of resources (aka strategic variable) within a changing industry environment to meet
the needs of markets/customers and to fulfill stakeholder expectations
Shareholders are the owners of a company, hence they own all equity and receive
all profits as dividends
Shareholder value is simply the discounted sum of all future profits and measures the
value of a company
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
17
(2) R = pq
(3) C = cq + F
(1) p = a bq
(4) = R C = aq bq 2 cq F max!
(5)
= a 2bq c = 0
q
ac
(6) q* =
2b
q *
q *
q *
> 0,
< 0,
< 0.
a
c
b
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
18
MONOPOLY EQUILIBRIUM
Monopoly: one firm in
the market, no
competition
monopoly
Given a, b, c and F,
choose optimum q to
maximize profits
3000
2500
a
b
c
F
100
1
10
500
2000
1500
R
1000
C
500
pi
q*
p*
pi*
45
55
1525
-500
20
40
60
80
100
120
-1000
-1500
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
19
AGENDA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
20
homogenous
products
heterogeneous
products
one firm
(monopoly)
some firms
(oligopoly)
many firms
Market structure
(better: industry
structure) depicts
number and size
distribution of firms and
structure of offered
products
national
football
leagues
transportation,
energy,
railway,
banking,
telco, .
free e-mail
services,
groceries,
automobiles,
gadgets,
technical
consumer
products, .
music
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
21
one firm
(monopoly)
homogenous
products
some firms
(oligopoly)
location
entry barriers
many firms
single-product vs.
multi-product strategies
innovation vs.
imitation
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
22
evidence
Quantity as
strategic
variable
Price as
strategic
variable
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
big picture
market structure and results
differ with respect to type of
competition
both from a theoretical and
an empirical perspective,
quantity competition has
more relevance (two stage
game: first stage capacity,
second stage price)
however, asking managers,
most of them think they are
playing price competition
game theory is the key
approach to analyze
competition
23
Game theory
is a study of strategic
decision making in
conflict and
cooperation
(interactive decision
theory) trying to
identify some optimal
behavior or strategy
given strategies or
options of others
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
24
Game
theory
List of players
List of strategies or actions available
Description of payoffs or profits for each
strategy
Rules of the game
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
25
Player 1
strategy A of
player 1
strategy
C of
player 2
1A / 2C
strategy
D of
player 2
1A / 2D
strategy B of
player 1
1B / 2C
Player 2
1B / 2D
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
26
Player 1
strategy A of
player 1
strategy
C of
player 2
strategy B of
player 1
(1)
(1)
1A/2C
1B/2C
(2)
1A/2C
(2)
1B/2C
Player 2
strategy
D of
player 2
(1)
(1)
1A/2D
1B/2D
(2)
(2)
1A/2D
1B/2D
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
27
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
1
strategy
D of
player 2
6
1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
28
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
1
strategy
D of
player 2
6
1
1
3
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
29
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
2
strategy
D of
player 2
6
2
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
30
Player 1
strategy A of
player 1
strategy B of
player 1
4
strategy
C of
player 2
3
1
Player 2
2
strategy
D of
player 2
Such a strategy is
called dominant
6
2
2
3
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
31
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
2
strategy
D of
player 2
3
8
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
32
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
2
strategy
D of
player 2
3
8
3
3
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
33
Player 1
strategy
C of
player 2
strategy A of
player 1
strategy B of
player 1
Player 2
2
strategy
D of
player 2
3
8
Inspection of 1 A / 2 C
and 1 B / 2 D shows,
that these equilibria
are indeed possible
hence: a game can
have more than one
equilibrium, and even
more than one Nashequilibrium
3
3
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
34
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
35
AGENDA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
36
Continuum of quantity
strategies
A
Samsung
Continuum of
quantity
strategies
qS
What we have to do
now is identify the
optimum solutions to
the Apple and
Samsung strategies in
quantities
qA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
37
(1) p = a bQ = a b(q1 + q2 )
(2) Ri = pqi , i = 1;2
(3) Ci = cqi + F
(4) 1 = R1 C2 = aq1 b(q1 + q2 )q1 cq1 F max!
1
(5)
= a b(q1 + q2 ) bq1 c = a c 2bq1 bq2 = 0
q1
a c q2
(6) q1* =
2b
2
q1 *
q *
q *
q *
> 0, 1 < 0, 1 < 0, 1 < 0.
a
c
b
q2
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
38
1
(5)
= a b(q1 + q2 ) bq1 c =
q1
quantity q2
a c 2bq1 bq2 = 0
a c q2
(6) q1* =
2b
2
Firm 1
q2
2
0
ac
2b
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
39
2
(5' )
= a b(q1 + q2 ) bq2 c =
q2
a c 2bq2 bq1 = 0
ac
2b
Firm 2
(6' ) q2 * =
a c q1
2b
2
q1
2
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
40
quantity q2
ac
2b
This is a Nash
equilibrium: a solution
to a non-cooperative
game in which each
player knows the
equilibrium strategies
of the other players
Firm 1
q2
q2 *
q1 *
ac
2b
q1
2
Firm 2
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
if no player can
benefit by changing
strategies (while the
other players keep
theirs unchanged),
then the current set of
strategy choices and
the corresponding
payoffs constitute a
Nash equilibrium
41
(1) p1 = a1 b1q1 b q2
p2 = a2 b2 q2 b q1 , b1 , b2 > b
(2) Ri = pi qi , i = 1;2
(3) Ci = ci qi + F
2
2b1
2b1
a2 c2 b q1
q2 * =
2b2
2b2
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
42
a1 c1 b q2
(6) q1* =
2b1
2b1
quantity q2
Firm 1
a2 c2 b q1
q2 * =
2b2
2b2
a2 c2
2b2
q2 *
q1 *
b q2
a1 c1
2b1
b q1
2b2
Firm 2
2b1
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
43
quantity q2
Firm 1
a 2 c2
2b2
q2 *
c2 c2 '
q2 *'
0
q1 *
q1*'
Firm 2
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
44
quantity q2
Firm 1
a1 a1 '
q2 *
3
q2 *'
Firm 2
q1 *
2
q1*' a1 c1
2b1
quantity q1
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
45
quantity q2
Firm 1
q2 *
2
q2 *
b2 b2 '
b q1
2b2
b q1
2b2 '
Firm 2
quantity q1
q1*'
q1 *
3
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
46
Apple
Samsung
strategic
characteristic
modeling
approach
Innovator - consumers
love innovativeness
Being innovative
requires R&D thats
high fixed costs
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
We have to depict
these differences in our
model
47
Price-demand schedule
Apple
Samsung
a(1) = 1100
b(1) = 0,7
b(beta) = 0,5 (market
specific)
a(2) = 1000
b(2) = 0,6
b(beta) = 0,5 (market
specific)
Cost function
c(1) = 400
F = 10000 (industry
specific)
c(2)= 360
F = 10000 (industry
specific)
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
48
Case (A)
1000,00
1000,00
400,00
400,00
0,70
0,70
0,00
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
428,57
428,57
700,00
700,00
118571,43
118571,43
300000,00
300000,00
181428,57
181428,57
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
857,14
700,00
50,00%
50,00%
50,00%
50,00%
39,52%
39,52%
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
two separate
monopolies
statistics
Apple vs
Samsung
1
= a1 2b1q1 b q2 c1 = 0
q1
(6) q1* =
a1 c1 b q2
2b1
2b1
q2 * =
a2 c2 b q1
2b2
2b2
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
49
(B)
two separate
monopolies
perfect
substitutes
(b(beta)=1)
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
1000,00
1000,00
400,00
400,00
0,70
0,70
0,00
10000,00
1000,00
1000,00
400,00
400,00
0,70
0,70
1,00
10000,00
Case (B)
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
428,57
428,57
700,00
700,00
118571,43
118571,43
300000,00
300000,00
181428,57
181428,57
250,00
250,00
575,00
575,00
33750,00
33750,00
143750,00
143750,00
110000,00
110000,00
statistics
Apple vs
Samsung
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
857,14
700,00
50,00%
50,00%
50,00%
50,00%
39,52%
39,52%
500,00
575,00
50,00%
50,00%
50,00%
50,00%
23,48%
23,48%
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
50
(C)
two separate
monopolies
perfect
substitutes
(b(beta)=1)
imperfect
subsititutes
1000,00
1000,00
400,00
400,00
0,70
0,70
0,00
10000,00
1000,00
1000,00
400,00
400,00
0,70
0,70
1,00
10000,00
1000,00
1000,00
400,00
400,00
0,70
0,70
0,50
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
428,57
428,57
700,00
700,00
118571,43
118571,43
300000,00
300000,00
181428,57
181428,57
250,00
250,00
575,00
575,00
33750,00
33750,00
143750,00
143750,00
110000,00
110000,00
315,79
315,79
621,05
621,05
59806,09
59806,09
196121,88
196121,88
136315,79
136315,79
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
857,14
700,00
50,00%
50,00%
50,00%
50,00%
39,52%
39,52%
500,00
575,00
50,00%
50,00%
50,00%
50,00%
23,48%
23,48%
631,58
621,05
50,00%
50,00%
50,00%
50,00%
30,49%
30,49%
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
(A)
statistics
Apple vs
Samsung
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
Case (C)
Firms are identical in
demand and costs
b(beta) = 0,5,
customers have a
tendency for one of
the brands
Comparing (A), (B)
and (C), firm size,
profits and prices are
in-between, however
identical across firms
51
Case (D)
1100,00
1000,00
400,00
360,00
0,70
0,60
0,50
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
363,64
381,82
654,55
589,09
82561,98
77471,07
238016,53
224925,62
155454,55
147454,55
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
745,45
621,02
48,78%
51,22%
51,59%
48,41%
34,69%
34,44%
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
cost and
demand
differences
statistics
Apple vs
Samsung
Apple
Samsung
strategic
characteristic
modeling
approach
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
52
(D)
(E)
cost and
demand
differences
cost
reduction of
Samsung
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
1100,00
1000,00
400,00
360,00
0,70
0,60
0,50
10000,00
1100,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
363,64
381,82
654,55
589,09
82561,98
77471,07
238016,53
224925,62
155454,55
147454,55
349,65
420,98
644,76
572,59
75578,76
96334,00
225438,90
241047,29
149860,14
144713,29
statistics
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
745,45
621,02
48,78%
51,22%
51,59%
48,41%
34,69%
34,44%
770,63
605,33
45,37%
54,63%
43,96%
56,04%
33,53%
39,96%
Apple vs
Samsung
Case (E)
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
Suppose due to
pressure by
shareholders
Samsung is realizing
some cost cutting at ~
10 % (decrease of
c(2))
Key results: Samsung is
growing, Apple is
shrinking, and now
Samsung is more
profitable
Following the cost
reduction, Apple has
to reduce prices (in
order to maximize
profits)
53
(E)
(F)
cost and
demand
differences
cost
reduction of
Samsung
introduction
of iPhone6
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
1100,00
1000,00
400,00
360,00
0,70
0,60
0,50
10000,00
1100,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
1400,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
363,64
381,82
654,55
589,09
82561,98
77471,07
238016,53
224925,62
155454,55
147454,55
349,65
420,98
644,76
572,59
75578,76
96334,00
225438,90
241047,29
149860,14
144713,29
601,40
316,08
820,98
509,65
243176,19
49945,43
493735,63
161092,28
250559,44
111146,85
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
745,45
621,02
48,78%
51,22%
51,59%
48,41%
34,69%
34,44%
770,63
605,33
45,37%
54,63%
43,96%
56,04%
33,53%
39,96%
917,48
713,72
65,55%
34,45%
82,96%
17,04%
49,25%
31,00%
statistics
input
Apple vs
Samsung
Case (F)
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
54
(D)
(E)
(F)
(G)
cost and
demand
differences
cost
reduction of
Samsung
introduction
of iPhone6
catching
with Galaxy
S5
input
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
1100,00
1000,00
400,00
360,00
0,70
0,60
0,50
10000,00
1100,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
1400,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
1400,00
1200,00
400,00
320,00
0,70
0,60
0,50
10000,00
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
363,64
381,82
654,55
589,09
82561,98
77471,07
238016,53
224925,62
155454,55
147454,55
349,65
420,98
644,76
572,59
75578,76
96334,00
225438,90
241047,29
149860,14
144713,29
601,40
316,08
820,98
509,65
243176,19
49945,43
493735,63
161092,28
250559,44
111146,85
531,47
511,89
772,03
627,13
187721,16
147217,66
410308,57
321021,86
222587,41
173804,20
statistics
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
745,45
621,02
48,78%
51,22%
51,59%
48,41%
34,69%
34,44%
770,63
605,33
45,37%
54,63%
43,96%
56,04%
33,53%
39,96%
917,48
713,72
65,55%
34,45%
82,96%
17,04%
49,25%
31,00%
1043,36
700,94
50,94%
49,06%
56,05%
43,95%
45,75%
45,86%
Apple vs
Samsung
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
Case (G)
Suppose Samsung is
catching up, yet not
completely, with a
new version of Galaxy
(increase of a(2))
Key results: Apple still
able to charger higher
prices, but Samsung
drastically growing
Market shares are like
equal with Apple
staying ahead in
profits, especially due
to much higher prices
55
AGENDA
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
56
in managerial economics, profit is just revenues minus costs and firms strive to
maximize profits
the profit function is maximized by choosing a strategy, i.e., a strategic variable (some
evidence that quantity due to investment character is the key variable)
game theory: a study of strategic decision making trying to identify some optimal
behavior or strategy given potential strategies of others
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
57
the Cournot-Nash model proves quite flexible and powerful to analyze competition,
see the Apple vs. Samsung case study
key limitations and obstacles are: data, and what if managers do not really maximize
profits
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
58
BACK UP
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
59
FURTHER READING
Fisher, T.C.G., Prentice, D. and Washik, R., Managerial economics: a strategic approach, Milton Park 2010.
Besanko, D., Dranove, D., Schaefer, S. and Shanley, M., Economics of strategy, Boston 2007.
Mansfield, E., Allen, W.B., Doherty, N., and Weigelt, K., Managerial economics: theory, applications, and
cases, New York 2009.
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
60
(D)
(E)
(F)
(G)
imperfect
subsititutes
cost and
demand
differences
cost
reduction of
Samsung
introduction
of iPhone6
catching
with Galaxy
S5
input
(B)
perfect
substitutes
(b(beta)=1)
Apple a (1)
Samsung a (2)
Apple c (1)
Samsung c (2)
Apple b (1)
Samsung b (2)
b (beta) (market specific)
F (industry specific)
1000,00
1000,00
400,00
400,00
0,70
0,70
0,00
10000,00
1000,00
1000,00
400,00
400,00
0,70
0,70
1,00
10000,00
1000,00
1000,00
400,00
400,00
0,70
0,70
0,50
10000,00
1100,00
1000,00
400,00
360,00
0,70
0,60
0,50
10000,00
1100,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
1400,00
1000,00
400,00
320,00
0,70
0,60
0,50
10000,00
1400,00
1200,00
400,00
320,00
0,70
0,60
0,50
10000,00
(A)
two separate
monopolies
Apple q* (1)
Samsung q* (2)
Apple p* (1)
Samsung p* (2)
Apple pi* (1)
Samsung pi* (2)
Apple
R (1)
Samsung
R (2)
Apple C (1)
Samsung C (2)
428,57
428,57
700,00
700,00
118571,43
118571,43
300000,00
300000,00
181428,57
181428,57
250,00
250,00
575,00
575,00
33750,00
33750,00
143750,00
143750,00
110000,00
110000,00
315,79
315,79
621,05
621,05
59806,09
59806,09
196121,88
196121,88
136315,79
136315,79
363,64
381,82
654,55
589,09
82561,98
77471,07
238016,53
224925,62
155454,55
147454,55
349,65
420,98
644,76
572,59
75578,76
96334,00
225438,90
241047,29
149860,14
144713,29
601,40
316,08
820,98
509,65
243176,19
49945,43
493735,63
161092,28
250559,44
111146,85
531,47
511,89
772,03
627,13
187721,16
147217,66
410308,57
321021,86
222587,41
173804,20
statistics
Apple vs
Samsung
Q
average p
Apple market share (1)
Samsung market share (2)
Apple profit share (1)
Samsung profit share (2)
Apple profit margin (1)
Samsung profit margin (2)
857,14
700,00
50,00%
50,00%
50,00%
50,00%
39,52%
39,52%
500,00
575,00
50,00%
50,00%
50,00%
50,00%
23,48%
23,48%
631,58
621,05
50,00%
50,00%
50,00%
50,00%
30,49%
30,49%
745,45
621,02
48,78%
51,22%
51,59%
48,41%
34,69%
34,44%
770,63
605,33
45,37%
54,63%
43,96%
56,04%
33,53%
39,96%
917,48
713,72
65,55%
34,45%
82,96%
17,04%
49,25%
31,00%
1043,36
700,94
50,94%
49,06%
56,05%
43,95%
45,75%
45,86%
COMPETITION BETWEEN APPLE AND SAMSUNG - CASE STUDY / Dr. Markus Thomas Mnter
61