In Chinese companies that are developing cheaper

In the mobile phone industry, the bargaining
power of suppliers is high because the supplier’s components and materials are
crucial to the success of handset producers’ success. Few companies are able to
produce their own processors, memory chips and other raw components that are
used in smartphone production.  Samsung, however, is unique in that they are
very strong in vertical integration- the ability to self-
supply, which leverages all aspects of the manufacturing process from raw
materials to electronics components to fully-assembled products (Vergara,
2012). Samsung had been a leading hardware manufacturer before it entered the
smartphone market, with major clients such as Apple, Dell and Sony- who are now
their direct competitors (Kim, 2010). This makes the power of suppliers, especially hardware suppliers,
largely irrelevant because Samsung is its own supplier for most components.
However, on the software side, Samsung is heavily reliant on the operating
system platform Android offered by Google. Although this reliance unquestionably accelerated its growth in
sales, it could be a grave disadvantage to the company. While Samsung adds more
services and features on top of the operating system to incorporate their own
trademarks to the devices, Samsung ultimately does not own Android (Lev- Ram,
2013). In fact, the operating system is freely available to all other mobile
phone manufacturers, including up-and-coming Chinese companies that are
developing cheaper phones. Moreover, Google is giving Android away on the
condition that manufacturers also install Google services such as Maps, YouTube
or Google Play, its app and content store, so there are limited chances for
their partners to develop similar services (Edelman, 2014: pp23). Another
potential threat is that Google has purchased Motorola Mobility,
therefore the partnership between Samsung and Android is at stake if Google
decides it wants Motorola to gain more market share (Lev- Ram 2013).


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