The Nature of the Relationship Between Firms: Samsung and Apple Custom Essay

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Individual Essay Instruction:
• Your INDIVIDUAL report MUST NOT BE purely descriptive; it must contain analysis to explain the development of outsourcing/ offshoring. You must relate this to underlying theories of the multinational enterprise.
We can change our essay topic but we have to stick to the case study. I would like to concentrate the essay more on applying the contribution of Hymer to the theory of MNE with the case of Apple and Samsung. Samsung could be chosen the main case for this essay.
Topics: Hymer’s contribution to the theory of the MNE
• Hymer is the pioneer of modern analyses of the multinational firm. He developed a theory which emphasised the importance of market and organizational power. We consider the key aspects of his contribution and discuss whether and why some aspects of his work have enduring value
Readings:
Ietto-Gillies (2012), Chapters 4, Horaguchi (1990), Buckley (1990), Yamin (1991) – compare first and 2nd editions of the chapter on Hymer, Yamin and Forsgren (2006), Yamin and Sinkovics (2007, 2010 #615)
We have done a group presentation which prepares us to write our own individual essay (instruction shown above). In the group project students will in groups of four or five conduct and write a research report on a particular case. The project tests your skill in applying theories to the ‘real life’ experience of firms, or industries in relation to outsourcing and/or offshoring. You need to effectively search various resources such as the library and the internet to gather sufficient information to shed light or interpret the growth and significance of these developments in a particular firm or industry.
Group presentation topic: The Nature of the Relationship Between Firms: Samsung and Apple
• Our objective is to analyze the nature of their relationship in terms of learning and power.
• What is interesting about this case?
o Samsung in Apple’s biggest supplier and also Apple’s biggest competitor
• The benefits from the nature of the relationship between the two firms.
• Apple and Samsung
• “A firm as efficient mechanism for transfer of knowledge”. (Kogut & Zander, 1993).
• Samsung has storage of Knowledge over years from R&D.
• As a result Apple looks for a contract with Samsung.
• What benefits can Samsung gain in relationship with Apple. Is it purpose of learning or power?
• Learning
– Tacit knowledge is likely to be transferred within the firm (Kogut & Zander 1993)
– Is Samsung learning from Apple?
• Apple vs. Samsung litigation
o Desire for Removal-of-Conflict
o Aim for control and power
o Hymer particularly applies if firms are seen as equal and interdependent.
o Cooperative/Competitive Relationship
o Industry Organisation
• Global Collusive Oligopoly
o Objective of Apple and Samsung
o Collusion = Oligopolistic Profits
o Information Sharing
o Market Sharing agreement
• Opportunity Cost
o Question of allowing new competitor or allowing current incumbent to benefit.
o Active vs Passive; Offensive vs Defensive
o Desire for networks
• Flexibility and Control
o Hymer points out the expansion of MNC involves a double movement-centralization and decentralization, integration and differentiation.
o Increase firms flexibility and control
o Apple controlling Samsung, also for Samsung to gain some control of Apple as well
• Dominant Element
o Hymer saw subcontracting as a way to control rather than relinquish control by MNCs
o Power is the key to effective control.
o The dominant element is either production or marketing
o Ownership of plant and equipment-production dominant, ownership of ‘intangibles’ was the key when marketing were crucial
• Apple and Samsung
o Apple sees marketing considerations as the dominant factor therefore they do not believe that the ownership of production is crucial. Therefore they use contract manufacturers to focus on downstream activities.
o Samsung believe that production is the dominant element and wish to internalise this for further control.
• Benefits of the contract
o Samsung could enjoy the economy of scale thus further reduce its cost.
o Apple can focus on their marketing and product development activities
o By focusing on cost reduction Samsung competes in different space , for Apple therefore is a further removal of conflict as they both can achieve their different objectives by being together.

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