Four reasons Samsung is faltering

What’s eating the South Korean technology company?

Samsung may be the world’s biggest telephone manufacturer having knocked Nokia off the top spot in 2012, but its latest figures have shown a marked decline in sales.

What are the problems the company faces? And what can it do to overcome them?

Competition from Apple

Samsung’s arch rival and favourite legal sparring partner, Apple, is riding the crest of a smartphone wave that saw the US company hit $10.49bn profit in the first three months of this year, selling a staggering 43.7 million iPhones – roughly 20,000 units an hour over that time frame. Over half of Apple’s profits now come from iPhone sales.

Maturing market

Just six years ago, the first smartphones were impossibly sleek gadgets that looked as though they had been sent to us from the future. Now they are humdrum necessities. This ubiquity means the shiny lure of these magic boxes has waned.

A greater number of competitors, combined with lower prices has meant that demand in developed countries is diminishing.

Samsung has been looking at creating lower-cost models aimed at developing markets. But can it get there fast enough? There is already a serious race to offer cheaper options with ZTE, Huawei and Xiaomi working to corner that space.

Some are asking whether we have reached “peak smartphone”.

Product differentiation

Samsung’s global success has been largely thanks to its world-beating Galaxy range of smartphones. But is the company improving features at a rapid enough rate for fans of the handset to consider an upgrade?

When the latest incarnation, the S5 was unveiled earlier this year, with added extras including a heart-rate monitor and a waterproof casing, the reception wasn’t as rabid as may have been expected. Reviewers of the unit have reported that there “isn’t really much to say about the Galaxy S5’s hardware, except that it’s all slightly better than the Galaxy S4’s.”

With new smartphones emerging on a practically annual cycle, it is not a surprising that the technology has reached something of a plateau.

Price wars

Surging competition has meant that updated models can now arrive at lower prices than their predecessors. The new Galaxy S5 is cheaper than the release price of the S4 version. This may help tempt upgrades, but comes at the expense of profit margins. The result is that ever larger numbers of units have to be shifted. Combined with a market that appears to be growing increasingly apathetic, there is a rocky path ahead.

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