Samsung: Competing on Mobile OS and Mobile Pay

According to Eric Schmidt and Jonathan Rosenberg in their recent book “How Google Works:” “Android is growing and expanding in ways that we could have never predicted. It is used to power electronic readers (including Amazon’s), tablets, game players, and phones. It also can be found in refrigerators, treadmills, TVs, and toys.” Yep, Google knew […]

According to Eric Schmidt and Jonathan Rosenberg in their recent book “How Google Works:” “Android is growing and expanding in ways that we could have never predicted. It is used to power electronic readers (including Amazon’s), tablets, game players, and phones. It also can be found in refrigerators, treadmills, TVs, and toys.” Yep, Google knew what it was doing when it purchased Android from Andy Rubin in 2005.
Unlike Android, Apple’s parallel engine, iOS, that drives the iPhones and iPads, is tightly controlled, and no third-party company can use the software in their devices!
Although there are several advantages associated with an open platform, such as the ability to exploit user communities in coming up with fixes and extensions of codes, there are a few disadvantages in business. One of these is the level-playing field and the “equality” or lack of differentiation that comes from using the same source code that everyone else has. Another problem with Android, compared to iOS, is that, because anyone can lay their hands on Android, bad guys (hackers) go after the software to infest it with malware, making Android more susceptible to various attacks when compared to iOS.
Samsung, who manufactures more smartphones than any other company and uses Android to drive them all, appears uneasy with the status quo, and is now differentiating itself from the rest of the pack. The first obvious attempt at this is the development of the company’s first mobile OS called Tizen, as an alternative to Android.
Samsung’s smartphone business, which accounts for approximately 68% of the company’s profit last quarter, has been losing share in the competitive market for the top-of-the-line smartphones as Apple and Chinese smartphone makers appear to be giving Samsung a run for its money. Samsung’s problem may even be worse at the low-end of the smartphone market due to rising competition from Chinese rivals such as Xiaomi, Lenovo, Huawei, and ZTE, who are selling much cheaper Android-driven devices. China and India have the populations, but their people, particularly India, do not have the expendable income to afford high-end smartphones in relatively large numbers. So, the low-end phones will reign in those regions. Unfortunately for Samsung, this is the specialization of the domestic rivals in China.
To remedy its situation, Samsung has, in the past couple of years, been trying to spur its smartphone business, not just by putting out better devices, but also in the software arena. The company has also invested heavily in innovations, including wearable computers. Samsung’s smartphone success has depended strongly on Google’s Android OS, which powers Samsung’s devices. Now, Samsung has developed Tizen, which will rival Android. Tizen was first used in Samsung’s wearable devices but will be used to connect the various devices that the company manufactures, including cameras, vehicles, and appliances.
To boot, Samsung launched its first mobile device, Z1, running Tizen, in India, on 14 January 2015. The device sells for 5,700 rupees, which is approximately $92. It has a four-inch display and a simple interface. The phone is powered by a 1.2 GHz dual-core processor and 768 MB RAM. There’s a 3.1-megapixel camera on the rear, and a limited VGA camera on the front. The phone runs version 2.3 of Tizen, and comes with 4 GB of on-device storage, which is expandable to 64GB via a micro SD card. The device supports dual SIMs, as is commonplace with devices in many developing countries, such as India and Nigeria.
It is clear that Samsung means business in its efforts to differentiate itself from Android, even though Samsung would like us to think that the company’s high-end phones will continue to run Android, while only the low end phones will run Tizen. The price point for Z1 will enable Samsung to compete with Micromax Infomatics Ltd in India. (India is the third largest potential market for smartphones.) The Z1 device also costs less than Xiaomi’s main offering in India.
Samsung’s intention to compete with the recently-launched Apple pay in the area of e-wallet became publicly known a few days ago with the acquisition of the startup company LoopPay, Inc., in Burlington, Massachusetts, in the U.S. According to David Eun, the Samsung executive who managed the deal, “LoopPay would join Samsung’s mobile division, which is building a platform to provide consumer services related to payments, including tracking loyalty points and spending habits.”
This acquisition by Samsung will certainly pit the company against more established payment services such as Google Wallet, eBay’s PayPal and Apple Pay. Samsung’s service is planned for launching in a few days, when Samsung unveils its Galaxy S6 smartphone in Barcelona, Spain. The service will allow you to register credit, debit, gift, and loyalty cards on your Samsung smartphone, and use the phone to make purchases, without the need to carry the cards in a physical wallet.
The bottom line Samsung is competing fiercely in the areas of mobile operating system with the launching of Tizen in India, and in Mobile Pay, with the acquisition of LoopPay, Inc.