A financial aspects comparison between Apple and Samsung: PhD Thesis Proposal

Author: Iloka Benneth Chiemelie
Published: 29th April 2017

1.    Title

A financial aspects comparison between Apple and Samsung

2.    Abstract

Apple and Samsung are considered the fiercest competitors in the telecommunication industry. Apple Inc. is seen as a pioneer, while Samsung is more of an innovator. Thus, this research aims to compete both companies in terms of their financial performance and approaches to accounting methods. This will entail having detailed understanding of how both companies define as well as adopt budgeting, costing methods adopts, the pricing strategy, their financial performance, and overall financial overview. This research will focus primarily on the last decade’s financial review and comparison. The analysis will also focus on the global market performance as it will aid to enhance overall comparative approaches and outcomes from the research process. In cases, market-to-market comparison will also be established where and when necessary.

3.    Research objectives

·         To reference existing literatures in the field of finance and present detailed understanding of how financial features influence performance or corporations – both on competitive and monopoly levels.

·         To reference existing literatures and present detailed understanding of the financial aspects of Apple Inc. and Samsung Electronics Company, highlighting the influence of these financial aspects of their performance as well as changes that the companies have enacted in their financial features towards reaching set corporate goals.

·         To present comparative analysis of both companies in relation to the financial features discussed, detailing which of the company has adopted the best financial features and the influence of such on the company’s performance as compared with the other.

·         To present reliable and effective recommendations for both companies in relation to how they can enhance the financial aspects of their business towards creating higher level of competitiveness and improved performance in the present global market.

4.    Research questions

·         Does the financial aspects of a company influence the company’s performance? If so, what are the influences such aspects can have on the performance of a company?

·         What are the financial features noticeable in Apple Inc. and Samsung Electronics Co.? What are the influence of these features on the performance of both companies?

·         What are the comparative features of both companies’ financial elements? Which of the company has adopted the best financial strategy for ensured sustainability and profit maximization?

·         What are the right elements for both companies to enhance their financial performance in the global market? How can these elements be implemented successfully?

5.    Literature review

Equity capital, debt capital and specialty capital are the three major capitals that business employ in their day-to-day corporate activities. Equity financing is referred as the money that business owners or investors contribute towards running the business. As (Abdul, 2012) noted, equity provides business owners the opportunity of exerting influence and continuously monitoring the decisions of the management through the board of directors. It also has the potential of enhancing the equity value for equity holders and increasing the performance of the company in the process. In their argument, (Cooper & Schindler, 2011) noted that firms adopting equity financing are capable of improving their financial performance as they have direct control of their business operations and since all equity holders represent the residual claimants that such firm must have in order to ensure efficient allocation and overall maximization of shareholders’ returns on investment. (Javed & Akhtar, 2012) supported this argument by stating that the equity capital does have positive relationship with the financial performance of any given firm.

The second form of corporate financing is debt financing and it can be classified into short- and long-term debt financing. Long-term debt financing is the money that is owed to lenders for any period beyond one year in the date of the current balance sheet, while short-term debt financing are those repaid within 90-120 days from the day it was borrowed. (Koh, Dai, & Chang, 2012) noted that there is no significant relationship between the returns on investment and debt financing. In support of this study, (Abdul, 2012) conducted an investigation of debt-equity ratio on the performance of a firm and found negative correlation between the two.

Besides capital financing – which are the funds used to run the business process, there are also other financial features in a company that can influence the performance of such company. They include the costing method adopted by the company, debt repayment approaches, pricing strategies, taxation and other tax related features, returns on investments, returns on assets, deprecation, liability, share value and financial returns (in terms of generated revenues). All these features will be loaded in this research to understand how they influence overall performance of a company.

6.    Theoretical review

For this research, three theories will be adopted as: Resource Based View Theory, Lifecycle Theory and Static Trade-off Theory.

In the resource based view theory, it is asserted that a firm’s competitive advantage is within its internal resources, and not within their positioning in the external environment. This implies that instead of just conducting an evaluation of external environment’s opportunities and threats when conducting business operations, the firm’s competitive advantage lays within its unique resources and capabilities (Nasieku & Susan, 2016). It ushers in the prediction that some types of resources that a firm owes and controls possess the potential and possibility of helping the firm in question to generate desired competitive advantage and effect advanced performance in the process (Nasieku & Susan, 2016).

In the lifecycle theory, it is asserted that a firm undergoes growth and eventually matures in the course of moving through the different stages of corporate lifecycle. As such, it is suggested that the financial decisions made by a firm is influenced greatly by the unique firm features such as birth, growth, maturity, and decline, especially when the firm is experiencing financial distress and threat of bankruptcy (Nasieku & Susan, 2016).

The statistic trade-off theory has its own affirmation, which is that firms have optimal capital structure, which is defined by trading off the costs of operations against the associated benefits with the use of equity and debt. In this theory, it is predicted that firms target their capital structure in such a manner that when the actual leverage ratio shifts from the optimal one, the firm will still be able to adopt a financing behavior that is capable of bringing the leverage ratio back to the optimal level (Nasieku & Susan, 2016).

7.    Research methodology

In his book, (Bhattacherjee, 2012) noted that scientific research can be grouped into three categories as: exploratory, descriptive, and explanatory. Exploratory researches are designed to conducted a new area of enquiry, in which the goals of such research are: 1) to determine the magnitude or extent of a given problem, behavior or occurrence; 2) to define basic ideas about a given phenomenon; and 3) to test the possibility of performing a more extensive study with the aid of the defined phenomenon. On the other hand, descriptive research is designed to conduct careful observation and detailed documentation of a phenomenon of interest. Explanatory research is conducted to seek explanation of observed phenomena, behavior or problem.

In the case of this research, descriptive method will be used. In essence, the research will present detailed description of the financial elements Apple Inc. and Samsung Electronics Co. From the information gathered, descriptive comparison of both companies’ financial elements will also be conducted and necessary recommendations presented.

Primary research analysis will be applied in this research. Data for this research will be qualitative in nature and sourced from both companies in questions. Data gathering can be either quantitative or qualitative, in which the previous reflects focus on quantity (volume), and the rather focused on quality (factual). The need for qualitative data gathering in this case is because companies being studied are real competitors in the same industry. Thus, only factual results can be used to compare these companies. The data will be sourced from their corporate websites and achieved information about the company’s financial performance.

8.    Ethical statement

A number of ethical issues need to be considered when conducting primary research. This is because overall research process can impact on quality of findings as well as applicability of these findings in real-life setting. Thus, a number of ethical statements have been established for this research as:

·         Data will be sources directly from companies being studied – this research will not adopt secondary sources when gathering information about the companies being studied. Data will be sourced either from the companies’ processed achieves or their official website. This is to ensure that the quality of this research is not influenced by possible biases that can be associated with secondary data sourcing.

·         Nonbiased analysis – the research will not take side for any of the companies being studied, and will adopt necessary measures to ensure none of the companies is offered higher advantage of obtaining favorable analysis in the course of this research. Facts and figures will be analyzed as gathered and not interpreted into different ideas.

·         Advanced quality – overall, the findings from this research is expected to be of advanced quality and easily applicable in the real-life setting. This is because the researcher will ensure that optimal ethical measures are adopted throughout the research process.

9.    Limitations

Although the research process has been designed in an ethical, effective and efficient way, with findings from this research expected to solve real-life problems, it is still undebatable that the research process will be limited in a number of ways as discussed blow

Firstly, the data can only be sourced from the companies’ achieves and online publication. There will be no direct interview with the CEOs of both companies. Thus, this makes findings from the research process limited in the sense that direct interview with the CEOs would have helped to offer detailed understanding why these companies adopt financial aspects associated with their business process.

Secondly, the research is qualitative in nature as data can only be sourced directly from both companies. This will limit detailed understanding of public views about the companies being studied. Where effected, such understandings would have been effective in describing public views about the financial strategies adopted by both companies and effectively help in recommending the best strategy for enhanced financial performance within the industry.

Finally, the research adopts global perspective. This broadens the whole research process and also reduces the chances of comparing both companies from specific market perspective. Such comparison would have been better as findings can easily be linked to specific market features within the market being compared.

Although limited by a number of variables as discussed above, the whole research process is still considered valid and findings from the research are expected to be easily applicable both within the industry and across other industries.

10.    Research Timeline and Outline 

This research is divided into five different chapters. The first chapter is the introduction, which presents details of what the research aims to achieve. This is followed by a review of relevant literatures in relation to the research topic. The third chapter defines the research methodology, while the fourth chapter is the analysis of findings from the research. Finally, the chapter is concluded with a recommendation and conclusive summary of the research outcome. Overall, the research is expected to last for a period of 3 months, stretching from the start to the finish.

11.    Bibliography

Abdul, G. K. (2012, 5 12). The Relationship of Capital Structure Decisions with Firm Performance: A Study of the Engineering Sector of Pakistan. Retrieved from International Journal of Accounting and Financial Reporting: http://www.macrothink.org/journal/index.php/ijafr/article/viewFile/1825/1516

Bhattacherjee, A. (2012). SOCIAL SCIENCE RESEARCH: PRINCIPLES, METHODS, AND PRACTICES. Retrieved from University of South Florida: Scholar Commons: http://scholarcommons.usf.edu/cgi/viewcontent.cgi?article=1002&context=oa_textbooks

Cooper, S., & Schindler, D. (2011). Business Research Methods, 11th, edition. Retrieved from blackboard: https://csuglobal.blackboard.com/bbcswebdav/institution/FCC%20Content/csfiles/home_dir/externalFiles_20130401041211/library__xid-1005_5/Textbook%20Reserve__xid-13309_5/OTL__xid-14610_5/OTL599__xid-1763549_5/OTL599_BRM_Mod2Reading_CH4__xid-4605593_5-1.pdf

Javed, B., & Akhtar, S. (2012). Interrelationships between Capital Structure and Financial Performance, Firm Size and Growth: Comparison of industrial sector in KSE. Retrieved from European Journal of Business and Management: http://www.iiste.org/Journals/index.php/EJBM/article/viewFile/2995/3037

Koh, S., Dai, L., & Chang, M. (2012). Financial Distress: Lifecycle and Corporate Restructuring. Retrieved from PeenState University: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.688.3816&rep=rep1&type=pdf

Nasieku, T., & Susan, J. K. (2016, 1 2). Effect of Financial Restructuring on the Financial Performance of Firms in Kenya. Retrieved from rajournals: http://www.rajournals.in/images/ijmeiarticle/v2-i1/2ijmei.pdf