Samsung Company Analysis Project
Executive Summary
This report provides an in-depth assessment and analysis of Samsung Company’s strategic management and decision making. This incorporates a detailed analysis of the external and internal operating environment via some tools and strategies. The methods and tools that were relied upon in the development of the report include SWOT analysis, PESTLE, IFE and EFE, SPACE, BCG, and Grand. Four different possible strategies acquired from QSPM as the strategic choice are also discussed. This is followed by an evaluation of the implementation and recommendation of feasible solutions. The results of the study reveal that Samsung has acquired an exceptional strategic advantage over all the respective competitors. In fact, the company relies less on the distribution of materials that are used in the development of its products. For market and competitive response, the company has retained the global leadership position based on its sales, manufacturing efficiency, customer satisfaction, revenue generation and sustainable competition. This report has thus established the current performance and strategic location as desirable when equated to some of the well-established companies in the industry such as Apple. Despite the strategic position the threats of the intensifying competition cannot be ignored. Thus, the study recommends that Samsung focuses on enhancing products diversity and invest more in development and research. The detailed assessment of the company’s external and internal operating environments demonstrates that the company is competitively and economically steady but more regarding strategic focus has to be done to sustain the ranking in the suture.
Company Background and Key Issues
Samsung is not only popular but also one of the most established companies in the world. Samsung Electronics is an international company that offers diverse products variety to the customers focusing on electronics and information technology solutions. The company has created and maintained a positive reputation as an innovative electronics company. The company was founded back in 1969 and has its operations situated across the world in over a hundred countries with an estimated workforce of over three hundred thousand persons (Samsung, 2017). The company’s headquarter is situated in South Korea. The company has sustained in original products being particularly electronics and electrical devices such as television, mobile phones, and cookers and so on even though it has diversified over the years in the quest to overcome competition. The diversification has resulted in the incorporation of other different and more advanced in terms of innovation technology such as computers, smartphones, telecommunication and memory solutions. Over the operative period since its establishment, the company has bought and in some instances tried to acquire distinct business companies as well. Some successful acquisitions have acquired within the research and apparel industries with entities such as AST and FUBU clothing respectively (Chien & Gunther, 2008). Evidently, Samsung has overcome a lot of complexities for it to be one of the leading electronics and Information Technology related solution giver in the contemporary world. The company has been ranked as the leader in terms of sales within the electronics market seconded by Apple over the competitors such as Nokia. Based on the present market changes and the company’s appealing strategic management, the ranking as the leading electronics manufacturer and seller is unarguable (Paek & Lee, 2017). However, this does not obstruct the formidable competition from the popular and accepted brands especially Apple which is rising innovatively in a rapid manner.
Samsung Company is strategically focused on sustaining a profitable operation throughout its operation an aspect that is attributed to its current success. This is achieved by consistently modifying its external and internal settings. In addition, it is worth acknowledging that the company has preserved its people’s focused culture that seeks to meet the needs of all its stakeholders from staffs, customers, community and investors without fail. The company widely acknowledges that financial gain is not a determinant of success if the customers and employees are unhappy (Chien & Gunther, 2008). In that while the customers offers a more valuable and wide market for the company’s produce, the productivity is mainly determined by its employees. Human resource is the most essential asset that the company holds that not only determines its produce but also the quality, innovative level and pace of production. The company is additionally committed to social responsibility as an ethical standard that seeks to guard the environment in which it operates in.
The electronics sector is an adaptable and modest business industry. The competitions within this sector on regular basis try to exceed others through products diversity, innovation, promotional strategies, strategic positioning such as focusing on the changing needs of the consumers and constant evaluation of the existing approaches with respect to the internal and external forces that affects business operation. While the marketing departments for the ruling companies especially Samsung centers their energy on the identification of the changing needs and preference of their customers and developing products and services that meets the anticipation, competition is intensifying (Chopra & Wu, 2016). Samsung as the leader represent one of the companies that has succeeded in marketing roles, products development alongside its operational potential to persuade and maintain valuable relationships with the customers. However, despite the success in order for the company to retain its relevance and profitability in the market, it needs to grow its market and meet the demands of the customers. The market is changing rather rapidly, courtesy of innovation technology and the success of the companies therefore depends on the ability to mitigate and adapt to these changes.
Through the company’s active strategic management and decision making, it has managed to obtain a relevant position in the market at ease. It is without a doubt that this strength is linked to the ability to understand the needs of the customers and respond without fail. Also, to its strategic focus on developing innovative and diverse products that position it well to overcome competition, its marketing approaches have been effective. The company adheres to the provision of valuable products that satisfies the innovative needs, high quality, superior designs, differentiated and variety to suit the socio-economic needs of its diverse market (Chopra & Wu, 2016). For the company to achieve a sustainable advantage in the business, it must adopt strategic approaches that seek to guard it’s against all sorts of threats. The need to expand continuously throughout the expansive industry cannot be ignored. In that, as competition is rising exploring some of the large markets that are not fully exploited is beneficial in expanding its market share, increasing sales and enhancing its global positioning. Without a doubt, Samsung has a stable economic status based on its competitive advantage, but this can only last if specific measures are adopted for the preservation.
External Assessment (EFE): Opportunities and Threats
EFE functions as an external audit tool for the company since the intention are to create a set of leading factors to establish the chances to benefit while identifying threats that should be mitigated for effectiveness to be achieved. With regard to PESTEL analysis tool in the assessment, the critical success and competitive factors can be evaluated using the EFE matrix. This is accomplished through classification, rating and weighing the measure of each. The Ratings range from unit 1 up to 4 which shows the low to excellent response.
The EFE table illustrates that Samsung has acquired a rating of 3.5from the highest score of 4. This therefore illustrates that the company’s external score is average and this implies that the company has done substantially well in exploiting the emerging opportunities while lowering the threats based on some measures. First, the company has gradually increased its productivity to meet the rising demand of electronic products across the globe. Also, the company launched several experience stores four years ago in some of the leading markets such as South Korea, UK, and the US with its focus on increasing sales of mobile devices such as smartphones, tablets, and appliances (Telegraph, 2014). The aim of the move is to capitalize on the instinct buying trend by mobile phone buyers. Also the introduction of innovative products such as Galaxy smartphones to exploit the growing interests by consumers in purchasing technological practicality items. The company also initiated its partnership with some of the established entities in China in the manufacturing of curved products screens particularly for television so that it can adequately manage the rising threat by LG and other distinct competitors who are entering into the electronics industry (Bloomberg, 2017). Technology in the company is fully exploited in the marketing functions and speed tracking of supplies from all over the world in the bid to ensure prompt delivery of materials. This supports its objective of fast and quantity production while adhering to the quality aspect. The payable period of supplies has decreased from 45 up to about 11 in a span of three years from 2013 up to 2016.
EFE for Samsung Electronics
|
External factors |
Weight |
Rating |
Score |
|
Opportunities |
|
|
|
|
1. Increased demand for electronics and computing items with 2 percent in 2016 2. Technology need by consumers 3. Impulse purchases of smartphones 4. Increased buying ability among consumers in the developed countries 5. Increased earning among consumers 6. Increased preference for eco-friendly items 7. Regulations for IP consent 8. Emerging markets |
0.20
0.15
0.20
0.05
0.05
0.05
0.10
0.10 |
3
4
4
3
2
1
1
1 |
0.6
0.6
0.8
0.15
0.10
0.05
0.10
0.10
|
|
Threats |
|
|
|
|
1. Increased bargaining power 2. Competition from LG in production of OLED 3. Brand value loss due to safety issues of galaxy 7 in 2016 4. Economic slowdown in South Korea and UK due to political instability 5. Reputation destruction due to imitation and patent infringement 6. Environmental regulations 7. Potential increase in taxation 8. Rapid technology advancement |
0.10
0.10
0.05
0.05
0.05
0.10
0.05
0.05 |
4
3
1
2
1
1
2
1 |
0.40
0.30
0.05
0.10
0.05
0.10
0.10
0.05 |
|
Total |
|
|
3.5 |
Samsung’s operations are based on the electronics and computing sector, which is associated with increased growth rated and changes that are mainly driven by the technology advancement rate and competition. This means that the entities that operate within this setting have to focus more on products development, market research, products diversity and differentiation. While the industrial growth rate is steady, that is further boosted by the global economic expansion of about 2 percent the sector is approaching development, but the instability is still high on the grounds of technological growth such as the rise of LED products.
It is evident that the productivity in the industry increased by about 2 percent in 2016 thus representing approximately 2600 billion dollars with an expected similar rise in 2017 (Samsung, 2017). Samsung is the leader in electronics sales and production with a world market share of about 21 percent, while LG seconds with 11 percent (Oled-info, 2017). The gap between the two competitors is undisputable which shows that Samsung has been effective in exploiting opportunities. The sector is one that is saturated when it comes to electronic home items such as cooker, refrigerator, microwave, and others based on the geographical position and the establishment of firms in the market but the share of each does not exceed 20 percent. Concerning smartphones, Samsung still leads worth 21 percent while Apple follows with 13 percent. However, when it comes to display panels, LG has taken the lead despite the fact that Samsung leads to small sized displays. When it comes to the new technology being OLED display the company drives as well as it owns about 90 percent of the global market share. Competition is rising rather fast from the developed entities given that LG recently initiated it OLED production firm (Oled-info, 2017).
PESTEL Analysis
PESTEL approach is focused on understanding the forces that affect the external competitiveness of the industry.
Political
In close to all the markets where Samsung Company has set its operations, the political setting is favorable to all its focus. However, there are minor but significant political irritants in some foreign markets where the political context is unsteady (Srivastava, 2018). The government plays a critical role by utilizing the legislative authority in attracting or discouraging foreign investments. For instance, if the taxes are set very high, this dieters foreign entities from basing their operations in the country due to the fear of experiencing losses rather than benefits. Political stability is a determining force when Samsung similar to other firms is setting its operation by obtaining favorable taxing or an enabling operation environment (Srivastava, 2018). Samsung has been subjected to pressure by the United States government with the motive of setting a production setting. The chairman of the company was for insinuating arrested due to a corruption claim which illustrates that politics act significantly in driving business. Also, the company has been subjected to political challenges in its origin nation based on the underlying conflict with North Korea. The company has experienced a sales decrease in the region and the threat of an eruption of war that might affect its operations. Also, in most of the African states, the company operates under high political unsteadied. However, despite the instability, the issue is minor since the company is developing a strategic focus to mitigate such threats.
Economic
Contrary to what most individuals believe, electronics goods have a short lifespan due to the current technological advancement that is evolving rapidly. In other words, if the products are not sold within a set period, then the company suffers losses. Also, due to the effort and the level of innovation that is involved the pricing of the products is premium which is focused on enabling a quick breakthrough. The buyers within the developed economies have the power to acquire new products. However, the buying of electronics products particularly in the developing economies is hard. The highest buyer’s populace is made of the low and middle-class people who imply that most of these companies fail to target the segment.
Socio-cultural environment
The general changes in the living styles due to modernization has led to a rise in an instant and unplanned products buying in general which is driven by the need to achieve immediate satisfaction. Also, the popularity of smartphones and the use of internet has developed a segment of buyers who seek for innovative commodities without evaluating the cost. Affordability is an issue but not to those that are triggered by innovation, based on the natural availability of the products the price is accountable as favorable as less effort in commitment to the assessments and search. The company has obtained efficiency based on its strategy of adopting local development. In that, the company customizes the products to fit the preferences of the consumers’ in the market. The main point is that the company operates within a market that is highly driven by lifestyle and personal preferences of the buyers. Since socio-cultural influence differs from a country to the next, the company had to reorganize itself to fit within the demands.
Technological
The dynamic abilities of a company are dependent on market complexity which forces the company to enhance its core abilities with time (Capgemini, 2009). The electronics industry is dynamic as it is mainly influenced by technological innovation particularly in the development of smartphones and televisions. This implies that the involved companies have to invest in growth, research, and production technology substantially. Samsung can be accounted to be among the leading innovative firms globally. The company has the advantage of the use of technological innovation for sustainable competitive positioning (Amui et al., 2017). The company relies on a technological change in the production of unique products in fighting competitive rivalry in the market. This has become one of its obsession with other companies are following somewhat closely. However, this has resulted in imitation of other companies such as Apple.
Environmental
Most governments are asserting the essence of guarding the environment. This has originated from the rising concerns regarding the climatic change. Companies are therefore being forced to adhere to the measures in their operations. In this context, Samsung has adopted the eco-friendly move that involves the use of environmentally friendly materials and approaches in obtaining a competitive advantage.
Legal
Since the electronic sector depends on technology and innovation, intellectual property remains to be a leading issue since the firms have to guard their ideas from duplication. In the recent, the company has been accused of imitating Apple. Also, the safety subject t is essential given that it can affect the firm’s image thus affecting sales. Based on Bloomberg (2016) Samsung was forced to pay a 12 million dollars fine to Huawei Company for a patent violation.
Internal Assessment (IFE): Strengths and Weaknesses
EFE is a form of an internal audit that seeks to establish the factors that the company can exploit and the weaknesses to be corrected. The table below illustrates that Samsung scored 2.39 which is slightly within the average level. This shows that the company has many strengths which have not been used maximally to overcome the weaknesses. The result is caused by an increase in the initiation of new products thus diversifying the focus of the company which failed to adhere fully to the value of quality. Also, the company was unable to maintain the innovation pace since galaxy seven was introduced in 2015 and the next phone was launched two years later (Samsung, 2017). This might have affected its market.
|
External factors |
Weight |
Rating |
Score |
|
Strengths |
|
|
|
|
1. Superior brand reputation: with a ranking of 7 2. World leader in electronics production and sales 3. High level R&D spending about 7 percent of all its expenses 4. Increased revenue through market expansion and products diversification. The company’s revenue has increased with 37 percent from 2013 up to 2016 5. Quality products 6. Unique and innovative designs 7. Excellent distribution and reliable suppliers 8. Brand reputation and customer’s loyalty |
0.10
0.10
0.10
0.10
0.05
0.05
0.02
0.02 |
3
3
4
4
3
2
2
1 |
0.30
0.30
0.40
0.40
0.15
0.10
0.10
0.02 |
|
Weaknesses 1. Revenue reduction with about 28 percent 2. Safety problems 3. Centralized sales 4. Inventory turnover reduction 5. Operating profit reduction 6. Political instability 7. Technological change 8. Demand changes |
0.10
0.10
0.05
0.05
0.05
0.03
0.03
0.03 |
2
1
1
1
2
2
1
1 |
0.2
0.10
0.05
0.05
0.10
0.06
0.03
0.03 |
|
|
|
|
|
|
Total |
|
|
2.39 |
In an industry that is characterized by rapid external changes, Strategic Resources and Capabilities (VRINE) view that is based on the company’s core capabilities and competencies ranging from financial to human resource offers a more steady approach of creating a competent internal strategy (Holsapple & Oh, 2018). Despite the fact that the electronic sector is not changing speedily the influence of technology has to be acknowledged, and therefore VRINE can be utilized in the identification of the experimental features that are valuable, competence, human resource, high financial gains and inability to imitate them. It is only the kind of resources that offer competency in their VRINE features that have the potential to equip the corporation with a competitive advantage.
Samsung Company’s competitive advantage has several sources. The outcome of the VRINE analysis illustrates the following as the company’s competitive source. To begin with, Samsung has invested adequately in technology research and products development with more than thirty R&D institutes that are located in different nations. Also, to its sizeable human resource about innovation is a benefit that it reaps (Gogoi, 2017). In that, the company has employed its workers based on the qualification. This plays a part in the classification of roles such as engaging, innovation, designing, marketing, manufacturing, sales, research and more. The development, innovation and research staffs comprise 16 percent of all its crews. This has enabled the company to distribute its resources to the roles in respective strategically. More so, the brand value and reputation of the company is desirable. The brand is valued at 51 million dollars which places it at the 7th position of the branding rank as per 2016 (Teece, 2017).
The company is well established in the global market given that it has been in operation for a long period. It means that through its successes and failures it clearly understands the trends in the market unlike the emerging entities. Also the company has a significant revenue and high sales rate. This means that, it has established such a stable market. Due to its financial stability it can easily afford to expand in different markets within the shortest time frame. More so, this plays part in finding its operations such as research and employing the most qualified personnel leading to products development (Paek & Lee, 2017). As a large company it boats of a large products supply at affordable prices since the suppliers cannot to lose it. Its reliable networks play part in ensuring that goods are delivered with adherence quality and time thereby supporting the efficiency and high productivity goal.
Strategic Feasibility
SWOT Matrix
|
Strengths |
Weaknesses |
|
1. Products variety 2. Brand image 3. Large market share 4. Innovation 5. Low cost manufacturing 6. Research and Development |
1. Patent issues 2. Premium pricing 3. Not focused on niche |
|
Opportunities |
Threats |
|
1. Increased demand 2. High disposable money 3. Innovative products demand |
1. Increased competition 2. Political instability 3. Competitive brand
|
Alternative Strategies
- Niche focusing to capture the wider market
In that the company lacks a niche focus and this might be affecting its ability to expand and get into different markets. Focusing on a specific segment can be useful in capturing the widest share since the approach will differentiate the company from all the competitors.
- Pricing reduction
Samsung is one of the companies with premium prices. Such approaches discourages low income individuals from purchasing its products. It is worth noting that middle and low class people represent the largest populace.
- Create retail chain stores and increase R&D centers
This will create a more engaging environment amid the consumers and the company. In addition, the company can get to understand the preferences and needs of its consumers easily.
SPACE Matrix
|
Internal Strategy |
External Strategy |
|
Financial strength from (+1 up to + 6) |
Environmental stability from (-6 up to -1) |
|
Gains per share + 3 |
Products price -2 |
|
Revenue Increase + 5 |
Competition level -4 |
|
Leverage + 4 |
Global economic -4 |
|
Liquidity + 3 |
Technology change - 2 |
|
|
Demand Elasticity -2 |
|
Average 3.75 |
Average -2.8 |
|
Competitive advantage from (-6 up to -1) |
Industry stability from (+1 up to +6) |
|
Product quality -1 |
Growth opportunities +5 |
|
Market share -1 |
Entry barriers +6 |
|
Brand reputation -1 |
Financial sources + 5 |
|
Customer loyalty -2 |
|
|
Average -1 |
Average 5.3 |
Alternative Strategies
- Establish additional R&D entities across the globe
- Introduce loyalty programs and retailing sores
- Market expansion
BCG
|
Question Marks |
Stars |
|
Increased products demand with minimal market growth: Samsung should focus on exploiting opportunities through market expansion. |
High market share with increased products demand. Samsung is currently doing fine in exploiting opportunities in the market. |
|
Dogs |
Cash cows |
|
Low market expansion and low market growth. Weak in expanding to the emerging markets leads to no substantial increase in revenue generation. |
High share in the market but low growth due to the domination of competitors. There are numerous opportunities but despite the minimal growth Samsung is performing well. |
Alternative Strategies
- Establish additional R&D entities across the globe
- Introduce loyalty programs and retailing stores
- Market expansion
- Product development
- Pricing adjustment to attract more customers
Grand Matrix
Rapid growth
Weak competition characteristics: Strong competitive characteristics:
Market expansion Market Expansion
Product Development Product Development
Liquidation Market Development
Market Development Horizontal Integration
Weak competitive status Strong competitive status
Liquidation Joint Ventures
Market development Reduced diversification
Product development competitive advantage
Slow growth
Alternative strategies
- Pricing adjustment
- Product development
- Establish additional R&D entities across the globe
- Introduce loyalty programs and retailing sores
- Market expansion
- Strategic Choice (QSPM)
From the above matching tools, the four strategies that appeared dominant are adding research and development centers, market development, creating loyalty and retailing stores and pricing reduction. Low cost and differentiation represent the primary competitive advantage drivers for Samsung. The company has achieved success in diverse and differentiated businesses which shows the strategic strength of the company. Also, the investment in development within the large scale offers the firm the advantage of adequately controlling the aspect of superiority and lowering expenses. Samsung prices its products highly based on the fact that the used materials and approaches are innovative that seek to satisfy the innovational desire. Thus has led to the lack of a market niche since those that understand about innovative quality only acquires its products. A market Niche would be essential in expanding the company’s market and popularity across individuals of all socio-economic classes (Amui et al., 2017). On the other hand, even though consumers are becoming highly sensitive to quality, innovation and satisfaction affordability is also a determinant of their buying wellness.
Creating loyalty and retailing stores is a strategy for ensuring that the company gets closer to its consumers to understand their needs. In turn, this will be useful in the creation of a substantial market share and enhance all its current efforts that seek to extend its interactions with the customers for all its electronic products. The shopping experience will be improved thus maintaining the loyalty aspect. Also, retailers are always closer to the buyers, and the sales will, therefore, be increased in the less exploited markets. The establishment of more R&D centers is aimed at supporting the fast production of innovative products. To keep up with competition the company must focus on short production to retain its relevance in the market. Market expansion and products development are one of the strategic methods that most firms are using to differentiate from the competitors. This means getting into the emerging markets and developing exceptional and yet satisfying products.
Final Strategic Recommendation
Retail chain and loyalty stores acquisition and the setting of more R&D centers across the globe are strategic options for Samsung based on its current performance. In that even though the company created it experience stores, it was driven by the need to defend itself against the competition. To engage its customers more, the strategic approach is to get closer to retails across the market (Holsapple & Oh, 2018). Customers are more triggered by brands that are not only superior but those that seek to meet their needs. Since the company has a people-centered culture, this move would benefit from the expansion of market share and sales increase. On the other hand, since technology is evolving very fast and the consumers’ needs are changing rapidly, research and development institutions can help in understanding the customers need and keep up with the competition.
VII. Implementation and Evaluation
For the successful implementation of the proposed strategies, the move has to be measurable, practical and beneficial. In that, it is not about implementing the plan, but the benefits have to be visible and measurable. Since the objective of the company is to become the leader in innovation, then the solutions must have the ability to achieve these goals. This, therefore, implies that the company must fast evaluate the potential and the benefits of the strategies in general. Also, the viability of the market must be assessed. Based on evaluation it is evident that with the unsteady market, there is a need to invest in retail, loyalty stores, and development initiatives. The company has to remain close to all its customers to understand their needs and adapt to changes in the global market.
References
Amui, L. B. L., Jabbour, C. J. C., de Sousa Jabbour, A. B. L., & Kannan, D. (2017). Sustainability as a dynamic organizational capability: a systematic review and a future agenda toward a sustainable transition. Journal of Cleaner Production, 142, 308-322.
Bloomberg. (2016). Company Overview of Samsung Display Co., Ltd. Retrieved from: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=22399354
Capgemini. (2009).The Changing Dynamics of the Global High Tech Industry. Retrieved from: https://www.nl.capgemini.com/resource-file-access/resource/pdf/The_Changing_Dynamics_of_the_Global_High_Tech_Industry_____An_Analysis_of_Key_Segments_and_Trends.pdf
Chien, C., Gunther, H. (2008). OR in the electronics industry. OR Spectrum 30, (3), pp. 377-379.
Chopra, S., Wu, P. (2016). Eco-activities and operating performance in the computer and electronics industry. European Journal of Operational Research, 248, (3), pp. 971-981.
David, F. D. (2011) Strategic Management – concept and cases. 13th Ed. New Jersey: Pearson
Gogoi, B. J. (2017). Effect of Store Design on Perceived Crowding and Impulse Buying Behavior. International Review of Management and Marketing, 7(2), 180-186.
Holsapple, C. W., & Oh, J. Y. (2018). Reactive and Proactive Dynamic Capabilities. Global Business Expansion: Concepts, Methodologies, Tools, and Applications: Concepts, Methodologies, Tools, and Applications, 366.
Paek, B., & Lee, H. (2017). Strategic entrepreneurship and competitive advantage of established firms: evidence from the digital TV industry. International Entrepreneurship and Management Journal, 1-43.
Samsung. (2017). Samsung Electronics Announces Fourth Quarter and FY 2016 Results. Retrieved From: https://news.samsung.com/global/samsung-electronics-announces-fourth-quarter-and-fy-2016-results
Samsung. (2017).Research and Development. Retrieved from: http://www.samsung.com/us/aboutsamsung/samsung_electronics/business_area/rd_page/
Srivastava, D. K. (2018). Taxation of E-Commerce: Problems and Possible Solutions. In Contemporary Issues in International Law (pp. 447-457). Springer, Singapore.
Teece, D. J. (2017). Dynamic capabilities and the multinational enterprise. In Globalization (pp. 105-129). Springer, Berlin, Heidelberg.
Telegraph. (2014). Samsung opens first ‘Experience Stores’ in the UK. Retrieved from: http://www.telegraph.co.uk/technology/samsung/10755868/Samsung-opens-first-Experience-Stores-in-the-UK.html
