Samsung Electronics
The name of the company is Samsung, which is a multinational conglomerate company. The link to the original website is www.samsung.com.
BACKGROUNG and HISTORY
Samsung is headquartered in Samsung Town, Seoul. The South Korean multinational conglomerate has numerous subsidiaries and affiliation with several businesses. The largest chaebol of South Korea was founded in 1938 by Lee Byung-chul. The business started as a trading company, but the group expanded itself by diversifying into areas such as textiles, insurance, retail, securities, and food processing. In the late 1960s, the company stepped in the electronic industry. Samsung was separated into four groups in 1987 following the death of its owner. One of the groups named Samsung Group globalized its activities and focused on electronics. The main focus of the group developed in mobile phones and semiconductors. These products are also considered as an important source of income for the company.
The current CEO of Samsung Electronics Ltd. is Jong-Kyun Shin. It is a public limited company and listed on London Stock Exchange (LSE) as SMSN. Regarding revenues and profit, the year 2015 was not beneficial as the revenues of the company decreased to $171.417 billion. Although the company made a profit of $16.283 billion, it was comparatively less than the previous year. However, the total assets of the company increased to $206.895 billion in the previous financial year. The total equity of the company has also increased to $143.599 billion. The company has around 307,000 employees in more than 80 countries who are a part of assembly plants and sales network. One of the biggest events that took place in the recent past is that it replaced its main rival from the top position. In 2011, Samsung became the world’s largest manufacturer of mobile phones. It replaced Apple Inc. (biggest competitor) and became world’s largest technology company .
The article Samsung Makes Aggressive Play for Emerging markets by Jonathan Cheng appeared in the wall street journal on April 6, 2016. This article addresses the steps that Samsung has made to stay ahead of its competitors in the global market, and especially within the Asian continent from where Samsung products are manufactured. The electronic company is winning back customers by cutting down most of its products prices. The South Korea's tech giant has focused more on cheaper gadgets to reach a wider market. The company has set out to compete favorably with Micromax Informatics Ltd, an Indian company that offers cheap electronics, and with Xiaomi Corp in China. Samsung, according to Cheng has been adding more features to its low-end phones to attract a larger customer base. The introduction of the Galaxy 7 series and the Galaxy S series together with the implementation of data saving features has seen to it that the company rakes billions of profits through sales ("Samsung Makes Aggressive Play for Emerging Markets," 2016). Analysts, however, dispute the lowering of prices citing it a short –term solution to the company's selling strategy. Moreover, the company has sought to lower the production costs by cutting down on materials, and reducing the numbers of smartphones produced, a move that allows for the low electronic costs. These strategies have enabled the Samsung Company to gain its lost market share in the Asian market.
The article is a revelation of the current state of affairs within the Samsung Company. This article portrays several concepts in business as addressed below.
Competitive intelligence
This refers to the process of closely monitoring an organization's market through gathering and analyzing information about customers, competitors, and products in order to make strategic decisions for the organization. As mentioned in the article, Samsung has come up with strategies to change the manner in which they run their business based on the information they have gathered regarding the prices offered by their competitors. The lower prices by Micromax Informatics has resulted in Samsung lowering its prices as well. Moreover, the company has also analyzed its previous performances and noted a decline in sales. Concerning the decline, the decision to lower prices and increase features is strategic and aims at drawing in more customers.
Demographics
Demographics is concerned with the study of a population based on factors such as economic status, sex, age, income level and the level of education. The Samsung Company targets low-income earners as well as high-income earners. It specializes on a variety of phones, which range in prices to match their consumer demands. The current cut down in prices is specifically aimed at reaching out to its low-income earners within the Asian region.
PORTER’S FIVE FORCES MODEL
Michael Porter established five forces to analyze the intensity of competition within the industry. These forces identify the competitive forces within each industry with an aim to determine the strengths and weaknesses of the industry. With the help of this framework, an organization can determine the impact of competitors through different aspects . On analyzing Porter’s five forces graphically, it can be observed that from horizontal competition it has three forces and from vertical competition, it has two forces. The three forces of vertical competition are the threat of substitute, threat of rivalry in the industry, and the threat of new entrants. The two forces of vertical competition are bargaining power of suppliers and bargaining power of customers. These five forces of Porter with respect to Samsung Electronics is mentioned in details.
Competition in the industry
This entails the number of competitors that Samsung has and the threats that such competitors pose to the company. The power of Samsung depends largely on the number of its competitors and the products they offer (50MINUTES.COM. Minutes, Cadiat, & Probert, 2015). The Xiaomi Corp of China offers the most competition to Samsung since it produces similar products to Samsung and sells them at a lower price. India's Micromax Informatics also offers a similar competition to Samsung.
Potential of new entrants into the industry
Samsung is threatened by the entry of new companies into the industry. The ease at which new companies spring up is made simpler since they ape what Samsung has already manufactured, only offering it at a lower price. Samsung has opted for options that make its products marketable in the case of this factor.
Threat of substitute products
The phone industry, and particularly the Samsung industry has been faced with a lot of incidences of substitute products. Here, competitors make products, which are look-alikes of the original Samsung products and sell them at a lower price (Bolstorff & Rosenbaum, 2007). The article addresses the substituting case in the Xiamo Corp in China, a company that specializes in substituting phone designs in the market.
Power of suppliers
This refers to the power that suppliers have which enables them to control the prices of goods and services. The Samsung Company has more power over its suppliers, and this has helped in arriving at a consensus with them, hence allowing it to obtain manufacturing materials at a lower price.
Power of customers
The ability of customers to influence prices by having a higher bargaining power and reducing prices to match their expectations. Samsung's customers have apparently managed to bring down prices as seen from the changes in pricing that the company has recently indulged in.
STRATEGY USED
The strategy used by the company is to lower its production cost by cutting down on material and reducing the production of some smartphones. It is believed that the strategy used by the company will reduce the production cost of the company and will help in attracting more customers towards them. From the information in the article, the impact of the implementation of the strategies is not discussed. Therefore, it is difficult to comment on the success or failure of the strategy undertaken by the company. However, the analysts criticized the strategy of the company and claimed that it can only be beneficial in the short run. Not all the companies can use this strategy because lowering the cost without the implementation of any specific strategy will not be beneficial for any organization in the long run. The strategy will be affected by industry life cycle because of the different phases of it. Once the industry moves to another phase every company operating in that industry must change its strategies to ensure their survival in that industry. The strategy of the company is the way the company pursues competitive advantage which is a concept similar to Porter’s generic strategies.
SPECIFIC STRATEGIES
Six specific strategies are discussed concerning Samsung Electronics, and the way it can be helpful for the company is also mentioned.
Value Chain Analysis
Value Chain Analysis is a business tool, which aims at creating the best value for customers. The value chain analysis helps in taking raw material and adding value to it so that the end result is worth of something for the people. Samsung can adopt the strategy of the value chain and add more value to the products. The products with added value which will attract the customers and they will get value for their money. From the value chain analysis it is known that the company must provide different categories of phones for different classes and try to provide maximum features in it so that every customer can purchase the products of the company. From the very beginning, it is the aim of the company to reduce the cost of its products and provide best options to the customers so that they can benefit from it. On analyzing the value chain tools for Samsung Electronics, it is observed that the company has managed to arrive at a low cost which was the aim of the company. The reduction in the cost is effective for customers and beneficial for the company as it can help in gaining more market share, which is effective for its customers. It adds new features to its phone models making them innovative and also provides a value for money to its customers .
Resource Based View
The valuable tangible or intangible resources that are available for the firm’s option can lead to competitive advantage for the firm. With the help of this tool, the short-run competitive advantage of the firm can be transformed into a sustainable competitive advantage. Some of the common resources that are available at the firm’s disposal are employees, financial resources, technological resources, etc. To implement this strategy, the firm must identify its potential key resources. The strategy also helps in evaluating the resources whether they are of any value or not. The rarity of the resources, imitability, and non-sustainability of the resources are also evaluated with the help of this strategy. The benefit of doing so is that it provides a clear view of the firm’s resources and the extent to which they can be utilized and turn out to be beneficial for the company. The strategy also develops a care plan for the resources to protect them so that they utilization can lead to maximum profit. The most potential resource available at the option of Samsung Electronics is that of technological resources. According to the article, it is noticed that Samsung Electronics has, utilized its technological resources to provide its customers with updated versions of its products to satisfy the constant demand for new products in the market, which indeed is helpful for the company.
Industry Life Cycle Strategy
The concept of Industry life cycle explains the various stages through which an industry goes. There are a total of five stages in the industry life cycle that are early stage phase, innovative phase, cost or shakeout phase, maturity phase, and decline phase. At the early stage, the alternative products are designed and positioned effectively to set boundaries of the industry. Once after the completion of this phase, the innovation phase starts where innovative products are introduced in the market. The innovation phase is the best as it gives rise to a healthy competition among the organizations that are a part of the industry. The next stage is shakeout or cost phase where the organizations in the industry try to be cost effective to capture a large market share. At this stage some of the firms’ shakeout and exit the industry as well. After this, the stage of maturity begins where the primary objective of the organizations switch from growth to market share and cash flow. The final stage of the industry life cycle is that of decline. It is a difficult stage where the revenues of the firms working in the industry start to decline. It gets difficult for the organizations to be a part of the industry and at certain situations the entire industry is impacted, and a big downfall is observed. A new industry can also replace the industry. From the article, it is observed that the Samsung Electronics is currently at the stage of innovation and cost phase. The company keeps on introducing new and innovative products for its customers while it also focuses on the cost to be economical for the customers. Samsung Electronics is bringing innovation in its products which have helped the company in increasing its market share .
Balanced Scorecard
The balanced scorecard is a strategic planning and management system which helps the organization’s to align its business activities to the vision and main objectives of the company. With the help of balanced scorecard, the organizations can improve their internal and external business activities. It also helps in monitoring the performance of the organization against the strategic goals set out by the company . The balanced scorecard also helps in analyzing the mix of financial and non-financial data items that are helpful in analyzing the resources of the firm. The main function of this strategy is to ensure that the organization is headed in the right direction. If the organizations are not performing according to the strategies of the firm, therefore, the scorecard helps in guiding the organization to achieve its goals. The strategy is widely implemented in businesses as it also helps in setting out goals and develops strategies to achieve the goals of the company. While applying the balanced scorecard strategy to the article of Samsung Electronics, it can be concluded that the company has set out its goals and developed the strategies. The scorecard identifies that the strategies of the company are aligned with the vision of the company which is to avail its products to a wider customer base .
Vertical Integration
The vertical integration is the strategy in which the same company solely owns the supply chain of the products and services of a company. It means that the activities of the supply chain are not outsourced. Vertical integration is mostly used when the business of the company is diversified. The companies with diversified products are focused towards expansion. The expansion is at a different point on the same production line. In vertical integration, the suppliers and distributors of the company are owned by themselves which helps the company to reduce its cost effectively. It also helps in increasing the efficiency of the organization because all the aspects that are required are linked properly to each other. The main impact of this strategy is for the transportation expenses of the company as it reduces them to a great extent. Another benefit of this strategy is that it reduces the turnaround time for the company. Samsung Electronic must use vertical integration strategy to reduce the cost of its products. From the analysis of the article, the main challenge faced by the firm was to reduce the cost to be competitive. If Samsung Electronics applies the vertical integration strategy, then it will reduce the cost to a great extent and offer low prices as compared to its competitors in the Asian market .
Leadership
The role of leadership is very crucial to the success of any business. There are different leadership models that have been described in the past, and all of them have a different impact on the performance of the employees and organization. The leadership of a company can help in establishing strategies and help employees to work in such a manner that the organization leads to its goals through the set-out strategies. A good leader has the capability to set goals for different departments and guide them to reach the goals. If the leadership at an organization is good, then it is not difficult for that organization to reach its goals. In the case of Samsung Electronics, the leaders at the firm are effective and help the employees to reach the desired goals. The effective leadership has led the company to meet its objectives. From the article, it is observed that the company does not require any change in the leadership style as it is already performance of the company shows the commitment and determination of the employees to reach the desired goals of the company .
RECOMMENDATION
It is recommended that Samsung Electronics should adopt the certain strategies like vertical integration, value chain, and resource-based view. These strategies are recommended because all of them are very cost effective. The strategies provide a sustainable competitive advantage to the firms and allows them to improve their efficiency. The strategies will help Samsung Electronics in achieving its goals and will also align the strategies to the vision of the company. The current challenge of cost reduction will be solved to a greater extent by the implementation of such strategies. These strategies will not only overcome the challenges faced by Samsung Electronics in the short run but will be helpful for the long run as well.
OPINION
In my opinion, the case study was helpful in analyzing the different challenges that are faced by large organizations. It also gives an idea about the strategies that are used by the company and inform about the effectiveness of such strategies. It helps in understanding a certain situation, implementation of strategy, and the impact of such strategies on the firm.
References
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