Strategic analysis of Samsung Electronics

Introduction

The report has been designed with a purpose to conduct an environmental analysis of Samsung Electronics and in order to develop a strategic growth management plan on the basis of identified internal and external analytical tools. The aim of this assignment will formulate a strategic management in order to improve Samsung's performance and competitiveness in its industry. In the starting section of the assignment Pestle analysis and Swot analysis will be conducted for external factors and internal factors. Porter's five forces model will be used in order to find the market position of Samsung Electronics.

In the later section of the report, the effective strategic direction will be recommended in order to achieve the goals and objectives of Samsung Electronics.

About Company

Samsung Electronics Co. Ltd. is a world’s second largest multinational company in a telecommunication industry which has been dealing with Cell phones, Tables, Tv’s Cameras, Home appliances, laptops, etc. Samsung’s headquarters has been located in Suwon in South Korea which is known to be as Samsung Digital City. It is the world's largest smartphone vendor as well as the second largest semiconductor chip manufacturer. 

External Factors Affecting Samsung

Macro environment has been consistent of all those external factors which are not in control of the Samsung but influences the strategic management decisions of the Samsung. Pestle analysis is a strategic analysis tool which has been used in order to analyse the impact of external factors affecting Samsung and its business strategies (Medina and Belanger, 2017).

Political Environment

It has been an important factor of the macro environment as it is directly related to the stability of the organization. The company has been facing tough completion in the market from Apple and Nokia. During the analysis, it has been found that Samsung is involved in a number of political scandals with the government of different countries. For example, the Uk government has been leaving no stone upside down in order to create challenges for Samsung.

Economic Environment

The company has been extended its business in almost 58 countries across the globe. Samsung has been making huge expenditures in building its infrastructure in these countries. Through this investment, company has been creating job opportunities in that countryand directly contributing towards countries economy. In this way company has been started paying  Different factors that have been affecting Samsung strategies and revenue while operating in different countries are the level of taxation, the rate of interact and cost of labour etc. Samsung has almost been making its heavy investment in infrastructure. This means that it has been creating employment opportunities in the countries it's being operated and directly affecting the economy of the country.

Social Environment

Samsung has been constantly engaged in launching new and innovative Smartphones in the market. So consumer all over the world has a perception about the company that it has been producing the best smartphones with the latest technology. (Indartono & Wibowo  ., 2017).

Technological Environment

Samsung has been considered as the most innovative company across the world. Organization design of the country has been playing an important role in making the company techno and innovative friendly. The management at Samsung has been supporting new innovative ideas of the employees to be implemented effectively

Legal Environment

It is already mentioned above that Samsung has been involved in various scandals. Hence it has been decided by the government of South Africa that consumer protection act 2008 should d be implemented. The negative effect of this action that has been found is that Samsung will dump its low-quality products in third world countries in order to maximize their profit. So the government should behave smartly by developing such laws in order to avoid such situations.

Ecological Environment

Samsung has been operating its take-back system by collecting dead mobiles through free of charge. Collected Dead phones are sorted and transported to recycling facilities. The company has been trying to produce environmentally friendly products in order to minimize the impact on the environment (Nurmi & Niemelä., 2018).

Swot Analysis

SWOT analysis has been focusing on external and internal factors that are affecting the Samsung Electronics. This analysis has been carried out with a motive to identify the environment in which the company is operating. External factors are opportunities and threats and internal factors are strength and weaknesses. This section of the report will deal with just external factors of SWOT analysis that is Opportunities and threats.

Opportunities

During the analysis, it has been found that market has been growing for computer especially in countries like India and Africa and in India where the consumer is still unaware of the latest technology that is being used in Tabs, computers, mobile devices etc. The population of the world has been growing at a fast pace. The mobile phone sales have also been increasing at a higher rate due to decreased call rates. These all factors can contribute towards increasing the profitability of the organization (Bohari et al, 2017).

Threats

Threats are defined as those situations which have been raised from the external environment and affecting the organization's business. Today market has got lots of competitor and Apple is one of them. It has a monopoly the market of smartphones and tablets like in America but till date, Samsung has been got failed to give tough competition to Apple in case of reliability. Hence there is a need to produce a low-cost product in order to compete with Chinese companies. Samsung has been having a large number of product ranges. Failure of one can affect the image of the brand.

Internal Factors affecting Samsung

This section of the report has been dealing with the internal factors that have attributed to the success of Samsung Electronics.

Strength

Samsung has the widest range of product portfolio which is consist of smartphones, tablets, home appliances, cameras etc. The positive aspect of a wide range of product portfolio is that the company has been holding a good market share in most of the categories. With its regular innovative ideas, it has got hold over the Nokia's Market share. Innovation has been playing an instrumental role as an internal strength of the Samsung electronics. Due to is innovative nature company has been launching continuously user-friendly and eco-friendly models. Along with this company has been making high expenditures on its research and development department for innovative products. That is why the organization has won various awards and got worldwide recognition for its work in the field of eco-innovation. This has enhanced the company's reputation and increased brand value in the market (Chatzoglou et al.,2018).

This research and development capabilities of the organization have made it the world's successful electronic manufacturer. It has been found during the analysis that manufacturing and marketing capabilities of the organization are much strong. The company has earned the name for its design and latest technology that is being used in its product. It has been introducing new features like dual cameras in phones and 17 TFT-LCD-TV monitors are the example of same. It has been sharing a good relationship with its retailers locating in the USA and Europe. Many of the products of the company is being sold out through these retailers only.

Weaknesses

While talking about the weakness of the organization then today market has been giving a tough competition to the Samsung electronics. The company has been leaving no stones unturned in making android more efficient but it cannot beat Apple's operating system. Other manufacturers have been designing their own operating system but Samsung has not yet. All the software have not been provided by Samsung whereas it is dependent on the third party. A wide variety of product -portfolio has also become a weakness of the organization because concentrated attention is not being given to any of them. Recently series of the model launched by the organization has led to cannibalization which has affected the sales of the organization. Other weakness of the organization is that it has been highly dependent on consumer electronic sales worth limited potential growth. Companies that have been offering their products online are available with better specifications but at low rates. The company has been always offering low margin products to their retailer but now it should be changed ((Kaur &  Malhotr, 2018).

VRIO Analysis and Samsung Electronics

VRIO analysis has been a strategic tool that has been used to evaluate the sustainability of Samsung Electronics. It has been considered as a complement to Pestel analysis through which internal resources and capabilities of the Samsung can be analysed in order to identify that whether Samsung can be a source of sustained competitive advantage. VRIO framework consists of a set of four question that is Valuable, Rare, Imitate and Organization

Valuable

Samsung has been known for its latest design and the technology being used in its electronic product. Organization’s huge investment in R&D sector has earned the name for its innovative ideas. The company has a wide range of product portfolio with that it can penetrate into various sectors of the market. Samsung has been always developed new engineering process in order to improve its older one which has increased its efficiencies. So it can be said that Samsung has been positioned itself brand in such a way that it has attained its maximum value in the market.

 Rare

Cheaper products with features have been available in the market but Samsung has been launching such products in the market with the latest technology are found to be rare For example, World’s smallest music player has been designed by Samsung Electronics. Dual front cameras on Smartphone have been introduced by Samsung only. During the analysis, it has been found that Samsung has the capability and resources for production and new product development which has been providing sustainable competitive advantage (Lin et al., 2012). 

Imitation

Samsung has registered lots of patent of their innovative products but still, the organization has been found guilty for violating the rights of apple inc. Secondly, until the date the organization has not created any milestone in the field of innovation and technology. The organization has not customized its software and till date, it has been dependent on the market for it.

Organization

Samsung has been growing dramatically as a leader of the smartphone industry. It has been found that Samsung has managed its supply chain management that the company is being operated as a monophony in which terms can be dictated in order to have a check on control.

VRIO Analysis

Resource/ Capability

Does it have Value?

Is it

Rare?

Is it

Inimitable?

Is the company

Organized to exploit this resource/capability

SCA, TCA, tCA, CP

The Brand

Yes

Yes

Yes

Yes

Sustained Comp. Advantage 

Supply Chain Management

Yes

Yes

Yes

Yes

Sustained Comp. Advantage

Product Mix & Customization

Yes

Yes

No

Yes

Temporary Comp. Advantage

Fabrication capacity

Yes

Yes

No

Yes

Temporary Comp. Advantage

Porter's Five Forces And Samsung Electronics

This section of the assignment has been planned in order to check out the market position of the Samsung Electronics through Porter's Five Forces. This analytical framework has been developed by Micheal Porter with a motive to shape the extent of competition in the market. Porter's five forces for Samsung have been listed below.

Bargaining Power of suppliers

Suppliers are the one from which every manufacturer or companies have been procuring their raw material. They and their bargaining power have been considered as an important force that can affect the position of the company in the market. These suppliers are smaller units which have been scattered all over the world. So Samsung can switch to any of the suppliers in case of any conflict so the bargaining power of suppliers is low in the case of Samsung Electronics. Another reason for low power is that Samsung has been a major source of income for these suppliers so they cannot change their brand. Samsung has made rules for their supplier that they can conduct announce and unannounced audits at any time in order to have control of quality and check on the system. Such factors have lowered the bargaining power of suppliers. Some of the suppliers become able to do so that is just because of either of their size or financial clout (Cho et al., 2018).

Bargaining Power of Customers

Bargaining power of customers has got increased with the time due to the quality of information available with the customers. In the case of Samsung it is medium because customers can easily change their brand as the switching cost is very low. But this is also true that customer just cannot dump its handset as it is a high-value item. So in order to maintain it, the customer has to approach the company for its service and spare parts. It can be concluded from this that customer and the company are in need of each other. They are totally dependent on each other (Wee, 2017).

The threat of product or substitute

It is easy to substitute Samsung smartphones with normal mobile phones without causing additional cost to customers. Samsung has been facing tough competition from the market. Branded companies like Nokia and local Chinese companies have taken over the market share of Samsung. It can be done at any time because a wide range of the products has been available in the market with the same feature at a low cost.  Samsung’s other electronics like TV has got an indirect threat from the increasing popularity of active lifestyle and spending time outdoors. Secondly, people have started watching TV programs on tablet, smartphones or laptops which has also affected the sales of Samsung televisions. The Company has already introduced the new model of television which has been offering seamless interaction with external devices and web applications. Still, the threat of substitute is on the higher side (Gardere et al., 2018).

The threat of New Entrants

Lots of hard work and investment have been made by the management of Samsung in order to make it a big brand. In order to give direct competition to Samsung Electronics, one has to make lots of investment in the market, operations and to attract talent. Regulatory pressure has got changed with the time which has been enacting as a barrier for new entrants. According to the analysis it has been found that new entrants have been entering into the market can not pose threat to Samsung. It can just start its business on small scale.

Competitive rivalry between the existing players

Samsung Electronics has been facing tough competition from its existing players. The issue behind the problem is that a large number of brands has already captured the market. Apple, Nokia, Toshiba, Phillips are the example of same. Largest players have been in the market from a very long time that is why several factors have caused tough competition among them. That is the reason new brand has to make extra efforts to enter the market because margins are low and competition is tense. Hence it can be said that the level of competitive rivalry is high (Nguyen, 2017).

Strategic Management Plan For Samsung

Strategic planning is all about management activity at Samsung Electronics in which they have been defining the goals and objectives of the organization by planning to allocate its resources which will strengthen the operations so that priorities can be set for employees and other stakeholders in order to work together with a common motive to achieve the objectives of the organization (Wolf and Floyd, 2017).

Many theories have been given in order to formulate the strategic planning for the organization. Igor Ansoff, Henry Mintzberg, Michael Porter, and Kenichi Ohmae are the four writers who have given their theories for Strategic management planning. Final strategic planning management theory of Porter has been derived from the Ansoff’s theory.

Samsung Electronics has been dominating the mobile industry with excellent strategic directions that have been guiding the organization on the path of success. This section of the assignment will try to identify the possible strategic option available for the Samsung. The company has to opt out both that is tangible and tactical strategies in order to remain to sustain in the market. As per the theory of industry life cycle, Samsung has been already reached at the stage of maturity. Now the organization has been paying attention towards the market share and cash flow rather than its growth. Before recommending an effective strategic plan, it is just to analyse the internal and external factors that have been affecting the organization  (Steinbach et al., 2017). So in order to have a check on this vision and mission of the company should be taken on board

Vision – ‘' Inspire the world, create the future

Mission

The mission of the organization is to encourage the world with the products having innovative technologies and the latest design in order to enrich the people' lives and must contribute towards socially responsible and sustainable future.

Objectives

  • To attain the number 1 position in the IT industry and globally among the top 5 innovative companies.
  • To be among top 10 companies having the best workplace
  • To expand the market and to lure the best talent.

Recommendation

Go Forward Strategy

Samsung has been implementing various strategies like Cost leadership or differentiation but its competitive advantage is being totally dependent on hardware. It has been found during the external competitive and internal analysis that there is a need to develop its own software for Samsung Smartphone. Most of the competitor of Samsung has been innovated their own software and has created successfully amalgamation of hardware and software. In order to complete its mission and to achieve its objective, Samsung has to stop relying on the third party for buying the software. In order to achieve this target Research and development sector has to play an instrumental role by taking this project on top priority (França et al., 2017).

Today Smartphone market has been getting saturated in a developed country so it is essential for Samsung to differentiate their smartphones by integrating them with its own phenomenal operating software. By doing this Samsung can translate its lowest cost strategy into lowest rate strategy which will help the organization in eventually minimizing the threat of substitute and lowering the intensity of existing rivalry.

Conclusion

External and internal analysis needs to be analysed in order to formulate effective strategic planning for Samsung Electronics. Samsung has been implementing various strategic directions in order to lead the smartphone market. But with the changing time, Samsung has to review its strategic planning for implementing go forward strategy. From above it has been determined that this strategy states that Samsung electronics has to innovate software for its smartphone.

References

Bohari, A.M., Hin, C.W. and Fuad, N., (2017) The competitiveness of halal food industry in Malaysia: A SWOT-ICT analysis. Geografia-Malaysian Journal of Society and Space, 9(1).

Chatzoglou, P., Chatzoudes, D., Sarigiannidis, L. and Theriou, G., (2018) The role of firm-specific factors in the strategy-performance relationship: Revisiting the resource-based view of the firm and the VRIO framework. Management Research Review, 41(1), pp.46-73.

Cho, W., Ke, J.Y.F., Chu, E. and Han, C., (2018) An Exploratory Study of Firms’ Bargaining Power and Cash Liquidity Performance during the Financial Crisis. Journal of Supply Chain and Operations Management, 16(1), p.132.

França, C.L., Broman, G., Robèrt, K.H., Basile, G. and Trygg, L., (2017) An approach to business model innovation and design for strategic sustainable development. Journal of Cleaner Production, 140(6), pp.155-166.

Gardere, J., Sharir, D. and Maman, Y., (2018) Consulting and Executive Coaching on Future Trends: The Need for a Long-Term Vision with Apple and Samsung. International Journal of Business and Social Science, 9(3), pp 456-554.

Indartono, S. and Wibowo, F.W., (2017) VRIO and THES Based Development of University Competitive Advantage Model in Formulating University Strategic Plan. International Information Institute (Tokyo). Information, 20(10A), pp.7275-7283.

Kaur, R. and Malhotra, H., (2018) SWOT analysis of m-commerce. In Mobile Commerce: Concepts, Methodologies, Tools, and Applications IGI Global. 22(40 ) pp. 1261-1280.

Lin, C., Tsai, H.L., Wu, Y.J. and Kiang, M., (2012) A fuzzy quantitative VRIO-based framework for evaluating organizational activities. Management Decision, 50(8), pp.1396-1411.

Medina Munro, M. and Belanger, C., (2017) Analyzing external environment factors affecting social enterprise development. Social Enterprise Journal, 13(1), pp.38-52.

Nguyen, T.T., (2017) Management education as an industry and MBA as a product: revisiting joint MBA programs using Porters five forces model. Global Business and Economics Review, 19(3), pp.356-377.

Nurmi, J. and Niemelä, M.S., (2018) November. PESTEL Analysis of Hacktivism Campaign Motivations. In Nordic Conference on Secure IT Systems 44 (23) pp. 323-335.

Steinbach, A.L., Holcomb, T.R., Holmes Jr, R.M., Devers, C.E. and Cannella Jr, A.A., (2017) Top management team incentive heterogeneity, strategic investment behaviour, and performance: A contingency theory of incentive alignment. Strategic Management Journal, 38(8), pp.1701-1720.

Wee, C.H., (2017) Think tank—beyond the five forces model and blue ocean strategy: an integrative perspective from Sun Zi Bingfa. Global Business and Organizational Excellence, 36(2), pp.34-45.

Wolf, C. and Floyd, S.W., (2017) Strategic planning research: Toward a theory-driven agenda. Journal of Management, 43(6), pp.1754-1788.

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