The Electronic Appliance Maker And Marketer (Samsung) - Essay Example

? Strategic Management Contents Contents………………………………………………………………………………………….. 2 Introduction…………………………………………………………………………………. ……2 Background………………………………………………………………………………………..3 Samsung PESTEL analysis……………………………………………………………………..4-8 Success of Samsung………………………………………………………………………………9 Samsung SWOT analysis…………………………………………………………………….10-11 Market/competitors………………………………………………………………………...........13 Introduction This paper looks at the marketing strategy of the Electronic Appliance maker and marketer, Samsung. It analyzes the company and its strategy using analysis techniques like SWOT and PESTEL. This paper also analyzes Samsung’s company strategy compared to its competitors to give an understanding of the company from different perspectives. Samsung is an ideal company for this analysis due to its unique and innovative ways of doing business in the consumer appliances sector (Clegg, 2011). This paper has employed two tools for analysis as described above in line with the guidelines set for writing the paper. Background Samsung operates in the consumer appliances and consumer electronics industry, manufacturing and marketing a variety of products which include mobile phones, TVs, Washing Machines Etc. The Company has successfully controlled the vast global market for consumer electronics managing to stay on top. Headquartered in Samsung Town, Seoul, South Korea, Samsung was founded in 1939 by the family of its current CEO Lee Soo-bin who has run the company for generations. The company operates in over 200 countries in the world and is a global leader in consumer electronic goods, technology and innovation (Michell, 2010). Samsung PETSEL Analysis PESTEL analysis is an acronym for the internal and external environmental factors which include issues from the political, economic, social, technological, environmental and legislative areas of a business (Hill, 2010). No company is a unique entity independent of its external environment. These factors influence how a business operates and compiling a pest analysis generates valuable information to analyze a company’s business environment as a whole (Johnson, 2008). Political Despite the political situation being conducive in the majority of the countries where it operates, Samsung faces serious, political threats in its countries of operation. The political climate in South Korea has recently become a perturbing for Samsung, and the company faces similar political instability in North Korea (Michell, 2010). The situation is not as grave as that in some of the countries where it operates. In African and South East Asian countries, Samsung is experiencing a discrete limitation due to the harsh business environment. The company enjoys favorable political conditions in countries like china and India, allowing it to build a better focus and concentrate on the markets. South Korea's relations with China have improved recently, creating a favorable business environment for Samsung. Taxes in China are also low, and the Chinese tariffs are on a declining trend (Michell, 2010). Economic Since entering the China market, Samsung posted its first profit in 1911 and 23 of its local manufacturing companies achieved a cumulative surplus in 2000. The company started to formulate a new business strategy for undertaking its business in china at the group level after the September 11 2001 terrorist attacks in the United States (Luo, 2001). The attacks highlighted how the company’s reliance on the US market left it vulnerable. Samsung reconstructed its global strategies around china in order to overcome the uncertainties regarding the future of the US economy (Lee, 2006). Other factors came together to enhance the strategic significance of the china market that included china’s accession of the world trade organization and the success of Beijing’s Olympic bid (Luo, 2001). Samsung began a five-percent differentiation strategy based on selection and concentration. This strategy focused on both the 1.3 billion consumers who constitute china’s overall population and the top five percent who make up the high-income earners (Lee, 2006). The members of the wealthy class occupied ten major cities that include Shanghai Beijing and Tianjin and constitute around 65 million people who possess a purchasing power equaling their counterparts in the developed countries (Lee, 2006). The concentration on selling high value-added, global-standard products to this customer section required that Samsung be able to evade the increasingly intense price competition from the local Chinese companies. The other advantage was that manufacturing and selling high-quality products helps to make the company’s brand image stronger. Product marketability is of course a critical prerequisite for the high quality brand strategy (Luo, 2001). The other part of the strategy was reinforced by second headquarters organization. Samsung decided to build a second headquarters in china in its efforts to strengthen its operations in the country. This decision was based on the belief that the company’s brand power was not fully utilized because local subsidiaries in china carried out their own personnel recruitment programs and sales activities (Lee, 2006). The china headquarters oversees the recruitment and deployment of personnel and sales activities in china. It is also responsible for founding Samsung’s long-term vision for the china market, formulating marketing strategies, and conducting market surveys that cover all business fields (Luo, 2001). This is aimed at consolidating the strategic planning functions that had previously been delegated to individual companies so that the company’s synergy is maximized. Consequently, the change of china headquarters has been promoted from the rank of president to deputy chairman, and delegated the task of controlling all operations in china (Lee, 2006). Socio-Cultural The growth and development of the information age has made telecommunication more critical for both business and pleasure purposes. It is significant to establish how receptive a society is to emerging technological advancements, specifically use of Smartphone and other leisure products (Doole, 2008). This enables a company to gain a better understanding of their basic target groups. Insight s into how age groups use their devices can give insights into the required improvements of new features in established products. The adoption rates of Smartphone and other devices have witnessed an increasing trend in the global market lately (Doole, 2008). Samsung has managed to incorporate itself into the emerging markets where it does its business despite being a South Korean company. This has brought about a "think global act local" mindset which has effectively narrowed the cultural and social gap between its home country business landscape and the market where it operates (Lee, 2006). One outstanding hitch has been the attitude of the company towards local affairs in the issues regarding bribes. The company makes efforts to achieve a balance between the aspiration values of the customer classes and the income levels they possess. Technological The most critical aspect of the technological environment remains to be the network infrastructure. For a company dealing mainly in telecommunication products, quality of service determines how likely and how quick consumers will adopt new products (Doole, 2005). Cellular network infrastructure has grown globally in the recent past, with expansion of fiber optic, cable TV and satellite communication to Africa and other regions. Technology is becoming more affordable, and demand for larger TVs and Smartphone is increasing, and other forms of technology are quickly emerging (Krishnamacharyulu, 2012). Samsung prides itself on its innovative approach to technology, manufacturing products that utilize cutting edge technology in their features and design (Haig, 2007). The company has strong technological capabilities, and its innovation drive is its biggest strength as a pioneer for most of the technological innovations it has brought into the global market through its products (Thomson, 2009). Environmental A manufacturer requires being conscious of availability of natural resources and extreme weather patterns in the locations of their manufacturing facilities. Some regions, specifically along the gulf coasts are prone to storms and hurricanes which may cause destruction of infrastructure and render Samsung products useless (Ferrell, 2011). The company has begun the implementation of environmental and social obligations as indicated by its approach to and “green policies” and CSR. Most of The Samsung's manufacturing facilities are constructed on environmentally sustainable designs, and the company is equally adopting similar practices (Lee, 2006). Legislative The past few years have witnessed the emergence of numerous patent lawsuits within the Smartphone industry. Handset manufacturers in the highly competitive market have been highly aggressive in guarding their intellectual assets by suing competitors with claims of patents infringements (Lee, 2006). In April 2011apple recently launched a lawsuit against Samsung alleging that Samsung used the same design features of the iPhone in its galaxy android phones. In April 2010, Microsoft signed an agreement with HTC to pay fees on android based handsets (Lee, 2006). These are some of the examples of legal problems faced by Smartphone manufacturing companies and Samsung in particular. It is significant to identify that manufacturers are employing their patent portfolios to restrict their competitors from gaining larger market shares. The costs incurred during legal battles can hinder or extend the release dates for new products, making it hard for manufacturers like Samsung to maintain competitiveness (Michell, 2010). STRENGTHS wide range of product portfolio brand value through multiple sponsorships good leadership theory high investment for R&D Technologically driven niche products WEAKNESSES proactive in the introduction of new products differences between language and culture insufficient software engineers or talent OPPORTUNITIES launching sub brands to the company product variation open more stores make the air-condition product category more strong THREATS low cost competitors in China legal wars with competitors Emulation mobile phones Samsung SWOT Analysis SWOT is an acronym for the interior Strengths and Weaknesses of a firm and the external opportunities and threats facing that firm. SWOT analysis is a technique widely used by managers to develop a quick synopsis of a company’s strategic situation. This technique is based on the assumption that an effective marketing strategy is derived from a resonant fit between the company’s internal resources and the external situation. An effective fit maximizes the firm’s strengths and opportunities while minimizing its threats and weaknesses (Johnson, 2008). This section provides an analysis of Samsung’s marketing strategy by the SWOT analysis technique, with each element analyzed in detail. Strengths Samsung is a world known brand, operating in more than 200 countries globally. The company enjoys a wide range of product portfolio which includes; mobile phones, TVs, tablets, cameras, audio devices, home appliances, PCs, laptops, printers, memory cards and other accessories (Lee, 2006). This well diversified, and distinguished product range effectively satisfies consumer electronic needs. Samsung also has an established brand value through multiple sponsorships and practices the good leadership theory (Haig, 2007). The company has a large market share in Smartphone, LED, and LCD etc that is continually experiencing growth. The stylish design of its products, due to development of new products that involve team of product designers, attracts customer interest (Ungson, 2007). Samsung has a substantial competitive advantage, which include a strong infrastructure, technologically driven niche products, high brand value and a high investment for research and development. The company has a research and development facility located at a single site, higher yield in products compared to its competitors and higher economic scale and economic scope (Lee, 2006). Porter's five forces analysis indicates the company is a large buyer, and can use this to attain a competitive advantage in the market (Michell, 2010). With financially strong, large resources at its disposal, Samsung has been able to both horizontal and vertical integration in the market, establishing its own stores and SRAM for their own mobile phones. Other competitive advantages include modern human resource practices based on meritocracy and not seniority, accompanied by attractive pay, bonuses and incentives (Viardot, 2004). Weaknesses The company is not proactive in the introduction of new products and some of the new products introduced are not user friendly. The differences between language and culture also often lead the company into conflicts with other players in the market. Samsung lacks sufficient software engineers or talent to create their own software, often borrowing ideas from its competitors. The company heavily invests in newer markets, research and development, failing to focus on the niche market (Capon, 2007). Whereas investment in research, development and design has brought the benefits of a dominant market position, and premium brand perception to the company, these benefits may not be long lasting as competitors are currently attaining higher market profitability with lower investment per product in these areas. The customer perception of weak product attributes like durability has affected the company’s products’ appeal in some markets (Doole, 2008). Opportunities Samsung could venture into product variation by introducing unique products and current products with a variety. Another opportunity lies in the introduction of affordable priced, user-friendly mobile phones. The company could also launch sub brands to its parent company and open more stores to attain more customers. Offering additional services to acquire new customers and retain existing ones is also a significant opportunity for the company (Krishnamacharyulu, 2012). Using new technology, the company can launch innovative products and creative products to maintain consumer interest and attract more customers. The company is also planning to make its air conditioning product category stronger by employing the best unique technology to help attract more customers and more profits (Lee, 2006). Samsung can also take advantage of low tariffs in the Chinese market and the high percentage of the younger population to expand its market share now and in the future. Threats The increasing volume of low cost Chinese products in the electronics market is eroding Samsung’s profitability. Samsung is facing threats from low cost companies like Huawei and Vizio. Huawei is a company producing low cost products and is currently a market leader in mobile-telecommunication networks, fixed-line networks and budget Smartphone while Vizio is currently a North American market leader in LCD TVs (Haig, 2007). Legal battles between the company and Apple is also impacting negatively on Samsung’s reputation and hindering discharge of new products into the market. The number of emulation mobile phones, mainly from China, is rising more than premium companies anticipate and lowering Samsung’s market share (Lee, 2006). The new nanotechnology also poses a threat to the company, as this may witness replacement of Samsungs DRAM technological advantages. Other threats the company is facing include increasing labor costs in South Korea, where Samsung’s headquarters is located, and challenges in the pricing of its premium products to compete with similar products in the market (Michell, 2010). Market/Competitors Samsung's key advantage over its competitors is the possession of a product range characterize by a high level of quality and responsiveness to customer needs. The features of its products are accompanied by better-quality design and utilization of artificial intelligence traits in the manufacture of its products (Lee, 2006). With the introduction of innovative products, Samsung grabbed the market for consumer electronics, managing to collect the maximum market share by providing value propositions that merge price elasticity with quality to produce a matchless combination (Henry, 2008). The company is a pioneer in the consumer electronics industry and is the world leader in consumer appliances and household goods market. It pursued a bottom-up approach to development by launching products aimed at the lower end of the market and then solidly climbing to the higher and niche products (Viardot, 2004). The company has an Oligopoly type of Market Structure. This is a market structure in which a small number of firms sell products that are substitutes for each other but with varying attribute, performance characteristics, price and image (Kotler, 2006). For example, both LG and Samsung sell DRAM chips, but the market price for this product in not known until both companies have made their output choice. Each company will make an output choice that maximizes its profit based on the company’s expectation of the other company’s output choice (Chang, 2011). Samsung has got into the developed markets of Japan, North America, china, Eastern Europe and South America. It is started to focus on its high-priority markets of the United States, Western Europe and southern Asia. The company is well established in china, with offshore production factories in Dongguan and Tianjin (Luo, 2001). It also has an overseas sale in Hong Kong and overseas branches in Chengdu, Beijing, Shenzhen and Shanghai. The company entered the Dongguan by obtaining construction approvals from both the Chinese and Korean governments and established the locally incorporated company to begin the mass production and mass production. It deals in the production of monitors, compact disc players, televisions etc (Luo, 2001). Samsung is an established comprehensive manufacturer of electronic components and parts, therefore playing a significant role in the electronic industry. Its competitive strategy, vision and mission have focused on differentiation and cost leadership. Samsung statements have included continuous development leadership and competitive production costs with high quality being one of its major strategic items (Luo, 2001). The company has been investing on strengthening its cost competitiveness and restructuring its production mix. It is constantly improving its innovation, quality, and customer service to stay competitive. Strong innovation is a key priority for product differentiation and Samsungs manufacturing system focuses on flexibility, quality, and retaining balance to attain the core of problems faster (Luo, 2001). This strategy is critical in the company’s effort to attain international recognition as being a leader in the industry. The company also stresses on securing the latest level of technology and quality assurance at the highest standard possible in attempts to continue improving reliability. The company has developed a strong structural integration which includes production, procurement, marketing, and research and development (Luo, 2001). Through this everyone in the company shares information and logistics on a real-time basis to support organizational downsizing, management renovation and engineering concurrently (Luo, 2001).Samsung has insisted on sticking to its purchasing policy in obtaining superior quality. 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