Business Strategy in a Global Environment - Case Study Example

Samsung Mobile Table of Contents 0. Background 3 2.0. PESTEL Analysis 4 3.0. Porter’s Five Forces 7 4.0. Key Success Factors (KSF) 9 Reference List 11 Bibliography 14 1.0. Background Samsung was established in 1938 as a Korean exporter of fish, vegetables and other grocery items. The company entered into the consumer electronics business in 1969 after the merger with Sanyo Electronics and in 1992, it introduced its first mobile phone (Samsung, 2014). At present Samsung is the largest multinational consumer electronics and information technology company. It operates through three divisions, IT and Mobile Communications, Device Solutions and Consumer Electronics. Samsung Mobile falls under the IT and Mobile Communications division (MarketLine, 2014). Currently, Samsung Mobile holds the leading position in the smart phone industry with a market share of 23.7 %. The global smart phone industry grew by 27.2 % in the second quarter of 2014. The number of units shipped has increased from 218.8 million to 281.5 million in a year in 2014 (IDC, 2014). Samsung Mobile caters to a wide range of customer base, from budget conscious to premium consumers. The company holds the 13th rank in the Fortune 500 list with revenue of $ 208.9 billion. This study is focused on Samsung Mobile and it includes the PESTLE analysis of the company and the analysis of the competitive forces in the industry. It also includes the discussion about the key success factors (KSF) of the company. 2.0. PESTEL Analysis Source: (Created by Author) 2.1. Political Influences The political scenario of a region puts significant effect on the business operations of a company. The sudden change in overseas business regulations is likely to hamper the business of multinational companies like Samsung. Moreover, large multinational companies become easy target politicians in their power play. In 2005, politician Roh Hoe-Chan allegedly released evidences of illegal fund channelling by Samsung’s chairman Lee Kun-Hee. Although the final verdict announced Samsung’s chair man to be innocent, but as a result of the long lasting law suit, the brand image of the company was hampered and it also broke the investor’s trust (Mcneill and Kirk, 2013). The hostility between North Korea and South Korea has also emerged as a growing concern for Samsung. The company’s massive production plant in Tangjeong, South Korea will be affected badly if North Korea attacks South Korea (Kiriyama, 2013). 2.2. Economic Influences The economy of a region defines the sustainability of a firm. It also highlights the purchasing power of the customers. A weak economic condition of a country is most likely to decline the revenue of a company (Kotler and Keller, 2011). According to the reports of Business Korea (2014), the economic degradation of the emerging markets has posed as an alarming situation for the Korean firms. The fluctuation in value of Korean currency will largely affect Samsung’s export business. It was also mentioned in the report that due to contraction in the local demand, the company will not see any rapid growth. 2.3. Social Influences The social structure and trends of a region states whether or not a particular product will be acceptable by the customers. The growing popularity of social media has increased rapidly over the past decade. This as a result has increased the usage of smart phones, which allows the users of access the internet and connect to their friends via social media much easily. The popularity of social media and the growing trend of internet usage have increased the sale of Samsung smart phones (Tran, 2012). Furthermore, the growing dependence of the students on smart phones is also responsible for growth of Samsung Mobile (Suki, 2013). Thus it can be stated that the change in the social trend towards a technologically savvy life style, has allowed Samsung Mobile to successfully target the customer’s needs. 2.4. Technological Influences The status of the technological advancement of a country is a primary determinant for a consumer electronics company for its entry in that region. The technological availability must support the production and usage of the company’s product or services (Kotler and Keller, 2011). Samsung has established its manufacturing centres in technologically advanced countries like Korea, China, US, etc. Owning to the availability of advanced automated assembly line and state of the art robotics technology, Samsung is able to manufacture its products and equipments in a more efficient way (Fortune. 2013). Thus it can be clearly stated that the business operation of Samsung is highly dependent on the technological advancement of a particular region. 2.5. Environmental Influence The climatic condition of a region is a major factor which influences the business operations of a company. Regions prone to natural calamities often cause alarming situations for business activities. The Japanese earthquake and tsunami in 2011, has caused a major disruption in the supply chain of consumer electronics goods, this as a result caused Samsung to face shortage of raw materials and fall in production volume (Lohr, 2011). 2.6. Legal Influences The business activity of a company is also affected by the legal framework of the global business environment. Samsung has been involved in a long term patent war with Apple. This has cost the company a lot of penalty charges and it has also put negative influence on the company’s brand image (Eichenwald, 2014). Thus the company must not overlook the legal issues involved in its business activities in the near future. 3.0. Porter’s Five Forces Source: Created by Author In this section the Porter’s five forces have been used to assess the competitive forces in the Global Mobile phone industry. 3.1. Buyers’ Power The global mobile phone market consists of two types of buyers, one is the retailers and the other is the network service providers, like AT&T, Verizon, etc. Due to a small number of network carriers, there exists a competitive bidding for getting contacts with the phone manufacturing company. As a result these carriers control the market price of the contact phones, but the rapid growth of the smart phone industry has compelled them to keep the price comparable (MarketLine. 2014a). Due to high competition in the retail market the retailers are also compelled to stock the latest popular products to meet the end-users’ demand at a competitive price. Moreover, in some cases like with Apple and Samsung, the companies also sell through their own retail channel, which dilutes the power of the buyers (Apple, 2014). Thus it can be stated that the overall power of Buyers is moderate. 3.2. Suppliers’ Power The phone manufacturing companies are mostly bigger than the supplier companies, thus they are capable of exerting influence on the supply chain. Due to large number of suppliers in the mobile phone industry the dominant players enjoy a very low switching cost. Moreover, the manufacturing companies lay down a series of quality standards which the suppliers are required to follow. As a result this decreases the supplier’s power. However, there are certain components like the integrated circuits are supplied by very few companies. The mobile operating system like Android is also supplied by one particular supplier. Thus it can be stated that the overall suppliers’ power is moderate (MarketLine, 2014a). 3.3. Threat of Substitutes The substitutes for mobile phones can be fixed land lines. However, with the growing variety of mobile usage, like internet access, taking pictures and listening to music, the appliances like mp3 player, laptops, digital cameras, etc can act as a substitute for a mobile phone. Although these products can be used as an alternative for a mobile phone, they cannot replace the usability and “all-in-one” factor of it. Thus the overall threat of substitute is quite low (MarketLine, 2014a). 3.4. Threat of new entrants The growing popularity of the smart phones and the rapid growth of the global mobile phone industry have attracted a lot of new entrants like Xiaomi, One Plus, Oppo etc (Cherrayil, 2014). These new companies focus at market penetration by offering smart phones with high specifications at a lower price. Thus, they are able to attract budget conscious and technology conscious customers at the same time. However, the presence of well established brands likes Samsung, Apple, Motorola, etc, poses a significant barrier to the new entrants. The new companies often find it difficult to compete with the quality assurance of the major brands. Thus the overall threat of new entrant is moderate (MarketLine, 2014a). 3.5. Rivalry among existing firms Although the mobile industry consists of a large number of manufacturers, but it is dominated by few major players only, like Apple, Samsung, Sony, Motorola and Nokia (Gsmarena, 2014). These major players pose severe competition for each other, in order to gain brand preference among the consumers. They continually try to introduce new innovative products to gain the first mover advantage and achieve a deeper penetration in the consumer market (MarketLine, 2014a). 4.0. Key Success Factors (KSF) Industry External Forces/ Needs Current KSF KSF for going forward Mobile phone industry Rise in technological advancement world wide Use of innovative technology Developing new technology Rise in consumer awareness Creating brand recall by promotional activities Creating long term customer relation Technological competitiveness in the market Gain first mover advantage Patenting new technologies Growth of Internet usage Faster internet access in handsets Advancement in cloud computing Fast growth of hectic lifestyle Easy access to email and other mobile apps Development of new user interface and high end hardware Key Success factors Narrative 4.1. KSF 1 The rise in technological advancement in a global scale has increased the customers’ expectation from new smart phone handsets. In order to cope up with the growing consumer needs, Samsung uses the latest innovative technology in the market. For future growth Samsung keeps on working in R&D in order to develop new technology, so as to keep up with the severe competition (Park, Yang and Lee, 2011). 4.2. KSF 2 Now-a-days consumers are more aware of the upcoming products and newly launched brands. Samsung launches extensive promotional activity to create top of the mind brand recall by breaking the clutter created by other brands. For future growth, the company makes sure that it maintains good relationship with its customers by providing excellent after sales service and best product quality (Reed, 2013.). 4.3. KSF 3 Samsung operates in a highly competitive market, where rival brands like Apple, Sony, Motorola, etc are continuously trying to surprise the customers with new technology. Samsung in response to this situation tries to gain the first mover advantage by introducing a new technology before its rivals. For future growth the company has patented its self developed technology or concepts, so that its rivals cannot copy them (Latestpatents, 2014). 4.4. KSF 4 The usage of internet in mobile handsets has increased rapidly over the years. The increasing popularity of mobile internet usage has been responded by Samsung by introducing faster internet access in their handsets, by incorporating 3G and 4G connectivity along with faster Wi-Fi capabilities. To stay ahead of the competition in the future, Samsung is working on to develop cloud storage and cloud computing technologies (Smith, 2014). 4.5. KSF 5 People have become busier than ever, owing to their profession and change in lifestyle. In order to make their lives easier, Samsung has designed its smart phones in such a way that the consumers can utilize the in-built apps and functionalities to complement their daily activities. For future growth, Samsung is continuously working on to develop the user interface to make it easier for consumers to use the product (Carlson, 2013). Reference List Apple, 2014. Apple Store Locations. [online] Available at: [Accessed 18 December 2014] Business Korea, 2014. Impact on Korean Industries: In Crisis Due to Declining Emerging Economies. [online] Available at: < http://www.businesskorea.co.kr/article/1371/impact-korean-industries-crisis-due-declining-emerging-economies > [Accessed 18 December 2014] Carlson, N., 2013. 10 smart phone apps that can make your life better. [online] Available at: < http://business.financialpost.com/2013/04/22/10-smartphone-apps-that-can-make-your-life-better/?__lsa=c99d-1bf1 > [Accessed 18 December 2014] Cherrayil, N.K., 2014. Oppo’s strategy is to bring innovation into smartphones. [online] Available at: < http://gulfnews.com/business/technology/oppo-s-strategy-is-to-bring-innovation-into-smartphones-1.1424829 > [Accessed 18 December 2014] Eichenwald, K., 2014. The Great Smartphone War. [online] Available at: < http://www.vanityfair.com/business/2014/06/apple-samsung-smartphone-patent-war > [Accessed 18 December 2014] Fortune, 2013. Samsungs road to global domination. [online] Available at: < http://fortune.com/2013/01/22/samsungs-road-to-global-domination/ > [Accessed 18 December 2014] Gsmarena, 2014. All mobile phone brands. [online] Available at: < http://www.gsmarena.com/makers.php3 > [Accessed 18 December 2014] IDC, 2014. Smartphone Vendor Market Share, Q3 2014. [online] Available at: < http://www.idc.com/prodserv/smartphone-market-share.jsp > [Accessed 18 December 2014] Kiriyama, G., 2013. North Korea Concerns Could Affect Samsung. [online] Available at: < http://www.nbcbayarea.com/news/local/North-Korea-Concerns-Could-Affect-Samsung-202107761.html > [Accessed 18 December 2014] Kotler, P. and Keller, K.L., 2011. Marketing Management. 14th ed. London: Pearson Education. Latestpatents, 2014. Latest Patents of Leading Technology Companies. [online] Available at: < http://www.latestpatents.com/category/samsung/ > [Accessed 18 December 2014] Lohr, S., 2011. Stress Test for the Global Supply Chain. [online] Available: < http://www.nytimes.com/2011/03/20/business/20supply.html?pagewanted=all&_r=0 > [Accessed 18 December 2014] MarketLine, 2014. Global Communications Equipment. [pdf] London: MarketLine. Available at: Market Line [Accessed 18 December 2014] MarketLine, 2014a. Global Mobile Phones. Market Line. London: MarketLine. Available at: Market Line [Accessed 18 December 2014] Mcneill, D. and Kirk, D., 2013. Tax evasion, bribery and price-fixing: How Samsung became the giant that ate Korea. [online] Available at: < http://www.independent.co.uk/news/world/asia/tax-evasion-bribery-and-pricefixing-how-samsung-became-the-giant-that-ate-korea-8510588.html > [Accessed 18 December 2014] Park, J.J., Yang, L.T. and Lee, C., 2011. Future Information Technology. 6th International Conference on Future Information Technology. June, 28-30. Reed, B., 2013. Samsung spent an insane amount of money to make 2013 its biggest year yet. [online] Available at: < http://bgr.com/2013/12/17/samsung-sales-promotion-spending-2013/ > [Accessed 18 December 2014] Samsung, 2014. About Samsung. [online] Available at: < http://www.samsung.com/us/aboutsamsung/corporateprofile/history06.html > [Accessed 18 December 2014] Smith, D., 2014. Samsung Claims WiFi Breakthrough Thatll Let You Download 1 GB In Three Seconds. [online] Available at: < http://www.businessinsider.in/Samsung-Claims-WiFi-Breakthrough-Thatll-Let-You-Download-1-GB-In-Three-Seconds/articleshow/44806966.cms > [Accessed 18 December 2014] Suki, N. M., 2013. Students’ dependence on smart phones, Campus-Wide Information Systems, 30(2), pp. 124 – 134. Tran, T. C., 2012. The Social Influence of Smartphone Usage. IT University of Copenhagen, Digital Design & Communication. December. Bibliography Anderson, J. C. and Narus, J. A. 2007. Business marketing: Understand what customers value. Harvard Business Review, 76(6), pp. 53-62. Arnould, E. J. and Thompson, C. J. 2009. Consumer Culture Theory (CCT): Twenty Years of Research. Journal of Consumer Research, 31(4), pp. 868-882. Ballantyne, D. and Varey, R. J. 2009. Creating value-in-use through marketing interaction: the exchange logic of relating, communicating and knowing. Marketing Theory, 6(3), pp. 335-348 Beard, F. 2008. Marketing client role ambiguity as a source of dissatisfaction in client-ad agency relationships. Journal of Advertising Research, 36(5), pp. 9-21. Berry, L. L. 2007. Cultivating service brand equity. Journal of the Academy of Marketing Science, 28 (1), pp. 128-137. Gillett, A., Ajasafe, F. and Lovell, H. 2011. Integrated Communication Plan - For the UK Mobile Phone Market. 3rd ed. New York: Wiley. Grönroos, C. 2007. From marketing mix to relationship marketing: Towards a paradigm shift in marketing. Management Decision, 32(2), pp. 4-20. Grönroos, C. 2010. The relationship marketing process: communication, interaction, dialogue, value. The Journal of Business & Industrial Marketing, 19(2), pp. 99-113. Gummesson, E. 2009. Relationship marketing: It all happens here and now! Marketing Theory, 3(1), pp. 167-169 Hackley, C. 2008. Divergent representational practices in advertising and consumer research: Some thoughts on integration. Qualitative Market Research, 6(3), pp. 175-183. Kumar, S. R. 2009. Consumer Behaviour and Branding, 3rd ed. New York: Wiley. Shimp, T. A. 2008. Advertising, Promotion, and Other Aspects of Integrated Marketing Communication. 5th ed. New York: Springer Verlag. p. 57. Temporal, P. 2011. Advanced Brand Management: Managing Brands in a Changing World. 5th ed. New York: Wiley. Read More