International Business Strategy: Samsung and Nokia - Case Study Example

New Project Table of Contents Introduction 3 General Background 4 Samsung 4 Nokia 5 Theory 6 based view 6 Samsung 7 Nokia 7 Resource based view 8 Samsung 8 Nokia 8 Porter’s Industry based view 8 Samsung 9 Nokia 9 Empirical Evidence 10 Samsung 10 Nokia 10 Conclusion 11 Reference 12 Introduction The 21st century world of today is moving at an extremely rapid pace. It is important to highlight that the massive technological developments that has happened over the years has played a major role in inducing the fast paced development. The emergence of telecommunication technology and its supporting infrastructure, which helped in the generation and distribution of high speed internet connectivity in various corners of the world, played a major role in the process of transformation of the globe into a well connected single entity. As a result of this technology powered transformation, there has been a free flow of information as well as access to knowledge in various corners of the world. This ease of access to information resulted in the evolution and emergence of many globalization trends from various global markets. It is important to highlight that as a direct outcome of the emergence of multiple trends of globalization, consumers in both the developed as well as the emerging markets are becoming more aware and demanding in nature. The growing demands as well as high awareness of the consumers in the multiple global markets creates the perfect business opportunity for many global multinational companies, who are looking forward to organizational growth as well as profitability. It can be said that these multinational companies compete with each other in various high growth markets around the world by using different strategies related to product and market development with the main aim of capturing a greater market share. It is important to highlight that the global consulting firm, PWC, by studying the macroeconomic performance of the developed markets has predicted that the emerging markets around the world are the most resilient ones in the times of ongoing and prolonged global economic slowdown (Maxwell, 2014). As a result, the multiple emerging markets of Asia and Africa have become an increasingly attractive destination for investment among various multinational companies. In this particular assignment, the focus is given on two multinational companies namely Samsung and Nokia, which belongs to the information and communication technology (ICT) sector, and are competing against each other in the foreign smartphone market of India. While Samsung has already become successful, Nokia has been experiencing a string of failures over the past couple of years in the high growth Indian market. General Background Samsung The brand Samsung belongs to the Samsung Group, which is a multinational company based in South Korea. The company was founded in the year 1938 by an ambitious businessman named Lee Byung–chull as a trading company. It is of utmost importance to highlight that the company entered the electronics industry in the year 1960. Since its entry in to the electronic segment, the company formed multiple divisions like Samsung Electronics Devices, Samsung-Electro Mechanics and many others. Over the years of conducting business in various business segments, the company has also undergone major restructuring. The group eventually became Samsung Electronics in the year 1988. Currently, Samsung Electronics has presence in three verticals like consumer electronics, IT & mobile communications as well as device solutions. The company is presently tremendously popular for its product portfolio comprising of Smartphones as well as tablets (Garside, 2013). It is important to highlight that despite the global recession that has impacted various global businesses to varying extent; the company has continued to make record sales and profits across various business markets. As of the year 2012, the company has generated sales revenue of over KRW 201 trillion along with a net income of KRW 29 trillion (Samsung, 2012, p. 3). Source: Samsung, 2012, p 2 Talking in regards to ownership, it is important to mention that the company is a public traded one and is listed in the Korea as well as the London Stock Exchange. Nokia Nokia is a multinational telecom company which has its headquarters in Finland. The company was incorporated in the year 1871. Over the course of its long existence in the technology domain, the company has made several changes in its product portfolio and has successfully diversified from the paper industry to the technology industry. It 1967, the company was registered as Nokia Corporation under the laws of the Finland, with the merger of three finish companies like Nokia AB, Finnish Rubber Works and Finnish Cable Works. The organization formally entered the market catering to telecommunication equipment in the year 1960. Over the years, the company has expanded as well as contracted its technology based product portfolio. Currently, the company has a highly diversified product portfolio comprising of latest technology phones, accessories and supporting apps. The company also has a highly impressive global network of production facilities for the manufacturing and development of mobile products as well as network infrastructure. As of the year 2012, the net sales of the company were estimated at around 39.8 billion USD (Nokia, 2012, p. 47). Discussing about the ownership of the company, it can be said that the company is currently a publicly traded company, which is listed in the New York, Helsinki as well as Frankfurt Stock Exchange. Theory Institution based view From the theoretical perspective, an institution based view stresses on the interaction between institutions and organizations, and the possible strategic choice that becomes the outcome of such interaction (Peng, Wang and Jiang, 2008, p. 3). The following pictorial representation clearly explains it: Source: Peng, 2010, p. 37 It also needs to be stressed that the institution based view is largely based on two propositions. The first one is that the managers of a firm make choices while maintaining the institutional constraints. The second one is that the informal constraints plays a major role in reducing uncertainty as well as increasing constancy when the formal constraints of institutions are unclear or are supposed to fail. Generally, the institutions based view is developed from the political, legal as economic systems present in a particular region (Peng, 2010, p. 46). In analyzing Samsung and Nokia, it will be effective to focus on the economic system aspect of the institution based view. Samsung For Samsung, it has to be stated that the company accurately identified the Indian market’s demand for mobiles with better features along with focus on quality and new technology. This helped the company to design value generating products for the customers, which automatically helped to gain and retain vital market share. At a later stage, the company also introduced cheaper version of the high priced phones, in an attempt to cater to the demand arising for the need of low end technologically advanced, better featured phones (slugpost.com, 2013). Nokia In analyzing Nokia on the grounds of institution based view, it has to be stated that the company failed to cater to the economic needs of the Indian phone market in regards to better features as well as new technology. The company also failed to respond to the demands related to low cost phones with value based features, a unique demand which was aggressively tapped by the domestic players present in the Indian mobile market (Rahmani, 2013). The misguided focus of the company led to the loss of vital market share, which in return contributed to the failure of Nokia in the Indian market Resource based view From the academic viewpoint, the resource based view for an organization is basically the analysis of the competency factors of the organization, which has the ability to provide it with a distinct competitive advantage (Czinkota and Ronkainen, 2009, p. 278). Samsung In analyzing the distinct competencies of Samsung, the primary focus has to be given on the high focus on developing its R&D division. This helps the company to introduce new models with innovative features as well as high end technology (Reuters, 2013). Also, another unique competency factor for the Samsung is its ability to introduce a new technology in the market within a very short time frame. In-depth research reveals that the diversified presence of the company in the electronics domain enables the company to reduce its dependency on suppliers and distributors, which often increase the lead time in implementing and introducing a new technology in the market (Worstall, 2013). Nokia Nokia’s competency factor was associated with its ability to build strong hardware for its phones (Economic Times, 2013). Though this competency factor helped Nokia in dominating the Indian mobile market, the launch of smart phones by various competitors flipped the focus from the hardware to the software side. Nokia’s failure to cope up with this change as well as to develop a new competency factor triggered a steady slide of sales for the products. Porter’s Industry based view Porter’s industry based view is largely dependent on the Porter’s five forces framework, which takes into account, the multiple variables like bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat from substitute products as well as intra industry rivalry (Peng, 2013, p. 47). The picture below provides a representation of all the five forces that comprise the Porter’s five forces model. Source: Hill & Jones, 2007, p. 45 Samsung Now in analyzing Samsung from the perspective of Porter’s industry view, it has to be highlighted that the company has the advantage of low bargaining power of the suppliers, because of its presence in various domains of technology which are generally required to manufacture vital components on a large scale. Also, the company enjoys a dominant position regards to the rivalry among established firms in the Indian market because of its leadership position. These naturally help the company to remain a successful player in the highly competitive Indian mobile market. Nokia Nokia’s analysis from the perspective of Porter’s industry view reveals that the company is at a disadvantage on all the critical variables. The continuously weakening market share of the products as well as the presence of strong competitors in the Indian market continues to contribute to its market failures. Empirical Evidence For the purpose of providing empirical evidence, that supports the success of Samsung as well as failure of Nokia in the Indian market, focus has to be given on the news articles as well as reports published by various market research agencies. Samsung According a Voice & Data survey, the South Korean electronics giant has become the largest mobile maker in the Indian market in the year 2013, with a market share of around 31.5%. The leading business newspaper of India, Economic Times has revealed that the company’ strategy to offers a highly diversified product portfolio in multiple price points has greatly helped the company to develop its dominance in the Indian market. Also, Samsung’s move to launch new phones with different screen sizes helped to gain the crucial edge in the Indian market (ET Bureau, 2013). Nokia Reports released by NDTV, a leading Indian news channel revealed that the Finnish company’s market share dropped to around 27% in the year 2013. The report revealed that the company’s loss of market share is mainly attributed to the failure to sense the demand for new technology as well as dual sim based phones (Press Trust of India, 2013). Business analysts, who have been tracking the company’s performance, highlighted that the launch of multiple phones by domestic and international competitors, which are high on new features and extremely competitive in terms of price also led to the loss of market share. The analysts also stated that the failure to develop an open source platform like Android further aggravated the downward slides of the company’s market share (Kuila, 2013). A view of the declining market share of Nokia from the fourth quarter of year 2010 and 2012 further substantiates the fact. Source: Singhal, 2013 Conclusion The mobile market is India grew by over 14% in the year 2013 and attained a total valuation of around 35,946 crores INR (Mitra, 2013). Multiple reports by industry sources reveal that currently the Indian mobile market is strongly dominated by the South Korean electronics giant with a market hold of above 31%. The focus on R&D along with the ability to introduce new technology based phones in the market at highly attractive prices as per the market demands and requirements at a very short time span greatly helped the company to develop a strong foothold as well as simultaneous success in the Indian market. Now, talking in regards to Nokia, it can be said that the slow response to the technological change that gripped the Indian market with the entry of multiple local and foreign players led to the failures of the once dominating player of the Indian mobile market (Singhal, 2013). Reference Maxwell, J., 2014. Beyond the BRICS: How to succeed in emerging markets. [Online] Available at: http://www.pwc.com/us/en/view/issue-15/succeed-emerging-markets.jhtml [Accessed 24 Feb 2014] Garside, J., 2013. Samsung overtakes Apple as worlds most profitable mobile phone maker. [Online] Available at: http://www.theguardian.com/technology/2013/jul/26/samsung-apple-profitable-mobile-phone [Accessed 24 Feb 2014] Samsung, 2012. 2012 SAMSUNG ELECTRONICS ANNUAL REPORT. [Online] Available at: http://www.samsung.com/common/aboutsamsung/download/companyreports/2012_E.pdf [Accessed 24 Feb 2014] Nokia, 2012. 2012 Nokia Annual Report on Form 20-F 2012. [Online] Available at: http://i.nokia.com/blob/view/-/2246090/data/2/-/form20-f-12-pdf.pdf [Accessed 24 Feb 2014] Peng, M.W., Wang, D. Y and Jiang, Y., 2008. An institution-based view of international business strategy: a focus on emerging economies. [Online] Available at: http://www.utdallas.edu/~mikepeng/pdf/Peng08JIBSWangJiang39(5)pp920-936.pdf [Accessed 24 Feb 2014] Peng, M., 2010. Global Business. US: Cengage Learning. Slugpost.com, 2013. Lesssons Learnt from Samsung’s success in Indian mobile market. [Online] Available at: http://slugpost.com/2013/08/26/lessons-learnt-from-samsungs-success-in-indian-mobile-market/ [Accessed 24 Feb 2014] Rahmani, M.H., 2013. Samsung vs Micromax: The home-grown mobile maker is now No 2 in domestic smartphone market. [Online] Available at: http://indiatoday.intoday.in/story/micromax-becomes-no-2-in-domestic-smartphone-market/1/305263.html [Accessed 24 Feb 2014] Czinkota, M. and Ronkainen, I., 2009. Emerging Trends, Threats and Opportunities in International Marketing: What Executives Need to Know. US: Business Expert Press. Reuters, 2013. Samsung success story: More about marketing than innovation? [Online] Available at: http://gadgets.ndtv.com/mobiles/news/samsung-success-story-more-about-marketing-than-innovation-350582 [Accessed 24 Feb 2014] Worstall, T., 2013. Why Samsung Beats Apple Or Perhaps Vice Versa. [Online] Available at: http://www.forbes.com/sites/timworstall/2013/09/09/why-samsung-beats-apple-or-perhaps-vice-versa/ [Accessed 24 Feb 2014] Economic Times, 2013. The fall of Nokia in Indian mobile market. [Online] Available at: http://economictimes.indiatimes.com/slideshows/tech-life/the-fall-of-nokia-in-indian-mobile-market/year-2011/slideshow/19293547.cms [Accessed 25 Feb 2014] Peng, M., 2013. Global Strategy. USA: Cengage Learning. Hill, C. & Jones, G., 2007. Strategic Management: An Integrated Approach. USA: Cengage Learning. ET Bureau, 2013. Samsung pips Nokia to become No.1 in India’s handset market. [Online] Available at: http://articles.economictimes.indiatimes.com/2013-08-21/news/41433115_1_voicedata-lumia-handset-market [Accessed 25 Feb 2014] Press Trust of India, 2013. Samsung beats Nokia to top spot in India, Apple posts strong gains: Survey. 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