Samsung Electronics: The Struggle for Leadership of the Electronics Industry - Case Study Example

The Samsung Corporation Historical and Geographical Aspects The Samsung Corporation is a company that was launched by Lee Byung-chull, in 1938. It was then just a modest business enterprise (Lee 2006). However, its admirable expansion compelled it to establish its headquarters in 1947 in Seoul- which was the capital. The corporation would survive even with the instability that would be triggered by the Korean War. At present, Samsung functions as the main parent firm which is responsible for the performance of numerous subsidiaries. Some of Samsung’s numerous divisions include its heavy industry divisions and the engineering department (Lee 2006). Samsung is made up of more than 80 companies which are spread through nations all over the world. It is involved in manufacturing products in the consumer electronics, shipbuilding, consumer electronics, and medical industries (Lee 2006) Technology Being an organisation that centres on creating electronic products, Samsung has always understood the importance of correctly assessing technological factors that will affect its bottom line. According to Hyun, Han and Yeh (2004), in the beginning, Samsung entered into contracts with electronic giants around the world such as Corning Glass Works, NEC and Sanyo which would help Samsung to be able to improve its production capabilities. According to Kim and Bae (2005) Samsung is considered to be very much ahead of its competitors in matters concerning technology. Samsung tends to gravitate towards developed economies. This means that it generates numerous products due to the incidence of production efficiency. When a corporation can benefit from working in developed nations that have good infrastructure and cutting edge technology integrated into daily life, it will likely save a lot of money due to reduced costs. This is usually due to the fact that fixed costs are usually distributed over the increased numbers of products generated. According to Katsioloudes and Hadjidakis (2007) Samsung even if realises more profits than corporations that are headquartered in lower scale economies. Political Aspects Samsung’s business environment is affected by both external and internal influences, which decisively affect its local, as well as global performance in various categories. In regards to political factors, an organisation can be affected by government guidelines, stipulations of conducting business and subsidies. According to Cacciatori and Jacobides (2005) all business entrepreneurs have to abide by the political regulations of a nation. The business in question also has to consider the education levels achieved by most of a nation’s labour force and the extent to which it has a developed infrastructure. The Samsung Corporation has experienced significant international success due to its investment in various nations other than South Korea (Lee 2006). However, the firm also experiences serious effects due to the political circumstances in all the nations that it chooses to invest in (Cho 2009). However, the political environments in nations in Europe and North America are more conducive to supporting the rapid development of a business enterprise which originates from a foreign nation (Lee 2006). This is why Samsung introduces so many of its products in Western nations. Resources The Samsung Electronics Corporation is, at present, made up of four different business units. These include the semiconductors, digital media, home appliances, and information & communications corporate units (Lee 2006). As a global corporation, Samsung is able to locate and utilize the raw materials from the best and most cost effective sources. The Samsung Corporation also has 26 plants in different nations across the world which are tasked with assembling, as well as creating its products which include plasma screen TVs, home theatres, DVDS, CRT monitors, TV satellites, and Blue Rays. Samsung Electronics also puts a lot of emphasis on the significance of researching into the possibility of creating new technologies as well as products (DJW 2011). According to Michell (2010) Samsung Electronics invests approximately 9.5% of its proceeds on research annually. Economic Aspects In regards to economic factors, Samsung has to consider factors such as a nation’s GDP, dynamics of taxation, foreign exchange rates and inflation rate, or lack thereof. In recent times, Samsung has greatly benefited from the development, in many nations across Africa and Asia, of a middle class that has a considerable disposable income. The Samsung Corporation follows a selective market policy because its manufactured commodities need consumers who have a significant disposable income (Lee 2006). According to Min (2004) Samsung has workers of different cultural backgrounds who serve across the world. In addition, Samsung attracts the best talent from nations around the world. It is a recognised fact that corporations such as LG and Sony depend on Samsung’s semiconductors to generate their 3D televisions. Samsung has the most skilled workers in terms of the creation of 3D semiconductors and, thus, stays ahead in the market. One reason why Samsung’s products are so innovative is because it is basically invests a lot of its proceeds in research functions. According to Chang (2011) the Samsung Corporation invested more than 5% of all proceeds, in 2009, to the function of research. The company then set up a considerable portion of its workforce to work in research-related operations. Social and Cultural Aspects Where social and cultural factors are concerned, Samsung has had to take into consideration the different changes that are being witnesses among different demographics that form Samsung’s customer base. For instance, large sections of the world’s population in developed nations are aging (DJW 2011). This means that, for branches based in developed nations, the products that will be most in demand will be those that are desired by the aging population. According to Michell (2010) Samsung has dealt with this complication by conducting research into the best products for a senior customer base, while also seeking to enter new markets. However, there are other, more fundamental challenges that are faced by the corporation in functioning in different nations. For instance, working with foreign workers tends to be a challenge for any manager, because they are accustomed to cherishing different working principles. According to Kwon (2006), there are not many globalised managers to choose from. This means that most international corporations have serious problems in attempting to understand the needs of their foreign workers. In developed nations, the conventional, top-down hierarchical structure is not often used. Korean management, however, favours this structure. In developing nations, Samsung may have to deal with supervisors who believe that the only way to retain the service of lowly paid workers is by threatening them. In nations like Germany, on the other hand, South Korean managers may find it challenging to deal with white-collar workers who are well-educated and expect to be treated as though they were partners in the firm. Samsung has dealt with these challenges by sending extremely talented officials to countries that have considerable opportunity (Lee 2006). Environment Samsung’s operations have also been affected by environmental factors such as global warming. According to Ewing and Feldman (2012), most of the world’s electricity is formed through the burning of coal. This then causes a massive release of Co2 into the atmosphere. Until ways can be found for technology to generate renewable and clean energy, technology will keep being perceived as a negative force that causes a lot of damage. To retain the loyalty of its customers, Samsung has partnered with other corporations to participate in corporate social responsibility initiatives. In terms of legal factors, the Samsung Corporation has had to conduct serious research on the business and tax regulations of different nations before it actually decides to invest in them (DJW 2011). This has ruled out the prospect of investing in certain nations. In addition, different nations have different beliefs on issues such as employment law, health insurance regulations and environmental law. International Aspects The Samsung Corporation has to constantly seek to pace itself. Samsung is also vulnerable to the moves of its rivals. For instance, there is the temptation to make the changes that it might observe its rivals or competitors making; in terms of targeted customer demographics, or integrating new technologies into products. Corporations such as China’s TE have already surpassed Samsung in the mobile device field. It would be unadvisable, though, for Samsung to stand up to this circumstance by adopting the same technology as TE (Ton and Huckman 2008). Samsung, in general, enjoys making huge investments in procedures that would basically overwhelm smaller companies. This leaves the firm in constant danger of suffering from huge losses if its estimations on the success of a product, or technology, prove to be wrong. According to Chang (2011) Samsung has used different forms of product advertising to appeal to customers in the past, which is something that has cost more than $500 million in Asia, Europe and North America. In addition, the corporation has also turned to online services to engage additional customers. Samsung’s website is extremely efficient and offers free shipping of purchased products (Shaughnessy 2013). The website makes it possible for people to post reviews after evaluating the products from different angles. Marketing The Samsung Corporation has benefited from different joint ventures which aim to deliver more customers to the firm. For instance, in 2009, Samsung forged an agreement with Toshiba for the sharing of semiconductor technologies (Chang 2011). This contract would also make it possible for Samsung to be able to use NAND flash technology. Samsung also forged an agreement with Netflix which made it possible for the latter to be able to offer movies to Netflix consumers by means of the Blu-ray disc players, Samsung BD-P2500. Such joint ventures make it possible for the company to be able to realise increased profits through new streams (Yahoo Voices 2011). In future, it would be beneficial for Samsung to work in league with 3D gaming corporations so as to be able to benefit from having a market share in the entertainment industry. Even though the department of entertainment is not as productive as that of the electronic goods, it would be helpful in influencing consumers and reducing weaknesses. The Samsung Corporation could choose to enter into contracts with outside corporations such as ‘Microsoft’, in order to improve its performance while gaining a foothold in the entertainment industry (Kim 2007). Such a move would also diversify the firm’s product portfolio, while facilitating enhanced brand acknowledgement. Ethics At present, Samsung is faced with accusations about its use of child labourers in its plants in nations such as China. This is, unfortunately, a common accusation where most of the international corporations are concerned. Sometimes such firms intentionally employ young labourers in order to save costs (Shaughnessy 2013). However, most of the time, they are not told about such arrangement by their partners who are the ones responsible for contracting child labourers. Samsung has stated that it is involved in serious efforts to curb the use of child labourers in its firms. Samsung has also, in the recent past, been accused of forcing its workers to operate for up to 16 hours a day without respite. Such cases are only now being revealed in public. However, their exposure is something that forces the firm to make serious efforts towards solving these issues because it wishes to keep benefiting from the investment of assorted sponsors. Conclusion Since its inception, Samsung has been providing electronic products for local as well as international customers. In addition, it has successfully changed from being a low quality producer which catered primarily for local communities, to being a manufacturer of stylish and commendable consumer electronics. The Samsung Corporation has even been changed to be more organic and flexible, resulting in the development of increased innovative capability. With its constant push to create the most cutting edge products, Samsung is likely to be the company of the future, in as far as electronic goods is concerned. Moreover, Samsung has, in the recent past, been embroiled in a series of court cases in which it is accused by the Apple Corporation of selling electronic products that violate patents. The situation is not helped by the fact that Apple is a significant customer of Samsung, and regularly purchases memory chips and processors from it. The court cases began in earnest when Samsung began to produce smart phones whose sales surpassed Apple’s iPhone. Apple’s executives felt that their company’s dependence on Samsung was limiting its negotiating capacity. It is likely that the outcomes of these disputes will determine the future of the phone industry. References Cacciatori, E. & Jacobides, M.G. (2005) ‘The dynamic limits of specialisation: vertical integration reconsidered’, Organisation Studies, vol. 26, no. 12, pp. 1851–1883. Chang, S.J. (2011) Sony vs Samsung: the inside story of the electronics giants’ battle for global supremacy, John Wiley and Sons, London. Cho, M. (2009) ‘The effects of diversity on organisational behaviour in a perceived homogenous society: the case study for Korea’, PhD thesis- The University of Southern California. DJW. (2011) ‘Samsung electronics’, Yahoo Voices, 20 January 2011, viewed May 3, 2014 from . Ewing, T. & Feldman, R. (2012) ‘The giants among us’, Stanford Technology Law Review. Hyun, S., Han, M. & Yeh, J. (2004) ‘Any call: building a powerful brand’, Korea Marketing Journal, vol. 5, no.4. Katsioloudes, M.L. & Hadjidakis, S. (2007) International business: a global perspective, Elsevier Inc., New York. Kim, D.O. & Bae, J.S. (2005) ‘Workplace innovation, employment relations and HRM: two electronics companies in South Korea’, International Journal of Human Resource Management, vol. 16, no. 7, July, pp. 1277-1302. Kim, S.W. (2007) ‘Organisational structures and the performance of supply chain management’, International Journal of Production Economics, vol. 106, no. 2, pp. 323-345. Kwon, O.Y. (2006) ‘Recent changes in Korea’s business environment: views of foreign business people in Korea’, Asia Pacific Business Review, vol. 12, no. 1, pp. 77-94. Lee, D. (2006) Samsung electronics: the global Inc., LEE Dongyoup, London. Michell, T. (2010) Samsung electronics: and the struggle for leadership of the electronics industry, John Wiley and Sons, London. Min, C. (2004) Asian management systems: Chinese, Japanese and Korean styles of business, Thomson Learning, London. Shaughnessy, H. (2013) What makes Samsung such an innovative company? Forbes, 17 March 2013, viewed May 3, 2014 from . Ton, Z., & Huckman, R.S. (2008) ‘Managing the impact of employee turnover on performance: the role of process conformance’, Organisation Science, vol. 19, no. 1, pp. 56-68. Read More