Strategic Management & Decision Making at Samsung Company - Case Study Example

Strategic Management & Decision Making - ICT Samsung Company Analysis Name Course Name and Code Instructor’s Name Date Contents Contents 2 1.0 Introduction 3 1.1Organization’s Background 3 1.2Purpose & scope 3 1.3Limitations 4 2.0Internal analysis 4 3.0External Analysis 5 3.1PEST 5 4.0 Industry Analysis 7 4.1 Porter’s 5 forces 7 5.0 Performance analysis (balanced scorecard) 9 6.0 Strategic analysis 10 Conclusions & recommendations 11 References 13 1.0 Introduction Strategic management is a practice undertaken by managers of an organization to help in decision-making, handling of human resource and other resources within the organization and in performance management. For strategic management to be done, the manager has to be clear about the organization’s goals and vision, so that the decisions made will propel the organization towards achieving its goals. When the goals are made clear, policies are introduced and the manager monitors the performance of the organization relative to the vision, and he makes it possible or easy for the policies to work by ensuring that he makes available all the resources needed. Strategic management also involves creating an awareness of the organization’s competitors and making effort to have more competitive advantage and greater sustainability over the competitors in the market (Henry, 2008). 1.1Organization’s Background The Samsung Group is a company that is based in Korea, and it is multinational in nature. The company was established back in 1938, and it is mainly known for being the world’s largest company that deals with electronic and other products related to technology. However, Samsung does not only deal with electronic product; it does ship building and aviation, chemical products, financial services, retail trade, phones, flash memory, disk drives, optical products, and entertainment products and services. The company is estimated to have annual revenue of about US$ 200 billion (Michell, 2010). 1.2Purpose & scope The purpose of this report is to do an analysis of strategic management of the Samsung Company by conducting a comprehensive internal, external and strategic analysis of the company’s financial operations over the past five years. 1.3Limitations There are several limitations to this study, the first one being the fact that only secondary data (material from the internet and Google books) will be used, meaning that only the data available in these sources will be used. In addition, considering that Samsung is a company that deals with so many other things and that has many facets, another limitation is the fact that this report will only analyse the financial side of the company over the past five years, which is also a very short period. Since part of the research will entail looking at the company’s financial reports, the information gathered thus may be biased because of the fact that the company will only write well about itself. 2.0Internal analysis Internal analysis of an organization entails an analysis of the internal factors, mainly strengths (resources and capabilities) and weaknesses, which may be an advantage or a disadvantage to the organization in one way or another. The strengths of a company refer to the available assets or the capabilities the company may have for meeting the needs of the market it targets, while weaknesses refer to the limitations the company may have or face in meeting the needs of its target market (Schilling, 2010). It is the resources or available assets and capabilities of a company that determine the success of creating competitive advantage for the company in the market. However, this is not to say that the competitive advantage of a company solely relies on resources; the capabilities of the organization are the determinants of how well the organization’s resources will be utilized for achievement of competitive advantage. Utilization of the resources is also measured by the knowledge and skills framework (KSF) of the workforce of an organization (Freeman, 2010). 3.0External Analysis 3.1PEST PEST analysis evaluates the Political, Economic, Social and Technological factors in the macro environment of an organization that influence decision-making and management strategies in the organization (Griffin, 2011). Political factors mainly include the policies the government makes that affect the organization in one way or the other. Government policies governing subsidies also greatly affect an organization. In addition, the political environment of a country can greatly influence the organization’s human resource, infrastructure and facilities and even social or health issues in the country. The government has the power to change the political environment of Samsung anytime. The government may pass bills or regulations that may change the decision-making models of the company at any time. Therefore, the Samsung Company has to design management strategies that will keep it above its competitors (Bruton & White, 2010). Economic factors that affect the organization mainly include those related to taxation policies. Also, globalization, recession, inflation et cetera are major determinant’s of an organization’s decision-making and management strategy. The rate at which foreign currencies are exchanged in the nation the organization is in also affects the organization. The economic stability of a country and the rate at which it earns foreign exchange may also determine how decisions will be made and how management will be done in an organization. The world has of late experienced major economic crunches and recession, making the economic growth in most places to decline to a negative rate, and this decrease in exchange rates and economic growth may have caused a struggle for Samsung. The company will therefore have to revise its costs of production so as to lower the prices of its products and services, and this may reduce the profit margin left (Kazmi, 2008). Social and demographical factors mainly influence the demand and supply curve and the decision making model of an organization. For instance, if the population of the country or area in which the organization is based is mainly comprised of young people and fresh graduates, the demand on the organization from the government to employ more people will increase. Samsung has a social advantage because of the reputation and name it has created among the population over the decades. This therefore gives the company an added advantage in the market because its products are more acceptable by consumers. However, the challenge is that the company has to work even more to maintain the image and to continually please its fans (Hill & Jones, 2009). Technological advancement creates new markets and new challenges to an organization. For instance, advancement in technology may open up a new market for manufacture of MP3 players to an organization that originally manufactured video tape players, but pose a challenge to the organization to finish off the old products and produce the latest technology products. Such an organization may have to either train the employees it has on the new technology or hire new employees who are trained on modern technology. This may greatly affect the decision making of the organization. Samsung therefore has to keep up with the fast pace of the ever-changing technological world so as to stay above its competitors (Thompson & Martin, 2010). 4.0 Industry Analysis 4.1 Porter’s 5 forces The Porter Five Forces analysis of the industry evaluates the five factors that determine the profitability of an industry. These factors cause intensity in competition, and they either make an industry more attractive if it is more profitable or unattractive if the industry is unprofitable because of the weight of these factors. Out of the five factors, two are vertical forces (bargaining power of customers and bargaining power of suppliers) while three are horizontal forces - threat of new entrants, threat of rivals or close competitors within the industry and the threat of substitute products (Sekhar, 2009). The bargaining power of customers or buyers is based upon the strength or bargaining advantage the buyers have over the company. Buyers who have a greater advantage over a firm can easily put it under the strain of conforming to the consumer’s wishes. An industry market that has very few suppliers (competitors) as compared to the number of customers has buyers whose bargaining power is low. If in the market the buyer is stronger, then the buyer can demand either for a price reduction or for better quality products at the same price. Samsung has many competitors, meaning that the bargaining power of the customers is high. However, the company can beat this by ensuring that its innovativeness and quality of products is unique such that customers have no choice but to opt for Samsung (Nutt & Wilson, 2009). The second force, the bargaining power of the suppliers, works in the same way as that of the bargaining power of the buyers. This is because in this case, the firm is the supplier’s customer. If the supplier is more dependent on the business, then the supplier has a lower bargaining power, but if the business is more dependent on the supplier then the supplier has a higher bargaining power over the firm. A market that has few suppliers is characterized by firms that have very limited choices and a low bargaining power, giving an upper hand to the suppliers in the market. If the suppliers of an industry have more power over the industry, then the profitability of the industry is lowered. The suppliers may have a great advantage over Samsung especially because of the limited number of suppliers of quality software and hardware devices. However, Samsung can minimize this by making some products for itself (Stegmann, 2009). The threat of new entrants in the market is mainly seen in markets that are highly profitable. A new competitor can enter the market and become a new entrant, or an already existing competitor can launch a new product and become a new entrant in that manner. When new entrants come into a market, they increase competition and reduce the profitability of the firms in the market (Daft & Marcic, 2010). However, it is not always easy for new competitors to enter the market. This is mainly because of the barriers and restrictions that are usually present to discourage entry of many new competitors to the market, thus avoiding perfect competition. Perfect competition is a state in the market where the profitability of all the firms in the market tends towards zero. Samsung has an advantage because it is one of the top companies of its kind, and it is easier for the company to dominate the market above its immediate competitors. However, the company has to ensure that it maintains high profile innovativeness in its products to stay above its immediate major competitors, who also have a considerable market share (Harrison & St. John, 2009). Firms within an industry become major rivals to each other because of the fact that each firm strives to secure the biggest share in the market, thus putting the other firms in the market at a risk of losing business. The number of companies in the market and the market share concentration of each company is a great determining factor. Samsung has to ensure that it gains higher competitive advantage and greater sustainability over competitors (Hill & Jones, 2008). Consumers get bored when a market is flooded with the same kind of product and they quickly switch to an alternative product when it is offered to them. A substitute product is that which has the capacity to swap places with the existing product in every sense, such that there will be no more need for the existing product. Substitute products cause elasticity to the competition, thus posing a threat to the existing products and companies. For instance, the demand on petroleum products, especially gasoline, is almost completely inelastic because of the fact that there is almost no threat of substitutes. However, consumer products face a very elastic demand because of the presence of substitute products. Since Samsung has very close competitors who venture into almost the same activities, it should introduce strategies that keep its products above those of competitors. Market research should therefore be thoroughly conducted (Warren, 2008). 5.0 Performance analysis (balanced scorecard) The balanced scorecard is a tool used in management of the performance of an organization’s human resource. The manager analyses the performance based on the return on capital and return on equity the organization gets. However, this does not mean that the balanced scorecard performance management only uses financial measures; there are also other measures that are not related to fiscal matters that are used in this strategy (Singh, 2008). In this strategy, the managers in an organization are updated on the performance of their departments and they are alerted on the areas in their departments that are not performing as expected. It is believed that by so doing, the managers are able to direct their energy and resources to the right areas that need more attention and they are able to reward those that are performing well. The vision of the organization is broken down and simplified so that the managers and the human resources are able to base their individual performance on the vision and goal of the organization (Haberberg & Reiple, 2008). Samsung can ensure that its performance is right by monitoring and managing the resources it has. The main resource the company has is its workforce followed by other resources such as its finances, technological advancement and its capabilities or strengths in the market. 6.0 Strategic analysis Strategic analysis mainly involves analysis of an organization’s market and its capabilities. It is this strategic analysis that enables the managers of an organization to create a strategic plan that will cause the organization to create new opportunities in the market. Strategic analysis involves analysis of the customers, competition and competencies of an organization (Daft & Lane, 2009). An analysis of the customers involves looking at the needs of the customers and coming up with products or services that will meet their need. In addition, the organization needs to know its most profitable customers so that it will direct more of its resources to satisfying such customers. An analysis of the competition includes looking at the threats in the market faced by the organization and analysing the market to identify the areas in the market where the organization can do well with lesser competition and obstacles. An analysis of competencies includes looking at the organization’s capabilities, strengths, abilities and the costs the organization can bear in practicing its abilities (Griffin, 2011). Gap analysis includes an analysis of the organization’s current position (actual performance) and of the position it aims to be at (desired performance). Gap analysis is conducted in relation to the organization, the business direction, business processes an information technology. Gap analysis of the organization mainly entails an analysis of its human resource and work structure of the organization. The work structure is comprised of the various divisions, departments, positions or ranks within the human resource body. Samsung has various departments and divisions, and there are different ranks in each department. Therefore, the work structure can be analyzed to identify areas that are lagging behind in performance (Bruton & White, 2010). The business process is the collection and a sequence of activities in an organization that lead to the formation of a certain product or service for a particular target group. The gap analysis can be conducted on Samsung’s business process by evaluating the performance of each process and coming up with ways through which each process can be more efficient to achieve a desired performance. Information technology in an organization basically entails handling of the organization’s data and processes through computers and telecommunication devices. Samsung’s gap analysis of its information technology can include an analysis of the efficiency with which its data is handled and the speed, accuracy and convenience with which information are passed through the organization. Improving and updating of its IT can lead to greater efficiency and therefore bring the company closer to its desired performance (Sekhar, 2009). Conclusions & recommendations The purpose of the study was accomplished, since a comprehensive analysis of the company’s internal, external, performance and strategic factors was done. Samsung Corporation needs to constantly analyse its weaknesses and strengths so as to come up with strategies that work. The company should ensure that it has a greater competitive advantage over its competitors especially in the external factors that affect its competitors equally. The company should also come up with new strategies for each of the porter’s five forces by ensuring that innovativeness is used. In addition, constant monitoring and effective management of the company’s resources should be done to ensure better performance. Apart from having a clearly defined work structure, Samsung Corporation should ensure that its business processes are efficient and that its information technology is up to date to ensure efficiency in data handling and safety of the company’s private information. References Bruton, G. &White, M. (2010). Strategic Management of Technology and Innovation. Sydney: Cengage South-Western. Daft, R. & Lane, P. (2009). Management. Cengage Publishers. Daft, R.L. & Marcic, D. (2010). Understanding Management. Cengage Publishers. Freeman, R. E. (2010). Strategic Management: a stakeholder’s approach. Cambridge: Cambridge University Press. Griffin, R.W. (2011). Fundamentals of Management. Cambridge: Cambridge University Press. 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