Samsung Company Analysis - Case Study Example

Samsung company analysis Name: Professor: Institution: Course: Date: Executive Summary This report is will focus on a company that has diversified business, under the same brand name of Samsung. The Samsung heavy industry, Samsung Electronics and Samsung Heavy construction all form the Samsung Group. The paper will analyze the company and its diversified strategies using tools and techniques such as the SWOT, TOWS and the PESTEL analysis. Samsung Group Strategies against those of its competitors as well as its entry strategies. The company will basically focus on understanding the company as a diversified multi-national company and recommended possible courses of action the company can take to remain successful. A table is provided in the report to show the market share of this diversified company in relation to its competitors in the various business units. Samsung Company is the ideal diversified company to analyze due to its innovative and unique approach to the business world. The paper is subdivided into sections, with the first part focusing on introduction and the other parts focusing on the data about the company, the future of the company and recommendations to the company. Table of contents 1. Executive summary 2 2. Table of content 3 3. Introduction 4 4. Company’s overview 5 4.1. Mission, Vision and Goals 5 4.2. Organizational structure 5 4.3. Products 6 4.4. Group Segments 6 4.5. Market/competitors 7 5. PESTEL Analysis 7 6. SWOT Analysis 9 7. TOWS Analysis 10 8. Recommendations 12 9. Conclusions 13 10. References 14 Introduction Samsung Company is the largest company in South Korea and the 2nd largest multinational diversified company in the whole world (Economist 2009). The company overtook its Japanese rival Sony in 2005 to become the world leader in consumer electronics brand and is a house hold name in many parts of the world (C.K.Prahalad, 2007). The company is also a leader in several domestic industries like the entertainment, retail, financial and chemicals industry. The company was founded by the family of current CEO Lee Soo-bin who has company for generations, in 1939. The company started as a very small trading company with only 40 employees (Lero & Nicole 2010). At the moment, the company has over 254,000 employees and it produces sixteen products which are dominating the market share globally. Flash memory, DRAM color cathode ray tube TVs, colour Television monitors, LCD drivers, CDMA handsets are just some of the products Samsung is specializing in. Samsung also manufactures mobile phones and its relationship of the company’s handsets with that of mobile network is so established that the dealers promote the Samsung mobile phones by giving exciting deals and offers to attract customers (Samsung 2010) The company has also created a mark in the house hold industry with the company’s washing machines and refrigerators making good response to the market. Other household products include the air conditioners, washers, air purifiers, vacuum cleaners and microwave ovens. The company’s digital media business produces laser printers, laptops, televisions, and DVD players, TFT-LCD panels for laptops and LCD televisions and monitors (Lero & Nicole 2010). The company’s head quarters are at Seoul and it operates in more than 100 countries all over the world. The company is a typical example of a family run conglomerate and is the world largest conglomerate in relation to its revenues and also because the company’s account take up 20%of the total South Korean Exports and makes annual revenues of up to $60 billion, profits of up to $10 billion and a market value of $100 billion which gives a rough idea of the size of the company (Samsung .com, 2010, 1). Company overview Review of Samsung Mission and Objectives Samsung’s well defined mission statement has given it direction and propelled it towards growth. The mission states, “Economic contribution to the nation, Priority to human resources, Pursuit of rationalism”(Samsung 2010). The company has been consistently delivering on this mission statement and is now one of the biggest wealth makers in the world. It has high levels of employee commitment that have ensured commitment and dedication to the company’s vision and its pursuit to bring the best products to make life better for them (Samsung 2010). The company has also shown a high degree of customer orientation ensuring that their products meet the customer needs and hence are more successful than those companies that are product oriented. Based on its current objectives, it is clear that Samsung is set to keep its position strong, is clear about what it wants to achieve and its mission statement acts as a guide to perfectly execute its objectives. The company’s organizational structure is as indicated by the chart below. Organizational structure Source: Samsung (2010) Products/industry Samsung operates in the consumer electronic and consumer appliances industry and manufactures a range of products and services in the industries indicated in the chart below. The company exclusively focuses on the consumer electronics segment and with its competitive edge the company has been able to acquire maximum market share for its products (Grant 2002). The rise of the Samsung Company has been in line with the growth of the Asian Tigers (the South East Asia countries). The company has been able to successfully penetrate into the global booming market for the consumer electronics and has stayed on top of the market. Samsung Group Segments Market / competitors Source: Samsung (2010) Samsung has a major advantage over its competitors in that its product range is marked with high degree of responsiveness to customer’s needs and quality. The product features come with unique and superior designs and use of Artificial Intelligence (AI) in making its products. With the arrival of new and innovative products, Samsung managed to take the consumer electronics market and acquired maximum market share through offering value to their customers by combining price elasticity with quality, a combination that has kept it ahead of competition. Samsung has been using the bottom-up approach to growth which include launching products that are targeted at the market lower end and then climbing steadily to the high end segments (Lero, Article Click 2010, 1). The company strategy The growth path of Samsung along the product dimension can be looked at from various perspectives: product price level, product life cycle (PLC), product characteristics and diversification which together combined have been the foundation for Samsung’s competitive advantage. From the PLC perspective, the company has been following a reverse order of the PLC (Jonathan et al 2008). When Samsung Company started operating in 1979, it chose monochrome TV sets as its first product despite the fact that they were in the decline stage already. From the price level perspective, the products growth path started at the low end of the price range and it gradually moved up parallel with the technological capability and the income rise. From the diversification perspective, Samsung initially operated with a simple product structure and concentrated mainly on home appliances and TV receivers. The 4th characteristic of the company’s product path is that monochrome TV which was their first product choice brand name insensitive but had high price elasticity (Armani et al 2001). Changes taking place in the macro environment that might have an impact upon the firm’s competitiveness Political facts Samsung is facing significant political forces in those counties where the company operates though in many of the countries, the political situation is conducive for business operation. Political situation in South Korea is becoming a worrying factor for the company and the country faces political instability at home as well. Samsung is at a distinct disadvantage in countries in the Africa continent and the South East Asian countries because of the hostile business environment. In countries like India and China, the political environment is conducive for the company which has allowed it to concentrative more on the market which will have a positive impact on its competitiveness (Lee & Dick 2009). Social-cultural Samsung has succeeded to integrate itself in the emerging markets where it conducts business despite being a South Korean based company. This has helped the company to think globally, act local mindset which has effectively bridged the social and culture gap between its home country’s business landscapes and the markets where the Samsung operates (Jonathan et al 2008). Samsung tries to strike a balance between the aspiration values of the customer classes and the level of income that they possess. Technology Samsung prides itself on its innovative technique to technology and also rolling out products that use cutting edge technology in their features and design. The company’s innovation is the biggest strength and it can take pride sine it is a pioneer for many of the innovations that it has brought out through its products in the global marketplace (Yu, Seongjae 2008). This innovation have helped the differentiate its product and also reduced if total cost and as a result, the company is able to sell its product at a lower price compared to its competitors giving it a competitive advantage over these competitors (Friedman &Thomas 2005). Economic Samsung has come up with strategies based on the economic size and the strength of the customer in terms of disposable income. Since the company needs high levels of income from its customers to purchase the product it produces, the company has used a target marketing strategy for its middle classes in those countries which it operates (Park & Gil 2006). Unlike the developed countries where the product lifecycle for its range of products are in the maturation or the decline phase, the company enters market where the business cycle for the product that it sells is in the initial stage. Indeed this strategy of entering where the products finds a ready market has paid off since it gives the company a competitive advantage against it key competitors resulting to high profitability (Lee & Dick 2009). Environmental Samsung has started to be conscious of its social obligation and environmental as evidenced in its approach to CSR a well as the green polices. Most of its manufacturing equipments are built on environmentally sustainable design and also the company is adopting other practices in line with this regard (Lee & Dick 2009). SWOT Analysis Strengths Strong financial position Heavy assets in technology, staff and artifact architecture Strong brand equity Market share leadership Loyal customers High research and development Strong management team Innovation Cost advantage Online growth Focus on new articles for the high-end marketplace Weaknesses Lack in artifact separation centermost on accumulation bazaar instead of alcove markets Different models at assorted amount points Not actual user affable design not proactive to introducing new products, it waits to attack the competitors lacks in product differentiation Opportunities Offer artifact variation Differentiate its account from competitors Through make itself distinctive from competitors, it can gain more market share.  By providing distinguish services it can increase its customer base crave for corpuscle phones apprenticed by the account provider or carriers tie up with account providers Since the demand for the cell phone is increasing as compared to other electronic products, Samsung group has the great chance to introduce user friendly mobile phones at affordable price. It would help to beat customers and also to lead market share Threats Agitated competitor, including Sony Ericsson and Siemens bistro into its share Motorola's baby minding in the U.S market, Nokia's acceptance in the Pakistani market, artful added than bisected of the apple market Not befitting clue of the new trend in the market Samsung advertisement is not excessive while the competitors advertise their products excessively which can take away the existing customers of Samsung Source: Samsung (2010) TOWS Analysis Internal factors Strengths Weakness External factors Opportunities SO Strategies Acquisition for growth Invest in research and development Leverage brand for growth and expansion in emerging market WO Strategies Innovative products with higher margins to drive profitability New markets for increase profitability Acquisition of now technology for innovation Threats ST Strategies Focus on innovation for higher margins Leverage brand to differentiate WT Strategies Diversification into new emerging market Invest in branding and customer loyalty programs Differentiation to avoid loyalty programs Source: Author 2011 As observed above from the TOWS matrix, Samsung should pursue expansion in emerging markets, growth, differentiation, and go for invest in innovation and research strategy as its future strategies. The recommended strategies as based on the TOWS matrix are discussed below. 1. Growth- this is based on its market capitalization strength, a very strong brand name and access to funds. Samsung should aggressively pursue growth strategy through several means such as regional expansion, expansion through acquisition to ensure that it comes out of the current economic conditions as a dominant entity on the world level and international expansion so that it is viewed as the strongest player in each of its segment that it operates in (Robert et al 2007 p24). 2. Differentiation – for the company to move away from profitability pressure and also ensure they are not competing at the lower end of the market, Samsung should try cutting edge technology through acquisitions and capture additional value or even access to new and also strengthen its investment in research and development. This will ensure that the company will have high profitability and at the same time catering to a higher value added market that has high demand and better profitability (Elegman 2005). 3. Focus on information technology- Samsung should heavily leverage information technology so as to ensure better targeted positioning and also products that meets the consumer needs. This would strengthen its huge market presence, prevent it from lower profitability and ensure that it satisfies its customers. 4. Branding and customer loyalty- in order to enjoys a premium positioning that can allow it to get better margins and fight off competition, more investment is needed in branding and consumer loyalty programs that ensures that Samsung is viewed as the first choice when customers want to buy anything. Recommendations The current strategic objectives of Samsung Company have demonstrated the strong performance, product leadership, profitability and global presence. Samsung has a strong mission statement and being a conglomerate, it follows related and unrelated diversification in all the group companies it has. Below are recommendations of major strategies that the diversified company should consider adding to what its current strategy establish a market position and become dominant in the consumer industry. Growth strategy at the corporate level As a result of the declining global conditions in the economy, the performance of Samsung has been stagnant in some of the segments. The company, which has a success history of acquisition, must be able to actively look at opportunities presented by this tough global situation so that it can be able to leverage its brand as well as grow fast in the growth markets. Differentiation at Business level Vanilla products like the flat panel monitor have been receiving lower profitability as a result of commodization. However, the company should consider investing in the latest technology to differentiate its products from those of the competitors and hence gain competitive advantage. Cost leadership at Business Level The company usually operates at a very large scale and has several suppliers for the raw materials and for this reason it has a cost advantage over its competitors which it can use effectively to sell volumes through lowered costs which would also keep customers away from competition and hence ensure that there is a steady cash flow in this tough economy. Leveraging Information Technology (IT) at the functional level As a result of the large number of business operations Samsung has, it must have vast knowledge in terms of customer preference, market trends, customer information and others. For this reason, the company should ensure that it uses the very latest IT tools to make use of the data collected from the customers which will help the company understand its customers more to ensure higher margins and brand loyalty. Conclusion From the above analysis, Samsung is a large conglomerate and diversified company with separate businesses which operate as different entities. The company is well positioned for present as well as future growth and has a high customer focus and process orientation. However, the company needs to invest in IT which will help it retrieve all the information that exist about the market and the customers which will in turn give it more insights on how to leverage its capabilities and ensure that it achieves its goals. In addition to IT, Samsung should consider people as their most important assets as they state in their mission. The IT system and the data captured about performance should be detailed and objective so as to give an insight to people into what is expected of them so that they can do their best to produce the best performance. Finally, the company new management should consider re-invention considering that in the recent past, there have been several scandals in the company. References Armani F, Carey J & Goodwin 2001 Samsung electronics Retrieved on 1st Apr 2011 from http://stuff.mit.edu/afs/athena/course/15/15.249c/Samsung%20Electronics%20-%20Master.ppt C.K.Prahalad, 2007, The Fortune at the Bottom of the Pyramid New York: Simon and Schuster, Economist 2009, The succession at Samsung Retrieved on 1st Apr 2011 from . Elegman 2005 Marketing Analysis of Samsung, Retrieved on 1st Apr 2011 from http://www.elegman.com/en/view_files.php?fileid=3168&language=en Friedman, Thomas 2005, The World is Flat New York: Viking Grant 2002, Cases in Contemporary Strategy Analysis , 3rd edn, Oxford: Blackwell, Jonathan C. Ho, Chung-Shing Lee 2008, "The DNA of Industrial Competitors " Research Technology Management. Volume: 51. Issue: 4. Lee, Tim Jones and Dick 2009 "Samsung, Others Adopting Value Innovation" Research Technology Management. Volume: 49. Issue: 5 Lero, Nicole 2010, A Brief History of the Samsung Company Retrieved on 1st Apr 2011 from . Robert D. Buzzell and Bradley T. Gale, 2007 The PIMS Principles: Linking Strate Performance (New York: Free Press,): 64-5. Samsung 2010, Samsung Profile Retrieved on 1st Apr 2011 from . Sangmoon Park, Youngjoon Gil 2006, "How Samsung Transformed Its Corporate R&d Center ." Research Technology Management. Volume: 49. Issue: 4. Search, Display 2008, Market Share for LCD Monitors Retrieved on 1st Apr 2011 from . Yu, Seongjae 2008, "The Growth Pattern of Samsung Electronics A Strategy Perspective" International Studies of Management & Organization. Volume: 28. Issue: 4 Read More