Globalization in Multinational Company - Samsung - Case Study Example

GLOBALIZATION IN MULTINATIONAL COMPANY, SAMSUNG Name Code & Course Professor’s name University City Date Introduction The current global population lives in an emerging market which implies that the world is in a paradigm shift from the basic need phase to a more consumption oriented phase. The shift has created a business environment for more new consumers of products and services across the emerging market companies transforming the customers into wider consumption hubs for the emerging multinational companies. Globalization spearhead various opportunities and threats in both domestic and international companies, having the main agenda of improving and innovating their products for competitive marketing position. Based on emerging market countries, globalization tend to contribute towards a rapid economic growth and development of the multinational countries, the capability of the organizations to support the expanding market oriented economies, ability to embrace each phases of technological development while having a sizeable domestic demand bases (Elikem 2014). Contrarily, globalization pose some threats to the emerging market countries. Based on literature, some of the challenges being experienced include difficulties in adapting to the cultural differences, continuous economic risks through exchange rate, balancing the price and quality, inefficiency in industrial infrastructure, challenges in aligning to corporate social responsibility and difficulties in marketing segmentation among others (Bremmer 2014). Samsung Multinational Company is best known as an electronic company and the largest Korean business group. As such, the company has managed to occupy 28% of the Korean market specializing in IT products, chemical industry and financial services (Seoul and New York 2015). This paper seeks to retrospect the opportunities and threats that are available for the Samsung Multinational company decision-marker. Based on the findings, the paper will give main lessons that the international managers can learn in the interplay between the host and the home country in achieving the multinational company success. Opportunities Market Expansion Companies opening borders purposefully for trade and foreign investments through globalization, opportunities for the multinational companies to expand its business to different nations is high. Through globalization, market integration, Samsung Multinational Company which managed to enter into telecommunication equipment sector in 1958 managed to run the production of its equipment and services in more than five different countries inclusive of eight different production bases (Pechit 2014). The company capability to penetrate into other markets is attributed to its ability to unleash an export offensive towards the developed countries. The capability of Samsung to operate in five different countries is an explanation of the market expansion through globalization. Currently, Korean Samsung company has more than 285 operations in 67 countries due to the company interest in equipping overseas units with skills and resources to prudently expand its services outside the home market based on globalization opportunities (Samsung Press Information 2014). Acting as a conglomerate, Samsung company is attributed on services such as suppler, manufacture, and engineering company across the globe. The company analyzes the geographical location and some of its advantages like findings from China does indicate that the country offers cheap and smooth labor costs hence Samsung company can easily expand its international market to china (Simonin 2014). As such, it is the strength of the Research and development (R&D) development department in an organization that would determine the company global competition advantages in different countries. Opportunities arises whereby a strong R&D enables companies to have quicker fulfillment of consumers’ needs at a faster rate than the global competitors. R&D has positioned Samsung Company to have higher degree of local responsiveness by engaging in product lines that require low degree of adaptation towards customers and high expected payoff from the products. Cost and Productivity Study has been conducted to identify the cost and productivity level of Samsung operation services across different countries. A single study conducted in Vietnam Samsung manufacturing factory indicates that Samsung Company is benefiting in low costs in manufacturing stage by using Vietnam labor force. Findings indicate that local labor working cost per unit in 2013 was only 30% of that of Gumi from Korea, indicating a difference of USD 5.7 in favor of Vietnam (Lee 2015). As such, the decision-makers need to understand the environment for internationalization of the products based on cost and productivity. The major reason as to why Samsung established the factory in Vietnam was to benefit from cheap assembling and production costs by using local labor force. Additionally, the cheaper labor costs experienced in Vietnam contributes towards reducing costs while generating more revenues due to the costs of Samsung company intermediate inputs not indicating a wider margin between the domestic factory and overseas factories (Hinh 2013) In the process, Samsung multinational company makes USD 628 million per year as a profit and re-investment amount. Based on the identified opportunities, it can easily be argued that the technique of operating in cost saving countries such as Vietnam, contributes towards the stability and large profits in Samsung multinational company which spearhead the company towards launching new products into the market through innovation as a next round of investments. Threats Substitutions towards New Entrants Currently, Multinational companies advocate for the latest technological development. Samsung company face threats from Chinese firms that are of low-cost products and services while embracing the mass-produce mainstream (Yin 2014). The new entrants take the advantage of the already developed technologies hence ability to save on the R&D costs hence producing a competitive product. Additionally, it is noted that Chinese firms have easy access to cheap capital both locally and international market. Based on its strong financial market position, the corporations are will to sustain minimal losses by employing the low-cost technique over the years so as to win the market leadership position in future. This is based on the analysis whereby chines multinational company’s salaries are about a quarter of those of Samsung while the labor costs are half of Samsung, implying that Samsung level of productivity must be twice of the China SMIC’s company (Lazonick 2014). Critically, China SMIC’s company has the capability to substantially reduce the Samsung’s margin hence a threat to Samsung through consumer’s substitution. Increase of Counterfeit Products. Research conducted by US Chambers of commerce indicates that approximately $500-$600 Billion annually, is lost through counterfeit products (Global Data 2013). As such, the perverseness of the increasing counterfeit products is a threat to Samsung company that strongly invest in quality to its products through low purchase power hence affecting the company profit margin. As such, an increase in imitation of Samsung products, the company financial health and brand position is likely to be affected. Competition Technological industry is highly competitive. Samsung company had an Apple Shock from Apple company when it launched iPhone in Korea. In 2009 to 2012, the Apple iPhone industry recorded the largest annual sales in Korea outshining Samsung strong base purchase (Heo 2015). The result indicates that Samsung company is under competitive threat from dome of telecommunication multinational companies globally. Corporate Social Responsibility Corporate Social Responsibility (CSR) proves to be challenging to global companies. Anti-globalization movements fighting cultural imperialism, employees losing jobs due to companies offshoring and outsourcing, placement of the intellectual property rights against human rights and pursuing unsafe technologies and unsustainable product consumption indicates that corporate social responsibility is a challenging factor that contributes to anti-globalization. Samsung multinational company has been criticized of producing products that are not recyclable and lack of recycling programs (Sharma 2013). As such, movements such as Electronics take back coalitions spearhead a marketing campaign attacking Samsung company for its failure to observe the CSR objectives. The company is believed to be producing metals that contain toxics that is harmful to the public, hence the movement is warning consumers of Samsung failures. Such a weak stance of Samsung adhering to CSR might shift consumer’s attention to different companies while countries that are fully align to CSR function might issue trade barrier to Samsung company hence limiting the globalization development of Samsung. Market Segmentation The current increase in globalization in the business world, the International segmentation has become a more important aspect in marketing. Samsung company experiences difficulties in capturing a sizable market share globally. It can easily be argued that one of the reasons that spearheads the challenge, it is through globalization whereby though the company has managed to operate in various countries, the customization of the products is not based on the preferences of the consumers (Steenkamp 2013) Cultural Differences Cultural differences arise either as a demand risk or a supply risk. Based on business management, record showcases that company’s representatives in different countries have the tendency of misreading consumers demand, poor communication patterns, challenges in forming business relationships, too conservative when assessing the distributors while issuing credits, low operational level and possibility of high conflict. Though Samsung company has tried to tackle cultural differences across its operational countries by having centers for multi-national trainings courses of staffs serving different countries, the outcome still indicates challenges (Renee 2013). As such cultural differences is still a threat to globalization development hence Samsung company requires its senior expatriate staff members to undergo compulsory specialist trainings on how to overcome cultural differences in different countries. Lessons to be Learnt Quick Decision Making International managers need to understand that quick decision making has both positive and negative impact in multicultural companies. Advantages of quick decision making contributed towards the success of Samsung company through bold and swift decision in investing in memory chips in semi-conductor industry hence managing to outshine the Japanese that previously dominated the market while advocating for slower decision making approach. Additionally, International managers need to understand that companies which has already ownership management system have the capacity to make quick bold and swiftly decision. It is the weak ownership management in Japanese company that impacted the firm managers not to make faster decisions after being cautious based on broad consensus. As such, Samsung company has been on the leadership positon in more than a decade in semiconductor industry (Jung 2016). Additionally, the managers need to engage in extensive research in countries that they are targeting to expand company’s services by analyzing the minimum wage levels, the cost of production and services while not forgetting to understand the corporate social responsibility regulations in the new country. Failure to engage into extensive research while collecting genuine data, the company new business opportunities would likely to fail by not meeting the consumer’s preferences. Spatial Integration Samsung multinational company has managed to integrate its operational activities on the key value chain of the organization. As such, most of the Samsung factories are located in a close geographical proximity. In the process, the company has managed to have quicker production of products while improving the company yields. This attributed to the management team for gathering the all relevant research teams into a single space area where research and development technique was initiated through integration of R & D activities that proved to be unique across countries. As such multinational managers need to understand that spatial integration of goods and services across the organization is important while continuing to invest on R & D for innovation purposes. Focusing on R & D, international managers need to learn that it is the globalization that spearheads global competition hence it is the R & D intensive order that continues to position the company to retain its market or expand into new markets while innovating new products that are of quality to consumer’s preferences (Khan 2013) Conclusion Conclusively, the study has uncovered a number of factors associated with opportunities and threats of globalization to multinational companies in emerging markets. The study has indicated that multinational companies are likely to benefit on factory outsourcing to countries that have a fair business environment purposefully for cost reduction operations. Based on TQM and SCM that are strongly implemented, multinational companies are likely to come up with new innovation that can easily meet the consumer’s preferences. Additionally, it is the TQM and SCM that enables companies to structure quick decision making in attempt to attain and maintain leadership positions in different instructress. Contrarily to the few mentioned opportunities, globalization is still a threat to both emerged and emerging companies that have multinational companies, and due to limited research information of the challenges of globalization, it is advisable for extensive research to be conducted in globalization effects to companies. References List Denisa, M 2013, ‘Intercultural Mediation in Communication,’ International Journal of Research in Business and Social Sciences, vol. 2, no.11, p. 345. Bremmer, I 2014, ‘The New Rules of Globalization,’ Harvard Business Review. Elikem, O 2014, ‘Globalization and Competitiveness,’ International Journal of Business and Social Science, vol. 5, no. 4, p. 287. Global Data, 2013, ‘Samsung Electronics Company Limited,’ Financial and Strategic Analysis Review. Business Insights. Essentials. Heo, J 2015, ‘Supplier Partnership Strategy and Global Competitiveness: A Case of Samsung Electronics,’ Eurasian Journal of Business and Management, vol. 3, no. 4, p. 1-12. Hinh, T 2013, ‘Light Manufacturing in Vietnam,’ Creating Jobs and Prosperity in a Middle-Income Economy, The World Bank, Washington, DC. Khan, A 2013, ‘Globalization and International R & D Flows into Emerging Markets,’ Journal of Emerging Knowledge on Emerging Market, vol. 3, pp 122-123. Lazonick, W 2014, ‘China as an Innovation Nation. Oxford University Press. United Kingdom Lee, K 2015, ‘Overseas Factories, Domestic Employment, and the Technological Hollowing out: A Case Study of Samsung’s Mobile Business Phone,’ Reviewed World Economic Journal, vol. 151, p. 465-466. Pechit, M 2014, ‘The Korean Electronics Industry,’ Boca, Raton, CRC Press. Renee, K 2013, ‘Samsung’s Competitive Innovation and Strategic Intent for Global Expansion,’ Problems and Perspectives in Management, vo. 5, no. 3, pp. 135-137. Samsung Press Information 2014, ‘Company Overview,’ History of Samsung, pp.1-7. Seoul and New York 2015, ‘The Top 20 Korean Multinationals: Changes and Continued Growth of Foreign Investments,’ Colombia Centre on Sustainable Investment, pp. 41-44. Simonin, D 2014, ‘International Strategy,’ The Strategy of Samsung Group, Research Gate. Steenkamp, J 2013, ‘International Market Segmentation: Issues and Perspectives,’ International Journal of Research and Marketing, vol. 19, p.185-200. Sharma, B 2013, ‘Contextualizing CSR in Asia: Corporate Social Responsibility in Asian Economies: Lien Center for Social Innovation, Singapore. Yin, E 2014, ‘Accelerated Innovation: The New Challenge from China,’ MITSloan Management Review. Read More