External Environment of Samsung Corporation - Essay Example

Executive Summary

Samsung Corporation is a company worthy of analysis as there is much to be learned from its strategic development. Hence, this report shall provide a strategic analysis of this company that has grown tremendously over the years. It will present its strengths, weaknesses, opportunities and threats (SWOT analysis) as the internal environment analysis. It will also analyze its external environment.

Introduction

Samsung’s humble beginnings in South Korea as a small trading company has evolved into a gigantic company with various businesses within a wide spectrum. Aside from being known for being a forerunner in information and communication technology (ICT), it is also involved in the business of semiconductors, skyscraper and plant construction, petrochemical, fashion, medicine, finance, hotels and more (Samsung Website, 2016). Its move to make a better world entails the hiring of talented, innovative people who are responsive to the demands of global consumers. Samsung has accepted the challenge to be a leader in the business fields they have conquered.

This strategic management report is limited to Samsung Electronics, a part of the Samsung group of companies. Its strong emphasis on innovation, research and development gives the company a competitive advantage, resulting in highly marketable products that bring in enhanced revenues. However, due to intensified competition with other electronic giants, Samsung cannot afford to be complacent if they want to remain to be on top. This analysis paper will discuss the challenges, triumphs and weaknesses of the company and how it plans to move forward in the years to come.

Main Body

Internal Environment

SWOT Analysis

Marketline (2015) does SWOT analysis regularly for a variety of companies. This document follows its outline and elaborated on by other sources.

Strengths

1. Strong market position and brand value.

Samsung’s strong market position in a variety of product categories continues to challenge its competitors. Since 1993, it has remained as the leader in market share in memory sales. In 2013, it held 38% of the global NANS flash market and 39.8% market share of the global dynamic random-access memory (DRAM) (Marketline, 2015). Samsung has also led in the sales of televisions, especially all flat panel TV products including those with liquid crystal display (LCD), light emitting diode (LED) and plasma display panel (PDP), enjoying a global market share of 26.8% (Marketline, 2015). It also leads in the sales of large TVs (60 inches and larger) as well as ultra-high definition (UHD) tvs.

The same goes for Samsung mobile devices such as mobile phones, tablets, phablets, cameras, etc. For example, its Galaxy S and Note series sold over a hundred million units, garnering a 32.3% market share of global smartphones and a 27.2% market share of global mobile phones (Marketline, 2015). Their huge market share in their other product lines are evidences of its popularity and competitive edge which works well for the company’s expansion possibilities.

2. Consistent emphasis on research and development

In an effort to meet the needs of their consumers, Samsung has significantly invested on research and development. Yoo & Kim (2015) share that Samsung’s innovation process began with research done by a multidisciplinary team of designers, engineers, marketers, ethnographers, musicians and writers who have worked hard to find out the preferences of users and what other needs they have. They also considered cultural, technological and economic trends. The company has also invested in an open innovation system strengthening its partnerships with outside research institutes to launch professional groups such as Softech and the Big Data Center building up the company’s software capabilities (Marketline, 2015). Aside from those, the company has also put up R&D networks to develop future technologies, materials, equipment and mobile applications. All these efforts in strengthening their research and development helped them launch their innovative products, mostly first of its kind. These have also enabled them to add a number of patents to their already filled caps.

3. Diversified Geographic Presence

The diversified geographic presence of Samsung in China, Korea, America, Europe, Asia and Africa allows the company closer ties with their consumers as well as the reduction of risks associated with a particular market. This has also helped the company in reducing costs through economies of scale (Marketline, 2015).

Weakness

1. Patent Litigations

Samsung has struggled with patent litigations weighing the company’s revenues down due to penalties for patent infringement. Most widely publicized are Apple’s design patent lawsuits against Samsung (Samuelson, 2016). The jury decided that Samsung has infringed upon Apple’s design patents and trade dress rights ordered Samsung to pay $930 million in damages. This case has reached the Supreme Court and mitigated the offense, and later on, Samsung was still ordered to pay the damage, but reduced to $399 million, which is still excessive for the company.

2. Dependence on Android

Unlike Apple which has its own operating system (OS), Samsung is wholly dependent on Google’s Android platform, and have limited units with the Windows Mobile and Bada OS. It has recently launched Samsung Z which is powered by the Tizen platform, but this needs a large investment to work fully with other Samsung lines.

Opportunities

1. Positive Outlook for Smartphone and Tablet Market

The demand for smartphones and other technological gadgets has grown immensely, and shipment is expected to grow at a compounded annual growth rate (CAGR) of 13.3% within the years of 2013 to 2017. By 2013, Samsung was the leading smartphone seller with a market share of approximately 32.3% (Marketline, 2015). Tablets are not far behind with a market share of 19.1% in 2013. Due to its multiple use and convenience, both are expected to grow in sales significantly in the years to come.

2. Growing Adoption of 3D Flash Memory

Suppliers are moving towards 3D production techniques to enhance the capacity of their devices and Samsung being a leading manufacturer of semiconductors, it can easily supply Nand flash and 3D flash memory products. Global memory market is expected to grow in value of $79.7 billion by 2017 (Marketline, 2015).

Threats

1. Intense Competition and Increasing Commoditization in the Mobile Sector

Because the internet age is upon us, companies rooted in the use of mobile devices, computing, internet and other industries are all competing for market share across all mobile products and services (Marketline, 2015). The availability of resources such as Google’s Android platform and cheaper supplies has empowered lower end companies to come up with more sophisticated technology threatening the position of Samsung, being more higher priced. It has been in competition with other android users, HTC, LG, Motorola and Sony, aside from its main rival, Apple.

2. Declining Average Selling Prices may Strain Margins

Mobile devices have experienced lowering average selling prices (ASP) due to its abundance of supply. From the average $314 price in 2014, it can further decline to $267 by 2018 (Marketline, 2015). Such decrease may threaten projected margins resulting in great losses for the company.

3. Foreign Exchange Risk

Samsung is vulnerable to the unpredictability of foreign exchange values, having its international presence in the US, European Union, South America, Japan and other Asian countries (Marketline, 2015). International businesses minimize their foreign exchange risk by keeping transactions in the local currency, however, fluctuations in currency exchange could impact the company’s balance sheet, cash flows and income statement (Marketline, 2015).

External Environment

Political

Samsung’s business principles include “compliance with laws and ethical standards, maintaining a clean organizational culture, respecting customers, stakeholders and employees, caring for the environment, health and safety and being a socially responsible corporate citizen” (Samsung website, 2016). All these point to the company’s creation of stable and relevant policies within its corporate environment.

Economic

Lashinsky (2015) reported that Samsung’s revenue as of 2014 was $195.8 billion dollars making it one of the world’s biggest and richest corporate kingdoms. This amount is wisely invested in research and development, compensation of human resources, marketing and other areas that further boost its economic standing.

Social

Samsung is true to its claim of being a socially responsible corporate citizen as it provides its stakeholders with means to improve their quality of life. It is concerned with the education of children through technology. With learners in mind, they design smarter learning environments to help students in enhancing their learning and performance making them better equipped for their future.

For their corporate social responsibility, Samsung brings health and wellbeing to far flung areas such as the rural areas of Africa. Their beneficiaries receive critical medical technology and healthcare solutions. With regards to protecting the environment, the company has set clear guidelines to ensure that their practices do not harm the environment, and always remind their partners to do the same, along with ensuring safety in their own practices (Samsung Website, 2016).

Technological

Samsung has become very much focused in enhancing the quality of their design, making it more innovative. Balancing this focus on design with their engineering edge has been a challenge, but with “empathy, visualization and experimentation”, they have maintained their innovative advantage (Yoo & Kim, 2015).

Strategy Challenge:

Jay Lee, Samsung’s head claimed that the company’s biggest challenge is for all of the employees to be willing to embrace new ideas and new leaders from outside Korea and be open to becoming ‘global’ (Lashinsky, 2015). Although Samsung is already ahead in technology, it still receives its share of criticism and negativity such as lawsuits filed against them. This is one risk of becoming ‘global’ which entails great responsibility to show the world that it is accountable for its faults. As the company continues to rise, it will gain more challenges along the way, some hindering it from achieving more success, but if the company becomes complacent, they can easily lose the top position they enjoy. Hence, Samsung should be unrelenting in the pursuit of their goals especially in terms of being the leader in trends and innovation. Their clientele may shift preferences quickly and the company should be vigilant in meeting newly acquired tastes and needs not only of the consumers in their periphery but also potential customers from other areas or countries.

Recommendations for Future Strategic Direction, Structures, Systems and Policies

Samsung’s strategies have been successful so far except for their failure at patent infringement. In exerting their best efforts at being most innovative, they should come up with highly original designs so that no one can claim that their idea was copied. Also, coming up with their own OS and expanding R&D efforts to other areas of the company apart from technology, would solve most of the company’s problems.

Not many people are aware about the company’s social responsibility endeavors. Publicizing these will not only help in the marketing and enhancement of company image but can also serve as a model to other people to emulate, especially the youth.

Conclusion

Samsung may be enjoying high market share right now, but it should not stop striving to be the best it can be as a company. It is beneficial to the company as well as to its stakeholders to keep developing new products and services that will meet their needs. Being aware of its strengths and opportunities, Samsung should keep taking advantage of these to further help it to grow. On the other hand, it should also focus on improving its weaknesses and confronting possible threats. It should avoid copying other companies’ designs nor other things that could land them more patent infringement cases. They should also be able to come up with their own feasible operating system so that they can be independent of Android platforms. In doing so, they create more opportunities to earn while defeating their competition. One way is also to keep their prices down so that more people will buy from them. This should be well-computed, perhaps involving some investment on their part just so their consumers are attracted to their products. They should find a strategy to keep prices down, thereby using cheaper alternatives for supplies without compromising quality.

Samsung is one great company succeeding in its vision to serve as well as earn. It delivers high quality service and ensures that their consumers are greatly satisfied with their products. Its journey towards success may not have been smooth, but many people are thankful for such journey, as for them, it is the arrival of an iconic brand that matters most.