Firms Internationalization Process - Samsung - Essay Example

?Samsung Executive Summary This report includes: Brief history of Samsung including firm’s internationalization process. This section also describes Samsung’s presence in UK and other foreign markets. Evaluation of the company’s existing external environmental conditions? including the macro and industry environments? by stressing on the firm’s current strategic challenges. It includes a SWOT analysis and PESTEL analysis. Samsung’s resource audit including the company's assets, resources and core competencies. Identification and evaluation of sustainability of the corporate and global strategies Analysis of strategic implementation, organizational structure and the use of power and control. The issues faced by the company? and suitable recommendations to tackle the issues. 2. Introduction 2.1 History of Samsung Samsung Electronics Ltd is an international leader in telecommunication, semiconductor, digital convergence technologies and digital media. The company is a typical paradigm of a family run corporation or ‘Chaebol?’ which is an essential element of the South Korean business industry. The headquarters of the company is situated in Seoul, South Korea and functions in over 100 countries across the globe. The Samsung group of companies is the largest conglomerate in the world? in terms of revenues and the fact remains that “exports by Samsung Electronics Co., South Korea's most highly-valued firm, made up for 16.5 percent of the country's overseas shipments 2010” (Samsung Accounts for 16.5 Pct of S. Korean Exports in 2011, 2012). Samsung is renowned as one of the top growing international brands and functions in consumer electronics industry, consumer appliances as well as produces and sells a wide range of products including mobile phones, washing machines, televisions? laptops etc. It becomes evident from this that the company gives top priority to the consumer electronics section. “In 2012, the brand value was worth USD 23.43 billion, which was a 20% increase from the previous year” (Global Harmony with People, Society & Environment, 2011). It is a fact that since the commencement of the business and up until the 1980s? Samsung was a follower not a leader. Samsung Electronics in Korea has transformed into a high-class business organization by shifting roles from an innovation follower to an innovation leader. In the late 1990s, Samsung opened a devoted “Value Innovation Program Centre” to recognize the core prospects to compete with its rivals. This is an incorporated five-floor facility? where value improvement is employed as a procedure and applied in numerous lines of products. 2.2 Internationalization Process Even though the organizational strategy of Samsung for the 90s revolves around consolidation, the strategy for its corporeal manufacturing facilities entails increasing progress offshore. The earliest abroad production efforts of Samsung were a Portuguese joint project operation set up in 1982, a United State subsidiary established in the year 1984 and also another established Mexican subsidiary in 1988. They had proficiency in the production of color TV sets and several core constituents. In the late 1988? it also possessed twelve subsidiaries for sales outside Korea. 2.2.1 Samsung in UK In UK, Samsung intended to expand its smart phone delivery by trebling its product line, since it drops behind by its competitors like Apple and Nokia. “Although Nokia is market leader, but in case of smart phone Samsung emerged as leader” (Kaushik, 2012). Samsung holds only 3 per cent market share, against Nokia (35%) and Apple (17%).  UK Legislation like high levying for energy bill too encourages substitutes into the electronic industry which is a growing threat for the sector. “During London 2012, Samsung will also showcase its cutting-edge mobile technology at the Olympic Park and across major sites in the city to enrich the Olympic Games experience for spectators” (IOC marketing: Media Guide, 2012). 2.2.2 Samsung in Foreign Countries Subsequent to the disappointing results with U.S. manufacturing, Samsung paid more attention on starting low-cost production plants in Southeast Asia, peripheral Europe and Mexico. Numerous factors encouraged this shift. Samsung have induced to take up a strategy of ‘follow-the leader’ due to the moves by electronics firms of Japanese and other Korean countries. Almost all of foreign affiliates of Samsung are engaged in the manufacturing of identical products, exploiting mass production capacity transmitted from Korea. 3. Samsung’s Environment Porter’s Five Forces For any business entity there are five forces that can be held responsible to have a huge influence on the current strategy and affairs of the company. The Porter's Five Forces model assists the manager “to analyze the competitive forces in the industry environment to identify opportunities and threats” (Hill & Jones, 2010). Buyer’s Power The bargaining power of buyers of Samsung is high as they have better access to information and while considering competition in the mobile phone industry. The market offers several similar products from other transporters; buyers have quite a lot of points to bargain on the products despite of Operating System, tech specs like screen resolution or camera quality, price, delivery service availability or somewhat more. Supplier’s power The bargaining power of suppliers is low in case of Samsung because they have its own supplier for most of the components. Samsung also occurs to be its own supplier of raw materials. Manufacturers of mobile phone may perhaps constantly incorporate ahead into the industry devoid of middlemen. In actual fact, Samsung has done this previously within Korea. The intensity of competitive rivalry The competition from rival for Samsung is high as the smart phone industry has numerous equally balanced competitors. Pressure to seize customers from the competitors is high because the smart phones market has sluggish in growth as it is on boom period. The threat of substitutes For Samsung, threat from substitutes is high. Almost all phones that execute the same functions of Samsung phone can be considered as substitute like mobiles running the Android OS as well as Apple iPhone and Blackberry. Each of these are in large quantity with alike cost and extremely competitive. Even though there is an augmented attractiveness of Tablets, they are usually too bulky to be regard as direct substitutes. At present, yet lower-end smart phones are able to be bought at very economical prices, and at times come free through certain contracts. The threat of potential new entrants Threat from new entrance is relatively too low because of the following reasons: Requirement of huge capital to get into the mobile industry where existing firms operate with several differentiation strategies Patent issue to produce a unique product, if they are not planning to invest on their own R and D. The costs of achieving a brand name while accomplishing economies of scale through investment in supply chain make extremely strong barrier to entry. And also the switching costs and customer loyalty may be another great barrier to entry. PESTEL Analysis This section serves as a business environmental scan. PEST analysis is “a useful tool when scanning the general environment” (Hentry, 2008). Here a PESTLE analysis is applied of the external macro environment in which SAMSUNG operates. Political Samsung regards political policy as very significant for the progress and the betterment of the company and it follows all rules and regulation forced by the government of every country where their business is operating. Samsung pays a huge amount of income tax as well as for the Government constancy. Samsung's business operations may at times by affected by Government regulations, depending on the country where it is operating in. In order to operate in foreign countries? the company upholds itself as a highly regarded, honest and socially liable entity. Economical Samsung had made vast growth in recent years, although it was facing hard confronts by the rivals. The major factor in this progress is the broad range of products presented by Samsung. It becomes clear that Samsung follows superior strategies in the markets where it operates depending on the strength and economic capacity of the consumers considering variables such as their disposable income. Social While considering the social and cultural part of a society, it is very significant to consider product recognition and popularity. Samsung pays more attention on this issue and products are designed on the basis of the social requirements and issues. For instance, Samsung offered low cost cell phones which showed very successful in the market. They aim to become world leaders by devoting their human resources and technology to produce better as well as eco-friendly products and services, thus contributing to a superior global community. They produce an open culture by encouraging senior as well as junior staff to formulate decisions and perform proactively? by making them feel a sense of ownership, depending on the joint esteem of trust and credibility as well as individuality. Technological Samsung keep updating the technical and technological segment to sustain its place in the market. Particularly in the LCDs, cell phone and further electronic products manufacturing requires to be done on computerized systems. This ensures an uninterrupted supply of products in the market and Samsung has obtained technological features for its development. Their innovative LED technology has decreased the wastage of energy to a great extent and it also ensures optimum utilization of resources, thus they are committed towards the environment responsibility also. Legal Apple commenced a lawsuit in April 2011 against Samsung, “claiming Samsung's Galaxy line of phones and tablets copy the look and feel of iPhone and iPad” (Ritchie, 2011). Manufacturers will use their patent products so that competitor’s move to gain more market share will be difficult. 4. Company resource audit - identifying the company's assets, resources and competencies. 4.1 Products and Assets: Products and services of Samsung include LCD and LED panels, Mobile phones, Semiconductors, Televisions and others. The company's achievement ratio of products approaching the Global Ecolabel level is 11 percentage points above the 2010 goal. As of the first half of 2010, Samsung earned the Global Ecolabel for its 2,134 models, thereby becoming the world's number-one company in terms of the number of products meeting Global Ecolabel standards. Total assets of this year are about US$ 384.3 billion. 4.2 Resources, capabilities and core competencies 4.2.1 Tangible resources and capabilities Every industry, containing the smallest ones, possesses various resources and capabilities. “Tangible resources are something physical, such as land, buildings, plant, equipment, inventory and money” (Hill & Jones, 2009). Tangible resources and capabilities are possessions that are watched and more simply quantifies. They can generally divide into four kinds: Financial: Samsung’s capability to fund its determined overseas growth is an example. Physical: physical resources and capabilities of Samsung include new plants and equipments, international presence, high quality inexpensive product and multinational locations. Technological: it contains experts for innovations and new product development, superior VHS format and production, MCA media software. Organizational: One example of organizational resources and capabilities is Samsung super reactive supply chain, which runs like clockwork with a speedy other than predictable rhythm. 4.2.2 Intangible Resources and Capabilities: Intangible resources and capabilities are harder to study and more complex to quantify. Examples of intangible assets contain; Human: human resources and capabilities of Samsung contain positive morale when company valued human resources with benefits and training, divisional competing complements and visionary CEOs. Innovation: Samsung has presently emerged as an innovative powerhouse for cool designs and huge targets. Reputation: “Reputation can be regarded as an outcome of a competitive process in which firms signal their attributes to constituents” (Peng, 2009). The Samsung efficient, low-cost processes, approval of market requirements and motivate during competition. 4.2.3 VRIO framework: Valuable Since 1969 during 2005, Samsung has turn into a great consumer electronic industry that produces digital media, semiconductors, telecom, and digital appliance and LCD products. Samsung attained achievement from five different groups from their resources which it can divide into three divisions; human resource, technology and corporate strategy. Organization Samsung has developed DRAM tools in improved ways but they brought tools from another organization, but Samsung has built own human resources and polices that sustains corporate strategy. Rare Samsung’s resources are precious other than a lot of other companies have human resource, technology and corporate strategy. An industry can get information if they have sufficient investment, as well a company can have good workers depend on their flexibility. Inimitable Except human resource, technology and strategy does not expensive to reproduce; also, Samsung accept the technology from other industry at the opening. So, every resource is imitable for participants. Presently, Samsung is facing Chinese DRAM industry as of limitability of their source. 5 Samsung’s Current Strategy “Samsung Electronics Co., South Korea’s biggest company by market capitalization and the world’s largest manufacturer of television, is considering to separate the Liquid Crystal Display (LCD) businesses and operations into a separate company, as a new business strategy, to improve the competitiveness” (Paracha, 2012). This unit of industry saw about 10% of fall in sales previous year. “Samsung Mobile Display unit is developing organic light-emitting diode (OLED) displays for mobile devices” (Samsung is Thinking on to Separately Develop LCD Business, 2011). Many of the display producers from Samsung to LG Display Co. are making OLED displays. OLED is presently used in smart phones and the experts are of the vision that it will soon replace larger LCD screens. 5.1 Corporate Level Strategy The Samsung Group is an international conglomerate business headquartered in Samsung Town, South Korea. The Samsung Group is composed of many global affiliated businesses, the majority of them united under the Samsung brand containing Samsung Electronics, the world's biggest electronics industry by sales and Samsung Heavy organizations, the world's second leading shipbuilder. “Samsung Engineering was ranked 35th, and Samsung C&T was ranked 72nd in a 2009 ranking of 225 global construction firms compiled by the Engineering News-Record. Samsung Life Insurance was ranked at 14th in a 2009 ranking of Fortune Global 500 Industries; Samsung Ever land is now the fifth most popular theme park in the world” (Samsung, 2012). Samsung Group accounts for in excess of 20% of South Korea's whole exports, and in a lot of domestic firms, Samsung Group is the single monopoly dominating a solitary market, its income as large as a number of countries' total GDP. “In 2006, Samsung Group would have been the 35th largest economy in the world if ranked, larger than that of Argentina. The company has a powerful influence on the country's economic development, politics, media and culture, being a major driving force behind the Miracle on the Han River. Many businesses today use its international success as a role model” (Samsung Recruiting Software Developers, 2011). 5.2 Business Unit Strategy Samsung Electronics located its importance on the business management situation of predicting and arranging for future ecological changes and competitiveness, which is one of the survival plans of a firm with an unpredictable future. The organization is forcefully determining the base for enhancing speed of business management and effectiveness oriented business management innovations as early this year. “Samsung Electronics consists of global business managers (GBM) that organize the firm along major product divisions” (Jin Chang, 2008). As such, it decided to organize SQL Server 2008, which can satisfy every three main needs of BI solution, containing cube write-back, ‘performance and reliability and consumer convenience, and the organization is carefully experiencing the profits of this IT innovation. 5.3 Global Strategy: Presently head of Samsung's parts business, which manages chips and display, Kwon covered Samsung's position in memory chips, where it has about 50 % global market share, and extended into logic chips, which now account for regarding 40% of Samsung's overall revenue of semiconductor. “A particular form of international strategy, characterized by the production and distribution of standardized products and services on a worldwide basis” (Peng, 2009). Currently, bold and resolute alteration has been finished in four important fields that will powerfully tough its potential growth and they are international human resource management system, global capability of Samsung’s service and product, utilization and development of latest business areas and market chances and the social duty and public picture of the Samsung. 6. Analysis of Samsung. 6.1. Strategic Implementation. A last critical determinant of a strategy’s accomplishment is the business ability to execute it successfully. And this depends on whether the particular strategy is reliable with the resources, the structure organization, the control and coordination systems, and the experience and skills of company personnel. “Strategic management is, at once, a framework to guide thinking and a process to guide action” (Amason, 2011). Managers should design a strategy to fit the existing resources of the company, procedures and competencies or try to build new systems and structures to fit the selected strategy. The key in the implementations to plan will be to coordinate Samsung’s present scheduling and controls of inventory by way of AuthenTec’s in order to continuously generate extra value without slowing down the process of manufacturing. A marketing strategy is a business hope to accomplish profitable and strong customer relations by targeting certain consumers, using a marketing mix, and accomplishment. Each marketing strategy must be measured by its capability to directly impact and develop upon all factors that the strategy contains. “Samsung is the biggest TV maker in the world, a big player in computers, printers, digital cameras, washing machines and the like. Sometimes in recent years, news accounts noted that Samsung makes more money than Japanese electronics makers combined” (Samsung’s Earnings: 5 Things to Watch, 2011). 6.2. Organizational Structure. Ideas of organizational structure change and design, goal setting, adaptation to environmental uncertainty, modernization, and inter-organizational relations are important in explaining past of the Samsung Group’s, growth period and its future. Leadership commitment to alter is perhaps the most significant element of any main transformation as Applications of Oracle a main dealer of ERP4 systems also recommends that for any main organizational transformation. Leadership activity of the Samsung went on with the program although some managers had to give up some of their authority and new jobs were formed. A quick alteration in the organizational structure of the business, viewed as moving towards a more horizontal organization, formation of cross functional units and association between R&D centers, development of product, marketing and also continuous evaluation of the programs of the rivals’, and the market altogether contributed to growth company. (Samsung Original Structure, 2009). 6.3. Use of Power and Control. Good management of organization is one of the fundamental ingredients to a successful organization. Centralisation is where significant decision making is done in the higher level of the Samsung. Entry of the Samsung into the electronics business had four significant features which continued to distinguish Samsung's electronics activities into the 1980's: a give attention on mass production, dependence on foreign technology, a strategy of follow-the-leader, and government support. Centralized structure of the Samsung's has limited the transfer of technological abilities to overseas affiliates, at the same time as they face new competitive necessities. Samsung's affiliates have been forced to interact with a rising variety of financial actors, including those inside the group. Therefore, every organization in the network needs a superior autonomy to keep away from bureaucratic paralysis in the system as a whole. “Constant change and superior products and services are vital for sustainable growth which, in turn, ensures the future of a corporation. To strengthen the foundation for sustainable growth, Samsung Electronics aggressively invests in R&D and new enterprises while maintaining strategic patent management” (Global Harmony with People, Society & Environment, 2011). 6.4. Samsung’s Philosophy. Samsung, follow a simple business philosophy: to dedicate technology and talent to generating superior services and products that contribute to a superior global society. Each day, people of the Samsung bring this philosophy to life. Leaders of the Samsung investigate for the brightest talent from around the earth, and provide them the resources they require to be the most excellent at what they do. The outcome is that all of the products of the Samsung from memory chips that assist businesses store essential knowledge to mobile phones that join citizens across continents have the authority to enhance lives. Samsung evaluates work capabilities of the individual according to function of job and provide a wide variety of training opportunities to foster every workers into experts in their respective fields. “Under the business philosophy of devoting our human resources and technology to creating superior products and services, thereby contributing to a better global society, Samsung Electronics strives to promote sustainability” (Global Harmony with People, Society & Environment, 2009). 7. Urgent Issues. The main issue in Samsung is that its competitors. Mobile phones and electronics equipments have turn out to be an inevitable resource for the people in modern era. The new generation is using different kinds of mobile phones for communication. From telephones to the iPhones, this structure has changed the vision of people. Although Samsung cannot succeed to control how its products are used by different consumers, they could on the other hand limit to whom it sells to. “As the mega case between Apple and Samsung kicks off in the courts, the rest of the electronics industry continues to struggle with the growing threat of patent infringement lawsuits” (McGregor, 2012). Electronic apparatus used in health care frequently includes hazardous substances that can damage human health. The wide networks of dealers and suppliers Samsung has can creates numerous risks, i.e. make liability issues for the business if stakeholders think that Samsung knew or must have known that the product might be used improperly. “Samsung management told the company's employees that it will eventually be vindicated in its fight with Apple” (Reisinger, 2012). 7.1. Recommendation and Conclusion. Before the liberalization of the financial system, only a small number of companies like Alwyn,Godrej, Kelvinator and Voltas were the main players in the customer durables market, accounting for no below 90% of the marketplace. Nowadays, these players manage the main share of the customer durables market. Customer durables marketplace is expected to produce at 10-15% in 2007-2008. It is rising very speedy because of increase in living standards, easy right of entry to customer finance, and wide variety of choice, as numerous foreign players were entering in the marketplace with the enhance in income levels, easy accessibility of finance, enhance in customer responsiveness, and introduction of new models, the demand for customer durables has increased considerably. In addition, Samsung must be concerned in trying to foresee how its products are and will be used by assessing their dealers and suppliers. Company must develop the after sales service of goods as it is the major factor for the sales of customer products. By way of “selling” as the vital objective, marketing policies are influenced by two core aspects: first, getting hold of consumers; second, preservation of the obtained consumers. So each other policy that is laid out will focus on the above two. A business has to work intimately towards accomplishing these two to achieve the desired cutting edge over its participants. Recommendations. If the SAMSUNG Ltd. decreases their price of the product like VIDEOCON and LG then SAMSUNG will take over the LG in every category. Company must distribute free calendar, key chain and t-shirts for creating brand popular amongst people. Company must introduce low price and low power use Refrigerator for gain the middle income grouping. Dealer wishes more advertisement to be done in the course of cable TV ads and local newspaper. To make customers conscious about the product. Timely of service in time. Ads of the company’s products must give attention on quality rather then cost. Company must target premium class or upper middle class customers. Company must introduce low price products to please the requirements of low or middleclass. Demo calls in addition to follow up Help Company to uphold consumer relationship and hence the business must give attention on these aspects. Company must concentrate on after sales service. Company must try to catch the rural market. Appendix I SWOT Analysis Strength Samsung consists of the broadest variety of product portfolios including tablets, TV/audio/video, mobile phones, home appliances, pc, camera, camcorder, memory cards, printer, peripherals and such other gadgets. Samsung possesses a noteworthy market share for a majority of its products. In the present scenario? Samsung holds the second position in market share of mobiles. Through better-quality innovation it has been able to capture the market share of Nokia in the case of smart phones. Samsung is one of the most successful business enterprises in introducing technology as well as designing innovating features? in the world. The LCD color phone, dual sim mobiles, phones with rotating lens, sleekest and lightest note pad are all the success of Samsung along with it being the first one to introduce phones with polyphonic ring tones? Samsung has the benefit of being one among the firsts to launch advanced features in refrigerator, LCD, and air conditioner. It launched the smallest MP3 player in the world and first 17” TFT-LCD-TV monitor in India. Samsung set up a manufacturing plant in India, thus reducing supply chain and logistics costs by taking advantage of the emerging economy of Asian market. Samsung’s brand value is augmented by 80% in last three years? according to various credible sources. Weakness A series of Smart phones launched by Samsung has led to cannibalization in recent times. Samsung depends too much on other parties for software, since it is the leader in hardware. Chinese products pay attention on economies of scale and have thus been able to penetrate into the Indian market by charging lesser costs? which in turn resulted in the sales reduction. Online stores sell an extensive range of products by providing superior deals because they do not incur the costs involved with channels of distribution. The LCD panel’s demand is anticipated to decline in the future. Opportunity Samsung has launched ‘Olympic Ratna Program’ as a part of 2012 London Olympics? since it is the official ‘Olympic partner’ of India. This may augment their brand awareness and boost up their sales. As the youth population in India is increasing, mobile phone sales is anticipated to raise owing to the reduced call rates. Samsung electronics has future plans of introducing personalized products for the Indian market which will develop their rural market share. Threats Samsung has an extensive range of product line and the collapse of any one product line will have impact on the others as well? which would ultimately cause brand dilution. As India is a prospective market, entrance of foreign rivals is expected to be high. Companies like Haier have already commenced achieving Indian market share in home appliances. Chinese products also pose threats to Samsung? with their low priced products. Low cost strategy of retail chains like big bazaar that sell home appliance and consumer electronics? which are obtained from foreign market in bulk quantity? are also threats to the Samsung company. Reference List Amason, A. C. 2011. Strategic Management from Theory to Practice. ROUTLEDGE. Print. Global Harmony with People, Society & Environment. 2009. Printed SOYINK. Available at [Accessed on 05 December 2012]. 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