Strategic Management - Evaluation of Strategies in Samsung Electronics - Essay Example

? Evaluation of Strategies in Samsung Electronics Introduction The sustainable development strategies and appropriate means of implementation are critical in any business environment. Samsung has unveiled its various strategies towards it achievement of better sustainability and more profitability. The company has seized various opportunities in reviving the succession plan to enhance stable management. However, there are various strategic capabilities that have been put in place to enhance sustainability while still there are other strategies that are recommended so that when put into place, more profitability will be realized (Anderson & Paul 1998, p. 1-13). The different strategies are analyzed and their sustainability evaluated. Also, recommendations and justification are given for other relevant strategies. Discussion The Samsung Electronics has been involved in accumulation of knowledge over the last few decades. However, the company is facing tough competition from other companies. The increase in the overseas production has impacted on the strategic response in Korea. The production network in Samsung extends beyond the ASEAN region through to China and India. Ration of the overseas production to the total production has in the recent years increased sharply. The competition is intense towards the cost-driven struggle for the low-end markets (Leachman & Jeenyoung 2002, p. 61-77). The three major electronics producers in Korea; Samsung, Daewoo and Goldstar, have expressed their intention in increasing the overseas production. By early 1990s, the Samsung Electronics performed an organization integration meant to increase the coordination between the marketing, production and research across and within the product lines. By 1992, the multiple product sectors were fully under the control of Kim Kwang Ho, who was the CEO and the head of the semiconductor operation. The company started initiating more radical reforms by mid 1993 who improved the dissemination of knowledge within the group. The semi-conductor sector enhanced the technological synergy in other related businesses. For instance, the production of the DRAM technology led to the precision of the Samsung electronics leading to significant improvement in technology. The product design capability is an important strategy by Samsung to enhance the internationalization of production where the low-value-added goods were produced while new products prevented hollowing out of production in Korea. The increased changes of the competition conditions increased the difficulties in foreign licensing and the designs turned out to be very complex. Samsung began acquiring some new capabilities through direct acquisition of foreign firms. The R&D operations in Samsung have been continually centralized Samsung Electronics had strategized on the release of new devices to expand the line-up based on the conditions in the market. This was to prevent overreliance on the android Platform from Google. This sought for the reduction of dependency on Android (Bong & Jinjoo 2004, p. 16). The company produces TFT monitors with the corporate customers being in mind. This strategy necessitates an approach where the company identifies potential markets among the business users whose employees have a high likelihood of spending long hours on a computer screen. The company also targets other markets such as the high street shops that use TFTs for the point of sale terminals. The company uses the radical market strategy to encourage high purchases of their products. The head office in Korea has played a crucial role in introducing strong brand awareness as well as instilling good product perceptions. Assessing the sustainability of this strategy, the company has been able to realize high profiles as well as creating high profile for their brand (Chung & Karen 2009, p. 20-27). Samsung Electronics is relatively new in mobile communications. Having established in CDMA markets in Korea and USA, Samsung has decided to incorporate global system for mobile communications, GSM, networks to gain entry into the international markets. The company has been able to integrate communications and computer entertainment, and this has enabled strong brand exercise, stretching brand name in taking in the new products. The company will compete with the already established firms through drawing on the economies of scale and the expertise (Chung & Karen 2009, p. 20-27). The company benefits in adopting such strategies like differentiated and low cost strategies in achieving significant margins for their products without charging the premium prices. This enables the customers recognize the given value, increase customer satisfaction, as well as reinforcing the brand loyalty. The strategy also enhances internal competence of the business. This is desirable since Samsung Electronic will enhance efficiency in implementing it. Furthermore, consistent focus on differentiation strategy means that innovation is constant for the products within the firm. As a result, products from Samsung Electronics Company will constantly adapt the customer trends and also the trends in the external environment. For instance, the response of Samsung Electronics to environmental and social consciousness will shift. Finally, the strategy can be regarded as the best for a hypercompetitive environment where differentiation is used as the key component. This ensures that responses are different and better instead of faster, cheaper and same (Leachman & Jeenyoung 2002, p. 61-77). On the other hand, in pursuit of the differentiation strategy, Samsung Electronics Company should maintain agility with the new development process of the product. Otherwise, the company risks attacks on various fronts by the competitors who are pursuing the focus differentiation strategies in market segments that are different. The company mitigates this through the creation of new markets facilitated by innovations and charging premiums for the key products. The other shortcoming of integrating the differentiation strategy and the cost leadership is that customers have high expectations of the best value. As a result, the margins are squeezed, especially during financially weak times. The problem of pursuing cost leadership strategy is the replication of cost reduction sources by the competitors, and this enhances continuous ways of reducing the costs. Nevertheless, use of limitations in cost reduction may be minimized through the strategic alliances with the competitors, and this creates win-win situations. Therefore, the combined strategies used by Samsung Electronics enable the company achieve an advantage and sustainable growth. The areas of improvement are recommended to enhance more profitability and management (Leachman & Jeenyoung 2002, p. 61-77). Samsung Electronics is strategizing on developing new products such as mobile phone. This strategy is meant to enhance innovativeness in design and gain positive market response. The marketing strategy for mobile phone markets is different from those of other products, and the promotional strategy is designed to enhance the brand recognition. The company is working on different new products through the extensive R&D and other innovations. This in itself enhances acquisition of a sizeable portion in the market due to the remarkable innovation (Chung & Karen 2009, p. 20-27). Samsung electronics has continued with the strategy of flooding the markets with new products. The company unveiled plethora of PCs and mobile devices like tablets, smart cameras, smart phones among others. There have been several announcements on some of the best-selling products from Samsung Electronics. This strategy is aimed at diverting the negative attention like those from Apple patent trial (Chung & Karen 2009, p. 20-27). The Current strategy One vital component of a strategy is the ways in which the organization intends to grow. This is especially noteworthy in Samsung company because of its objectives of leading; leading the digital convergence revolution. Two strategic methods under the current strategy are strategic alliances and organic growth (Leachman & Jeenyoung 2002, p. 61-77) Organic growth entails the growth rate achieved by a company through increment of the output and sales rather than from profits, takeovers, acquisitions or mergers. Organic growth enables a firm develop the market positions in the long term which can help achieve growth cheaply. The current strategic position of Samsung Company can easily fit in the organic growth since the company is leading in the market. Organic growth facilitates the development of the long-term market position. It also helps the company in achieving growth much easier in the growing markets. Despite Samsung Electronics Company having large cash reserves, the organic growth allows the company to focus its funds in other areas like research and development (Leachman & Jeenyoung 2002, p. 61-77). Assessing the sustainability of the organic markets, Samsung Electronics has its leaders being growth-oriented, the culture of growth is relevant, the bonds with the customers are excellent and sales are effective. Also, the competences in innovation in Samsung Electronics are unrivalled. Based on the forum that was held in 2008, a leading company that specializes in growth strategies have more advantage in attaining sustainable growth. Therefore, the organic growth in Samsung Electronics is sustainable though it might not always be the most appropriate strategy, especially during entry into new markets or country due to the requirement of deep local language which misses in Samsung electronics. Therefore, this problem can be solved by adopting the strategic alliances. Strategic alliances entail the formal relationship between parties towards achieving the set goals while maintaining the independence. The company had had 29 alliances that have increased its efficiency in an entry to the new markets and acquisition of skills and technology. However, the company possesses the most innovative technologies and any alliance would mean increased competition from their competitors. Nevertheless, sharing resources and costs is an advantage, like the Samsung-Sony alliance. Organic growth may be used alongside alliances in an entry to new markets in order to minimize the associated costs and the learning curve. Strategic alliances provide an efficient way towards entry into the new markets. However, on sustainability assessment, the applicability of this strategy when expanding the operations to the emerging markets is questionable since most firms would imitate Samsung and the mutual benefit for Samsung will thus lose meaning (Leachman & Jeenyoung 2002, p. 61-77). According to Porter (1980), organizations have three basic strategic options to gain the competitive advantage. These include differentiation, focus and cost leadership. Samsung fits in the cost leadership strategy since it increases profits by reducing costs while charging average prices to the industry. Cost leadership is among the core competences in Samsung while the differentiation strategy may be applicable due to the continuous innovative nature of the Samsung Company. The competences in Samsung Company are unmatched, both in innovation and quality. Therefore, differentiation strategy is particularly appropriate for Samsung. Based on Porter’s framework, Samsung Electronics varies its scope. For instance, the OLED TVs serve a market niche currently, and according to Porter, the ‘be all things to people’ or ‘stuck midway’ have a high likelihood of affecting the performance. Nevertheless, in Samsung Electronics, the integration of differentiation strategy and cost leadership may lead to promising results. This indicates that the framework may have some considerable limitations (Leachman & Jeenyoung 2002, p. 61-77). According to Bowman, some limitations of this framework include; first, it does not define where and how to compete and does not consider market segmentation. Secondly, the framework confuses competitive strategy with the corporate strategy since the individual business units may contain several different strategies such as those in Samsung, and finally, the framework is disadvantageous since it excludes some other feasible strategy options since it suggests one strategy only. From the analysis of the Samsung strategy, it is clear that differentiation and cost leadership strategies may be incorporated simultaneously. Using the Bowman’s strategic clock of 1997 in evaluating the strategic options in Samsung, the customer’s perceived added value is compared against the price. Based on this model, the strategy in Samsung Electronics is primarily ‘hybrid’. This means that the strategy is achievable by the consumer and it at the same time differentiated. Nevertheless, differentiation exists in the presence or absence of a premium price based on the reference products and associated markets. The strategy can be considered as focussed differentiation since price premium is charged in a niche. Based on the Bowman’s model, Samsung operates different strategic options from the hybrid through focussed differentiation. Therefore, this framework enhances a higher flexibility than the Porter’s framework. Recommendations The Samsung Electronics Company will have to diversify the growth strategy in the emerging markets since most of its competitors are imitators, and the current strategic alliances and organic growth are ineffective. The acquisition of resources in the emerging markets by Samsung Electronics would be effective in ensuring the presence of immediate markets and the essential knowledge on effective competition. Diversification of growth strategy will provide an immediate market presence and essential local knowledge towards expansion of the global presence. Mergers should not be incorporated in Samsung Company since the company can own its operations fully. The company should continue investing in R & D in newer technologies, like nanotechnology to enhance the cost leadership and the differentiation gap to enhance a cheaper production of more differentiated products. The company should aim at being the pioneer in launching products at premium prices to enhance continued innovation and maximized profits. This will allow for the creation of markets that require a focussed differentiation to allow for the charging of the price premiums. This is critical in the present economic climate due to restrictions of the margins. Production and promotion of products that are environmental friendly should be considered in future R&D and innovations. This will help in adapting to environmental and social changes based on customer preference. The change should be driven from the company to enhance social and environmental consciousness when conducting business. This in return promotes and reflects the customer preferences. Samsung Company should also engage in internal innovations as well as investing in the cutting edge IT resources to enhance streamlining of the effectiveness and processes. The company will increase the competitive advantage as well as reduce the costs. The company should also enhance the brand loyalty to be able to retain customers for longer periods. This will increase the switching costs and reduce customer acquisition costs. This entails both the business-to-business and domestic buyers. The company should continue highlighting unique selling points and quality through marketing campaigns to enable their customers have the feel of their products References List Anderson, M. G., & Paul, B. K. (1998). Strategic Sourcing, The International Journal of Logistics Management 9(1), pp. 1-13. Bong, S., & Jinjoo, L. (2004). Effective Team Processes for Technology Internalisation with Special Emphasis on Knowledge Management: Successful Late Starter, Samsung Case, International Journal of Technology Management 27 (1), pp. 16. Chung, K., & Karen, F. (2009). Samsung Electronics and the Pathway to Integrated Design Success, Design Management Review 20(3), pp. 20-27. Leachman, R. C., & Jeenyoung, K. (2002). SLIM: Short Cycle Time and Low Inventory in Manufacturing at Samsung Electronics. Interfaces 32(1), pp. 61-77. Read More