Is Samsung Taking Higher Risk without a Proper Strategic Plan - Case Study Example

Is Samsung taking higher risk without a proper strategic plan? 16/11 Table of Contents Terms of Reference 3 2.Procedures 3 3.Findings 3 3.1 Samsung’s Strategy 4 3.2 Response Strategy 4 3.3 Differentiation Strategy 5 4.SWOT Analysis 5 4.1 Strength or Success of Samsung’s Strategy 5 4.2 Weaknesses 6 4.3 Opportunities 7 4.4 Threats to Samsung 7 5.Conclusion 8 6.Recommendations 8 7.References 10 1. Terms of Reference The report is aimed at evaluating the success of Samsung’s strategy and any shortcomings thereof in three different perspectives. These perspectives involve the competitive strategy Samsung hold, the risk taking strategy it adopts and the diversity initiatives it has opted for. The Report is written by (Your NAME) for the purpose of evaluation of Samsung’s strategy and provide recommendations for further improvement in its strategy. The report is intended to be used by the business Analyst, John Deen for information purposes only. This report is issued on November 16, 2013 and is valid only for the purpose described. 2. Procedures This report is based on secondary research and contains information from books, news articles, online journals and websites. The claims are supported with the sources used. 3. Findings Samsung is no longer a small player in the business environment. Samsung has earned its name in the biggest players of the electronics industry over a period of time. However, the recent boom signals some clear and clever strategic moves by the company. Samsung is competing by providing a wider range of products than its competitors. Samsung is a South Korean multinational corporation with its head office in Seoul. Lee Byun-Chul laid the foundation of Samsung in 1938 (Peng, 2012). The company moved towards the electronic industry in the late 1960s and after Lee Byung-Chul passed away, the company was divided into groups including CJ Group, Hansol Group, Shinsegae Group and Samsung Group. Samsung group flourished and is still growing its profits steadily since 1990. Despite the success stories of Samsung, the credibility of Samsung’s strategy in the long run is questionable. Is Samsung taking too much risk to avail first-movers advantage or does it have a clearly defined and thoroughly designed strategy for investing in newer technologies to capture, increase and retain its market share? 3.1 Samsung’s Strategy Samsung uses a multidimensional competitive strategy with differentiation and rapid response strategies as the core of its success in the business industry. Samsung is more likely to create and introduce newer technologies and innovative products in minimal possible time. The products of Samsung under different categories are quickly designed and produced with an effective supply chain management to support the success of its products. The company is continuously investing in the unique product offerings (Nisen 2013). 3.2 Response Strategy Samsung has a clearly defined and well thought strategy working underneath the operations that are carried out regularly. Samsung’s note is a living example of how Samsung identifies and accommodates customer’s needs and expectations in its offerings. The Research and Development department of Samsung takes the lead in understanding customer demands and competitors’ current and future acts. The company, in an attempt to deliver differentiation along with a rapid response to the customers’ need for having a drawing and hand-writing feature in their smart phones, merged the characteristics of a phone and a tablet and introduced Samsung Note which was highly applauded and accepted. The R & D department found out the need of Asians to have such a device to support their needs with ease. Samsung is spending a lot on Research and Development area. It has been identified that it is spending 5.7 percent of its revenues on R&D which is 3.3% higher than Apple. This clearly shows Samsung’s aggressive attempt to innovate and avail the first movers’ advantage. 3.3 Differentiation Strategy The distinct product offerings of Samsung are abundant in the market today. In the year 2000, Samsung involved itself in producing batteries for digital gadgets. Like any other product of Samsung, the batteries were a hit and in ten years time, it became a well-known supplier of batteries being one of the largest names in battery manufacturing industry around the globe. In 2001, Samsung moved towards the televisions industry and invested heavily on the innovative flat-panel televisions. It took Samsung 4 years to become a leader in the television manufacturing industry with differentiation on the basis of flat-panel displays. The strategy continued and took shape of flash memory that enabled the existence of i-phone and ipad possible. Hence, this technology gave Samsung a strategic advantage and made it a major supplier for Apple. The strategy to differentiate on innovation and uniqueness of products has led Samsung to be in the list of Apple’s major competitors in the modern world. 4. SWOT Analysis 4.1 Strength or Success of Samsung’s Strategy Samsung started off under the management of Lee Byung-Chull as a low risk-taking and highly structured organization with pre-defined rules and procedures prevailing as a core management strategy back in the mid 1980s. Using this strategy, under the circumstances prevalent during that period, Samsung achieved a market leader status in Korea. Samsung’s global operations and success was limited and non-observable in that period. However, from the period starting 1993, Lee Kun-Hee introduced a Quality management initiative to get Samsung reputational benefits in the global market. The new management was backed up by a formal and radical change initiative along corporate restructuring to support the organization in meeting the global standards and competition. The previously adopted domestic approach backed up by a polycentric view was now replaced with a geocentric attitude and risk taking values (Warner 2013). Top management was given independence and authority to take risks in order to compete and produce brand awareness in the global market. The shift from a risk-averse to a risk-taking approach altered the operations and culture at Samsung. The company switched from a centralized to a decentralized structure making employees more empowered and enthusiastic towards their work. From the beginning up till now, Samsung’s strategies are proving to be successful and effective within the domestic and global environment. The shift from a domestic to global business leader was properly aligned with the radical change and restructuring. Hence, the strategies at Samsung are well developed and thoughtful and cannot be termed as abrupt decisions without proper planning. 4.2 Weaknesses Samsung uses diversification to spread its network. It manufactures and excels in producing almost everything from batteries, medical devices to digitals gadgets (Lee & Lee, 2007). The recent plan of Samsung is to step in the production of Solar panels and the plan is to invest in this technology for 10 years. The strategic planners at Samsung undoubtedly are highly empowered and intelligent. Their planning, so far, were either up to the mark or went beyond expectations keeping the cases of Samsun S series mobiles to Tablet and Samsung Note. The risk-taking behavior, however, may cost the company a great deal of finances as the investment of $20 billion is planned for the Solar systems suggest (Seoul 2011). In an attempt to innovate and surpass its competitor Apple Inc., the company lost a lawsuit for patent infringement. In addition, Samsung provides chips and OS to its major competitors, which means that any attempt to nail its competitors would be harming its major customers. 4.3 Opportunities The emerging hype of smart phones, tablets and note increase the stability of its profits in the foreseeable future. Increasing the marketing cost has resulted in building stronger brand reputation backed up by an increased client base. The company has the opportunity to avail cheaper laborers from countries including India, Pakistan and China. Stepping in to the newer technological appliances and products open new doors of success and risks for Samsung which is a strong and integrated part of its overall strategy. Acquisition of companies and patents provide a more reliable image of the company along with more profits being generated by the uniqueness of its products and offerings. 4.4 Threats to Samsung Chinese production industry is more cost effective and efficient than any other country in the world today. Samsung has a huge threat from the Chinese competitors as they are able to replicate and re-design the products with the same features and specs as Samsung. The same strategy of mass production, faster and efficient supply chain and vast range of products being pooled in the world market can be and is adopted by the Chinese companies. The risk-taking approach, in such a competitive environment, may prove to be a failure if rapid introduction of products and development is slowed down at any point at Samsung. The investments, plans and strategies of a company are closely speculated and monitored by the competitors in the market. With the leading position Samsung is holding today, they are at a risk of being left behind in the pace of development as China is more efficient and quick in production. Samsung’s shares have fallen by 12% owing to the competition and failure to capture the smart phone users with low cost substitutes available in the market (Lee 2013). 5. Conclusion Samsung, indeed, is taking risk at a higher and strategic level and has incorporated this concept in its organizational culture. It has taken advantage of first-movers or innovators in the business market in the past on introducing Tablets and Note. However, its strategy cannot be questioned on being a properly thoughtful and well-designed in an attempt to move towards innovation. The management of Samsung is well-aware of its responsibilities and has adopted a risk taking attitude which is an integral part of the overall Samsung’s business environment. The risk-taking attitude was established after being accustomed with the risk-averse culture in the domestic business environment. The switch, in reality was a move from domestic to global environment and was proved to be a success keeping the current global market share of Samsung in view. 6. Recommendations The threats and competition in the industry may pose a greater threat to its success if any of its plans and upcoming models and products, are speculated by the Chinese competitors. In addition, there are chances that a product or a new gadget may not produce results which were expected by the management, hence, the company needs to build a portfolio of investments which include high and low risk products at the same time. Moreover, the diversification initiatives of Samsung pose a greater threat when a company moves from one market to the other in terms of cultural variables affecting the operations of the company on one hand and the tastes and economic conditions of the clients on the other. In addition, diversification in terms of products offered, the company has less information and experience requiring more talents to get its name entered and stabilized in the industry. The recent move towards the solar panel and LED manufacturing places a question mark on Samsung’s future success for the heavy investment it has planned on this area of operations (Driver 2008). Samsung needs to cut its costs down as the competition in the industry suggests. Chinese and other low cost electronic manufacturers are offering lower prices capturing the clients and reducing Samsung’ market share. 7. References Peng, M. (2012). Global Strategy. Stamford: Cengage Learning. WARNER, M. (2013). Managing across diverse cultures in East Asia: issues and challenges in a changing globalized world. Abingdon, Oxon, Routledge. Lee, W., & Lee, N. S. (2007). Understanding Samsungs Diversification Strategy: The Case of Samsung Motors Inc. Long Range Planning, 40(4), 488-504. Driver, D. (2008). Making a material difference in energy. Energy Policy, 36(12), 4302-4309. SEOUL (2011, October 1). Samsung The next big bet. Retrieved from www.economist.com/node/2153097\ NISEN, M. (2013, March 15). Samsung Corporate Strategy - Business Insider. Retrieved from http://www.businessinsider.com/samsung-corporate-strategy-2013-3 LEE, M. J. (2013, July 26). Samsungs Profit Soars on Smartphone Sales, but Margins Feel Pressure - WSJ.com. Retrieved from http://online.wsj.com/news/articles/SB10001424127887323610704578628622467331286 Read More