Samsung Group as Innovative Enterprise - Case Study Example

Innovative Enterprise: Samsung Group Introduction The new age of digital technology has had a significant effect on present times and has brought about breakthrough changes in the way of life of people. The contemporary domestic and social setting has been quite fast and dynamic in the given business scenario and seems to be growing at a phenomenal pace. The same has compelled companies to look for new ways to innovate and change their ways of doing business and search for newer products to offer to consumers so as to sustain the competition and cope up with their counterparts in this ever-changing business environment (Shaughnessy, 2013A). The aim of this paper is to develop insights over the innovation strategy adopted by Samsung as well as provide academic support and link to the strategies adopted. The paper highlights the reason behind choice of Samsung as the most appropriate company for the purpose of research and goes forth to analyse business strategy of the concern. Through a detailed market analysis using the PESTEL analysis tool, the paper establishes significant grounds for the reasons behind the particular innovation strategies followed by Samsung group. The underlying factors for success of Samsung’s innovations have been put under 6 different headings and detailed analyses present sufficient reasons to believe that Samsung has been the correct choice for the study. Organizational outline In the current scenario, Samsung has been successful in establishing itself as a well-recognised and revered company all across the globe. The South Korean venture has gained its status and has become synonymous with innovation, making its mark in television and mobile phone technologies. The Fast Company Magazine has ranked Samsung as one of the top three companies, in terms of innovation. The firm has been growing at a very fast pace to transform into a global leader in the consumer electronics division. The company rose from being a small local payer to a conglomerate that has invested into diverse businesses, which range from food, to consumer electronics and apparels. The Korean Exchange has about 19 of its subsidiaries listed. As per the latest data available, the company employs over 427,000 people worldwide (Lee, 2005). It was in November 2000 that Samsung Electronics began its transformation into a Digital e-Company that strived and converged towards digital technology. Samsung’s development model had undergone a change from the division centric approach to a portfolio centric one (Delany, et al., 2002). The aim of such an approach was to develop integrated solutions in mobile technology for home and office networks and portfolios of core competencies for Samsung. Such initiatives were directed towards key areas like, corporate strategy, brand marketing, design and research and development. Reason for choosing Samsung The reasons for choice of Samsung as the company for analysis of their innovation strategy in the scope of this project can be highlighted as below: Samsung is a company that has worked upon widening its scope and approach towards development and innovation. It has been making significant investments into research and development, which have been recovered quickly owing to their technological advancements, effective study of the market and successful marketing strategies. The company’s success is not restricted to only one product or industry of activity. The success has been phenomenal in different types of products and the company has been careful in managing market share and market penetration levels. The company has been successful in measuring needs and wants of the consumers quite successfully, which brings forth another factor for consideration. The company responded within time and maintained their product quality, which not only catered to consumer demand, but also created a demand for itself within the market (Nicholson and Snyder, 2009). Samsung has been quite extraordinary with its resource deployments and market timing. It has allocated desired resources, including finances, to the most appropriate products at a time when there is need for innovation and scope for making a phenomenal market entry. The timing for release of Samsung Galaxy series provided stiff competition to the monopoly held by Apple in no time at all. Therefore, innovation at Samsung can be referred to as the crucial factor for company success, which helped to maintain market position and develop a sustainable strategy for competition. Company Business Strategy Presently, innovation is deemed to be one of the critical components for a successful business. Irrespective of the industry, innovation helps companies to maintain their market position and survive competition. Samsung’s strategy for sustainable competitive advantage has been to gain innovative edge over its competitors. The current degree of innovation employed at the company is in order to make strategic changes in launch of different services offered by the company (Porter, 2002). Samsung Group tries to develop lifestyles and provide design solutions that are aimed at such deliveries. The company’s success would not have been possible without the partnership of its multicultural resources. The company conducts extensive researches on local lifestyles and compares results of different countries so as to identify similarities and differences between the lifestyles. This helps to design products that shall suit to a specific group of lifestyle patterns, thereby adopting a localisation strategy through customization of its global products (Power, n.d.). Market Analysis The analysis of the market for Samsung is considered necessary to gain a better understanding of factors that have been responsible and conducive for success of innovation strategies adopted by the company. This market analysis shall be done on the PESTEL framework. Political The level of political intervention with Samsung is tremendous because it is deemed to be the backbone of telecommunication and electronics industry. Each minute change in technology is monitored and charged by the government. Economic The analysis of macro market and factors like, interest rates, foreign exchange rates, growth of society and GDP changes of different economies, have a direct impact on financial flows of the company, which in turn affects strategic decisions (Jensen, 2001). Socio-cultural The standard of living of people, societal stability and consumers’ purchasing power in a market determine the marketing strategy and the product offering of Samsung and company’s flow of revenues in the particular market; hence, are critical to company’s success. Technological The trends in technology in the market reflect the level of competition present in the industry and also determine the kind of advancement required for Samsung. In the electronics industry, it is of key importance to be aware of the trends in technological changes in order to sustain oneself. Samsung LED televisions have brought about a production technology that does not use mercury and as a result, the company gained sustainable competitive advantage through technological corporate governance (Morris, Kuratko and Covin, 2010). Environmental Environmental consciousness is gaining increasing importance. The environmental laws have become strict. Additionally, there are numerous environmental compliances that must be adhered to in order to ensure sustained growth for the company (Cho, Lee and Pfeiffer, 2013). Currently, energy conservation, carbon footprint and recycled use of materials are the most popular environmental issues among electronics companies. Samsung LED televisions produce the highest technology with 60% energy savings as compared to any other LED TV. Samsung products and packaging use about 40% of the recycled material in their production activities (Jo and Harjoto, 2011). Legal Legal trends help to determine the kinds of strategies that can be adopted by a company. These trends also determine the legal hindrances and company growth strategies. Lawsuits that have been filed against Samsung by Apple are an example of the drastic manner in which lack of legal environment awareness can affect a business. Underlying factors User Centric Designs The design philosophy for Samsung has been quite creative that forms the core of its competitive strategy. The company tries to strike a balance between ‘feelings’ and ‘reasons’ of consumer’s perceptions and their needs and demands. The designs of Samsung do not deliver ‘feeling’ of class or status alone to the consumer, unlike Apple, in their association with products. The company also attaches a ‘reason’ for quality of its products by adding multiple complex and unique features (Hendry, 2000). Samsung Electronics was the pioneer in development of 3D technology in televisions. This innovation helped company to lead the market, especially in North America and Europe. The 3D technology associated the new and upcoming television viewing manner with ‘reason’ and also incorporated high fashion and hip ‘feeling’ with a entirely new paradigm of television technology (Mohr, Sengupta and Slater, 2010). Samsung has a dedicated design centre where about 700 highly creative and qualified people work upon research projects that cater to different fields such as, graphic designs, industrial design, lifestyle research, interaction design, colours, material development, business planning and human factors (Bartholomew, 2001). Lifestyle based segmentation Mass customization of Samsung products is neither possible nor feasible. Hence, in order to address the same, the company has adopted the lifestyle based market segmentation strategy. The products of Samsung are segmented on the basis of local trends, market conditions, perceptions and technological attainment (Chang, 2011). This was observed in Samsung’s attempt of launching global standard products with a localisation strategy. This attempt was observed in most products of the company, where the designs and blueprints, as per the global themes and standards, remains adequately flexible for supporting changes and adaptations as per local demand and needs. For example, design of its mobile phones is appreciated alike by a Parisian or a Nigerian; but in terms of the localisation strategy, Samsung has enhanced battery life of the Nigerian phone due to demand for the same owing to frequent power and electricity failures within the nation. With this strategy, the company was successful in establishing itself as a global as well as a local player in different nations and was able to earn the title of being a first class company in consumer electronics. Quick Response to Consumer Demands Innovation is regarded as one of the most crucial factors for success of any company. One of the most primary issues associated with success of Samsung has been its product innovation strategy. Innovations within company’s products have been able to offer quality to customer. This innovation has also seen rapid progress in the field of telecommunication and computers. Samsung has undertaken its product innovation strategy in the field of telecommunication by either upgrading technology or working upon costs of the product. This strategy helped Samsung to cater to the levels of demand, thereby formulating a pull effect, which in turn led to company growth. This pull effect shall lead to a definite growth in demand quantities of the product (Shaughnessy, 2013B). Maintenance of a good record keeping system and quick delivery technology has added on to innovative success for Samsung. The company maintains different products in their warehouses and employs innovative technology to upkeep these facilities, stocking them as per the consumer demand and manage the entire channel of delivery of goods from their point of origin to that of delivery. This is the uniqueness of design strategy of Samsung (Roll, 2005). Research Investments and Innovation Protection Samsung has been the recipient of over 19 awards for its design excellence internationally. In 2006, the company has registered to over 17,377 patents globally, which include those related to nanotechnology, biotechnology and fusion technology. Samsung had been the leader in the market for LCD and LED television sets in 2007 (King, 2013). This level of research and development undertaken by the company has given Samsung an unparalleled leadership and competitive edge. Samsung Electronics has about 6 research centres in South Korea alone and about 16 others in different parts of the world. The results of such R and D ventures get commercialised into new products and technologies (Shapiro, 2013). The company has incorporated an effective system for management of such proprietary rights so as to bring about key innovations and technologies through patents. In addition, organizational protections act towards successful brand management and smooth running of organizational system. Distribution and Pricing Model The market dominance for Samsung has been driven by its pricing as well as distribution mechanisms. The firm uses an intensive distribution strategy so as to make products available to a wide range of customers spread out across huge geographical expanse. This strategy is important for Samsung because of recognition and brand popularity that it enjoys. The feeling of safety with its products and maintaining consumer expectations has been the key to Samsung’s popularity. The strategy adopted by Samsung is to flood the markets with its products and this has been highly responsible for success of Samsung’s mobile phones technology, thereby providing stiff competition as well as contributing towards overall success of the organisation (Infoworld, 2014). Platform and System Diversification Apple had filed lawsuits against Samsung for infringement of its patents, designs, copyrights and ideas. As a result of this lawsuit, Samsung has lost a significant market share and was also stopped from selling its Galaxy S3 model of smartphones in the USA. With a view to manage such a blow, the company attempted at a novel strategy, which was specific to its mobile phone business. Samsung developed mobile phones that could run on three or more operating systems, unlike those of Apple that ran on a single operating system. This allowed substantial flexibility in smartphone operations and also allowed Samsung to determine the widely accepted format of operating system, which could subsequently form core of its mobile phone technology (Michell, 2010). Conclusion So, it can be concluded that innovation has been the most crucial factor for success of Samsung or any other industry. It assists the organization in maintaining existing market share through innovation of existing products, thereby attaining sustainable competitive advantage. Samsung has been quite poetic in saying that it supports innovation, but strategies undertaken acclaim that the company could not have had a more specific agenda. Samsung’s strategy for innovation focuses on localization of its globalised innovations, speed of research and development initiatives, extensive marketing and distribution channels, product development that is demand-centric and design focused and quick diversification strategy to manage competition. Future Scope The consumer electronics segment is an industry that exhibit fierce and extensive competition, where the product portfolio is quite large and a huge number of players are present in the market. The advent of digital technology has caused more companies to enter this industry. Companies like, Apple, Sony, LG, Panasonic and Nokia, have all started to invest in research and development activities and design of products. Such high development and advancement of technology has reduced lifecycle of products. This has also increased the pressure on innovation. Additionally, sunk cost associated with new product development has risen. Such a trend has also led to outsourcing of designs, which again has serious implications on intellectual property rights protection. All these collectively have made markets conditions difficult and competition fiercer to manage. Reference List Bartholomew, D., 2001. Cost VS Quality. Industry Week, 250(12), pp. 34-41. Chang, S. J., 2011. Sony vs Samsung: The inside Story of Electronics’ Giants Battle for Global Supremacy. London: John Wiley & Sons. Cho, S. Y., Lee, C. and Pfeiffer Jr., R. J., 2013. Corporate Social Responsibility Performance and Information Asymmetry. Journal of Accounting and Public Policy, 32(1), pp. 71-83. 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