Global Strategy of Samsung Group - Case Study Example

Profile of the organization Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 24, 09, 2010 Table of Contents Table of Contents 1 Outline 2 I.Profile of the organization 2 i. Definition of the nature of the company- Samsung Group 2 ii. Constituents of the company forming the conglomerate 2 iii. The size and influence of Samsung in Korea in economic terms and revenue collection 2 iv. The root of the company’s growth from the time it first came into the market in 1938 to date 2 II.Importance of using Business strategy in Samsung Company 2 i. Importance as regards the robustness of the company 2 ii. Importance as regards the volatility of the electronics business 2 III.Strategy School used by Samsung 2 i. Strategy used in marketing of Samsung’s products 2 IV.SWOT Analysis 2 i. Strengths, weaknesses, opportunities and threats found in Samsung 2 ii. Effects and challenges that these elements present to the company 2 V.Changes in the Industry 2 i. Changes due to technological advancement 2 ii. Changes due to economic competition within the market 2 iii. Market share analysis 2 VI.Competitive strategy used by Samsung 2 i. Definition of competitive strategy and the one used by Samsung- internet advertisement and popularization of products 2 VII.Conclusion 2 Profile of the Organization 3 Importance Using Business Strategies in a Business 6 Business Strategies Used in the Organization 7 Strategy School Used in the Organization 8 SWOT Analysis for the Organization 9 Changes in the Industry 10 Market Share Analysis 11 Competitive Strategy 11 Bibliography 13 Appendices 14 Appendix 1: Summary of Details of Samsung Company 14 Appendix 2: Summary of Samsung’s Market Share 14 Outline I. Profile of the organization i. Definition of the nature of the company- Samsung Group ii. Constituents of the company forming the conglomerate iii. The size and influence of Samsung in Korea in economic terms and revenue collection iv. The root of the company’s growth from the time it first came into the market in 1938 to date II. Importance of using Business strategy in Samsung Company i. Importance as regards the robustness of the company ii. Importance as regards the volatility of the electronics business III. Strategy School used by Samsung i. Strategy used in marketing of Samsung’s products IV. SWOT Analysis i. Strengths, weaknesses, opportunities and threats found in Samsung ii. Effects and challenges that these elements present to the company V. Changes in the Industry i. Changes due to technological advancement ii. Changes due to economic competition within the market iii. Market share analysis VI. Competitive strategy used by Samsung i. Definition of competitive strategy and the one used by Samsung- internet advertisement and popularization of products VII. Conclusion Profile of the Organization The Samsung Company is a conglomerate corporation which is a multinational company whose headquarter is in Samsung town in Seoul in South Korea which posses as South Korea’s biggest chaebol and also as the largest conglomerate by revenue in the whole word having a net annually revenue collection of up to US $ 173.4 billion in the 2008 fiscal year (Garrani 2005). This company is made up of numerous multinational companies that operate under the brand name, Samsung and these include (Glen 2010): Samsung Electronics- by sales, the largest electronics company in the world) Samsung Heavy Industry- the second largest shipbuilder company in the world) Samsung Engineering- 35th Engineering company in the world) Samsung C&T- 72nd largest company of the 225 global construction firms in the world. Samsung Group is responsible for over 20 percent of South Korea’s total exports and it is a monopoly in the domestic industries dominating a single market and this makes its annual revenue to at times be as large as the total GDP of some countries (Glionna 2010). For instance, in 2006 Samsung Group alone would have been the 35th largest economy in the world if it was to be ranked and its economy would have been larger than that of Argentina as a country. This large economic might has made Samsung Group very powerful in the country influencing the country’s local policies, politics, economic development, culture and media (Garrani 2005). The company’s logo is well designed and is symbolic in many respects since it captures its core values and organizational culture that informs its policies and objectives. Since the time it first entered into the market, Samsung has had four logos. Its latest logo that has been in use from 1993 is mostly blue in colour which represents the ocean and planet earth and the oval shape into which the word Samsung is inscribed is taken to mean space and galaxy. See figure 1 for the logo. Fig. 1 Samsung Logo Samsung Group was founded in 1938 by Lee Byung-chull who was from Uiryeong County and called this first company Samsung Sanghoe and initially had forty employees and the company was first located in Su-dong which is the current day Ingyo-dong (Glionna 2010). The company first dealt in dried fish and green grocery that was sold locally within the town and picked with time such that in its first few years of operation, the company prospered so much that Lee had to relocate its headquarters to Seoul in 1947. With the coming of the Korean War, Lee took the opportunity to build a sugar mill company that he called Cheil Mojik becoming the first South Korean sugar manufacturing facility. These two companies merged and traded under the name Samsung and diversified into many areas becoming an industry that was highly differentiated and widely consistent offering insurance services, securities and retail facilities (Garrani 2005). In the late 1960s, Samsung Group started its electronic industry that took the market by storm and shot straight to prominence and business success in its first two years of entrance into the market. In the early 1990s, Samsung Group invested heavily in research and innovation in the electronics industry where it was able to invent newer and more refined products and appliances that had not been seen in the electronics industry before. In 1982 it established a television assembly in Portugal and two years later built a US $25 million similar facility in New York. From here henceforth, the company has remained dominant in its niche market and thus has continued to wield a great amount of market share all along its operation (Glen 2010). The 1990s further saw the company increase its operational value tremendously by acquiring a host of companies locally as well as abroad in addition to leading the way in some specific electronic components. During these days of expansion, Samsung’s construction branch won the contract to build one of the two largest Malaysian Petronas Towers, the UAE’s Burj Khalifa and the Taiwan Taipei 101. Lee’s successor, Lee Kun-hee sought to change the company’s strategy to the Initiating cost-leader that it was to a differentiator role that it sought to become. He managed this by selling off ten of its subsidiaries, downsizing the company and merging other operations to concentrate on three main industries: engineering, electronics and chemicals (Glen 2010). This robust economic powerhouse was so established that in the 1997-98 Asian Financial Crisis it escaped almost unscathed save only that Samsung Motor (which was over a $5 billion venture) was sold at a loss to the French auto giant Renault. As of now, Renault Samsung is owned by 80.1 percent Renault (of French) and Samsung Group only owns 19.9 percent (Glen 2010). Ever since then, Samsung has endeavoured to produce state-of-the-art electronic appliances and has therefore dominated in the worldwide production of semiconductors and has even surpassed the former world’s largest semiconductor’s producer, Intel. In 1992, Samsung Group became the largest producer of memory chips and built its first liquid-crystal display screen in 1995 and expanded further to become the largest producer of DRAM chips, optical storage devices and flash memories. Given that Samsung is a very large corporation with over 260 000 employees (see appendix 1 for further details), it has had to skew most of its strategies to make its robustness of great benefit of the community it exists in. It has therefore come up with an elaborate Corporate Social Responsibility (CSR) that is well outlined in its specific benefit to the society. One of these CSR initiatives can be seen in the Samsung Medical Center which is a non-profit making medical organization through which Samsung gives back to the society. Annually, Samsung Group sends over $ 100 million in donations and Samsung Medical Center of Korea consists of Samsung Seoul Hospital, Kangbook Samsung Hospital, Samsung Cancer Center, Samsung Changwon Hospital and Samsung Life Sciences Research Center (SLSRC) (Porter 1995). Importance Using Business Strategies in a Business The robustness of the corporation requires that the company has specific strategies that are put in place for the proper running and management of the corporation. Using a business strategy in a business is very instrumental in the survival of the business. The long-term goals of the company are addressed in the business. The running of a business like electronic products is no easy challenge (Porter 1995). Daily, new challenges are discovered and with a business strategy, the threats can be dealt with in a manner that ensures the continuity of the business as well as the profit making. For an organization like Samsung, developing a business strategy is very important for them to survive in this competitive world (Glionna 2010). This is a multinational company, thus some of their products are sold to the outside markets. In the business, also Samsung will have many challenges like competition from rival electronics products producers and rapid introduction of new technology in the market. Electronics business is a very versatile industry that requires the condition for survival to be the company with the most technologically advanced electronics and cheapest in price (Glionna 2010). Therefore, for Samsung to survive and expand in the market they need strategies that will ensure that they will produce the cheapest product in the market. This is to be achieved using modern manufacturing techniques and reducing on the total companies operation cost. The company will also need to establish customer loyalty through establishing of superior products that are of standard. Finally, to curb against competition they will have to involve themselves in rigorous advertising and selling techniques to popularize their products within the populace (Porter 1995). Business Strategies Used in the Organization Samsung Company has adapted several strategies to ensure that the organization remains afloat amidst all the market pressures available. The first strategy is the increase of sales. This strategy can be difficult to realize given the numerous market forces like competition and globalization that affect the organization (Dyer 2001). The plan the company uses is the introduction of nationwide advertising campaign to popularize their products. Another strategy the company employs is the creation of new markets. This it does by sending out regional sales persons to areas the organization has no foothold. Additionally, it seeks to set regional and local sell points to reach the consumers in the grassroots. The presence of sales personnel and outlets in the regions makes it easier for implementation of after sales services as well as handling complaints. By increasing the area of market, Samsung is able to increase its market share of the products (Porter 1995). By having a larger market share it has the growth of the business as retailers seek to stock the company’s products promote it (Dyer 2001). After all, if the organization’s brands itself is the leading company then it can conduct its advertising with confidence (Dyer 2001). This is because all consumers always want to associate themselves with the leader. It is also an indicator that the organization is enjoying higher growth than its competitors which is good news to the stakeholders of the company. Growth is another strategy that the organization has. Sales and market share are the yardsticks that are used to measure the company’s growth. Larger organizations are less likely to have takeovers and are able to have benefits of having economies of scale. Growth also automatically translates to organization achieving the full potential it has the capability of achieving. This means that the managers and other workers are able to enjoy higher salaries among other material benefits. Growth can also be achieved by acquisition of other companies. This strategy is currently being employed by Samsung Company on a wide scale. Finally, to achieved globalization the organization is introducing standardization of the electronics products being produced. Standardization ensures that all the products produced by a given company have the capacity of being sold anywhere in the world after meeting the strictest of standards of quality and authentication (Dyer 2001). The organization strives to introduce standard products because this leads to increased sale meaning increase in profits. Strategy School Used in the Organization An effective market strategy seeks to achieve the ends that are desired by the organization. The main aim of an effective strategy is to help to dislocate the source of market to its competitors. This mostly comes as a shock and due to the shock; the competitor will usually try to counter the strategies. As he does that, the organization is supposed to put all the focus to the point of weakness of the competitor (Porter 1995). Once this point is broken, then it allows the organization to have a market entry in an area they did not have before. The strategy school or the type of strategy Samsung Company uses is the Envelopment strategy. The strategy involves the use of identification of the weak points within the competitors and then developing ways to gain entry into that segment. Once in, the organization is able to spread effectively enveloping the markets and gaining control of it. Usually Samsung introduces one product in a certain market and tests to see how the product is received. After that, there is gradual introduction of other products and before long; the market is littered with its fuel products and related services. This strategy is used within Samsung because of its desire to increase market share and for it to go global. For effective globalization, organizations have to see how consumers will receive the products in the other countries. Owing to the fact that in these countries there are industries producing the same products, the strategy is very useful in ensuring a slow takeover (Porter 1995). The important thing about this strategy is that it does not require huge resources to implement and it can have quick results as long as the products being introduced are of high quality. With the use of this strategy, Samsung has been successful in penetrating other related markets and in the process had the chance to increase its profits. SWOT Analysis for the Organization SWOT analysis is the tool that is important in the auditing of the position of the business in relating its environment. In involves evaluating the strengths, weaknesses, Opportunities, and threats that concern the business. The strengths in Samsung include competitive pricing, having a good brand image as the leading electronics company in the region. Due to its expansion, it covers a very wide geographical area thus it enjoys a higher market share. This wide coverage permeates even foreign markets and economies. Among the weaknesses that the company suffers are high operating costs due to the high costs of energy and high payment of salaries since it is such a large corporation with a huge workforce all over the world. Lack of research facilities that measures to the challenges of the 21st century and that are in tandem with the current technological requirements is also a weakness the company has. This leads it to have a lack of technological edge among its competitors (Dyer 2001). The final weakness is due to the lack of incentives from the government. Among the opportunities that the organization enjoys are increasing level of communication awareness. The awareness leads to a higher sale of its fuel products among other electronics products. Higher revenues due to increased sales are also an opportunity the organization enjoys. Finally, the organization enjoys an opportunity is the introduction of numerous regional outlets. This outlet leads to increase sales and closer services to the consumers by providing after sales services (Dyer 2001). Threats the organization is bound to suffer are the competition from the organizations that produce cheap petroleum and electronics products. These products are low quality but due to their cheapness they are popular among the consumers who do not understand the standard of goods they are being offered. Some companies are also using the Samsung’s name to produce imitations that are of low quality, the consumers are duped to think that they are buying the genuine Samsung products. The table in appendix 1 gives this SWOT analysis in a summarized form. Changes in the Industry The electronics industry is a rapidly changing industry that requires the introduction the new technologies to be able to survive and therefore it requires that corporations operating within such an industry heavily invest in research and innovation to meet these technological challenges. To be able to remain competitive, the organization has to ensure that it offers products that are on top of their markets. Another change sweeping the industry is the development of international trade due to globalization. International trade increases sales and serves as the avenue to be able to increase its geographical area of market (Porter 1995). The effect of this international trade is that the organization is forced to introduce standard goods according to the level of standards allowed in the countries of sale .Overall; this will lead to increase of sales that result also in the increase of profits. Because of introduction of new technologies and effects of globalization, the organization has a bright future. It needs to invest in a good research facility to ensure that any change in the market is addressed. It also needs to have consumer satisfaction surveys that will ensure that will be proper feedback to the management of Samsung and by this the company is likely to remain prominent in its niche market. Market Share Analysis Currently Samsung has a market share of 83 percent in its country of origin, and a policy decision needs to be made so as to institute proper structures that ensure that this high market share is maintained at that. See appendix 2 for a summary of Samsung’s Market share. Competitive Strategy A competitive strategy is marketing strategy that most firms use to increase their sales and popularity among its customers. It seeks to make the company achieve uniqueness in the market in the process helping it grow and move away from the position it hold currently. In Samsung, the strategy can be used to post an online buying to the markets or places it has not yet reached (Porter 1995). Using the internet, the organization can popularize its products in the areas it has not yet established physical presence. This is particularly important for Samsung since it is a large corporation that is operational in many economies throughout the world. In these areas, the company can allow its consumers to order online and the products can be arranged and shipped to them using courier services or other means available. To be able to achieve popularity the products should also have discounts. By using this strategy, the organization will have more sales, increased exposure to the market, and achieve globalization (Dyer 2001). This is among the surest ways of ensuring that the company has unrivalled competitive strategy among its contemporary competitions. Bibliography Dyer, D 2001, Business Strategy for A2, Cambridge University Press Cambridge. Garrani, H 2005, ‘Samsung Surpasses Sony for the First Time, Taking over the No.20 Spot’ Interbrand, viewed 23 September, 2010, . Glen, D 2010, Policy on Target Substances: Chemical Management and Environmental Sustainability about Samsung, viewed 23 September, 2010, . Glionna, M 2010, ‘Samsung Doesn't Find Satirical Spoof Amusing’, Los Angeles Times, viewed 23 September 2010, . Porter, M 1995, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Appendices Appendix 1: Summary of Details of Samsung Company Element Description Type Public (Korean: 삼성그룹) Industry Conglomerate Founded 1938 Founder Lee Byung-chul Headquarters South Korea Samsung Town, Seoul, South Korea Area served Worldwide Key people Lee Kun Hee (Chairman and CEO) and Lee Soo-bin (President, CEO of Samsung Life Insurance) Products List Electronics, Shipbuilder, Financial, Chemical, Retail, Entertainment, Flash memory, Aviation, Optical storage, Smart-phones, Hard disk drives etc Revenue US$ 173.4 billion (2008) Net income US$ 10.7 billion (2008) Total assets US$ 252.5 billion (2008) Total equity US$ 90.5 billion (2008) Employees 276,000 (2008) Subsidiaries Samsung Electronics, Samsung Life, Insurance, Samsung Heavy Industries, Samsung C&T etc. Appendix 2: Summary of Samsung’s Market Share Product Samsung’s Global m/s Competitors m/s year DRAM 34.3% Hynix 21.6% Q1 2009 NAND Flash 40.4% Toshiba 28.1% 2008 Large-size LCD Panel 26.2% LG Display 25.8% 2009 February PDP panel 30.5% LG Display 34.8% Q1 2008 Active-Matrix OLED 90.0% LG Display - Q2 2008 Lithium-ion battery 19% Sanyo 20% Q2, 2009 LCD monitor 16.1% Dell 14.6% 2008 Hard disk drive 9.5% Seagate Technology 34.9% 2007 Multifunction printers 16.4% HP 19.2% Q1 2009 Television sets (LCD, PDP, CRT) 23% LG Electronics 13.7 % Q3'09 French door refrigerator (U.S. market only) 18.79% Whirlpool 23.83% 2009, January Mobile phone 21% Nokia 37.8% Q3 2009 Digital camera 9.1% Canon 19.2% 2007 Drillship 80% Daewoo Shipbuilding & Marine Engineering 20% 2000~2007 Read More