Samsung's Strategic Management Analysis - Case Study Example

Introduction

Samsung is one among the leading world’s mobile phone manufacturing brands and its customer base is quite large. It has been involved in manufacturing of mobile phones for twenty years now and it has grown to becoming a reputable mobile phone brand. This is because of its business strategies that are aimed at keeping up with the stiff competition from other players. Alongside this model, the paper also addresses the strategic options available for this company, alongside the recommendations for the strategies.

Task 1

In trying to understand the current position of the firm’s mobile business, this paper analyzes Samsung’s business model using the five forces framework. Michael E. Porter of Harvard University created this analysis. This model is a pure competition model that shows how firms strive to remain competitive and profitable in a competitive industry. The five forces framework is comprised of the following sources: rivalry, threat of substitutes, buyer power, supplier power, and threats of new entrants.

Rivalry

Rivalry is the situation where firms struggle to have competitive advantage over their rivals. Indicators of industry concentration measure rivalry. A high concentration ratio is an indication that an industry’s market share held by few large firms (Wilson, 2010). A low concentration ratio is an indication that the industry is very competitive with many small firms with each holding a not so significant market share. The mobile phone industry is an industry where there are few large firms commanding a huge market share. Samsung luckily is one of the firms. The others are their fierce competitors, Apple and Microsoft. The rivalry in the mobile phone market cannot be fully regarded as disciplined, as there is aggressiveness to gain competitive edge over the rival. Samsung has been trying to stay at the top of the game by employing the tactics that ensure its continued increase in the market share. The mobile phone company has maintained its price at a low range as compared to its key rival and has led to its penetration and establishment in the US market. As of December last year, the number of smart phones sold in the country that were from the brand was 31% of the total with Apple beating it by only 10% (Song, & Lee, 2014). In addition, Samsung employs product differentiation through its S series and the J series. The Samsung S7 is the latest phone in the line of innovations that aim to differentiate the company from the other mobile phone manufacturers.

Threat of substitutes

In this model, substitutes refer to the products from other industries that could offer the same services as the product being manufactured. Mobile phones do have substitutes, but the substitutes are not as convenient as the phone itself. So luckily, for Samsung, the substitutes to mobile phones are either very expensive or inconvenient so the demand for mobile phones is quite inelastic

Buyer Power

This is the impact that buyers have on the producing industry. The power of buyers is stronger when the buyers are few. This would mean that the buyers set the price. The case is however not applicable to the mobile phone industry because the buyers are quite many and price is dictated by the manufacturing company itself alongside the law of demand (Song, & Lee, 2014).

Supplier Power

This is the influence that the suppliers of the inputs of production of a product have on the firm. The suppliers could be the suppliers of labour or even the suppliers of raw materials. Currently, there has been an increase in the number of personnel and material required in the manufacturing mobile phones so Samsung does not suffer the adverse effects of supplier power.

Threats of new Entrants and Entry Barrier

Being that Samsung is an established brand, the threat posed by new entrants is not quite significant. The market favours traditional players and it takes a while for new entrants to curve a niche. However, brands such as the Huawei have come up strongly to curve a segment of the market for themselves.

Threats and Opportunities

The mobile phone market is very dependent on innovations and Samsung has the opportunity to come up with new technology that is unique to their product. The buyers of these products are fascinated by new inventions daily (Wilson, 2010)The threat that Samsung faces however is losing profitability because of the new entrants who are mostly based in Asia and also the diversification of products the company has limits their ability to excel in one innovation unlike their rival, Apple.

Task 2

Samsung Electronics operates in a highly competitive global market, where new products are being developed and made available for the consumers in the market. To withstand such competitive forces, in the global market, the company has to adopt strategies that enhance their innovativeness as much as it enables them to utilize their resources, both human and non-human, in the most efficient way. In addition, the company needs to eliminate their managerial practices and institutions, which restrict or are discriminatory, within its management and the entire organization. Samsung has been effective in utilizing the human resources, marketing, design, manufacturing, and technology departments within the organization, which have given it a competitive advantage in the market thus becoming a successful global company.

Threshold resources & capabilities

Among the company’s threshold resources are its financials, which is made possible by the large market share that the company has enjoyed over the years. This has helped the company to boost their flow of cash through increased sales as much as they have been able to boost their capital base. The design and manufacturing departments within the company has been highly effective, ensuring that the company produces high quality products that are capable of meeting the market needs. These outstanding manufacturing within the company indicates their extensive physical resources, which are most valuable to Samsung. In addition, the company has a production line with a high capacity, which indicates their technological resources endowment. As a result, Samsung has been able to compete favourably with other producers in the market. Samsung has valuable human assets, which have been enhanced by the company’s program to recruit and pool together talented employees. As a result, Samsung has been able to offer unique brands, which are highly valued in the market. the culture of the company is also another unique asset, which has enabled them to reward their outstanding employees and, in turn, encourage them to improve their performance.

Distinctive resources & capabilities

Samsung has various capabilities, which enable them to adjust to the changes in the global market environment and achieve a competitive advantage. Over the years, the company has, provided innovative electronic products, which has made it a globally recognized brand. Through innovation, Samsung has been able to provide a variety of products, which makes it possible to address the needs of different segments of their consumers. This is enhanced by the quality of their research and development, which makes it possible for them to identify the market segments and be able to come up with possible solutions, customized to the demands and abilities of the consumers in each segment. Apart from providing a wide variety, the company has been able to focus on quality of their products, as a way of ensuring that these products satisfy their customers’ needs. Additionally, Samsung has a high capacity to produce electronic products, which makes it as global competitor, by being able to diversify their market coverage.

Samsung Electronics operates in a highly competitive global market, where new products are being developed and made available for the consumers in the market. To withstand such competitive forces, in the global market, the company has to adopt strategies that enhance their innovativeness as much as it enables them to utilize their resources, both human and non-human, in the most efficient way (Jung, 2014). In addition, the company needs to eliminate their managerial practices and institutions, which restrict or are discriminatory, within its management and the entire organization. Samsung has been effective in utilizing the human resources, marketing, design, manufacturing, and technology departments within the organization, which have given it a competitive advantage in the market thus becoming a successful global company.

Samsung has many resources, both tangible and intangible, which enable it to compete favourably in the market. The tangible resources include the financials, organizational, physical, and technological resources. On the other hand, the intangible resources of the company include its human, reputational and human resources, which they have been able to accumulate over the years of operation (Jung, 2014). Among the company’s threshold resources are its financials, which is made possible by the large market share that the company has enjoyed over the years. This has helped the company to boost their flow of cash through increased sales as much as they have been able to boost their capital base. The design and manufacturing departments within the company has been highly effective, ensuring that the company produces high quality products that are capable of meeting the market needs. These departments in the company are well organized, which makes it easier to plan, control, and coordinate their activities, making them the most valuable to Samsung. In addition, the company has a production line with a high capacity, which indicates their physical resources endowment. As a result, Samsung has been able to compete favourably with other producers in the market, since they are able to access raw materials and produce at a relatively low cost. Samsung has valuable human assets, which have been enhanced by the company’s program to recruit and pool together talented employees. As a result, Samsung has been able to offer unique brands, which are highly valued in the market. The culture of the company is also another unique asset, which has enabled them to reward their outstanding employees and, in turn, encourage them to improve their performance.

Samsung has various capabilities, which enable them to adjust to the changes in the global market environment and achieve a competitive advantage. Over the years, the company has, provided innovative electronic products, which has made it a globally recognized brand. Through innovation, Samsung has been able to provide a variety of products, which makes it possible to address the needs of different segments of their consumers. This is enhanced by the quality of their research and development, which makes it possible for them to identify the market segments and be able to come up with possible solutions, customized to the demands and abilities of the consumers in each segment. Apart from providing a wide variety, the company has been able to focus on quality of their products, as a way of ensuring that these products satisfy their customers’ needs. Additionally, Samsung has a high capacity to produce electronic products, which makes it as global competitor, by being able to diversify their market coverage. Their effective promotion of brand name as well as the outstanding quality of their customer service in all their stores has gained the company a greater market share and a positive reputation. Additionally, Samsung has been effective in adopting new technology, through research, development efforts, which have seen them offer unique products in the market that, are highly priced, and their demand is high.

On international strategy, Samsung has been a leader in international market expansion. They have been able to diversify into the production of different products to match the varying needs of the consumers in various global markets. Its presence in the international market has provided it with a wide range of benefits (Simonin, 2014). The company has been able to leverage the various advantages available in the different markets, such as low labour costs in the Chinese market, manufacturing in Sao Paulo, Brazil, while R&D has been found effective in the U.S, Silicon Valley, and London in England. However, as much as internationalization presents a wide range of benefits, there are equally many challenges that are presented by its international presence such as cultural barriers, inability to utilize the economies of scale in new markets as well as challenges with the patents and copyrights for their products in various countries. These barriers are likely to damage the company’s brand image. Therefore, the company should continue with its strategy of diversification, while focusing on particular markets, which are most valuable to it. In addition, continued application of research and development is essential to ensure that the company remains innovative and creative both in marketing and in designing of new products in future.

Task 3

Samsung electronics can incorporate strategic management in its processes in order to succeed in competing over other companies (Jung, 2014). The first strategy is to become an ultimate fast follower, in which the company becomes very quick when it comes to learning from other companies in the same field. This can be done by reading and analyzing the market to understand the upcoming trends and develop product that fit in this market. This part does not concentrate much about what the customers want but rather on what the competitors are doing because there is a high possibility that the moves by the competitors are dependent on the needs of the customers. This includes observing the new technologies being introduced in the market, and the customers they are attracting. In return, Samsung can develop an almost similar product, but with better qualities and specifications, and one that has a high possibility of outdoing the products of other companies.

Strategic management in this case can also include pivoting and producing quickly, in which the company manages to push success and to kill the failures that it experiences. The production of unique items can be supported by proper marketing skills. The company has to look at the regions where their products do not seem to be doing very well, and marketing there to inform the potential customers the benefit of using products manufactured by Samsung electronics. Additionally, customers may avoid purchasing a particular product because they are not aware of which vendors to trust for the purchase of these products (hill, Jones, & Schilling, 2014). Therefore, Samsung electronics has to come up with a means of supplying its products to the customers so that they are sure that they are purchasing the legit commodity and not a counterfeit. By virtue of this company being the largest chipmaker of the chips used in smart phones and other electronics, it has a cost advantage over its competitors. Therefore, it should aim to use this to boost its sales and increase the market for its products.

Market research has always proven to be a very important strategy when it comes to finding out the reviews of customers about the products supplies, the features they would want improved or the devices that they feel are not present 9in the market. It is through market research that Samsung would be able to identify the kind of innovative ideas that they need to feet in the market, especially because technology is evolving at a very high rate, and companies have to change their operations at this same rate (Ireland, Hoskisson & Hitt, 2010). Market research would provide the company with innovative ideas that would lead this company to file more patents and continue with its upward trend. Market research also makes it possible for the company to find out the technology that has flooded in the market and come up with new technology to fill the market gap.

In conclusion, the company faces rivalry from various competitors such as Microsoft and Apple. However, the kind of rivalry experienced includes disciplined competition, in which the competitors involved aim at attaining a competitive edge over each other. The company is also faced by the threats of substitutes from the competitors and about the products that they produce together with the power of buyers and suppliers. The large market share of this company increases the threshold capabilities of the company, alongside its distinctive resources.

Reference List

Hill, C., Jones, G., & Schilling, M., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Ireland, R. D., Hoskisson, R. E., & Hitt, M. A., 2010. Strategic Management: Concepts: Competitiveness and Globalization.

Jung, S., 2014. The Analysis of Strategic Management of Samsung Electronics Company through Value Chain Model. International Journal of Software Engineering and Its Applications, 8(12), 133-142.

Jung, S. C., 2014. The Analysis of Strategic Management of Samsung Electronics Company through the Generic Value Chain Model. International Journal of Software Engineering and Its Applications, 8(12), 133-142.

Simonin, D., 2014. International Strategy: The Strategy of Samsung Group. ResearchGate. Retrieved 20 April 2016, from https://www.researchgate.net/publication/285370984_International_Strategy_The_Strategy_of_Samsung_Group

Song, C. Y., & Lee, K., 2014. The Samsung way: transformational management strategies from the world leader in innovation and design. McGraw-Hill Education.

Wilson, R. M., 2010. Strategic marketing planning. London: Rutledge.