Samsung in UK Market: Strategic Analysis and Future Business Policies - Case Study Example

• Samsung in UK Market: Strategic Analysis and Future Business Policies
• Introduction:

The mobile phone was introduced to the world only a few decades back. The basic versions of the mobile phones were meant to serve one purpose only, that is, staying connected. But this purpose was redefined with the introduction of the smart phones. These smart phones could work with the same efficiency and precision of that of a personalized computer, so much so that they have almost taken over laptops now. According to the report published in OFcom, 2015, 33% people find their smartphone as a comfortable means of going online while 30% would rather use their laptops. The clear bias towards the smartphone over the laptops is shown due to the fact that they are a much compact and portable version of the traditional computers. No more considered to be the sole purpose of the phone, the calling facility now is just one of the many features in the phone. There has been an immense potential in the mobile industry since the beginning of time. Being the largest market in Europe, the UK market alone is worth 14Billion Pounds (UK Trade &Investment, 2016). There are 80 million subscribers in this market, which provides a big opportunity to the companies to find out new ways to get engaged into the telecom business (UK Trade & Investment, 2016). With rapid evolution of technology, where the latest technology faces the constant threat of becoming obsolete within no time, mobile phone industry has turned into a highly competitive industry.

• • • • • Objective of the paper:

The objective of this paper is to analyze the current position, evaluate the strategic options and recommend the strategic route for the mobile business of Samsung in the UK.

• Samsung in the Current market:

Samsung is one of the major players in this industry. Essentially a Korean Company, Samsung entered the electronics market in the 1969 and later, entered the mobile industry in 1993 (Williams, 2015)

Slowly and steadily it emerged as one of the major players in the mobile industry. The first mobile phone by Samsung was SH-100 launched in 1988 (Williams, 2015). During the beginning years, the growth was slow. By 2012, Samsung had captured a giant market share of 30.4% with a sales growth of 16% in the year 2011-2012, which was considered the best in the industry (Business Overview, 2012). Facing though competition from its rivals like Apple Inc, it has always focused on incorporating newer technologies into its products. A major part of Samsung’s game plan to stay ahead of competitors, in this particular industry, has always been to emphasize more on the innovation. It claimed Nokia’s position in the market as the largest mobile phone maker in the world, in 2012. Since then, it has been giving a tough competition to Apple too, by launching several new phones incorporated with newer technology every year. In the years 2011 and 2012, Samsung was awarded the most number of patents by the US Patent and Trademark Office (Shaughnessy, 2013). For a very long time now, the two rivals have been busy fighting the bitter patent war against each other which started in 2012 and the war is still on. In 2016, Samsung will try to open the initial battle in the Supreme Court (Whitney, 2015). It lost $1.05 Billion to Apple for infringement of patent in that one case alone (Fox news, 2012). Although Samsung has lost in most cases, it still stands strong giving Apple tough competition (Whitney, 2015).

• Current position of the organisation and comparison with competitors:

At present, Samsung is undoubtedly the world’s largest smart phone manufacturer and owns about 95% of the android market globally (Kelion, 2013). It stands strong today in the market facing bitter rivalry from its competitors, Apple being the most prominent of them all. Few other newcomers in the same market, who are worth a mention, are Xiaomi and Huawei.

Xiaomi is comparatively new in the market and has been active in the markets of China and Asia Pacific. Recently it has entered the Brazilian Market, marking its entry into the American subcontinent. Within such a short period of time, Xiaomi has outperformed LG.

Image 1: Market share of smart phones across the globe (IDC, 2016)

Huawei, being low-cost, is considered to be a valuable alternative by many consumers and poses as an important competitor in the market in China.

During the year 2011-2012, the world witnessed a bitter patent war between Samsung and Apple. The two companies made more than half of the smart phones sold globally during 2011-2012.

By the end first quarter of 2015, Samsung became number one in the Smartphone market but compared to the market share in the 2013 of 31%, it fell down to 24%. At the end of fourth quarter of 2014, Samsung was able to sell 83.2 million Smartphone across the globe as compared to the 61.2 million of Apple (Ribeiro, 2015)

• Brand Positioning of Samsung Mobile:

In order to compete with all the available brands in the market, Samsung is continuously doing innovation in their product line and developing new products for various market segments. One of the major feature of the organization is it does not have any particular tagline as a brand. Organizations prefer to use separate tagline for different brands which is helpful for the company to create a unique identity among the customer. The organization is placing themselves as a pioneer in innovation. In the recent years Samsung is mainly focusing on the features of their mobile and making it more and more unique than the others. Launching Galaxy 6 with a curve screen is a clear indication of that as no other organizations are yet to have these features (Savov, 2015).

Among developing nations, India and China are the two most important markets that every mobile phone organizations are targeting in last few years. Samsung is also no difference. With the launch of low priced mobile phones from Micromax, Motorola, it started to lose its market share in India as well. During 2013-2014, it lost its position to Micromax as the leading mobile brand in India. Being the second largest mobile phone market, it is very important for the company to regain the market position and to do that Samsung incorporated number of strategic changes. To gain the market Samsung not only started to change its pricing strategy, but at the same time it also adopts the 4G LTE devices which are gaining more and more popularity in the smart phone industry. During the last quarter of 2015, the total sales of the Samsung mobile phone grew by 15% to reach 25.3 million compared to 22 million of last year (News 18, 2016). In India, for the year 2015, Samsung is leading the Smartphone market with a market share of 28.6%, followed by Micromax (14.3%) and Lenovo (11.4%). If one considers both smart phones and feature phones, Samsung is again at the top with 23.6% market share, closely followed by Micromax (13.7%) and Intex (13%) (News 18, 2016)

• Porter’s Five Force Analysis of Samsung:

The Five Forces Model, by Michael Porter, describes the five factors that affect the competition in any industry. It gives a holistic understanding of the entire market and the competitors, which in turn helps the company to understand what factors can be used to its advantage. These factors are:

• Competitive rivalry
• Supplier power
• Buyer power
• Threat of new entry
• Threat of substitution (Porter, 2008)

Image 2: Porter’s Five Force Model

(Source: Porter, 2008)

• • Competitive rivalry:

The rivalry amongst the competitors is a major determinant of the competition in an industry. Few factors that determine the level of competition in the industry are the number of competitors in that industry, the differences between the quality of products of the competitors, competitive advantages, consumer loyalty etc. (Margretta, 2012).

The competitive rivalry is very high in the smart phone industry. Though there are only a few major competitors present, but many small companies are coming up every now and then. These small companies pose the threat of turning into major competitors. A huge competitive advantage of Samsung is its aggressive research and development. The company has always been actively involved in developing new technologies. The main strategy followed by Samsung is to overflow the market with as many different products with different technologies as possible.

• • • Supplier Power:

The power of the supplier emphasizes on the fact that how easy or difficult it is to source inputs for the business in a particular industry. It specifically depends upon the number of suppliers that are available in the industry and how expensive the inputs are. This in turn helps in determining the cost of manufacturing, which helps set a profit margin for the business (Margretta, 2012).

The mobile phone industry requires to source mobile phone parts from the suppliers. A large number of suppliers are available in the market who supply these parts. The manufacturer can easily procure these parts from any of these suppliers if need be. Hence, the suppliers do not have much power in this industry.

• • • Buyer Power:

The buyer power indicates towards the various options available to them (Roy, 2011). In context of the smart phone industry, the buyer power is high. There are a large number of competitors in the market offering a wide range of products. Hence, it is very easy for the consumer to buy from which ever company he/she prefers.

Samsung has used this fact to its advantage, as people are ready to pay more for better features. Also, making a wide range of products available for the consumers has helped it in gaining more consumers who were previously buying phones from the competitors.

• • • Threat of new entry:

Entering the smart phone industry calls for investment, the major ones being research and development needs, packaging, advertising and launching. It is difficult to enter the market unless the new entrant has resources. A new entrant can perform well in the market if it has access to proper resources. Thus, the threat of new entry is not very high in the smart phone industry. Samsung has benefitted from this, given the fact that it keeps a check on the increasing competition in the industry. The more difficult it is for the new entrants to enter the market, the safer it is for the existing companies in the industry.

• • • Threat of substitution:

The ease with which an alternate can be provided to the product in question is described here (Roy, 2011). Speaking of the Smart phone industry, the competition is very high. The consumers can easily switch from one company to another according to their preferences. Also, a wide variety of smart phones are available in the market today, starting from phones with basic application features to very advanced ones. This provides a lot of options to the consumers. The threat of substitution is moderate. The factors that cause a substitution of brands is if the competitors come up with effective measure to provide the same or better technology at lower price.

Strategic Analysis of Samsung:

• The business strategy of Samsung has always been to make a large variety of products available to the buyers. Product differentiation strategy has helped Samsung to emerge as a market leader over a period of time. Overflowing the market with smart phones and providing buyers with a lot of options is what has made Samsung hold its position as the market leader globally. Samsung has a large variety of smart phones that run on both Windows OS and Android. Similarly, it has mid range models too along with higher ended ones (Kelion, 2013).
• A huge competitive advantage that Samsung has over its major rivals is that it does not depend on only the highly advanced and expensive varieties of smart phones to retain its market share. Low cost strategy has helped Samsung to capture the price-sensitive market, where the sales increase with the drop in price. The company gives equal importance in developing the lower range too. This is what had made it survive the fall when its heavily priced model “Edge” could not perform well in the market (Zoheb, 2015).
• Samsung has used various cost effective measures to lower the price of the phones. Manufacturing the components is one such method. Samsung manufactures these components and uses them in the smart phones that it manufactures. This gives the company a huge cost advantage over its competitors. Not only it helps in pricing the products low, it also gives the company an added benefit of bulk manufacturing (Shaughnessy, 2013).
• The pricing model that Samsung has followed is Competitive Pricing. Most of the phones are priced in the mid range, whereas Apple, which is its main rival and one of the major competitors, has all its products priced on the higher end. This have given Samsung a huge advantage over Apple and helped it retain its market leader position.
• Conclusion and Recommendation:
• Recommendation:

Based on the above analysis Samsung can follow the following Steps to improve its performance in the market:

• Ecommerce websites are emerging as very effective means of reaching the consumers all around the world. Samsung should focus on tying up with various Ecommerce websites offering premium rebates to attract more customers. This will help in increasing its market share by reaching out to those potential markets where the options of setting up physical stores are limited.
• The company should also focus on incorporating more features into the lower range models. As many competitors are coming up with lower range products with advanced features, this can pose a threat to Samsung in the long run.
• Conclusion:

Samsung had entered the market as an electronics company, but a few decades later, it emerged as the market leader of the smart phone industry. One of the main factors that have contributed to its success is the effective business strategy of Samsung. Product diversification and low cost strategy have helped it in gaining a huge market share. Also, Samsung has done extremely well in keeping up with the latest technology and improvising on the existing models. The smart phone industry has high competition and Samsung has effectively tackled this competition by focusing on the factors that it could use for its advantage. Keeping itself aware of the changing market trends and improvising on its own business model has kept Samsung amongst top players in the market.

Reference List:

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http://www.foxnews.com/tech/2012/08/24/jury-reaches-verdict-in-apple-vs-samsung-case.html

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