Capability Analysis of Samsung Mobile - Case Study Example

OF SOUTHERN QUEENSLAND MKT3002 BUSINESS STRATEGY IN A GLOBAL ENVIRONMENT CASE STUDY 2 – CAPABILITY ANALYSIS& STRATEGY CHOOSING : Student ID: Due Date: Table of Contents Table of Contents 2 1.1 Capability Analysis Table 3 1.2 Capability rating by Resources 4 2.0 Capability Matching 7 2.1 Capability matching table 7 2.2 Rating capability with the KSF 7 2.3 Rating narrative 8 3.0 Strategy Choosing 9 3.1 Five Strategies 9 3.2 Preparing Matrices 10 3.3 The Five Questions 11 Reference List 13 1.0 Strategic Capabilities 1.1 Capability Analysis Table Table 1.1 Capability Analysis of Samsung Mobile Functional Area Samsung Mobile’s capability Description Procurement Sustainable resourcing of raw materials Samsung procures its raw materials from trusted suppliers which abide by company’s regulations. Manufacturing Efficient manufacturing process yielding high volume finished products Samsung uses technologically advanced equipments and skilled workers to produce high quality products Distribution Worldwide distribution The company owns a wide distribution network which allows it to market its products all over the world Branding High brand awareness The company has positioned itself as producer of both high range and mid range smartphones Consumer Service Customer oriented approach to offer better customer service The company is best known for its fast consumer response and close customer relationship Source: (Created by Author) 1.2 Capability rating by Resources Table 1.2 Rating of Capabilities Resources Capability -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 Tangible Resources Manufacturing plants Yielding large number of final products x Human Resources Skilled work force x Advanced Equipments Cost efficient output x Intangible Resources Brand Image High consumer preference x Process and Systems Operational Process Performance evaluation and improvement x Organizational Culture Work environment x Source: (Created by Author) 1.3 Capability choosing and justification Capability 1 (Procurement): Procuring high quality raw materials is imperative to a firm’s ability to produce better quality products. Samsung has business collaboration with several suppliers which offers high quality raw materials and service quality at attractive prices. The company has designed its supply chain management in an efficient manner so as to ensure hassle free and seamless sourcing. The company also employs legal and ethical process to procure and transport materials like tantalum or coltan. Certain mining regulation makes it illegal to mine particular materials from areas like Congo. Samsung ensures that all of its raw materials are procured from legal sources like the US, Thailand, Russia, etc (Samsung, 2008). Owing to the highly reputed brand image and high financial strengths, Samsung is often able to exert influence on the supplier companies and thereby controlling the supply chain. However, Samsung is dependent on particular companies for procurement of certain integrated circuit equipments. However, the company maintains a good relationship with its suppliers so as to ensure a long term sustainable sourcing of raw materials (Marketline, 2014). Capability 2 (Manufacturing): The manufacturing process of a firm is the most important capability, as it produces the products for the company which is sold to generate revenue. Samsung owns several manufacturing plants in more than 80 countries (Grobart, 2013). It allows the company to increase the production level in the host countries. It has also enabled the company to manufacture at a lower cost and sell products at a lower price compared to exporting from home country. Samsung leverages the comparative advantage of host countries by utilizing the low cost skilled labours, particularly in the Asian markets. The company used the most technologically advanced tools and equipments to manufacture its products. As a result, its production process is highly cost effective and yields large volume at lesser time. Samsung also employs skilled labours and trains them to increase individual efficiency, which in turn increases the production output of the facility (Samsung, 2015). The manufacturing process is highly energy efficient which allows the company to operate in an environmentally sustainable way by reducing its carbon foot print. Moreover, Samsung continuously looks forward to expand its production capacities. It has invested nearly $15 billion to develop a new manufacturing plant in Seoul (Market watch, 2014). Capability 3 (Distribution): Distribution process helps a firm to send its products to its end users. Without the distribution process a firm cannot sell its products. Samsung has a wide distribution network in more than eighty countries, owing to its years of expertise. The company distributes its products via third party as well as self owned distribution channels. Samsung is mostly dependent on its distributors, as an efficient distribution is one of the major determinants of increased sales volume. In order to increase the efficiency of the distribution channel, the company has initiated certain programs which provide benefits for the distributors. The company provides assistance, technical support and training to the channel partners. Samsung also assures that its distributors meet certain eligibility criteria to be able to commence business with it. The distributors must enter into a legal contract with Samsung and they must assign a relationship manager for the company. Any business commenced needs to be overseen by the relationship manager (Samsung, 2015b). Thus, Samsung has created a robust distribution network, which allows it to penetrate in a wide variety of market places. Capability 4 (Branding): Branding is required to gain consumer preference which in turn helps the firm to increase its customer base. Samsung has achieved a strong brand image in the consumer electronics industry. It holds the 13th rank in the Fortune 500 list (Fortune, 2014). Samsung Mobile is also the market leader in the mobile devices industry. This suggests that the company has managed to gain high consumer preference which leads to increased sales volume thereby increasing its revenue generation. According to the reports of Shaughnessy (2014), Samsung is fast gaining on the brand image of Apple. The company has firmly positioned itself in the mid range and high range mobile phone segment, thereby catering to a wide range of customer base. Capability 5 (Consumer Service): Consumer service is also an important capability of a firm which allows it to create stronger brand image and close customer relationship. Samsung offers high quality consumer service by prioritizing the customers’ needs. This is achieved by proper training of the customer relationship executives and maintaining a good relationship with the customers. The company also maintains a fast response time to solve customer’s issues and problems, thereby gaining their trust and strengthening their brand image (Samsung, 2015c). 2.0 Capability Matching 2.1 Capability matching table Table 2.1 Matching capabilities with the KSFs Key Success Factors (KSF) Capabilities 1) Rise in technological advancement world wide Samsung constantly develops innovative technologies by taking advantage of the global technological advancement and improved manufacturing and procurement process 2) Rise in consumer awareness The company utilizes the high consumer awareness leverages it for promotional activities in order to strengthen its brand equity. 3) Technological competitiveness in the market Samsung to constantly produces innovative products in order to have first mover advantage in the industry. 4) Growth of Internet usage Developing better connectivity by innovation and adding features which allows consumers to utilize high speed internet 5) Fast growth of hectic lifestyle Developing innovative application and new features to add more value for the customers. Offering better customer service. 2.2 Rating capability with the KSF Table 2.2 Matching capabilities with the KSFs Capabilities 1 2 3 4 5 KSF 1 9 10 5 1 1 KSF 2 1 1 8 10 7 KSF 3 7 8 9 7 7 KSF 4 7 9 4 5 6 KSF 5 5 8 8 9 10 Total 29 36 34 32 31 2.3 Rating narrative Capability 1: Samsung’s ability to procure high quality raw materials has allowed it to develop high quality innovative products (Samsung, 2008). It has also allowed it to increase its competitive advantage by developing product differentiation. By maintaining a robust supply chain management, Samsung has been able to increase its resource optimization and reduce its operating costs. Capability 2: Samsung performs extensive research and development to enhance its manufacturing process, and to develop innovative technologies. The company introduces new technologies and features in their products to gain consumer preference and increase its market share. Its newly developed features add more value for the customers like better connectivity and applications that make lifestyle easier. Capability 3: Distribution channels developed by Samsung allow it to cater to a larger customer base and penetrate in different markets worldwide (Samsung, 2015b). This allows Samsung to create a strong brand image among the consumers. Moreover, the wide customer base owing the wide distribution network also helps Samsung to generate higher revenues. Capability 4: The Company has developed strong brand equity by introducing a large product portfolio and improved consumer service. The strong brand image has allowed the company to enhance consumer awareness of new technological developments of Samsung. It is also responsible for increasing its customer base and thereby increasing its revenue generation. Capability 5: Samsung deeply focuses on providing the best consumer service in the industry. This allows the company to achieve more value addition for the customers and at the same time it has allowed to build a close relationship with customers. Offering a better customer service than the rivals also acts as a competitive advantage and it positively influences the brand image of the company. Moreover, enhanced service quality spreads positive word of mouth among the consumers, which is also responsible for developing a stronger brand image. 3.0 Strategy Choosing 3.1 Five Strategies Strategy 1: Samsung currently holds the leading position in the mobile devices industry, in terms of market share and customer base. However, in terms of brand image Apple has taken the number one position (Forbes, 2014). Samsung needs to create a stronger brand image in order to take over Apple, which is currently its primary competitor. This can be achieved by bringing more uniqueness to its high range products which will attract niche customers. Although the high range mobile handsets have lower sales volume than mid range ones, but developing innovative features will increase its brand image. As a result, this will get reflected in consumer presence of the entire product portfolio. Strategy 2: Samsung has always been criticized by the consumers for the use of polycarbonate body even in their high range mobile handsets (Kovach, 2014). The company should create a new high end product line by focusing on both premium hardware quality and usability. This will give Samsung a major boost to compete with Apple. Moreover, Samsung is well known in the ‘phablet’ market, after the success of its Note series. Therefore, the company should focus on adding more value to the upcoming models and position them as premium flagship devices. Strategy 3: Samsung mobile mostly runs on Android operating system, which makes it highly dependent on Google for platform development. This also gives Apple an upper hand over Samsung, as Apple uses its own proprietary operating system. Moreover, the rise of android devices in the Smartphone industry has led to standardized user experience, which as a result reduces the room for value addition in terms of user experience. Therefore, Samsung needs to develop its own proprietary mobile platform, which will allow the company to offer a completely new user experience, thereby increasing consumer preference over rival brands. 3.2 Preparing Matrices Table 3.1 (Corporate Level Matrix) Ansoff Matrix Products/services Existing New Markets Existing Market penetration Product Development New Market development Diversification (Samsung) Source: (Kotler and Keller, 2011) The Ansoff Matrix can be used to gauge the strategic position of Samsung. The Ansoff matrix has four quadrants based on two factors market presence and product development. The Market penetration suggests that a firm is pushing its existing product in the existing market. The Product development is introducing new product line in existing market. Market development is associated with penetrating in to new markets or to new geographic locations. Finally, the Diversification suggests that the firm is introducing new products in a newly penetrated market. In case of Samsung, the company operates in multiple overseas markets, and constantly increasing its market expansion. The company also constantly develops innovative products and introduces them in all of its operating markets. Thus it can be stated that Samsung employs the diversification strategy. Table 3.2 Porter’s Generic Strategies (Business level matrix) Competitive advantage Lower Cost Differentiation Competitive Scope Broad Target Cost Leadership (Samsung) Differentiation (Samsung) Narrow Target Cost Focus Differentiation Focus Source: (Kotler and Keller, 2011) The Porter’s Generic strategy matrix assesses a firm’s approach towards its business. Samsung operates in a broad target market in order to gain competitive advantage. Thus it can be stated that the company follows two major strategies, Cost leadership and Differentiation. Cost leadership suggests that Samsung has been able to reduce its operating cost thereby increasing its profitability. This has been achieved by proper resource optimization and leveraging the comparative advantage of low priced resource and skills outsourcing. Differentiation on the other hand suggests that Samsung has been able to cater to a broad target market with differentiated product line. 3.3 The Five Questions Does the organization plan to grow? Samsung has always tried to seek out new ways to expand its business operations, either by entering into new market or by introducing new product lines in order to target a broad customer base. Samsung has recently spent nearly $15 billion dollars to develop and new chip manufacturing plant (Market watch, 2014). This suggests that Samsung is trying to meet the increasing consumer demand by hiking its production volume. The company has gradually achieved a firm foot hold in the entire consumer electronics and gadgets industry. It gained significant popularity in the smart watch and tablet market. Thus, it can be stated that Samsung plans to achieve a steady growth in the market. What product(s) and service(s) does it plan to produce? Samsung’s consumer electronics division manufactures products like television sets, refrigerators, air conditioners, etc. The IT and mobile communication segment operates in media solutions, mobile networks and manufactures devices like smartphones, notebooks, tablets, etc. The Devices solution segment provides third party customized solutions and services to other companies (Marketline, 2014a). What customers does it plan to service? Samsung offers it services to both business houses as well as end users. The company offers its electronics solution like large scale integration, solid state drive, eMMC multi chip memory cards, CMOS chips, automotive lighting etc. The company also specializes in providing high quality after sales service to the end users and offers solutions to hardware and software related issues (Marketline, 2014a). Which generic strategies will it follow? The company will follow the Diversification strategy in order to differentiate itself from the rivals. Moreover, Samsung has also planned to follow the differentiation focus strategy in order to market its extremely high range Smartphone handsets, which is targeted at the niche customers. Thus, Samsung will follow multiple generic strategies in order to cater to a variety of customer base. The broad scope will allow the company to penetrate into the mass market and the narrow focus will help the company to cater to the niche market. As a result, the company will be able to ensure steady growth and sustainability of its business operations. What position in the industry will it occupy? Samsung will keep its hold on the leading position in the mobile devices industry (IDC, 2014). In order to do so, it has to attain higher competitive advantage relative to its competitors, and have to ensure that it can be sustained for a long term period. Reference List Forbes, 2014. World’s Most Valuable Brands. [online] Available at: [Accessed at 19 January 2015] Fortune, 2014. Samsung Electronics. [online] Available at: [Accessed at 19 January 2015] Grobart, S., 2013. How Samsung Became the Worlds No. 1 Smartphone Maker. [online] Available at: [Accessed at 19 January 2015] IDC, 2014. Smartphone Vendor Market Share, Q3 2014. [online] Available at: [Accessed at 19 January 2015] Kotler, P. and Keller, K.L., 2011. Marketing Management. 14th ed. New Jersey: Prentice Hall Kovach, S., 2014. This Is Why We Make Our Phones Out Of Plastic. [online] Available at: [Accessed at 19 January 2015] Market watch, 2014. Samsung to invest $14.7 billion in new chip plant . [online] Available at: [Accessed at 19 January 2015] Marketline, 2014. Global Mobile Phones. [pdf] London: Marketline. Available at: [Accessed at 19 January 2015] Marketline, 2014a. Samsung Electronics Co., Ltd. [pdf] London: Marketline. Available at: [Accessed at 19 January 2015] Samsung, 2008. Product Environment Performance. [online] Available at: [Accessed at 19 January 2015] Samsung, 2015a. Process Technology. [online] Available at: [Accessed at 19 January 2015] Samsung, 2015b. Distributor Program. [online] Available at: [Accessed at 19 January 2015] Samsung, 2015c. Customer Delight Service. [online] Available at: [Accessed at 19 January 2015] Shaughnessy, H., 2014. Why Apple Is Losing Ground To The Samsung Brand. [online] Available at: [Accessed at 19 January 2015] Read More