Samsung Electronics Corporation - Book Report/Review Example

Samsung Electronics Corporation 1.0 Introduction This paper aims to focus the global value chain of Samsung Electronics Corporation (SEC). This company is determined to be a global leader in areas relating to mobile and other media technologies. Samsung group is a Korean conglomerate, which comprises of 83 companies incorporated in Korea. The value chain of Samsung include the procurement of components that form the basic raw materials, this components include the mining of tin that has recently been viewed to cause environmental pollution. Any product that is not procured by the procurement department are done in a just and fair process. These components are then assembled in different factories around the globe. Other components that make up the value chain of Samsung include research and development (R&D) that is meant to make sure that Samsung brands are outstanding other products around the globe. Logistic is another key component of value chain, in Samsung the logistics are mean to make sure that the products reach the consumers in time. From this analysis it can be deduced that a value chain of a company is meant to identify the primary activities it performs that form customer value and the related support activities. The ‘output ‘of an organization’s value chain activities and the value delivered to customers and the resulting revenue it collects. Thee ‘inputs’ are all the resources required to conduct the various value chain activities; use of these resources creates costs. Value chain activities can therefore lead a company to act unethically or involve itself in environmental destruction. 2.0 The Samsung Value Chain Activities 2.1 Basic Value Chain Michael Porter’s value chain theory and model of creation of value in the manufacturing and service industry can be applied in the analysis of the activities undertaken by Samsung. This theory is effective in the analysis of the specific activities that a company gets involved in in order to add value to the service or product offered to the market with an aim of satisfying the needs and preferences of the target consumers. Porter’s model of value chain breaks down the functions of the organizations into discrete processes and functions which have been designed as building blocks to offer competitive advantage to the company (Porter 1998). This paper seeks to apply the Michael Porter’s value chain theory to present the distinctiveness of the activities involved in the Samsung Mobile media value chain. Since this is a technological area, the model will be slightly modified to accommodate the mobile media industry by classifying activities such as design, product development and basic research as primary activities as opposed to their early classification in this model as support activities. The activities in the value chain analysis of Samsung are presented below. 2.2 Research and Development (R&D)Organization R&D has been prioritized by Samsung in its technological development as the most important step in its value chain. This is because this first step adds more value to the brands of Samsung thereby propelling Samsung to be a global leader of the mobile technology. Effective R&D has enabled Samsung to progressively maintain the market leadership position due to its ability to break new frontiers at every stage of product development such as in integration of technology and in product design. The quality of the product design can be demonstrated comparison with Apple’s I- product family. Research and Development (R&D) is Samsung is organized into three layers. The first layers is The Samsung Advanced Institute of Technology (SAIT) whose main purpose is to secure and oversee proper and safe management of technology such as patents, identification of future growth engines for advanced technological development and ensuring that Samsung builds its technological competitiveness in the fundamental functions. The second layer is the SEC, which refers to the R&D centers which specialize in the development of technological ideas designed for development of promising long term results. This layer is divided into several sections and each section handles a research department. These two layers are considered as the core R&D layers as they are purposely involved in the core product planning and technological development. The last layer is made up of divisional product development teams which are mandated with the responsibility of working with design centers to commercialize products that are due for market in the short run, such as two or one year. In the mobile phone industry, design and R&D for phone technology is decentralized in a number of centers. Korea holds the Solution divisions which is handles the final products in preparation for the market. 2.3 Procurement In Samsung, the activities involved in procurement are different from those in other companies such as Dell or Apple. This is because Samsung has intra-firm attributes which lacks in other electronic companies where the production of all the components is not done by the firm. This has been known to result in complications with the suppliers of electronic components or potential suppliers as some of the product may overlap with some of the divisions as a result of sharing a component, whether it is internally made by Samsung or sourced from outside. Most of the Samsung operational activities are intra firm, and therefore, Samsung seeks to make its procurement process operate like that of the intra firm system as opposed to that of the external procurement system. The purpose of building such a procurement system is to ensure that suppliers and potential suppliers of electronic components have a great working relationship with the company, thereby feeling like a family. When suppliers are accredited and inside the Samsung family, they are offered new horizons which makes it easy for them to successfully operate in the electronic industry, however, outside the family, suppliers find it very problematic to do business with Samsung. 2.4 Logistics The activities covered in logistics on Samsung are uniquely designed to comprehensively handle the various administrative activities. It is even hard to describe the logisticsinvolvedin Samsung operations in this value chain analysis as it is very complex. The logistics involve core building for differentelectronic features as well as combined components which are sourcedboth externally and internally. The components are then shipped by a department known as Samsung Electronics Logitech to their assembly factories oversees or in Korea plants. The department involved in logistics is responsible for handling of outbound and inbound logistics which also involves undertaking the processes and payments of external companies thathavebeen outsourced to work with the global ERP system which derives its operations from the Samsung SDS. The inbound logistics concepts in Samsung are very comprehensive as the logistics companies are Samsung subsidiaries. A company, "Samsung Electronics Logitech“, is one of the several subsidiary companies of Samsung that handle the total logistics services for Samsung. 2.5 Assembly Assembling of Samsung products is an activity that is linked to manufacturing. There are three aspects of the manufacturing process that are involved in the assembly process. The first aspect is manufacturing where assembly involves component manufacturing as well as semiconductor manufacturing. The second aspect is the systems manufacturing where there is application manufacturing and software manufacturing. Lastly, there is the device assembly packaging where the activities involved are the label assembly such as batteries and assembly of other components. Samsung has different electronics production plants in different parts of the world such as Europe, North and South America, Korea and Asia pacific. The plants are specialized in production of different components and each division handles its on assembly plant and its own factory. There is no record of outsourcing of assembly reported in Samsung as all the activities are handled by the plants. The major locations where assembly takes place is Vietnam, China and Korea. 2.6 Trading support service and outbound logistics Samsung’s trading support service and outbound logistics are handled by a specialized subsidiary company known as Samsung Electronic Logitech. The company is designed to handle logistics as well as trade support activities such as undertaking insurance claims where the company needs to liaise directly with Samsung as well as negotiating payment collection for the electronic products that are meant for exportation. This operation of logistics and trade support service helps in the payment of the export products by issuing and signing a document which presents the exporters to the bank after the export products have been loaded for shipment. Outbound logistics in this case are involved in both shipping and warehousing. There are three attributes of the shipping process; shipping charges, shipping notification shipping issues and shipping method. For purposes of warehousing the export products to be shipped, a company is expected to manage the process of the warehouse thereby decreasing the warehouse costs. In Samsung, the main distribution centers for shipment of export products is located in Suzhou and Tianjin. These two locations undertake the handling of many thousands of electronic products per year and, therefore, they are significant attributes of the firm’s global supply chain infrastructure. 2.7 Marketing and Sales Marketing and sales of Samsung products is based on different locations. The sales offices in overseas are in six huge regions such as Latin America, North America,Middle East and Africa,CIS Baltics, Europe and Asia Pacific. There are four huge locations where the Samsung overseas production networks are based. These are North and South America, Europe, CIS and Asia Pacific. Furthermore, there are nine overseas locations for the Regional Head Quarters which are, India, UAE, Russia,China,Singapore,UK, Latin America and North America. The sales and marketing aspects of Samsung are divided into two divisions with marked distinctions. The division handling the electronics in the DM&C as this division; operations have a globally-based marketing model. The other division is the B2B division which handles the devices solution business and its marketing structure is very different from that of the electronic segment. All the major markets dealing with Samsung products have a DM&C sales and marketing subsidiary company with is involved in a partnership what Samsung to increase the sales of the company. 2.8 After-sales Samsung prides itself in offering high quality after sales services especially in the Korean market. This is attributed to the high quality of the electronics and device products such that there are very rare cases where the already purchased products are returned. The general reliability of the products is very high and therefore cases of defects in products are remedied with replacement with new products. This can be demonstrated by the move by Samsung to sign an agreement with a supply chain company based in Switzerland known as CEVA, which was contracted to pick up all the Samsung products that had been returned by the customers due to different types of defects. The CEVA Company was required to conduct quality control in order to determine the cause of the defects and whether such defects can be repaired. Samsung invests in after sales services in order to boost the loyalty of the customers on their products by increasing customer satisfaction. 2.9 Support Activities Samsung prides in the support of the most professional infrastructure both in HR management and in firm infrastructure in Korea. The support services received from different organizations are rated astop notch. Support activities extended to Samsung include, investment funds, handling of finance, investor relations and financial support. The Samsung electronics support activities involves the creation of a venture fund which purposes to foster potential suppliers. Samsung has set up a venture whose main function is to offer financial resources and assistance to upcoming firms interested in biotechnology, electronic, semiconductors, communication and information technology. In terms of firm infrastructure, the company has great corporate governance, well executed financial support and a well-established to deliver assistance for support of new investment. The HR management emphasizes on high skill employees in management, IT and engineering, heavy investment in research capability, innovation and training improvement. 2.10Samsung Product Lifecycle Management This activity is essential is ensuring that Samsung products such as mobile media devices, semiconductors and LCD comply with the global environmental regulations. A recent development in this area is the Eco-Design Assessment System. This system was set up in order to assess the impact of the materials used in designing electronics and devices on the environment to as to mitigate any potential damage. The system was later in 2009 upgraded into Eco-Rating system which ensured that all the products were assessed for compliance. Samsung hopes that there will be implementation of more measures to handle the product lifecycle management in the future which will be incorporated in the value chain with an aim of ensuring that all the new activities to be established in the future comply with the “green” movement. This will involve partnering with more recycling companies as the company is already working together with some of the most reputable recycling companies to ensure that their wastes are disposed effectively(Kim, 2011). Despite the company’s efforts to comply with the environmental and ethical regulations, Samsung has faced severalchallenges in its value chain. The following section seeks to provide insightsintothe ethical and environmental issues facing Samsung. 3.0 Environmental Impacts and Ethical Issues Resulting from Samsung Operations 3.1 Samsung’s Environmental Destruction In the year 2013 Samsung admitted that the tin they mined was causing severe environmental destruction. Tin is part of the raw material that the company uses to manufacture some of its products, which is claimed to destruct tropical forests by environmental campaign group Friends of the Earth (FoE). The campaign group found out that mining of this mineral used to make smartphone technology is destroying tropical forests, coral and damaging the community life of the people living on the island of Banka, Indonesia. It is for this environmental impact that the FoE are suggesting that smart phone manufacturer like Samsung to take due responsibility on the impacts that may occur on the supply chain. Intensive and reliable investigation found that silt from tin mining vessels kill coral, thus driving away fish and marine life ruining the livelihoods of the fishermen in those area. There has also been several occasions where the injury and deaths have occurred when the mining pits collapse. Due to this environmental implications of Samsung, it is very important for the company to employ extremely measures to protect the environment. It they don’t take due diligence in their actions human life will keep on to be lost in the areas where they perform mining of tin, and it will be viewed as an unethical company with no value of human life and environmental consciousness. 3.2 Health Concern of Samsung’s Workers Workers working at semiconductor and other electronic plants are reported to be mostly diagnosed with cancer and other series of chronic and severe diseases. This diseases include leukemia, brain cancer, lymphoma and other diseases which are found to be common among the workers working in semi-conductor and other chemical-intensive plants to be high. There has been no direct evidence linking this phenomenon to the plants, but the number of people with cancer working in these plants is extremely high. These employees are found to have been working on semiconductor fabrication, which include chip burning (a process that involve testing semiconductors by subjecting them to high voltage and heat), usage of x-rays and ion implantation. This are process that have been highly linked to causes of cancer and other chronic diseases in medical fields, which is due to the fact that they contain organic solvents such as benzene and lead ions that is highly cancerous. Benzene and other unstable organic compounds that are mostly used to manufacture electronics and other semiconductor material include methylene chloride and trichloroethylene, which are linked with cancer and system damage known to affect development of embryos. Majority of environmental organizations such as U.S Environmental Protection Agency (EPA) has confirmed benzene as a human carcinogen. The compound is also claimed to cause diseases such as leukemia and other complicated blood disorder such the ones Samsung worker are suffering from. 3.3 Unhealthy Competition: Samsung vs. Apple Three years ago Samsung and Apple engaged in a litigation fight concerning patents of the smartphone. The two are the leading companies in the world producing smartphones, the last few years have seen the two companies spent billions of dollars purchasing patents and suing one another. In the year 2015 a federal jury in San Jose, California ruled in favor of Apple, the decision reward Apple $1.05 billion in damages from Samsung for infringing six patents. This case sheds light on the manner which patent system has become dysfunctional globally. It is the court system that are been used to settle the score rather than the patent officers, and this puts the consumers on the losing end. Infringement of patent rights is unethical since it is viewed as a form of unhealthy competition. Patents are supposed to be an incentive of innovation, it is for this reason that infringing patents right seems unethical and uncouth. Unending court battles questions the stability of the company, it is therefore the obligation of a company to make sure that the products it produces are differentiated in all manner. The ruling stated that Samsung had infringed patent rights like the shape of Apple and other basic items such as the application icons on the screen. Infringement ruling has the capability of slowing a firm for a short period of time, which can be viewed as unhealthy competition since the consumer will be on the receiving end. 4.0 Conclusion Value chain of Samsung as indicated from the above analysis involves the activities that the company has undertaken in the course of designing, producing, marketing, delivering, and supporting its product or service. The activities such as ones that Samsung is involved in Thailand to mine tin for the production of smartphones has resulted in the destruction of environment and loss of human life in this region. Although the value chain of a company is a very important aspect in terms of gaining a competitive advantage, the ethical issues raised during the course of undertaking the core activities should be assessed and managed. Companies should put mitigation measures to ensure that it acts ethically and with due diligence. It is also on the interest of the company to make sure that the company’s value chain doesn’t cause harm to employees or competitors for the sake of its reputation and avoidance of litigation. 5.0 References Porter, Michael.1998. Competitive Advantage: Creating and Sustaining Superior Performance. New York, New York. The Free Press Kim Ji-Hyun, 2011.“Major reshuffling expected at Samsung at year’s end.” The Korea Herald/Asia News Network, 27. Samsung Electronics Consolidated Statements of Financial Position, Income Statement, http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/downloads/consolidated/2011_Consolidated_all.pdf. Samsung Electronics, Business Report page 20-33, http://www.samsung.com/us/aboutsamsung/ir/financialinformation/businessreport/download/2011_business_quarter02.pdf Saunders, M., Lewis, P. &Thornhill, A. (2003) Research Methods for Business Students (3rdedn), England, Prentice Hall. Yin, R. K. 1993. Applications of case study research (2ndedn), Newbury Park, California Sage Read More