Business Policy - Samsung Electronics - Essay Example

Samsung electronics has been a major player in the chip development industry for many a decade now; it has gone from a low quality chip producer to one that is now known as one of the highest quality chip producer. It now faces stiff competition from Chinese competitors that are now looking to take away market share from Samsung and Samsung is now looking at different markets, this paper is going to study the strategic directions that are available to Samsung to secure its market share and maintain its reputation as a high quality chip producer in the region, for this purpose one of the main things that need to be studied are the strengths and weaknesses of the company, a SWOT analysis for the company follows. SWOT Analysis SWOT is basically an acronym for Strengths, Weaknesses, Opportunities and Threats, where strengths and weaknesses are internal and opportunity and threats exist in the external environment, with this basic understanding let us now discover the strengths of Samsung. Strengths for Samsung would be its human resources, because Samsung places such a high value on its human resources and believes in rewarding its labor and not punishing them makes a whole lot of difference because employees are more motivated to work and they have a strong sense of loyalty to the company; this makes a whole lot of difference as people would put in more effort for the company to succeed in achieving its targets and in bad times they would be much more supportive of the company which may include accepting a lower wage for the period that the company is suffering because there is a sense of ownership and belonging with respect to the company. At Samsung this is achieved by relieving the employees of the 90% of their burden such as healthcare for them and their family and retirement , with these burdens taken care of, it allows employees more freedom to concentrate on their work rather than worrying about other things.. Another important aspect is that Samsung places a lot of value on high quality and it develops that through research and development, it spends heavily on research and development and it has been unique in developing the way that it encourages people to research. It has an annual competition between two teams, one in California and the other in Korea itself, these two teams develop a new and better product each other and have been the source of many new product designs for Samsung, this is a strength that most of its competitors may lack and it gives Samsung a definitive edge over other competitors in the market, it is a strength that has seen Samsung grow into what it is today. Samsung has been able to do this because it has been able to identify how this was possible, where as many companies have their research and development centers scattered all over the globe, Samsung has its in one place only; Korea, where engineers and designers work together and hence it is a more effective way to design and engineer products because all of it is being done in consultation with each other. Weaknesses that Samsung has that it has not been able to determine yet what it needs to do with the competition a clear cut policy needs to exist so that everyone works within that frame work, another thing that Samsung lacks is that the products are a bit too highly priced because of the cost structures that prevail within Samsung, Samsungs prices are at least $0.20 higher than the industry’s average price. Opportunities that prevail for Samsung in the market is that there are opportunities for finding niches so that it does not have head on competition in all of the markets and does not have to compete on all fronts, rather it would have a specialized product line and range and it can count on being a strategic leader in all those markets. The threats that are existent for Samsung is from the competition that it faces from companies in the Chinese market, not only do they threaten to take away Samsungs core competency in the longer run if they keep going like this and they also threaten to shift the physical productions market from Korea to China, which could potentially put Samsung at a disadvantage. The strategic direction for Samsung can be determined through the space matrix, the space matrix is a strategy that is used to determine which strategic policy it should implement and why that is so. The space matrix has 4 factors on which it is built, financial strength, environmental stability, industry strength and competitive advantage. The average for both axis is taken and the point is plotted, there are different strategic policies in each quadrant of the matrix. Financial Strength: Operating Profit +6 Costs (256mb DRam) +5 Operating margin +4 ROA +5 GP +5 NI +5 Environmental stability: Inflation -5 Technology attrition -6 Average= +19 Competitive Advantage: Research and Development -1 Human resources -1 Brand Image -3 Industry Strength: High Barriers to Entry +3 Growth Potential +5 Average= +3 The resulting space matrix would be like this This shows that Samsung should follow the competitive strategic policy and it should look to invest into more markets and develop these markets for its products, it should also be looking into diversification of its products and play according to its core competencies. As for the pressure of the lower end Chinese chip makers Samsung should ensue the aggressive policy and look to capture markets that they have not been able to enter or dominate as yet and they should also be looking for a long term competition with these players as they have financing and backing from the Chinese government. The financial strength that Samsung has is reflected in the space matrix because they have an average score of +19, this would help the company in investing in new fields and markets as finances would not be an issue for the company All in all Samsung must play to its strengths and develop these core competencies further to gain a competitive edge in the market, it should be able to identify future market trends and how it could be able to capitalize on these trends to gain the first movers advantage. Bibliography n. pag. Web. 4 May 2010. Read More