Strategic and Non-Strategic Decisions of Samsung - Essay Example

?Strategic management of Samsung Strategic and non strategic decisions Strategic decisions The ansoff market matrix has four alternatives for organisations seeking to grow, and these include market penetration, market development, diversification and product development (Kipley et. al., 2012). Product development is a strategy characterised by introduction of new products in existing markets. Samsung appears to have embraced this strategy wholeheartedly. Samsung is largely known for its sale of electronic products and mobile phones. While the company has diversified into several areas, it is still working hard to maintain market leadership in its core business. It was ranked first in the television industry according to its market share. Furthermore, the organisation enjoyed similar rankings in the mobile segment owing to its investment in smart phones. Despite all this, rivalry in the telecom business has put Samsung under intense financial stress. It may be leading in the industry but has lost some market share (Refer to appendix 2 on the situational analysis) when cable firms entered the touchtone phone, TV and PC market. Some of the new innovations from the company are more flexible than previous products. For instance, Samsung’s version of the Android device is more compatible with current software in the market. Market leaders like Apple are worried about this capability because their products lack the same features. Furthermore, the company now uses second mover advantage to address the flaws that were inherent in older products. It has worked on features such as security to make its devices stand out (Reed, 2013). The organisation has a reputation for innovation across new and existing product segments. In the year 2012, it recruited several researchers and innovators. This translated to the registration of over 5,000 patents in that year. For these reasons, the company got the first runner up position in the top US patented companies. Samsung has garnered a series of awards for its impressive performance. In Europe, it got four awards from EISA, which is an award program for audio and video industry players (Samsung, 2013). In theory, companies may also adopt a green strategy option that depends on technology, carbon use, and consumer recycling patterns among others (Kipley et. al., 2012). Samsung received recognition from the best Global Brands portfolio as it was ranked 9th in the industry. The latter achievement stemmed from its sponsorship of the London 2012 Olympics. Other corporate sponsorship initiatives have also been on the organisation’s priority list. The firm’s commitment to corporate social responsibility is undisputed. It engages in a recycling program within its manufacturing sites. This move is in line with current environmental preferences for clean manufacture (Refer to appendix 5 on PESTLE analysis). Furthermore, it has committed to environmental protection by avoiding PVCs and other harmful materials (Guardian, 2012).These approaches may also give a company sustainable advantage according to green strategy theorists. Production within the company is also something worth noting. Samsung manages to keep its production costs down due to its choice of manufacturing centres. Since the firm is Asian-based, it is at a unique position to select cheap countries for manufacture. This has caused it to enjoy comfortable profit margins that emanate from controlled production costs. The global nature of the firm makes it poised to make such a choice. Operation costs have also been kept down by the organisation’s strong bargaining power. The company has considerable clout over its suppliers in the semiconductor, mobile phone and television set industries. This allows it to negotiate with such brands and thus establish lucrative ways of dealing with the differences. The latter move may be defined as cost leadership. Michael Porter identified certain generic strategies that companies may engage in, and cost leadership is one of them (Porter, 2008). Here, organisations reduce their production costs, enjoy higher profit margins and thus sustain competitive advantage of their rivals. Theory thus approves of Samsung’s strategic decision. Non strategic decisions Marketing efforts have also been impressive for the company. The value of the Samsung brand is constantly improving. It is now at $33 billion, which was an increase of 40% from the previous year (Interbrand, 2012). This company has been targeting top technology markets like the US for its products. Branding is not a strategic but an operational decision. Marketing is only one of the ways in which companies implement their grand plan, so it cannot be categorised as a strategic decision. Employees usually collaborate with human resource personnel in order to give their ideas about certain occurrences. (Refer to appendix 9). This is a non strategic decision because it occurs on a daily basis and is only one of many options to achieve the company talent management strategy. For reference on how the company manages talents strategically, refer to Appendix 1. This was an illustration of the vision that the company has for itself in an attempt to become the best place to work. The image in Appendix 9 also has details about the company’s approaches to achieve a certain vision by 2020. The plan governs operational decisions Samsung unveiled its prestigious 3D TV brands globally in the major countries like US, UK, Australia and China. The product was launched in all the major stores like John Lewis, Curry’s etc (Refer to appendix 6). This was a non strategic decision owing to the fact that it was operational. Product launches are a manifestation of the company’s strategy for innovation, but are not an actual long term plan. 2. Risks In risk analysis, one must look at three key aspects that include risk capacity, risk tolerance and risk required (PWC, 2013). Risk capacity entails all the financial aspects of a client’s business and they include net worth, balance sheet, and revenue inflows. These figures give a brief history of the nature of risks taken by Samsung. In the next segment in this report, details of Samsung’s financial position can be found. The company appears to have strong cash flows (Also refer to appendix 4 on SWOT analysis). This implies that it has the financial backing needed to invest in new ventures. After looking at risk capacity, one must follow through on risk tolerance. This parameter is a measure of the company’s willingness to take risk. For this aspect, one must look at the frame of mind of the company and establish whether they are capable of handling such risks. Samsung is one of the most aggressive organisations in the smart phone industry. The firm is currently competing with companies that consider it its suppliers. The organisation recently entered into the Android market thus causing ripples across Apple’s and Google’s market share. The firm decided to name its new innovation the security-enhanced android. Such a label has the implication that other organisations offering the same product were not secure. The company had worked with Apple and Google for a relatively long time. However, this latest move has caused the two companies to rethink their strategy. Google is now using a different supplier – Motorola to create its version of the X-phone. Conversely, Apple has decided to partner with other organisations for its android market. The two new competitors have realised that they cannot keep being a market to an organisation that threatens their very existence. As a consequence, most of the buyers have terminated their relationship with Samsung. Such responses pose serious problems for Samsung in the future. While entry into new technology markets may boost its revenue at the onset, some questions may arise on the sustainability of the practice (Reuters, 2013). The company may lose the partners that it had worked with for a long time. Therefore, for every two steps it makes in such new markets, the firm must encounter a backward step with regard to its older partners. This undermines its profitability in the long run (Iwatani and Sherr, 2011). These actions indicate that Samsung has a high risk tolerance. Interactive strategies in business refer to those approaches that depend on a competitor’s moves (Heifetz, 2012). Sometimes, this may manifest as a form of cooperation or it may be explained through game theory. This appears to be the path taken by Samsung. The method may generate unwanted reactions from rivals. Despite obvious indications that using game theory is a relatively high risks scenario, Samsung appears to be willing to take the plunge. It may be necessary to moderate these risks in the future. Lastly, businesses must look at risk required when making strategic decisions. All companies have their own goals, which involve risk to a certain extent. The timeline that they must operate in prior to completion of the strategy is also worth noting. Samsung needs to expand the sale of its 3D television sets. This must occur within the next few years. International brands like Sony, Sharp LG, Philips and Panasonic have more than a quarter of high-end market segment for 3D television sets (Refer to appendix 6). By the year 2014 3D sets will have a market share of 39% and a value of more than $117billion. The company must take risks by considering different market segments. Overall, Samsung has a huge financial base, which implies that its risk appetite is relatively high. Furthermore, the company has a contingent of loyal employees who are likely to stick by it even in tough times. The brand name is solid and has even garnered a reputation for entering into uncharted territory. Acquisitions have also been a common occurrence. Therefore, the company has a high risk appetite, which is likely to be manifested in new ventures aligned to the business. 3. Financial Overview Over the past three years, the company has enjoyed increased profits. In 2010, it had a net income of KRW 16,147 billion. This reduced to KRW 13,759 billion and then increased to KRW 23, 845 billion. The corresponding operating profit for these same years was KRW 16,147 billion, KRW 13, 759 and KRW 23, 845. Cash flows from operating activities also followed the same pattern. They increased, decreased and then increased again between 2010 and 2012. These figures stood at KRW 23, 827 billion, then 22, 918 billion and finally increased to KRW 37, 973 in 2012. The annual report for 2013 is yet to be released but is poised to be quite positive. Shareholders’ equity rose steadily within this period of analysis. In 2010, it stood at KRW 89, 349 billion. Subsequently, the figure became $101, 314 billion and finally in 2012, it stood at KRW 121, 480. Investing activities took a toll on the company as the income from these activities was negative throughout the three years under analysis. In fact, expansion activities are the number one reason behind its relatively low profit margins. Overall, the most recent sales revenue are KRW 201 trillion. This is approximately, double the amount from the previous year. Additionally, the organisation has a stable capital and liability ratio. The latter figure is 49.1% while the capital adequacy ratio is currently at 79.5% (Samsung 2013) Income Statements 2010 2011 2012 2012 Sales 154,630 165,002 201,104 220101,104 Operating Profit 17,297 15,644 29,049 290499,049 Net Income 16,147 13,759 23,845 23,845 Balance Sheets Assets 134,289 155,800 181,072 181,072 Liabilities 44,940 54,487, 59, 59159,591 Shareholders’ Equity 89,349 101,314 121, 480 121,480 Cash Flows Cash Flows from Operating Activities 23,827 22,918 37,973 37,973 Cash Flows from Investing Activities (23,985) (21,113) (31,322) (31,322) Cash Flows from Financing Activities (152) 3,110 (1,865) (1,865) (in billions of KRW) 4. Recommendations Samsung is in a place to develop and raise its marketplace share by becoming a worldwide resource of telecom services. In the strategic decisions, it was shown that the company has lost a lot of market share to rivals. It can reclaim these aspects by adopting a more proactive approach. Under the strategic decisions, it was shown that the company has a tendency to become a cost leader. It needs to expand this strategy in all its core business. The strategic decision of diversification must be rethought in order to dwell on televisions sets. Samsung is a global brand, so it can easily step in both the high and low end market segments owing to its overall resources and experience in the market. A major update of the novel 3D TV technology will occur globally, so Samsung needs to be part of this. Samsung may have to rethink its aggressive strategy of competing with most of its consumers. The latter companies always have the option of selecting other suppliers as they have a high bargaining power. In order to cub patent infringement, it can consider partnering or merging with its competitors. If this is not tenable, then it may need to do more legal research concerning its new products. 5. Conclusion Samsung seems to be making waves within the electronic industry. However, its sustainability in the industry can be put into question if it does not reverse its current strategic choices. The company prefers to use game theory in order to make its strategic moves. This has brought some legal and corporate challenges. Instead, the company should dwell on entering the high segment market for the sale of 3D televisions. It should use cost leadership to achieve this goal by selling high quality televisions to the new target market. A risk analysis has shown that the company has a high risk appetite. Samsung has a supportive employee base as well as a sound financial position. Therefore, the company should take risks that enable achievement of its strategic goals. Appendix 1. Strategy at Samsung from the Annual report 2. Situational Analysis The rivalry in the telecom business has put Samsung in intense financial stress and the business faced a great loss in marketplace share when cable firms presented complete resolutions to its clientele that enclosed touchtone phone, PC and TV services. Samsung is in a place to develop and raise its marketplace share by moving its objective of becoming a highly money-making worldwide resource of telecom services into realism. 3. Gap Analysis An association should think about all possible reasons to solve matters and make the best choices. By enhancing decision process, knowledge administration, worker requirements and synchronization, work place infrastructure has a considerable effect on managerial presentation. First companies depend upon the capability of people to organize their individual work endeavor toward a universal objective. Samsung is experienced with financial pressures. They team up to organize plans to streamline the corporation. Through the plans they are trying to put into practice, Samsung is having complexity communicating the details to their workers. Samsung is known for treating their workers well, so they do not want to damage that standing for the reason that their employees are very important part of the business. 4. SWOT Analysis Strengths Customers of the Samsung are reliable and supporting the brand. Samsung is currently enjoying difficult position against its rivals. Samsung is keeping very good business relationship with their vendors and suppliers. Samsung electric company is financially sound and stable. Weaknesses Samsung is facing furious competition by its rivals. Trade unions in South Korean are tactically links and they are very strong while negotiating and bargaining. Marketing executives required improvements in all the essentials of marketing strategies. Opportunities The economic situation in Seoul (Korea) apparently looks positive. The government is giving consistent policy to Samsung. Samsung is rationally equipped to be careful of the changes in technology. Threats The law has been passed very often in relation to the industry sector. Technological changes are taking place frequently in the industry. 5. PESTLE analysis Political Features: These features have a great power on the ruling of firms that consists of laws enforced by the governmental body in which firms should function. As indicated by the study, the political setting in UK seems quite stable and steady. Regulations planned by the novel conformist regime like taxes, cutting the communal expenses and judgment to increase gasoline price will have strong effect on the purchasing power of customers. In addition, the business policies of Korea also plays crucial role for supporting worldwide competitiveness to relocate expertise in exchange for marketplace admittance. Economic Features: The financial Features plays very critical and significant position in marketing the 3D TV. Financial depression or decline of financial system decreased the spending power of people. U.K market is in danger of extinction by the economic slump. As the redundancy rate rises, customer’s excitement for novel technology may be tangential. Sale volumes have been incessantly decreasing in value and the exchange rate is all time low that will boost the import cost. Social Features: Current age band of people has strong zeal and mania for innovative tools and expertise. Electronics market plays very important function in satisfying this passion. A young person watching late nighttime programs and getting enthusiastic to television programs that decreases their attention towards games and studies is an imperative societal feature. Technical Features: The electronics market has been well thought-out as one of the largely rising with low product life stages that have demonstrate the approach to worldwide earnings. A 3D television set is a special viewing television device that utilizes 3D techniques of manifestation that projects a television program into a rational 3 dimensional domain. Technical expertise is brand new to television market that further decreases people going to Cinemas. Samsung is leading the market with another landmarkoforiginal and ground-breaking expertise Ecological Features: Customers are having more consciousness towards ecological and expecting increased power effectiveness, inconsequential or no release of hazardous energy. Lawful Features: Intellectual possessions are turning out to be a critical and imperative in the market. There are huge odds of disagreements can take place like the recent famous Apple’s disagreement with Google’s Nexus One regarding a copyright matter. Samsung itself won a heated discussion recently in opposition to Sharp on the subject of a copyright matter that was started in the year 2007. Legislation concerning neighboring worker civil liberties, taxes and Intellectual possessions will out influence on Samsung’s tactical choices. 6. Marketing mix Marketing mix is an essential notion in current marketing and rationally it is referred to as convenient tool that the organization combines to create the reaction it required in the targeted market, so it depends on all the things a business can do to persuade the demand for its manufactured goods (Kotler and Armstrong, 2004). Marketing is about projecting the correct product at the correct price in the accurate way to the accurate customers. This is how value is added. Getting a product in to the market involves balancing numerous significant ingredients, i.e. the 4Ps of the Marketing Mix: Product, Price, Promotion and Place. Product: The Next generation 3D TV is new innovative item. In simple expressions, the product consists of all features of innovation to provide true entertainment to its customers. The 3D televisions were voiced as the biggest innovation in the television history with combination of highest performance and stylish design. With the Samsung 3D TV the customer will have the prospect of enjoying TV programs in 3D sitting at home and viewing TV will never be the same as the audience will be able to enjoy and experience the feel of their favorite stars of sports, film and TV leap off their TV in to the living room right before them. Samsung is proposes a series of 3D capable LEDs , LCDs and Plasma Tv’s (www.samsung.com, 2010) Price: Pricing is principally fixing a particular price for a services or product presented. In simple words, Kotler and Armstrong (2004) make clear the awareness of price to get the manufactured goods. Fixing a right price is not as simple as it looks. Usually in common regulation, populace asserts that a small cost will draw additional clientele. The argument is not accurate because clientele not only look for cost alone. Clients look forward to an appropriate service and value for the funds that he pays. They take action in reaction to value so a lesser cost does not fundamentally indicate stretched volume of sales if the services or item for consumption is not fulfilling the hopes of the customers. The price for the 3D brands starts from ?1600 to ?2000. The price is not so competent. Placement: Samsung unveiled its prestigious 3D TV brands globally in the major countries like US, UK, Australia and china. The product is launched in all the major stores like John Lewis, Curry’s etc (Jobber and Fahy, 2003). Promotion: The promotion captures the type of a new “Starter Kit” that presents United States costumers the opportunity to get pleasure from 3D movies in their own homes, rather than going to the cinema house to enjoy 3D movies. Samsung utilized the FIFA Football World Cup to publicize several value-added bundles along with its new 3D TV ranges (Bradley, 2005). Fresh buyers were offered bundled 3D movies, home theatre systems and Blu-ray players. People who procure certain Samsung 3D TV models from dealers all over the country will have the chance to seize the Bonus 3D bundle. Apart from these bundled promotional offers, Samsung has launched a strong advertisement campaign for its range of 3D TVs. The TV advertisement campaign is worth of ?8 Million that runs over 3 months. Apart from the TV advertisement, it has also launched ?7 million print media advertisements. 7. Market Segmentation Demographic by age: 1. Middle age groups 2. Teenagers 3. Executive class Behavioral segmentation Technological segmentation Designing the new products on the latest trends Affordable prices for all income groups of the society 8. Target market Samsung should aim both the high end marketplace segment as well as low end marketplace segment for the reason that in both areas there are prospects. The international brands like Sony, Panasonic, LG, Philips and Sharp have more than 75 percentage share of the high-end market segment globally. Samsung being a global product, it can easily step in both the high-end and low-end marketing segment because of its overall knowledge and ability to invest in the market (Chang, 2008). Market research firm Generator Research forecasts a major update of the novel 3D TV technology globally, showing that by the year of 2014 the business share for 3D sets is predicted to reach over 39% and the market will value more than $117billion (Samsung.com, 2010). In reference to another market research organization, DisplaySearch (2010), the 3D TV market is predicted to increase from the year 2008’s value of $ 902 million to $ 22 billion in 2018. particularly, the 3D TV business is predicted to grow to $ 17-billion, and the number of units expected to sale will increase to 64 million in the year of 2018 from 200,000 units in 2009 (Samsung.com, 2010). Globally, in the year of 2010, it is expected that there will be approximately 4.2 million 3D TVs will be sold as all the major players like Samsung, SONY, Panasonic, LG and sharp are entering in the business. The value is expected to triple to 12.9 million in the next year itself according to a new market research. Above said figures looks like huge but the fact is that the above stated figures are just a fraction of the original LCD TV sale. On the other hand, it is expected that by 2012, 27.4 million 3DTelevisions will be sold globally and by the year of 2015 the value is expected to 78.1 million units. This shows an enormous composite annual growth of 80.2% between 2010 and 2015. The figures show that the 3D Televisions here for growth and may replace all the existing TVs in near future. Samsung, on the other hand, is geared up to direct in this Information and Technology era as it will use its power in semiconductor, telecom sectors and customer electronics know-how to develop ground-breaking multicapable products and generate dominant network that will empower the consumer for anytime, anyplace infrastructure and a higher quality of lifestyle. The 3D TV products launched by Samsung will reach the complete audience and entertain all the generations. Samsung will hope for a huge market share with its new product launched and beat the competitors (Mullins and Orville, 2013). 9. Cultural Web of the Samsung Employers today are faced with the need of having stake in the growth of its employees which ultimately contributes to organizational success. Here, people expect that the employer contributes to their development and gives them a sense of ownership and pride in what they execute. Samsung Electronics, a leading company, ensures that it is able to have a culture which acknowledges human power and invests in employees accordingly. This investment in building the core competencies and winning the trust of the employees has a direct impact on organizational success and competitiveness. For this, the company promotes a flexible work-life culture which helps the employees keep a balance in their lives and be dynamic members of Samsung. The following paper elucidates the organizational culture and cultural web at Samsung. Time Management: Samsung Electronics not only looks for giving a balanced work environment to its employees, but also works towards the improvement of productivity by giving flexible work schedules to the people which helps in elimination of unnecessary overtime, and maximization of work performance through channeled time management (Choi &Roh, 2009). Samsung believes that people should start taking responsibility of their time and focus on their jobs. Involvement of the people in Work decision: Samsung has developed a culture that encourages employee involvement and suggestions in major organizational decisions where employees share knowledge, ideas and expertise to bear fruits in the future. Not only this, employees receive incentives for their active participation in knowledge sharing programs at the company (Choi &Roh, 2009). Welfare programs: Samsung ensures that all the employees are in the best of their health, and their children are living a good life where they receive educational and health benefits. This continues after retirement where the employee is attributed to receive post retirement fringes as well. Diversity management: With Samsung getting global, it has developed opportunities for the employees in which they can work under a creative atmosphere and enhance their skills. It has become increasingly essential for the company to understand that it works as a global organization, and diversity must be reflected in its processes. Here, every employee is given a chance to have a voice regardless of their cultural backgrounds (Sustainability report, 2009). The number of female employees has also increased dramatically as the business has expanded. Samsung has continued to encourage the employees to work towards better work outcomes and embrace diversity as advantageous. For this, it raises awareness through cultural webs and links where people are encouraged to work together by embracing the values and behaviors of others (Choi &Roh, 2009). Samsung enhances its operations through management of its efficiency where the HR systems are aligned properly and measured through the position evaluation system. There is a global help desk where employees who are not aware of the languages and cultures of their host countries are provided with important information and help is provided. This help involves everything from VISA processes to settlement in the host country. The global code of conduct guides the behavior of the people at Samsung which involves discrimination, transparency customer relationship management and collaboration where everyone in the framework contributes developing relationships and maximizing the outcomes. Therefore, it is evident that Samsung with time has made contributions to improve its cultural links by accepting diversity and cultural differences, and acquires the most reasonable assets i.e. employees for sustainability. References Guardian, 2012. Galaxy sends Samsung profits sky high. The Guardian, [online] 26 October. Available at: http://www.guardian.co.uk/technology/2012/oct/26/samsung-galaxy-profit-sharesAsdf [Accessed 5 November 2013] Heifetz, A., 2012. Game theory: Interactive strategies in economics management. Cambridge: CUP. Interbrand, 2012. Best Global Brands 2012. [online] Available at: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012.aspx [Accessed 5 November 2013] Iwatani, K. and Sherr, I., 2011. Apple: Samsung Copied Design. The Wall Street Journal, [online] 19 April. Available at: online.wsj.com/article/SB10001424052748703916004576271210109389154.html [Accessed 5 November 2013] Kipley, D., Lewis, A. and Jeng, J., 2012. 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Annual Report 2012. [online] Available at: http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2013/SECAR2012_Eng_Final.pdf [Accessed 5 November 2013] Read More