Samsung Strategic Management Analysis

Samsung Strategic Management Analysis

Introduction

Samsung is a South Korean company that happens to be one of the world’s largest producers of electronics and technology products. It specializes in the manufacture of a wide variety of industrial and consumer electronics such as digital media devices, appliances, memory chips, semiconductors and integrated systems (Song & Lee, 2014). Samsung operates through various business divisions that include information technology, consumer electronics, device solutions, and mobile communications. The organization manufactures a wide variety of equipment and products that include televisions, monitors, personal computers, peripherals, air conditioners as well as semiconductors. Samsung is highly profitable because of its global market operations and strong brand name anchored on quality as well as competitive pricing compared to its main rival, Apple Incorporation (Wati & Koo, 2010, January). The paper seeks to analyze the operations and competitiveness of Samsung in the electronics and technology industry to unearth its potentials.

Samsung Porter’s Generic Strategies

Cost Leadership

Cost leadership is a critical strategy for various organizations to deliver high sales and profitability. It involves delivering products and services to customers in a certain market at lower prices compared to competitors (Shin & Kim, 2015). Organizations achieve cost leadership in the industry by reducing the costs of production and other operational costs associated with a product. Samsung is a producer of several products sold in various markets across the world. The organization has a low price policy that helps in appealing to low-income customers thus increasing its sales (Endrődi-Kovács, Kutasi & Magasházi, 2018). Unlike Apple incorporation with premium pricing, Samsung has provided its products to the market based on different features that differentiate its performance than competitors. Cost leadership strategy has worked well for Samsung in attracting a large audience through the world to buy its smartphones and other products.

Cost leadership is one of the most effective strategies adopted by Samsung to achieve increased market share globally (Song & Lee, 2014). Compared to its rivals such as Apple, Samsung has been able to achieve a positive customer outcome through enhanced loyalty and satisfaction in the market. Cost leadership has brought about improved performance that has assured the organization of long-term success in the market. The global smartphone market is experiencing a boom with many customers coming from emerging markets such as Latin America, Africa, and Asia. Customers in developing and emerging markets are highly sensitive with prices, thus they prefer to buy from Samsung than Apple because of price differences (Wati & Koo, 2010, January). The emerging markets are likely to experience greater smartphone penetration and this presents a critical opportunity for low-cost organizations such as Samsung.

Differentiation Strategy

Differentiation strategy involves techniques organizations generate value for their customers by offering unique and variety of products (Wati & Koo, 2010, January). Business organizations offer differentiated product characteristics that not only relate to a product itself but also the way it reaches various customers with services such as customer service. Samsung is a master of differentiation because of the wide variety of products it is offering that offers customers innovative technology. Samsung considers the market and produces unique products that exceed the needs of customers in the effort of meeting high market value. With differentiation, Samsung is in a position of offering different products in a single series; say Galaxy phones, to enable different customers to buy their products because of affordability reasons (Chang, 2012). The differentiation strategy has enabled Samsung to claim a market position as a unique and most effective producer of various products in the market.

Focus Strategy

A focus strategy is a way various organizations achieve a competitive advantage in the marketplace in the effort of achieving high levels of performance (Chang, 2012). A focus strategy enables an organization to focus on various market segments to enhance increased competition for enhanced success. Samsung should focus on reducing the costs of production and other operations costs that affect the overall prices of products. The organization should consider reducing the cost of delivering the product to its customers in the effort of achieving low prices in the market. Samsung should consider improving the quality of its products as well as adopt superior designs through accruing higher quality materials from suppliers (Wati & Koo, 2010, January). Product quality will help Samsung to achieve the same level of operation like Apple and this will boost its performance and productivity in the market.

Samsung Porter’s Five Forces Analysis

Bargaining Power of Suppliers

Suppliers are the major source of raw materials for Samsung to access the critical power of manufacturing its products. Suppliers constitute an important segment of Samsung and their bargaining power and this affects the position and productivity of Samsung Company (Song & Lee, 2014). In the case of Samsung, the bargaining power of suppliers is low because they are many and scattered over the world. It implies that Samsung can switch to any supplier or any other brand of their choice. Samsung is the one responsible for making rules for suppliers to follow and conduct a regular investigation to know whether they are adhered to. Samsung has always been giving rules to its suppliers concerning labor affairs to product quality in the effort of maintaining a good reputation in the smartphone market.

Bargaining Power of Customers

The 21st-century customers are focused o accessing quality information concerning the organization and its products to make an informed purchase. The bargaining power of customers is moderately high in the case of customers because they represent the purpose of its existence (Song & Lee, 2014). The major reason is that the switching costs for customers are very low and thus they can easily compare brands with other brands offering the product. Most of the customers in the technology industry are after enhanced technology in various products as well as higher competition to accrue quality products. Currently, Samsung is investing a lot of resources in advertising, research and development to produce high-quality products and services that will attract more audiences (Endrődi-Kovács, Kutasi & Magasházi, 2018). Some of the factors moderating the influence of customers include a brand image, quality of the products and financial position of the organization.

Threat of Substitutes

Substitute products and brands usually pose a moderately high threat to the operations of Samsung in the technology market. The brand has several competitors that offer products with the same or that exceeds their product quality (Maghsoudlou, Mehrani & Azma, 2014). Some of the leading competitors of Samsung in the market include LG, Sony, and Apple that lead the market in terms of quality and other pricing. The white goods industry is flooded with massive amounts of substitute products because they are consumer durables making Samsung be careful with deciding the most appropriate market strategy. Large organizations such as Samsung have adopted differential pricing in the effort of attracting consumers from different income pyramid away from low-cost substitutes (Choi et al., 2012). To improve its positioning, Samsung has diversified its product portfolio to include critical gadgets with access to the internet, enhanced television programs and playing sophisticated applications.

Threat of New Entrants

The threat of new entrants is low for Samsung because it has already built a large brand focused on enhancing increase success in the market (Endrődi-Kovács, Kutasi & Magasházi, 2018). The white goods industry is known to have high barriers of entry as well as low barriers to exit with global companies like Samsung. It is very expensive for organizations to consider entering the white goods industry because a company needs to set up a distribution network and the supply chain. For globally operating organizations such as Samsung, exit from the market can be very easy because of handing over or selling the business to domestic companies in case of failing sales (Jung, 2014). The white goods industry is a complicated case for many startups with inadequate resources to match with market giants such as Samsung.

Industry Rivalry

Competition in the electronic and technology is very high because of a large number of competing brands with their sizes influencing the financial strength (Maghsoudlou, Mehrani & Azma, 2014). Some of the leading competitors of Samsung include Apple, Sony, and Toshiba among other leading brands competing for the same market share. The market giants make it difficult for other brands to enter the market because of enhanced customer loyalty and manufacturing experience that offers quality. Large players in the industry such as Apple have an established brand image in technological innovations and this has become a primary factor for enhanced differentiation (Shin & Kim, 2015). Emerging companies such as Xiaomi and Huawei are offering better technology at low prices and this has helped them to improve their performance and competition in the market.

SWOT Analysis

Strengths

Samsung is an innovative organization that has invested substantial resources in research and development to provide high quality and creative products (Choi et al., 2012). The organization allocated substantial resources to research and development efforts and this has facilitated innovative development of its main products that include memory cards, televisions, cameras, phones among others. Samsung has been a winner of various awards such as Consumer Electronics Show for its innovation efforts in the technology industry. The company Samsung commands a large market share in various products is engaged in manufacturing and marketing. For instance, it emerged as the number one marketer of smartphones globally with 21.4 percent of the global market. Samsung has outstanding manufacturing and marketing capabilities that have enabled it to produce high-quality products for its customers (Maghsoudlou, Mehrani & Azma, 2014). The organization has long-standing relationships with retailers from the Asian region, the United States and Europe who help to boost its sales.

Weaknesses

The market share for Samsung has been shrinking over the years due to increased competition from Chinese smartphone producers (Shin & Kim, 2015). The organization is slowly losing much of the Asian market because of increased innovation and technology from companies such as Huawei. Samsung is heavily dependent on American markets with the potential of achieving their goals easily. The organization sells 70 percent of its smartphones in the United States and this can be extremely dangerous in case of a high recession in the country. Samsung has large product diversity and this has hampered its ability to focus on a single product for increased success and productivity. For instance, Samsung has failed to come up with excellent and outstanding features and technology to achieve increased productivity and success in the market (Endrődi-Kovács, Kutasi & Magasházi, 2018). Samsung lacks its operating system while depending on android and this inhibits the company able to produce unique products.

Opportunities

Samsung is preparing to launch one of its most innovative conditioning products known as the “Triple Protection Proposition” that has advanced technology and impeccable construction (Maghsoudlou, Mehrani & Azma, 2014). The product is likely to provide increased revenues and profitability given the requests made by many target customers in the global market. Samsung should focus on leveraging from the growing Indian market, as many people are becoming independent tech giants and the increased use of smartphones for communication. The demand for smartphones in India is in the increase requiring Samsung to develop its positioning better in the market. The better pricing of Samsung products has radically reduced the market of Apple iPhones promising increase market share for Samsung and its various products (Chang, 2012). Samsung has been acquiring new companies in the effort of ensuring future growth and diversification of products and services in the effort of enhancing increased productivity.

Threats

Increased competition in the smartphone market from Samsung opponents has facilitated reduced sales and productivity (Shin & Kim, 2015). Some of the leading competitors of Samsung include Huawei, Apple, and Xiaomi that are providing smartphones with the innovative technology in the market. Samsung has been involved in serious controversies that in most of the time threaten its business operations and productivity in the market. Recently, Apple filed a lawsuit against Samsung for patent infringement that attracted a heated court battle. Patent infringement tarnished the reputation of Samsung thus making some customers switch away to other innovative organizations such as Huawei (Choi et al., 2012). The declining middle-class incomes in North America, especially the United States, is a major issue that has reduced consumer buying power for Samsung.

Value Chain Analysis of Samsung

Inbound Logistics

Samsung has about 570 suppliers with its supply chain comprising of over 2,500 suppliers of various products around the world. The majority of Samsung suppliers are in Asia, followed by the Americas, Europe among others. In the effort of controlling its inbound logistics, the organization has owned most of the logistics firms as its subsidiaries (Endrődi-Kovács, Kutasi & Magasházi, 2018). The organization has strategic relationships with its suppliers to achieve enhanced value creation in its markets.

Operations

Samsung Electronics is a multinational organization with over 37 production units in more than 17 countries across the world (Maghsoudlou, Mehrani & Azma, 2014). The company manufactures 90 percent of its products it offers to the market in-house and operates in various divisions that include consumer electronics, device solutions, and mobile communications. Additionally, the organization has maintained its 199 global operation hubs that include sales subsidiaries, manufacturing subsidiaries, head offices, research centres among others (Shin & Kim, 2015). The major source of value in the operations of Samsung includes advanced technologies and sophisticated operations systems meant to improve its operations and productivity.

Outbound Logistics

Apple incorporation under Steve Jobs gained popularity as the pioneer in the introduction of modern smartphones in the market. Samsung quickly started launching its products and services in the effort of competing with Apple. The organization has proved to be effective in the market in several ways such as delivering updates and other popular products that command a large market share (Choi et al., 2012). Samsung Electronics Logitec facilitates a comprehensive range of logistics operations as well as dealing with its insurance claims.

Marketing and Sales

Marketing and sales are the primary activities carried out by Samsung in the effort of delivering various products to the intended customers in the market (Jung, 2014). Samsung is associated with quality provision because of the high capabilities of its products and services offered to its customers. The marketing and advertisement budget for Samsung has been increasing rapidly on yearly bases because the management seeks to increase sales in various markets. The advertisement gives the organization a platform through which it appeals to its customers to improve value creation as well as increase sales of particular products (Shin & Kim, 2015). Additionally, Samsung utilizes social media in reaching several customers accustomed to online operations to increase its sales target.

Services

Offering outstanding services to customers is one of the major aspects that is highly celebrated by Samsung (Song & Lee, 2014). The organization seeks to improve its value provision and maintaining its operations in the effort of achieving increased success and productivity. The organization seeks to educate and train its employees to have expertise before doing any other operation such as acquisition (Endrődi-Kovács, Kutasi & Magasházi, 2018). The organization has a set of standards and operational procedures that are aimed at reducing risks as well as improving service delivery to its customers in the market.

Human Resource Management

Samsung community services team was established in 1994 to facilitate various processes carried out by its employees. The organization values its employees as a source of competitive advantage because of their high levels of skills in the market. Samsung has over 300 central offices for its public relations that entrenched at supporting its employees to achieve better in the market. The organization has been engaging its employees in training and development initiatives that are meant to improve their skill and knowledge development in the market (Jung, 2014). One of the strongest human resource assets for the company includes talented researchers and engineers who offer unequal services to its customers.

Technology Development and Firm Infrastructure

Samsung is a technology organization that seeks to increase its market share through increased innovation and creativity (Choi et al., 2012). The organization has increased its position in the market in terms of producing high quality and efficient digital appliances, memory cards, media products, and system integration. The organization has vibrant research and development centres concerned with the development of technology that will improve the value of its products in the market. In terms of firm infrastructure, Samsung has gained several acquisitions that have made it enhance some adjustments for employees and other organizational materials (Shin & Kim, 2015). The organization acquired some new items and employees that are providing outstanding services aimed at improving success and productivity.

Conclusion

Samsung is one of the most profitable organizations in the technology and white goods industry (Jung, 2014). The organization is concerned with the production, designing, and marketing technology products in various markets around the world. The competitiveness of Samsung in the white goods industry is due to the large capacity of resources, operational efficiency as well as the creative talent to produce highly innovative products (Endrődi-Kovács, Kutasi & Magasházi, 2018). The organization rivals Apple in the smartphone market and it is slowly overtaking it to achieve it because of pricing. Samsung has all times been producing high-quality products offered to the market at low prices as a competitive strategy that seeks to attract a large pool of customers.

References

Chang, S. I. (2012). Study on human resource management in Korea’s chaebol enterprise: a case study of Samsung Electronics. The International Journal of Human Resource Management, 23(7), 1436-1461.

Choi, B., Kim, J., Leem, B. H., Lee, C. Y., & Hong, H. K. (2012). An empirical analysis of the relationship between Six Sigma management activities and corporate competitiveness. International Journal of Operations & Production Management.

Endrődi-Kovács, V., Kutasi, G., & Magasházi, A. (2018). Visegrád group expertise and position in the Samsung global value chain: A case study of Samsung electronics in the V4 countries. Central European Business Review, 7(1), 14-36. Retrieved from https://search.proquest.com/docview/2117409226?accountid=45049

Jung, S. C. (2014). The analysis of the strategic management of Samsung electronics company through the generic value chain model. International Journal of Software Engineering and Its Applications, 8(12), 133-142.

Maghsoudlou, Z., Mehrani, H., & Azma, F. (2014). The role of after-sales service in customer satisfaction: a case study (Samsung house appliances). International Research Journal of Management Sciences, 2(6), 175-179.

Shin, W. S., & Kim, C. (2015). Samsung’s journey to excellence in quality. International Journal of Quality and Service Sciences, 7(2), 312-320. doi:http://dx.doi.org/10.1108/IJQSS-03-2015-0036

Song, C. Y., & Lee, K. (2014). The Samsung way: Transformational management strategies from the world leader in innovation and design. New York, NY: McGraw-Hill Education.

Wati, Y., & Koo, C. (2010, January). The green IT practices of Nokia, Samsung, Sony, and Sony Ericsson: content analysis approach. In 2010 43rd Hawaii International Conference on System Sciences (pp. 1-10). IEEE.