Samsung is a Seoul-based electronics company that deals with television sets, cameras, personal computer items, print solutions, cell phones, home appliances and other accessories. Having been started in 1938 as a Korean export business, it has grown to be one of the leading multinationals. The multinational company’s vision is to "Inspire the World, Create the Future." (Samsung, 2013). The company’s philosophy is “to devote our talent and technology to creating superior products and services that contribute to a better global society” while its core values are people, change, excellence, co-prosperity and integrity. The company also follows a strict set of business principles that seek to comply with laws, respect clients, care for the environment, participate in corporate social responsibility and build a good organizational culture.
This research paper generally seeks to explore the external and internal environments of the company. To do so, the paper explores the most influential external environment factors, competition forces, what the company can do to address competition, external threats and opportunities, internal strengths and weaknesses, core competencies and value chain.
Two segments of the general environment that would rank highest in their influence on the corporation and their effects
To analyze the general external environment, there is a need to use PESTEL. According to Lorat (2009), PESTEL analysis is a tool that is used to explore the political, economic, social, technological, environmental and legal factors that may affect the business. In this case, technological and social factors are identified as the highly ranking factors that would affect the corporation and the industry in which it operates in. This is because, first, as it has already been mentioned, the company deals in products that require constant technological innovation. Therefore, if there are drastic changes in the global technology, the changes would directly affect the business, especially manufacturing. Depending on the nature of the change, these effects may be either positive or negative. For instance, the development of the touch-screen technology on a global scale has led to the manufacture of Samsung Galaxy (Michell, 2010). The other effect is that development of such technologies would mean that even the competitors are able to develop similar products thus saturating the market. Secondly, social factors are likely to lead to changes in consumer tastes, preferences and attitudes. According to Lorat (2009), change in consumer attitudes towards a product in the negative always reduces sales thus revenues and profits.
Significant forces of competition and how the company recently addressed them
In any industry, competition is inevitable. Due to technological advancements, the electronics industry has become one of the most competitive industries in the world. In a bid to understand the anatomy of competition, Michael Porter proposed analysis the following factors: threat of substitutes, threat of new entrants, supplier power, buyer power and the degree of rivalry (Lorat, 2009). However, there exists a differential weight in which these factors affect companies in different in industries. In the case of Samsung, it is proposed that degrees of rivalry and buyer power are the most significant competition factors for the company.
The above finding is variously justified. Firstly, these components of competition are in line with the above-mentioned external factors that would mostly affect the company. They included technological and social factors. In this regard, technological actors would propel the degree of rivalry while social factors would influence the buyer power.
In the recent past, the company, Samsung, has been in the limelight addressing the issue of competition. According to Michelle (2010), this has been seen in the development of super products to effectively compete with substitutes from other companies. According to the author, the development of Samsung Galaxy has led to a global applause in the product and consequently led to apprehension of significant global market share. This is demonstrated by the fact that in mid-January 2013, Samsung reported that its Galaxy S3, S2 and S global sales had surpassed 100 million units (Samsung, 2013). This led to achievement of operating profits of 8.3 billion U.S. dollars. This is a clear indication that through technological innovation, Samsung has been able to deal with rivalry in the market. Other ways in which the company uses technology to deal with competition is development of other products such as Smart cameras and Tablet personal computers.
To influence the positive attitude towards its products, the company engages in community affairs especially in supporting education and healthcare (Samsung, 2013). The multinational also manufactures a wide variety of products for the middle-class. The company observes high quality standards for optimal customer satisfaction. This, in a way, leads to more awareness and consequently reduced competition.
What Samsung could do to improve how it deals with rivalry and bargaining power of buyers
In order to deal with competition, Samsung is likely to adopt a system of product promotions over the next few months. In fact, the company already has several promotions whereby clients win various products such as the four NX1000 cameras which are to won weekly for the next four weeks, as indicated in the website. This trend is likely to continue since other companies are also very vigorous in penetrating the market. Between December 15, 2012 and February 10, 2013, Samsung continues with its “Buy Samsung, Win Great Fan Prizes Promotion” (Samsung, 2013). Most of the prizes in this promotion are related to Chelsea Football Club. Perhaps the logic behind this is the fact that many people, especially the young, like to watch soccer. By partnering with such soccer teams, Samsung will definitely continue to create more presence thus market its products more. Since the products are technologically advanced, the company will succeed in showing that it has super products thus increase people’s craving to buy them. It is also predicted that the company will participate more in corporate social responsibility in communities where it is based. In terms of environmental protection, Samsung South Africa has already launched a 49 million power initiative that would lead to environmental conservation (Samsung, 2013). It is predicted that the company would roll out such initiative in other countries across the globe. This would reinforce positive consumer perceptions towards the company and its products.
Samsung external threats and opportunities: Dealing with them
According to Lorat (2009), threats are those conditions that arise from the external environment and affect the profitability of the company. In most cases, threats are macro-economic in nature: they emerge from the outside; the company cannot have control over them. In the context of Samsung, threats arise from political, social, economic, technological, legal and environmental fronts. According to Michelle (2010), two of Samsung’s threats include legal issues between the company and competitors like Apple and cheap products from Chinese companies. The latter is considered to be the most serious threat to Samsung’s business model.
In order to deal with this threat, there is a need for the company to produce low-cost products. In order to beat the Chinese products, the company must not comprise on quality: the cheap products must also be of fair or high quality. This way, the company is able to deal with the Chinese threat. This can be variously justified. First of all, the company has already made handsome profits from the sale of Galaxies. These profits should be used to curb competition arising from Chinese firms. Secondly, the company invests massively on research and development. This means that using their expertise, they would be able to develop cheap but high quality products.
Samsung has many opportunities at its disposal. These include, for instance, introducing a air-condition product category, opening more branches and stores across the world and investing in new technology. The latter is viewed as the most helpful opportunity that the company can use to increase its profitability. Firstly, it is a conceptual aspect of strategy implementation: technology was one of the greatest external environment aspects that could influence Samsung’s business. Technology was also found out to be a key component of competition (five forces). Therefore, it presents a great opportunity for the company. Secondly, through technological development, the company will be able to create a variety of products in such a way that incase one of the product lines in not performing well, other lines can help the company out.
Samsung internal strengths and weaknesses: Dealing with them
The success of Samsung has been highly attributed to its internal strengths. According to Peng (2008), some of the strengths of Samsung include research and development, innovation, turnaround strategy, emerging global brand, new products each year and customization. The weaknesses of the company are few. One of the major ones is the question of language. Coming from a Korean origin, the top management may face a setback in communicating a world that mainly uses English. Language coding is also important in product design: most consumers may not understand Korean languages if they are used to write user manuals or operating systems. The other weakness in the company is the fact that the company produces products that are not user friendly. In line with the conceptual approach, this is seen as the most serious weakness because it is based on technology, which is a key determinant of profitability and success of the company in the modern era. In the same way, innovation is considered the most important strength for the company; again because it is centered on technology, a key external environment component that would determine profitability in the modern era.
Samsung’s greatest strength can be used to fix its worst weakness. According to Peng (2008), the company can use its innovation prowess to tackle the problem of non-user-friendly gadgets. This can be done by literally using innovative ideas to develop user-friendly gadgets. Besides, the company invests intensively in research and development.
Samsung’s resources, capabilities and core competencies
Samsung has recently come up as a very strong corporation in the global scene especially on mobile telephony. Due to its most profitable product lines and segments, the company has continued to increase its profits and revenues. Therefore, its resources do not only include physical assets but also revenues and acquisitions. The company has acquired many companies such as Fokker, FUBU, Rollei and Lehman Brothers Holdings. According to Peng (2008), the company was the second-largest ship maker by revenue in 2010. By 2012 revenues, the company was the world’s information technology company. BY end of 2011, the company’s revenues were $ 220.1 while total assets were $343.7. The company has about 350,000 employees word wide. The capabilities and core competencies of the company include wide range of products, high brand value, strong infrastructure, competent employees, vibrant management, financial strength, technological innovation, high investment in research and development, impressive salaries and a higher yield among others.
Samsung’s value chain analysis
By use of the above capabilities, core competencies and resources, Samsung is able to create a strong value chain. In terms on inbound logistics, Samsung employees should synchronize the current control of inventory and process of scheduling without slowing down the manufacturing process. Operations are a major aspect of the company’s success. For instance, overseas shipping should be well planned so that there are no increased costs of labor in Korea and China (Michelle, 2010). Outbound logistics would include well coordinated distribution of smart phones and other products while marketing and sales could be hyped through internet. In order to link these primary activities with support activities, there is a need to establish an effective communication network and an integrated information system.
Samsung remains one of the leading multinationals in the electronics industry. Having been established in the late 1938’s the company has grown to be a global leader in innovation, technological use and product portfolio. However, its most important external environment elements are technology and social or consumer issues. Although it has a great opportunity in expanding its market and strength in innovation, it is faced with stiff competition from Chinese firms. Moreover, that can be countered through a strong focus on value creation by use of core competencies, capabilities and resources.