International business management report writing help: Samsung electronics – its products and Pestle analysis

International business management report writing help: Samsung electronics – its products and Pestle analysis

Part 1:

Module 1:

1.1  Product Profile:

The product is Samsung Galaxy S III. It is a touch-screen smartphone which runs on Android operating system. This smartphone has additional features like increased memory storage capacity, intelligent personal assistant device, eye-tracking features and 4G LTE support. The smartphone runs on Android 4.0.4. There is also a wireless charging option in this smartphone. There is also an 8 mega-pixel camera in the phone.

Samsung Galaxy S III is the most sophisticated product in its segment and directly competes with Apple’s iPhone. Apple has filed a number of intellectual property and patent infringement lawsuits against Galaxy S III.

Business Model of Samsung Galaxy S III:

The business model of smartphones of Samsung relies on challenging the product leader, Apple’s iPhone, in the segment. Samsung’s smartphones, including Samsung Galaxy S III, have similar technological sophistication as iPhone, but come at lower prices than iPhone.

So the business model of Samsung in smartphone segment is to be a cost leader. It manufactures sophisticated smartphones like Galaxy S III at lower costs than its competitors. It then passes on part of these cost savings to customers in the form of lower prices than competitors like Apple.

Advantages of Exporting:

 The biggest advantage of exporting a product or service into a market is that it requires lower investments than entering a market by making direct investments there and setting manufacturing facilities in these markets. A company doesn’t need to make investments in setting manufacturing facilities in the markets that it serves through exports (Philip Kotler, Kevin Kohler, 2000).

A company is insulated from political, economic and social upheavals when it serves those markets through exports. It is a good strategy for selling products and services in volatile markets like those of Sub-Saharan Africa.

Risk is minimized when a company opts for the export route for selling its products and services. Export strategy is suitable for catering to markets which are not very large in size or which are still at a nascent stage (Onkvisit, Sak, John J. Shaw,2004).

Export is a very viable strategy for small and medium enterprises to sell products and services in foreign markets.  These enterprises lack the resources required for making foreign direct investments in foreign markets.

Disadvantages of Exporting:

Countries often impose various kinds of tariffs on imported products. A company exporting its products or services into a country can find them becoming dearer because of these custom duties.

A company relying on exports has to market its products or services in the target market through agents in that country. These agents charge commissions which eat into the profit margin of the company. Export strategy results in lower profits for the company.

A company can have better control over its products, services and marketing strategy when it enters a market through direct investment route. The company doesn’t have much control over its products, services and customer service when it uses the export route for selling its goods and services.

1.2  Current Market Profile:

Samsung Galaxy S III is currently being sold in all the major countries of the world. The target customer for this product are the urban middle class and higher income group customers. The target customers of Samsung Galaxy S III have an urban lifestyle. They prefer to be connected 24 hours a day with the virtual world on internet. State-of-the-art gadgets are an important part of the lifestyles of the target customers of Samsung Galaxy S III. Most of the prospective customers are in the age group of 20 to 45 years.

The user profile of Samsung Galaxy S III is generally similar in domestic as well as international markets. The product is such which is used on a continuous, daily basis by users and customers.

The countries in which Samsung Galaxy S III is being currently sold are usually developed markets or the emerging market ones.

1.3  Industry Analysis:

The five forces analysis of the smartphone industry, where Samsung is a major player, reveals:

Bargaining power of customers: Switching costs for customers are not very high. Differentiation between the products of the competitors is gradually coming down. Brands play an important role in determining the choice of customers. It can be said that bargaining power of customers is reasonably high in the smartphone industry.

Bargaining power of suppliers: Most of the suppliers of components like micro-processors and memory chips have long term contracts with smartphone makers. Most of the smartphones, with the exception of Apple, use Google’s Android smartphone operating system.

Intensity of competitive rivalry: The major players in the smartphone industry are Apple, Samsung, Nokia, HTC and LG. There is intense competitive rivalry between Samsung and Apple Inc. This rivalry has extended to courtroom battles with both companies accusing each other of patent violation.

Barriers to Entry: Barriers to entry in the smartphone industry are very high because of sophisticated technology, patent protections being enjoyed by existing players and the high capital and marketing expenditures needed.

Threat of Substitutes: Basic model phones now have many features that come with smartphones . Tablet PCs are emerging as important substitutes to smartphones. The threat of substitutes in the smartphone industry is obviously high.

1.4 SWOT Analysis of Samsung:

Strengths: Samsung’s strengths lie in its strong research and product development.  Its marketing and brand name are also areas of strengths.

Weakness: The weakness of Samsung is that it is still not considered as a product leader in the smartphone segment. Samsung is considered to be more of a follower.

Opportunities: There are immense opportunities of market penetration for Samsung in markets of least developed countries of Asia and Africa.

Threats: The major threat to Samsung comes from Apple Inc. Apple is seeking injunction against sale of Samsung’s smartphones on charges of patent violation and copying. If Apple wins these lawsuits then it would mean serious trouble for Samsung’s smartphone business.

Module 2: Global Market Search

Fig 1: Map of South Sudan

Fig 2: Map of Sudan

Fig 3: Map of Ethiopia

The three potential markets where Samsung can export Galaxy S III are South Sudan, Sudan and Ethiopia.

Country 1: South Sudan

Country 3:

 Part 2:

Module 3: In-depth Market Analysis and Selection of Target Market

Which will be the most suitable market for export of Samsung Galaxy S III?

There is a good degree of political and social uncertainty in Sudan, South Sudan and Ethiopia. It will therefore be a good idea for Samsung to not enter these markets directly but to serve them through exports. All three markets are currently at a very nascent stage in terms of smartphone demand. But in the medium and long term demand for smartphones is likely to increase significantly in these countries because of improvement in political, social and economic situation.

Out of the three countries, Sudan is the best one because its economy is clocking high rate of growth; per capita income is increasing. South Sudan gained independence from Sudan only in March last year. It is presently the newest country in the world. South Sudan’s economic health is not good but is likely to improve fast on the back of its huge oil wealth. Ethiopia’s drawback is its abysmal level of poverty. All these three markets are markets of future and Samsung should build export capabilities for all three of them. But among them Sudan seems to be the best market for Samsung Galaxy S III.

Sudan currently has the 17^th fastest growing economy in the world. There are huge market penetration opportunities in this country. Samsung can enter this market first through the export route. If the political, economic and social scenario unravels favorably then few years down the line Samsung can make direct investments by setting up a manufacturing facility for smartphones here.

Module 4: Entry Strategy

The selected target market for the country is Sudan. The entry strategy should be to enter through the export route in the country and supply the customers there with Samsung Galaxy S III. Samsung should appoint its export agents in Sudan. These export agents will receive the exported units of Samsung Galaxy S III and market it inside the country.

4.1 Distribution Strategy:

The distribution strategy is important because when a company chooses to enter a market through the export route it enjoys little control over the distribution channels (Joshi, Rakesh Mohan, 2005). Samsung will have to identify and forge strategic alliance with good export agents in Sudan. It should divide Sudan into regions. This regional division should be on the basis of provinces in the country. For each region Samsung should have at least one export agent.

The export agents will receive the smartphone units on delivery in Sudan. They will then transport these units to warehouses. These export agents will be responsible for marketing and distribution of the smartphone units to the retailers in Sudan.

Fig : Distribution model showing the various intermediaries for the distribution of Samsung Galaxy S III in Sudan

Retailers will also be responsible for after sales service. Samsung will have to initially send a team to Sudan for training retailers in after sales service.

4.2 Exchange Rate Strategy:

The Samsung Galaxy S III will be sold in Sudan in the local currency, Sudanese Pound. The prices will be set in dollars and will be converted at the exchange rate prevailing on the date of exports for determining the price in Sudanese pound at which the smartphone units will be sold in Sudan. The prices will be set after including the commission of the export agents. These agents constitute an additional layer in the distribution channel.

Setting the price in dollars and then converting it into Sudanese pound for determining the local price has the disadvantage that it will expose the company to the risk of adverse exchange rate movements. Suppose between the time a unit of Samsung Galaxy SIII is exported to Sudan and is sold to customers, the Sudanese pound depreciates against the US dollar. In this case the company will support losses on the units sold.

However the above risk can be managed or hedged through tools like forward contracts. A forward contract is a contract in which a company locks in the exchange rate value for a future date (Paliwoda, Stanley J, John K. Ryans ,2008). So for instance the date on which a unit of Samsung Galaxy S III is exported into Sudan , the exchange rate is 1 Sudanese pound = 0.43 US $. It is expected that theis unit will be sold to the customers after a period of 1 month. Samsung is not sure that Sudanese pound will not depreciate during this period.

Samsung can hedge this exchange rate risk by entering into a forward contract with a counter-party. In this contract Samsung will agree to sell 1 Sudanese pound at 0.43 US $ a month after. Through this contract Samsung will eliminate its exchange rate risk. Even if Sudanese pound depreciates against the dollar, Samsung will be unaffected because it will sell Sudanese pounds gained from the sale of Samsung Galaxy S III unit at the predetermined price of 1 Sudanese pound equal to 0.43 US $.

Fig: Graph of the variation of Sudanese Pound against the US Dollar over the past twelve months

From the above figure it is clear that the value of Sudanese pound against the US dollar remained stable during much of the past twelve months. However it has depreciated sharply against the dollar from August onwards. Promotions should be increased when Sudanese pound depreciates against the dollar. Higher revenues resulting from higher sales due to increased promotions can make up for the losses caused by the depreciation in exchange rate of Sudanese pound against the US $. A better strategy will be to combine increased promotions with hedging the exchange rate risk through forward currency contracts.

4.3 Marketing Strategy:

Marketing of products poses new kinds of challenges when a company chooses the export route for entering a market.  It is important that Samsung effectively markets the Samsung Galaxy S III in the Sudanese market. It should market its products through advertising in electronic and print media in the country. For this purpose Samsung can use the services of a local advertising agency.

In the initial phase of introduction of Samsung Galaxy SIII in the Sudanese market Samsung can promote the product by offering discounts. Besides this I will recommend that in-shop promotions at the retailers selling Samsung Galaxy SIII will go a long way in increasing the market share of the product in Sudan.

4.4 Cultural Strategy:

The culture of Sudan is different in many ways from the culture of other major markets of Samsung. The country is suffering under a wave of Islamic fundamentalism. Islam is the religion of majority. Promotional and advertising campaigns should be devised taking into account the  Islamic sensibilities of the country.

The use of smart gadgets like smartphones is steadily rising in Sudan. These gadgets are on the way of acquiring the importance of cultural symbols. Samsung can take advantage of this cultural trend.

4.5 Corporate Social Responsibility Strategy

There are not many ethical issues involved in exporting Samsung Galaxy SIII smartphones to Sudan. However Samsung can fulfill its corporate social responsibility by providing a vent for disposal of e-waste arising from the usage of Galaxy SIII. Customers should be given the facility to return their old Galaxy SIII smartphones to the retailers. The retailers can return these wasted and discarded phones to export agents of Samsung in Sudan. These export agents can ship this waste to Samsung for recycling and disposal. This will raise the costs of operations for Samsung but will give a good brand image to the products of the company in Sudan.

4.6 Conclusion

The right distribution strategy, exchange rate strategy, marketing strategy and cultural strategy will ensure that Samsung gets success in its endeavor in Sudan. Markets of sub-Saharan Africa like Sudan are of strategic, long term importance for Samsung. The processes created in Sudan, if successful, can be duplicated in other markets of this region.

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