Writing Assignment help on : Versatile Business Environment of Samsung Electronics
1. Introduction
The continuously changing business environment has instigated the external as well as internal environmental analysis of the electronics company Samsung. That is why in this report we have chosen Samsung, which is the world leader in consumer electronics and has been merging as household name across the globe since 1939 (Lero, 2009).
1.1Brief History of Samsung Electronics
Samsung was founded by the present CEO’s family Lee Soo-bin in the year 1939. Samsung electronics is a classic example of a family run conglomerate which forms an integral part of the business landscape of South Korean economy. The company headquarters are located in Seoul and it is operational in approximately 100 countries. In terms of revenues Samsung tops the charts and it accounts for 20% of South Korea’s exports (SAMSUNG Profile, 2010).
The global market share of the company can be seen from the table attached with the report as APPENDIX A. The table shows that Samsung is the world leader in terms of sales and revenue in the consumer electronics products and is the best amongst its competitors because of its quality and the wide range of products. The annual revenue of Samsung is $60 billion with a market value of over $100 billion and it is the world leader in the major technologies like DRAM and LCD displays and that is why Samsung electronics is regarded as the most innovative leader in the field of consumer electronics (Lee & Dick, 2006).
2. Procedure
2.1Methodology used to undertake the research
The Methodology which has been used to conduct research is first all the relevant information and data has been collected from various sources and then the business environment is being analysed using the two strategic tools that is SWOT analysis and PESTLES analysis for analysing the external and internal environment for Samsung and then Porter’s Five Forces are being studied .
2.2Scope of research
Since Samsung Electronics has grown locally in the Korean market as well as globally, this consistent growth has inspired us to study the business environment of Samsung and to study the marketing strategies which are being used by Samsung.
The business environment is very unpredictable and ever changing factor, so it is very important to analyse and understand the changes happening in the business environment and react to them in order to survive and to achieve growth in the markets. Therefore proper knowledge of Business environment is necessary for the entrepreneurs to plan and implement the strategies are required to find out the scope of improvement. So that the opportunities can be created as well as exploited which arrive on the way? It will also help Samsung to retain its stability, gain competitive advantage and to be prepared for the future challenges which might arrive.
2.3Outline which perspectives were chosen to analyse the organisation and why
The data collected through research methodology is used for proper analysis using SWOT which is strategic business planning tool where strength, weaknesses, opportunities and threats for Samsung will be found. It is also used for the identification of business objectives along with the internal and external factors which are analysed through PESTLE analysis.
3. Key Findings and Discussion
3.1Based on research taken and give overview of key issues facing the organisation
- Threat majorly from China which is famous for producing low cost consumer electronic items.
- Many chip producers are partnering with Chinese companies like there was an agreement signed between Infenion, Elphida and SMC.
- Growing threat from new entrants in the market
- Rising inflation which will make the products costlier
- Recession has reduced the disposable income of consumers at the same time.
3.2PESTLE analysis
Political Environment
There is significant amount of political risks which Samsung has to face in most of the countries where it operates, however in major countries the political environment is quite conducive for Samsung to operate. Due to unstable political climate in South Korea it has to face political instability at home. But situation is less bad as compared to other countries like South East Asian countries and African countries where Samsung just has distinct advantage as the political environment is very hostile. While in the countries like India and China the political environment is quite conducive which helps Samsung to concentrate in better manner (Yu, 1998).
Socio-Cultural Environment
Although it is South Korean company then too it has been successful in integrating with the emerging markets of other countries wherever it does business. This has resulted in a mindset which particularly resembles ‘Think Global, Act Local’ which has effectively helped in bridging the social and cultural gap between the markets in which it operates and the business landscape of the home country. The only troubling aspect which Samsung has to face is its attitude towards the local officials in the matters which are related to bribing them in order to get their business done. The company mainly tries to strike a balance between the level of income of the consumer class and the aspirational values of the consumer classes.
Technological Environment
The company prides on its highly innovative approach towards the technology and it uses the same in order to roll out new products which use the cutting edge technology in its features and designs. The technological capabilities of Samsung are very famous and it is supposed to be company’s strength. The innovative drive of the company is its biggest strength and the company can also boast of being the pioneer in many fields of technological innovations which it has been introducing through its highly innovative and global products in the market place.
Economic Environment
Samsung adopts good strategies in its operational markets which are based upon the economic size of the market and the strength of the consumers in varies terms like the buying power, disposable income of consumer etc. The products made by Samsung need high level of disposable income from the consumers so that these products can be bought; therefore the company follows a targeted marketing strategy which is mainly aimed at the most of the countries’ middle classes wherever the company is operating.
Furthermore the company plans to enter only the countries where the business cycle is in initial stages for its products. It does not target or enter the developed countries where the product lifecycle is already either in maturity or decline phase for its range of electronic products. This strategy of Samsung to enter the countries in the initial stage of business cycle has really paid off as it gets readymade market for its range of products.
Environmental Factors
The “green policies” and the CSR approach hitch has been adopted by Samsung indicates that the company is getting conscious towards the environmental as well as social obligations The manufacturing factories which have been built for production of its products have been based upon environmentally sustainable designs and many other practices have also been adopted by the company in context to environmental sustainability.
3.3SWOT Analysis
The SWOT Analysis done for Samsung can be seen from the figure below:
3.4 Porter’s Five Forces
Power of Suppliers
The suppliers have limited bargaining power as there are numerous suppliers for consumer electronic products in the market. There are over thousand suppliers in South Korea itself and across the globe too for the electronic parts needed to make Samsung products. However the fact that suppliers produce unique parts for every electronic appliance maker gives and advantage to the suppliers which cannot be easily ignored. Samsung depends on its suppliers for timely delivery of components and any supply chain disruption can cause damage to Samsung sales.
Entry Barriers
Samsung has found an easy way out to enter new markets so entry barriers are very high for it. For example entry into India and China markets which are two emerging markets has been able to provide Samsung with the much needed volumes in order to expand its business. Therefore easy entry can be used by company, but rising global financial crisis might prove harmful along with the rivalry form the existing companies in the same segment.
Power of Buyers
Power of buyers is a bit higher on Samsung because the buyers have a wide variety of products to choose from and range of products too is available to them. There are several alternatives for mobile phones and various other electronic gadgets available for consumers in market. The bargaining power of buyers is high because the consumer electronics market is buyer’s market. This is evident from the endless ‘price wars’ Samsung has faced till date. However Samsung has an advantage that buyers do not switch the brand immediately they take time to adjust and adapt and only when they are totally dissatisfied they switch brands.
Threat of Substitutes
For a company like Samsung threat of substitutes i.e. very high because the electronics consumable items is flooded with competitors which pose intense competition for it. SO the company has to be on toes to combat the new product entries. Moreover the “me-too” products which compete against the established Samsung are introduced in the market and pose a threat. This is significant high threat for Samsung amongst all the Five Forces.
Industry Rivalry
Due to the presence of the competitors in the market like LG, Panasonic, BenQ, Nokia, Motorola, Toshiba etc the industry rivalry is high for Samsung. Mostly in emerging markets like India the competition is very tough.
4. Summary and Conclusions
From the above PETLE analysis, SWOT Analysis, and Porter’s Five Forces it is evident that the Samsung has achieved a great growth path from the perspectives of:
- Product Life Cycle ( PLC)
- Diversification
- Product Pricing
- Product Characteristics.
All these factors together have allowed Samsung to build a strong foundation to get unique competitive advantage. From the PLC perspective the Samsung’s product development shows that it followed a reverse order of PLC. This evident from the fact that when it started its operation in 1971 Samsung launched monochrome television as its first product although they were undergoing a stage of decline in advanced countries.
From the price level perspective the growth path of Samsung started with low priced product range and it gradually moved upwards parallel with the technological innovation and rising incomes. Regarding the diversifications Samsung followed a simple product structure which concentrated mainly on television receivers and range of home appliances. However from early 1908’s it started product diversification?
Lastly the product characteristics path followed by Samsung by choosing the monochrome television as first choice indicates it was incentive to the brand name and it chose highly-elastic commodity product.
5. Conclusion
The above analysis and findings clearly indicate that Samsung has unique and unusual growth where it has surpassed larger rival companies and gained competitive advantage in the developed markets like United States and Japan. The credit goes to its cutting-edge technology and innovation. This has led to a unique path where Samsung cannot just adapt to the; latest technologies but through its emphasis on R&D works it can launch its own new technology.
Samsung is already ahead in the Learning Curve, but it needs to maintain its competitive edge to handle the threat from new entrants and the threat of substitutes to remain the market leader. However Samsung can easily play on its forte that is ‘legacy’ and ‘speciality’ product factor. Thus given the fact that Samsung has been through troubled times in recent past due to various internal and external factors the company management needs to choose which strategy would be better for their ever changing business landscape (The Sucession at Samsung, 2009).
6. Recommendations
Based upon the research findings the recommendations which can be given for Samsung are:
- Company should adopt the ‘Glocalization’ approach (Friedman, 2005) according to which the strategy adopted by Samsung should be global in conception while it should be local in execution in the markets in which it operates (Perreault & McCarthy, 2006).
- It is right time for Samsung to adopt a bit aggressive approach while going global and this way tap the markets of the portion which is called the ‘bottom of pyramid’ (Prahald, 2007). This requires a little bit reorientation of current strategy followed by Samsung. It needs to now adopt the strategy of lower end pricing model, the one which it adopted and paid-off during its inception stage.
- It can also develop joint ventures with Chinese firms for expanding its joint investments, this way they would be able to produce low end products in China and high end products in Korea. Moreover the Chinese firms are very desperate in gaining market share even at the cost of loss and Chinese government will provide cheap finance too to the joint ventures (Singha, 2010).
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