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MASTER OF BUSINESS ADMINISTRATION- MBA

Strategic Management

LECTURER–Trish Ganly

INDIVIDUAL ASSIGNMENT

Lecturer:Trish Ganlay

Bilal Ahmed - Nº 2159403

Full time Student

Dublin- 30/08/2016

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Executive Summary:

Since 2008 smart phone industry has experienced an unprecedented growth and

number of new trends smart devices has become the key entry points and main

innovative platforms for internet businesses, As devices become intelligent

consumers are expecting more from their digital lives, china is a global leader in

smart phone uptake, recent trend sees a rising demand of Feature-rich 3G phones.

The rising demand for cheaper phones has hardly hit the high-End market Leaders

in favour of Medium/Low End features rich competitors. Threatens the stylish ,trendy

and expensive mobile phones.by 2014 share of Chinese local companies in market

is reach to approximately 50%,The position of domestic brands getting stronger is

commensurate with the growing demand of mobile phones in rural and sub-urban

areas. This Apple Inc. and Samsung electronics two of the largest technology firms

provide a new paradigm on how vertically integrated firm operate today. Both

witnessing fall in market share since the emergence of low-cost features rich smart

phones. Samsung is diversified manufacturer establish itself in consumer electronics

and home appliances and later enter in to mobile phone business is 3C

integration(computer, communication and consumer electronics).Samsung has been

trying to expand business in other mid-sized cities which was previously neglected

and operation was confined to major 100 cities through the partnership with national

distributor “China Mobile”. As a large conglomerate having a geographically

distributed and collocated network Samsung plc. enjoys above average return ”the

cost driver has benefitted most to Samsung in seeking cost advantage is vertical

integration with its production facilities”(Reauters,2013),This business model allow

Samsung to build on their proficiencies and to minimize transaction cost. Having

facilities in Asia –Pacific and Taiwan make it easier to significantly obtain economy of

scales.

Samsung plc. Higher management Raise concern about recent fall of revenue in its

china business, Samsung electronics (SE) are required more immediate and

stringent actions as the importance of china business is too high. There are many

possible reasons of recent fall in revenue but the most important are SE distribution

channel strategy ,its marketing strategy and perhaps the use of open-source

operating system in its devices.in fact the success of Samsung over second half of

2000 was mainly fostered by growing popularity of its android based smart phones.

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Conversely Samsung over reliance on Google Android operating system is making it

more vulnerable to competitive retaliation .developing own software would be a

major step in competitive landscape in china. Although android is highly popular OS

in china number of user increase to 75% from last three years, but Samsung brand

image and innovative capacity could come up with user-friendly interface.one

example is apple’s which is also our largest competitor in global market ,executing

successful lock-in strategy by developing its own iOS ,Apples smart phones, tablets

and computers operating system are combined in usage, apple .Inc. is far above the

competition. Present report is being framed which is emphasizing on strategic

analysis based on rational planning model and structuralist strategy that is bound to

be devise by operating environment, planning process goes through each element in

sequence;

In this report corporate strategy of Samsung plc. would be assessed, strategic

position and nature of competition in china will be analysed, evaluation and

identification of alternate strategies and if necessary re-stating the business

objective.The objective of this report is to carve out a viable competitive position

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provide with the recommendation for sustaining competitive advantage on long term

basis.

Contents 1.0 Introduction: .................................................................................................................................... 7

1.1 Back Ground: ............................................................................................................................. 7

1.2 Large Conglomerate: ............................................................................................................ 7

1.2.1 Core Value: ......................................................................................................................... 7

1.2.2 Ethical Stance: .................................................................................................................... 7

1.2.3 Corporate Structure: .......................................................................................................... 8

1.2.4 History in china: .................................................................................................................. 8

1.2.5 Market Segmentation:........................................................................................................ 9

2.0 Significance of Mobile Division (IM): ........................................................................................ 10

3.0 External Environment: ................................................................................................................. 11

3.1 Pestle Analysis: ........................................................................................................................ 11

3.1.1Political Factors: ................................................................................................................ 11

3.1.2 Samsung Political Relationship and Influences: .......................................................... 12

3.1.3 Corporation Tax ................................................................................................................ 12

3.1.4 Government support to Mobile industry ........................................................................ 12

3.1.5 Drawbacks: ........................................................................................................................ 13

3.2 Economic Factors: ................................................................................................................... 13

3.3 Social factors: ........................................................................................................................... 15

3.3.1 Socio Economic Factors: ................................................................................................ 16

3.4 Technological Factors: ............................................................................................................ 17

3.5 Ecological Factors: .................................................................................................................. 19

3.5.1 Measures to Overcome: .................................................................................................. 19

3.5.2 Implications for manufacturing industries: .................................................................... 19

4.0 SWOT Analysis: ........................................................................................................................... 19

4.1 Resource Audit: ....................................................................................................................... 20

4.1.1 Financial Resource: ......................................................................................................... 20

4.1.2 Physical Resources: ........................................................................................................ 20

4.1.3 Value Chain ....................................................................................................................... 20

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4.1.4 Research & Development: .............................................................................................. 22

4.1.5 Human Resource: ............................................................................................................ 23

4.1.6 Intellectual Capital: ........................................................................................................... 23

4.1.7 Brand Equity ...................................................................................................................... 24

4.1.8 Consumer Loyalty: ........................................................................................................... 25

4.2 Weakness: ................................................................................................................................ 26

4.2.1 Management Competency: ............................................................................................. 26

4.2.3 Lack Of Nationwide Distribution network: ..................................................................... 27

4.2.5 Open source operating system: ..................................................................................... 27

4.2.6 Vast Product Line: ............................................................................................................ 28

4.2.7 One Size fits to all: ........................................................................................................... 28

4.3 Evaluation of Resources: ....................................................................................................... 28

Samsung VRIO Analysis ........................................................................................................... 29

4.4 Opportunities: ........................................................................................................................... 30

4.4.1Samsung Brand Image in china: ..................................................................................... 30

4.4.2 Emerging Market: ............................................................................................................. 30

4.4.3 Economic Expansion: ...................................................................................................... 31

4.4.4 Technological Advances: ................................................................................................ 31

4.4.5 Product Life Cycle: ........................................................................................................... 32

4.5 Threats: ..................................................................................................................................... 32

4.5.1Patent Infringement: .......................................................................................................... 32

4.5.2 Tough Competition: .......................................................................................................... 33

4.6 SWOT Summary ...................................................................................................................... 34

5.0 Strategic options: ......................................................................................................................... 34

5.1 BCG Matrix ................................................................................................................................ 35

5.2 Head-on Attack ........................................................................................................................ 35

5.3 Collaboration ............................................................................................................................ 36

5.5 Multi-channel Structure ........................................................................................................... 37

5.5.1 Marketing Strategies: ....................................................................................................... 38

6.0 Managing strategic change .................................................................................................... 39

6.1 McKinsey 7S Framework ....................................................................................................... 39

6.1.1 Change in in staff: ............................................................................................................ 40

6.1.2 Change in skills: ............................................................................................................... 40

6.1.3 Change in values: ............................................................................................................. 40

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6.1.4 Change in system: ........................................................................................................... 40

6.1.5 Change in system/Processes ......................................................................................... 40

6.1.5 Change in structure: ......................................................................................................... 40

7.0 Conclusion .................................................................................................................................... 41

8.0 Recommendation ......................................................................................................................... 42

References .......................................................................................................................................... 44

Appendix 1 ............................................................................................................................................ 46

Appendix 2 ............................................................................................................................................ 47

Appendix 3 ............................................................................................................................................ 48

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1.0 Introduction: Mobile phones are become increasingly intelligent, previously they were only

designed to provide telephony service but now it involves in to smart phones which

has capability as essentially as mini computer that can store and process

information. Many regular mobile are phase-out from market during this transition

period, such as Nokia which was leader in industry was not able to manage the

transition from regular phones to smart phones. Thus the introduction of smart

operating system in the mobile phone industry and their rapid diffusion marked a

strong technological discontinuity; the sudden redundancy of regular devices and the

rise of smart phones(Funk;2008)

1.1 Back Ground:

1.2 Large Conglomerate: Samsung employs merger & acquisition as main

business strategies,a spokes man from a samsung electronic said “acquiring a

samsung electronic is also and effective means of developing technological

competence and patent capacity”(WSJ) ,(Greiner 1970)”Suggest that every entity

grow in size in goes through a changes as it gets bigger. Each change occur in

response to a crises “he further define that early years of successful business entity

are period of creativity and innovation”.Having a very diverse range of business and

comprehensive range of products under each business,(SE)account for 37.5% of

total business. Samsung electronics is committed to bringing the best user

experience to its customers through its innovative hardware and service. The SE

business strategy leverages its unique ability to design its hardware with seamless

integration.

Electronics:37.5%

Chemical industry:2.5%

Heavy industry:3%

Financial service:33.5%

Other activities:23.8%

1.2.1 Core Value:

“inspire the world create the future“the main purpose of the Samsung Inc. is to

devote the resources in research and development to produce innovative technology

that can contribute to a better global society.as part of Samsung electronics vision

,the objective is to grow significantly bring new and innovative technology in market

1.2.2 Ethical Stance:

Division has strong faith in ethical standards. And continuously judge every individual

and collection action in compass of fairness and respect for all stakeholders the

Samsung electronics vision to enhance the global turnover, explore new markets

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and bring peoples closer and connected through advancement in modern

technology.

https://news.samsung.com/global/fast-facts

1.2.3 Corporate Structure:

The corporate parent Approach: In Samsung Plc. enterprenueal structure is prevalent.it organised centrally and run

autocratically by its owner manager Lee-Kun hee.Head office in south Korea is

responsible for the group Business, major decision mainly taken in head office about

strategic direction of the organization. Samsung globally pursuing “parental

developer “approach, it delivering benefit to its china Mobile Division(IM) by providing

well establish brand image, centralised pool of resources, experience and skills.

1.2.4 History in china:

Samsung Plc. First activity export of dried fish, fruits and vegetables to china. In year

2000 first technology research centre establish in Beijing. Which later followed by the

china Unicom and first Samsung and Unicom CDMA mobile equipment. Set up

various research and development facilities in china on mobile and communication

the head of Samsung china “ho moon kang” recently declared “we want to create

business models and product design to serve Chinese market first and eventually

export them to the rest of world”(George haour :2015), Samsung plc.china CEO is

regarded as one of the SE top three executives worldwide. Currently SE has 60%

share of total turnover of Samsung group ,In china SE is a group of 28 production

facilities,3 distribution companies and four research and development centres and

was elected most respected enterprise in china. Since mainland china start offering

mobile phone service in 1987 the number of smart phone users has risen in 2002

surpassed the number of users in United States. Becoming the largest market in

world. Samsung electronics china turnover of 21.1 billion US dollars as a 16% share

of total of Samsung plc. Entry of SE in to china market is the representative example

of emerging market expansion of Korean electronics firm, Since Finnish develop

expensive High-end handset based on 3G technology ,its greatest strength

particularly in the countries where demand for low cost phones are rising such as

china, India and brazil. Local players in china came to increase their production and

marketing abilities offering Well-designed Low and mid-end handset at very

competitive prices.

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1.2.5 Market Segmentation:

According to Kotler “customer needs are diverse and the diversity requires manager

identifies group of customers with similar characteristics”. He further argues that

divided the basis of segmentation in to geographic variables, demographic variables,

psychographic variables and behaviour variables.

By position Chinese mobile market can be divided in to low/Middle end, middle/high

end, and all segments.Samung strategic positioning is in middle andhigh end

market.

1.2.6 Xiaomi as a Major Threat:

Strategic space induce entrants to untapped neglected market.National distribution

system of mobile phone in china had long term relationship with early foreign

manufacturers, however these distributors were not very interested to sell many

phone models for domestic manufacturer when they came to emerge first, as a result

domestic manufacturers have to find the different approach they choose to target 3rd

and 4th tier cities that was not covered by foreign manufacturers and establish

representative office in each region. The position of Xiaomi grew stronger with the

growing demand for mobile phones in rural areas, while Samsung’s efforts are

concentrated on urban localities. Mainly in the 100 largest cities of the country.

Xiaomi together with other local brands gained popularity through targeting “power

users” or audio visual trend setters the age group of (14-49) who are technology

savvy. Concentrate on youth market to cater for ever changing needs they comprise

of 16% of total digital population in china, these consumers are constantly looking for

new features and experiences who uses smart devices mainly for Entertainment,

music and games,Xiaomi customized their product for particular group of peoples.

At corporate strategy level in Samsung Plc. Strategic gap can be expressed a

reduction in total market share from 2013 level. The purpose of the strategy

development is to implement strategies that will fill this strategic gap.

(See Figure 1 For comparative market share trend)

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Source (Statista.com)

Smart phone shipment market by share in china

Date Xiaomi Samsung

2013 Q4 6.50% 18.80%

2014 Q1 11.00% 18.00%

2014 Q2 14.00% 12.00%

2014 Q3 14.80% 11.00%

2014 Q4 13.70% 7.90%

2.0 Significance of Mobile Division (IM):

Samsung Revenue from Communication and Mobile division (IM) is substantial;

account for nearly account for half of the group revenue. See Figure 3 For

comparative Revenue by (IM) division and from other divisions.

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4

XIAOMI

SAMSUNG

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Source (Samsung plc.com)

3.0 External Environment:

According to peter Drucker”this as a pattern of activities that seek to achieve the

objectives of the organization and adapt its scope, resources and operation to

environmental changes in long term”. Organization does not operate in vacuum;

external environment has great implication on every aspect of business.

(drucker;1982)

3.1 Pestle Analysis:

The structure approach to identify significant factors in environment of an entity and

to identify current influence and future potential influence it is very useful framework

for environmental analysis. Our aim is to ascertain the causes and factors which lead

to drop in market share, Moreover to identify potential opportunities in the

environment.

3.1.1Political Factors:

Political environment consist of political factors that have strong influence on

business entities. We discuss the legal and political component together because the

interplay between these forces makes it difficult to disentangle their individual

impact. Political system in china is take place in the framework of socialist republic

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50

100

150

200

250

2014 2015

Other

Mobile(IM)

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run by communist party in china is more attractive and business conducive state.

After more than a quarter century of reform and opening to the outside world,

Chinese government had the goal of quadrupling the GDP, By 2020 private

ownership of people assets is now legal although some key industries are still in

state hand. Restriction on foreign trade was relaxed when china join world trade

organization in 2001. it is the attractive place for foreign corporation because of its

large market size and socio economic distribution.in the early 2000,china overtook

the USA as the world largest recipient of foreign capital.

3.1.2 Samsung Political Relationship and Influences:

Samsung in more than three decades has built relationship “guanxi” with major

Chinese government officials and perhaps more importantly with three major telecom

national distributors, china telecom, china Unicom and china mobile. Through their

persistent focus on social contribution help SE to achieve reliability and trust.

Executive committee of foreign investment companies issued a document title

Beijing declaration on corporate social responsibility(CSR),where they proclaimed

their commitment to harmonious development of business and society through

involving businesses by focusing on four areas; protection of intellectual property

rights, environmental protection, public social welfare and technological innovation.

In China Samsung ranked first among foreign companies for CSR responsibities

initiatives in china. The technological side, making contribution to vocational

education in china while enhancing the social recognition of blue collar workers. “in

2002 Samsung has setup university scholarship programmes and partnership with

26 key Chinese universities and offered more than 26000 scholarship in

2013(Guangzhou,2013)

3.1.3 Corporation Tax

Adverse variation in tax can adversely affect companies, in china it is stable at 25%

since 2012, providing a stable business environment for planning and decision

making.

3.1.4 Government support to Mobile industry

Supporting investment in high tech industries to reduce china dependence in modern

technology. Foreign investment in china guided by catalogue of industry for guiding

foreign investment, divided in to three parts namely. “Encourage”. “Restricted” and

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“Prohibited “sectors. Encourage sector are those which involve in high tech,modern

industries. Our entity fall in the Encourage sector which enjoy several benefits. China

attractiveness for investment largely due to the availability of cheap labour, greater

supply of skilled work force and perhaps most importantly, state build infrastructure

for high tech industries which is rare in Asia. Furthermore emphasize of Chinese

government and public on corporate social responsibility(CSR) also provide

opportunities for companies to capitalise strategy on CSR.in 2010 Chinese

government explicitly states that companies in china should take on social

responsibilities.

3.1.5 Drawbacks:

Red Tapism in china many administrative and bureaucratic task which can be

simplified in other countries are quite time consuming. The weak monitoring

system and the prevalence of personal relation “Guanxi ”tend to create

bureaucratic inefficiencies .

Freedom of Press: Media has greater role for organization success, product

can gain popularity overnight with impressive advertisement.

Unfair competition:Due to protectionism impose by of Chinese government

foreign countries are often held to different regulation and standard than their

domestic counterparts.

Intellectual Property Rights: China has introduced legislation covering every

aspect of protection of intellectual property. But there is a difference between

having adequate law and its effective enforcement.

3.2 Economic Factors:

Since the open door policy in early 1970 china adopt the capitalist mode of economy.

The year 1978 mark the beginning of china transformation from a rigid centrally

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planned economy toward an increasingly open and market oriented economy. Which

characterized by liberalisation of trade, fair competition and transition from

agricultural economy to service oriented economy. China socialist economy is the

world second largest economy by nominal GDP and world largest economy by

purchasing power parity. Its GDP has grown over 9% on average over the last two

decades and still maintain the strong momentum estimated to 17.62 trillion in 2014,

account for 15% of total global output. The absolute poor population has dropped

tremendously from 250m to 25m, average income per person has risen to 7808 in

2015 from 5000yuan.in 2011 representing the expanding GDP and prosperous

population. Inflation on the basis of consumer price index has dropped significantly

from 2011 level which was 4.1% in 2011 ,now has diminish to 1.6%.interest rates in

4.35%,which also drop as a result of liberalisation policy and the objective to

enhance business activities. According to recent survey of BRIC countries “usage of

smart phones” china has 66% smart phone users followed by Russia which has 37%

users of smart phone. Have a glance; Figure 4 Depicting Emerging Market in

china

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Source (Statista.com)

3.3 Social factors:

Social indicators enable Decision makers to predetermined possible trends in future,

Help to forecast demand of particular product and market, make plans

accordingly.3Gsmart phone are A choice of young, literate and technologically savvy

generation, relative size of young age group is small this is partially due to the china

one child policy introduced in late 1970’s.growth in population between the age of 15

to 64 which highly comprised of 50+aged peoples. This account for 75% of total

population. According to recent estimates published by (countrymeters.info).china

will see same kind of problems as aging developed markets like japan. Aftermath of

one child policy has adversely impact the availability skilled workforce average.

Population growth is 0.57% per annum,declining fertility reduced the level of young

population, AS a result grey market 60+ is growing at much quicker pace which

increase the burden of retirement pension on Chinese government, recently ban on

this policy has just been lifted to fuel the supply of young workers. (See figure 3 for

Age Distribution in china)

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Source(Mckinsey.co.uk)

3.3.1 Socio Economic Factors:

Lower middle and poor class projected to be overtaken by middle class by

2022.samsung own 5000+ income group which is predicted to be surge very rapidly

by 2020.

Age Group

under 15

15 to 65

65+

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20

30

40

50

60

2012 2022

poor class

middle class

high middle

affluent

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3.4 Technological Factors:

According to the forecast by 2020 china’s E-commerce market could surpass 1trillion

USD.there is very high proportion of total sales carry out online According to the

report 72% of consumer electronics were made online in 2015,china as more

internet user than any other country account for 22% of internet user globally, Almost

94% Chinese population using 3G phones, Rise in E-commerce would reshape

distribution structure in china , coverage would be improved, china’s domestic rivals

heavily targeting rural and sub-urban areas through E-commerce and has already

penetrated 60% of the rural market(Ning,2007),in 2014 rural subscribe accounted for

more than half of china mobile 53 million new subscribers,(chandler,2014).Above all

government Effort to boost technological infrastructure Enhance literacy and to

revitalising the country with science and education provide great scope for

Technological landscape.

Source (Statista Forecast)

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.According to the UNESCO report Asia represent 30% R&D expenditure and much

of the credit belongs to china.

Highlights of 13th Five year Plan (2015 -2020)

Cyber economy to be further expanded and .network speed to be increased

and fees lowered

Increased autonomy for universities and research institutions.

Increase the link between universities and public/private sector.

Online culture building to be enhanced and collective development of

traditional media and new media to be promoted.

Innovative teaching abilities to be raised to endure universities meet the

international standards.

transform status of manufacturing giant in to world tech power by focusing on

innovation.( news.xinhuanet.com)

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50

100

150

200

250

US China UK Japan

E-commerce sales by country

E-commerce sales by country

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3.5 Ecological Factors:

People republic of china paying staggering price for its increase industrialisation and

economic growth. Since the level of air and water pollution is immense. Major

polluting fuel factor responsible for green house emission is the increase usage of

coal, china is responsible for 30% of coal usage world largest emmitor.in 2014, it

emit about as much C02 as USA and India combined. Coal is responsible of 64% of

china total energy. Product manufacturing industries are ranked number 8 in major

polluting contribution industries.

3.5.1 Measures to Overcome: country has recently taken various step toward to

formulate more rigid regulation for manufacturing industries;

3.5.2 Implications for manufacturing industries:

Manufacturing companies will periodically publish information about

environmental impacts. Mandatory disclosure to institute of public and

environmental affairs and the natural resources defence council.

Manufactures are subject to rigid public scrutiny and obliged to provide

remedy for environmental violations.

Enforcement and penalties of environmental violation become severe,

reported widely by national media.

4.0 SWOT Analysis:

Swot analysis is the technique to identify key factors that have influence business

.we proceed to analyse current capability of our entity in order to draw meaningful

conclusion. Base on the analysis Decision about resource allocation and

configurations of resources with environment would be taken. it will include

assessment of internal resources, competencies and capabilities of entity moreover

each resource will be evaluated on basis of competitive edge such as the

uniqueness of the resources and the shield of resource that it provide to retain

advantages in long -term, for this purpose VRIO tool would be employed.

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4.1 Resource Audit:

4.1.1 Financial Resource:

Samsung as being a conglomerate has Large cash pile which reduce dependence of

external funds.71.49 trillion cash reserve enable Samsung electronics to invest

heavily on new R & D Increase innovative capacity without resort to financial

institutions, tremendous amount of cash helps Samsung plc. to manage its working

capital effectively, we currently have 2.5$ Assets in every 1$ liability.

4.1.2 Physical Resources:

Samsung has advantage over its rival that for major smart phone components it

does not depend on supplier. Samsung has its own component making division for

the production of major mobile phone components, it has their own fabrication unit

use to build a silicon wafers such as processors, ram,DRAM and flash storage.

Which ensure smooth delivery of parts and guaranteed market for its disposal.it also

sold DRAM and flash storage to its biggest rival Apple.Inc.”SE is also one of the

world largest supplier of electronic components, and a top supplier of Apple, dell and

Hp(Yoo-chull ;2010)it is interesting to note that about a third of Samsung revenue

comes from companies that compete with it in electronics(Ramstad;2009).

4.1.3 Value Chain

SE operates using a vertical integration model which leverage all aspect of the

manufacturing process from raw material to electronic components to fully

assembled products”eisenburger and xu;2003)below table make it clear how much

Samsung produce on its own.

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(Source JP Morgan)

For fierce competition and rapidly changing market demand ,key to success lie not

only in improvement but how to manage and organize production network. Electronic

industry is one in which production is conducted at global level. Components and

parts are produced in some country and assembled in different country in to finished

products .Samsung focuses to establish low cost manufacturing plant in china, which

is Samsung important sub production network with in two central nodes aim to utilise

low cost resources and to pursue the major customers for its products. Total of 34

production sites around the world 21 factories are in asia.SE has establish ties with

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local partners which is pre requisite for market entry, while having own establish

distribution network. Locally oriented operation has achieved local and regional

linkages between production and marketing activities.

Brain conclude that “Most of smart phones produced in Asian production network,

the production is facilitated by existing production network”(Brain

chiristiansen:2015)

4.1.4 Research & Development:

Innovation is crucial to become successful in technological sector.R&D is the biggest

strength of Samsung plc,invest 9% of sales revenue every year in R&Dactivities,we

have 70000+ total engineers, owned 36 R&D centres globally. Which enable

company to become global leader in market. Samsung plc. Research and

development activities are a great source of innovative products. “Samsung has

been place on second position in terms of R&D spending. It has many R&D centres

from silicon valley to Beijing to Bangalore” (fortune.com)

Figure 5 below depicting the level of R&D expenditure made by Samsung plc.

(Source Mckinsey&co)

0

2

4

6

8

10

12

14

16

2011 2012 2013 2014

Samsung R&D expenditure in US$ Billion.

samsung R&D expenditure us $Billion.

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4.1.5 Human Resource:

“Samsung declare open HR to prepare for an open Era, the SE abolish

discrimination based on academic background and gender for HR which increase

potential capabilities of their employees”(Serc Organization)Samsung has 319000

employees working in 84 countries, more employee than any other rival Samsung

Plc. software engineers twice as many software engineers in Google. Its advance

technology training institute offer a wide range of training opportunities to nourishes

all employees expert in to their respective fields by running systematic education in

advance technology institute, Samsung art design institute(SADI),HR development

group(Leadership training).it focus on sharpening the expertise of future oriented

employees in every area of organization.(Samsung.com 2016)

(Source Developer.com)

4.1.6 Intellectual Capital:

Patents

Patent is one of the several key barometers of innovation and an important ways

companies protect themselves. Innovation is the key for long term survival and

provide shield to protect innovation from competitors, SE patent portfolio is one of

the strongest portfolio in tech industry. Ranked number one in EU on the scale of

patent registration, and by having 7976 patent registration give rank number 2 in

USA.

0

50000

100000

150000

200000

250000

300000

Apple Google Microsoft Samsung

Comparison of Software Engineers

Comparison of SoftwareEngineers

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Utility patent granted in US

Organization 2013 2014 2015 Total

SAMSUNG 4652 4936 5059 14647

Apple 1775 2003 1937 5715

Microsoft 2659 2829 2408 7896

Intel 1454 1573 2046 5073

Amazon.com 530 741 1136 2407

LG electronics 1945 2119 2241 6305

4.1.7 Brand Equity

Samsung brand is globally recognized and respected, consistently recognized as

global market leader by industry authorities.it has been publish in many well-known

magazines and journals as a most admirable brand. in fortune report 2010 Samsung

ranked 2nd in world most admired brand in electronic industry and ranked 16th in the

business week. Its brand value alone makeup 450M billion in assets on financial

statement. Increased enormously from previous periods by 134%.(Statista.com)

See Figure 4 for comparative brand value and brand rating

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(Source statista.com)

4.1.8 Consumer Loyalty:

Samsung plc. Earned a global reputation for being an Ultra-Cool Brand offering

stylish, trendy and expensive mobile phones. Measurement of customer loyalty is all

about measuring the strength of this relationship between the customer and the

business. According to recent survey Samsung scored 35 for customer loyalty, which

is above the industry average.SE is investing heavily in its brand image and

consumer loyalty programmes which standout it product form competitors and give a

competitive edge. This is exacerbate by increasing CSR activities in china, Samsung

has ranked first among foreign companies for CSR initiatives in china in

2014(Samsung,2014b) in 2015 SE was among ten companies named” the most

respected enterprise in china,(Economic Observer;2015),Chinese senior leader

expressed their gratitude to SE on high level of CSR activities. A brand dependence

index reveal that most people are dependent on Samsung brand rather than any

other brand.(Brand chid of UTA brand studio)..

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4.2 Weakness:

4.2.1 Management Competency:

Despite its past success by having a visionary, creative and ambitious managers,

Samsung unusual management structure is becoming obsolete, it is headed by three

CEO’S,”Oh Hyun Kyun” who is performing the role of CEO and vice chairman

together from 2012 to present seems the violation of corporate governance best

practice code, Samsung quality of management has been deteriorated from previous

year. Wall street journal publish that type of structure prevail in Samsung is unusual

management structure. It’s also laid out a possible scenario of changes that comes

across in Samsung telecommunication and electronic division, states that “JK SHIN”

who is overseeing mobile division could be moved out, another CEO “B.K YOON”

could potentially oversee the mobile division on top of his current duties running

Samsung home appliances and TV business.

27

4.2.3 Lack Of Nationwide Distribution network:

In china mobile manufacturer can be divided by origin in to western manufacturer

(nokia,motoroal,alcatel and Siemens),Asian manufacturers(Samsung,LG,Panasonic

and Mitsubishi) and domestic(Bird,ZTE,Oppo,Xiamoi).Domestic manufacturer are

good at local distribution and catering product to local taste. Distribution channels

are one of the major difficulty in front of Samsung their early entry in china gave

them some preferential advantage of having alliance with national level distributors

“national china mobile” which is state owned and focus on 100 major high End cities,

Despite early growth major markets are now become saturated and the growth in

low-tier cities is very high, having alliance with one major national distributor confine

SE reach to low Tier/High growth market.to successfully combat local players.

4.2.5 Open source operating system:

There are three big computing platforms globally, Android claim over 65% markets of

smart phones. In china 90%market captured by Android OS.In fact the success of

Samsung was mainly fostered by the growth of Android-Based Smartphones.

Despite having user friendly interface and content rich features and access of

applications,SE overreliance on complementors such as Google For using “android

“Operating system in its products make it more vulnerable to competitive

rivalry.eventhough Android Surpass Every single software platform and has great

number of users but it is common source of software for example Xiaomi plc. also

using Android OS in its devices which make it easier for customers to switch due to

the familiarity of software. And there is a growing view that android is inferior than

Apple IOS.Customer buy Samsung phones for their strong hardware and allure of its

galaxy line, but there is no differentiation for customers to buy complementary

Samsung software.

28

(Source Business Insider)

4.2.6 Vast Product Line:

Company popular in flood the market with so many product, it is successful strategy

in highly volatile and fast moving industry which ensure balance return from a wide

portfolio in long term, but also distract attention from core product which account for

60% revenue of organization.

4.2.7 One Size fits to all:

The needs of mobile phones functionality and requirement of application,

entertainment and multimedia vary between customers. Some customers may need

high computing capability but for other entertainment, multimedia and ringtones are

important. Low tier cities highly consist of defined segments and have different

needs, by ignoring such information ,Samsung not only losing market share, but also

losing potential segment to competitor.

4.3 Evaluation of Resources:

Having identified key resources of organization, Proper consideration is required to

asses’ firm capability in using these resources efficiently and effectively to create

29

value. VRIO is model to asses firms resources capability to create sustainable

competitive advantages.(See Appendix 2 for descriptive VRIO analysis)

Samsung Inc. VRIO Analysis

Samsung VRIO Analysis

Resources/Capability Valuable Rare Difficult

to imitate

Exploited

by the firm

Physical Resources Yes No Yes Yes Competitive parity

Value chain network Yes Yes Yes Yes Sustainable

Comp.Advantage

Human Resource Yes No No Yes Temporary

Comp.Advantage

Management Capability Yes No No Yes Temporary

Comp.Advantage

R&D Yes Yes Yes Yes Sustainable Comp

Advantage

Brand Value Yes Yes Yes Yes Sustainable Comp

Advantage

Customer Loyalty Yes No Yes Yes Competitive Parity

Tacit Knowledge

Yes

Yes Yes Yes Sustainable Comp

Advantage

30

4.4 Opportunities:

To sum up, this disruptive change in technology and market environment brought

Samsung many opportunities to extend it market share significantly.

4.4.1Samsung Brand Image in china:

Open itself to an array of cross border economic activities.in china stable political

environment ensure consistent planning and stability for business environment the

formal diplomatic relationship between china and Korea was agreed in 1992. Which

has broadened the scope and help to overcome inherent barriers. Relationship

between china and Korea is plausible bolster bilateral trade. Samsung is in china

more than three decades and has established relationship “guanxi” with major

Chinese government officials, strongly highlighted social contribution in annual

corporate sustainability reports. Samsung has achieved greater influence through

their social contribution in china help to enhance its reputation as it is rose to second

position upgraded from seventh in the list of fortune CSR ranking. With the motto of

an organization loved by Chinese peoples, “gain in employment and economic

prosperities lead to public trust which essential for political actors to keep their

political legitimacy”(hadjikhani et al;2008)SE has put their efforts in to gaining trust

through high tech and high quality products high financial performance and social

contribution to china through their CSR activities(seo ,2011).Samsung activities for

helping education, vocational course and scholarship programmes are recognised

and fully supported by Chinese government.SE learned the importance of building

relationship with socio political actors such as government officials, business

retailers and sales, advertising corporations. This relationship helps to proliferate

Samsung presence from 1 subsidiary in 2003 to 25 autonomous subsidiaries in

china.

4.4.2 Emerging Market:

World second largest economy by nominal GDP and largest economy by purchasing

power parity. China demographic is constantly changing; population growth and age

distribution fluctuate. Level of education is getting increase literacy rate has reached

90% as government emphasis on education through its major long term plans. The

availability of skilled labour in local market is quite easier as the technological

awareness for R&D centres and products is locally available on low cost. For every

31

dollar required in us to manufacture it cost 80 cent to manufacture in china. Ministry

of information industry so far has given out 30 GSM phone license and 30 CDMA

phone license.

4.4.3 Economic Expansion:

GDP is increasing by 11% since 2010.emergence of upper middle class is unveiling

many opportunities, Attitudes are changing over time and it is probable that the

usage of smart phones will completely eliminate regular phones and market will

expand further. There are 94% of smartphone users in china, this is promising and

showed a plausible trend for future. Samsung target high end market, the rise in

upper middle class and affluent household will increase the size of target market.

Research conducted by BCG and Ali baba research arm, found that 81% of

consumption income by 2020 come from household who annual income above from

24000$.

4.4.4 Technological Advances:

According to UNESCO report, Asia Represent 30% R&D and much of them belong

to china. In 2004 there were some 700 R&D,by 2010 number had more than

32

doubled. China is going digital very quickly, by 2016 country will have more than 730

million internet users and 380 million online shoppers, it has 359 million online

payment users in mid2015. This advancement not only help to foothold mass market

for smartphones but also standardized the market according to global standards. As

we know the technological obsolescence rate in Korea is high compare to world

average, that gives Samsung some advantage (Demand Condition on porter

Diamond) to bring innovative products at shorter intervals in global market, this

demand condition in home market is converging with technological rise in china, it

will assimilate the demand condition in both market, such as the introduction of

mobile payment service or introduction of new operating system would be easily

adopted as more and more business and government in china are beginning to

eliminate obstacles to the adoption of information and communication technologies.

According to one study, Chinese performance can be explained to a surprisingly

large extent by the suggested technology-adoption framework.it can account for

roughly 80% of china productivity gains. “growth of E-commerce is very high in low

tier cities ,digital consumer in small and medium size citites make purchase on their

mobile devices more frequently than their higher income counterparts in large

cities”.(Accentuare.com)

4.4.5 Product Life Cycle:

Despite have low growth in Q42015, smart phone market is growing very rapidly.in

china alone during the fourth quarter of 2015 smartphone made up 78% of total cell

phone sales volume, According to forecast update from (international data

corporation) smartphone market are expected to grow by 3.1% in 2016, while device

powered by Google operating system android are expected to grow 6.2% in 2016.

It can be deduce from above analysis that industry is in Growth stage of life cycle.

Demand for affordable smart phones predicted to be increase substaintially.which

can also be evident from intensifying competition as new competitors found it

lucrative market.

4.5 Threats:

4.5.1Patent Infringement:

As economy expands vigorously and the most common repercussion of developing

economies is illegal activities like counterfeiting and IP infringmenet.In 2008 about 20

33

% of 750 million handset produced whether counterfeited or off branded phones in

china. Xiaomi is also accused of copycat Samsung products designs. Patent

infringement is commonplace new commercial invention can be copied, legislation is

in place but there is a difference between having a particular regulation and its

successful implementation. Some blames government for the unprecedented scale

of its failure to protect intellectual rights, only china has opened entirely fake

Apple.inc store with employees who think they work for US Enterprise.

4.5.2 Tough Competition:

The increase in competition as a result of globalization has made markets high risk

and more volatile.(caiden 1980osborne and gaebler 1992,robins and coulter

,2005;robbins and judge,2005)Today the most important factor which laid the

foundation of globalisation is communication. Remarkable progress in

telecommunication technology has had enormous impact on telecommunication

manufacturing and service industries. Growing use of telecommunication devices

lead to the birth of many new organization. The industry is continuously undergoing

transformational change. The smart phone market is thriving very rapidly, as per

current statistics 1.5 billion of smart phone users in 2014 has jumped to 1.8 billion

20% and projected to 2.65 billion by 2020. This required continuous improvement in

product ,timely strategic action and tactics to remain competitive in market. “recent

year increasing information intensity and the globalization of capital flows has

resulted in improved and less costly communication and information

system”(welllenius and stern ,1994).

34

4.6 SWOT Summary

Strength

Extensive research knowledge

Highly-skilled scientist in workforce

High investment in advance equipment

Patent on products

High brand value

Consumer loyalty

Weakness

Organizational Structure

Using android operating system

Very Diversified Business

Distribution channel structure

Wrong marketing tools applied.

Opportunities

Strong growth in market demand.

Product market is in growth stage.

Emerging market, large segment which

is still unexploited

Ideal Relation with political

Actors(lobbying power)

Threats

Hostile regulation by government in

favour of competitor.

Emerging low cost competitors using

“Android”.

Unpredictable market less loyalty.

Rapid technological change

Tough competition lead to declining

margin

Patent infringement

5.0 Strategic options:

Portfolio Management

Samsung plc. is diversified manufacturer, entering mobile business is 3C integration

(Computer, communication and consumer electronics)we have wide product

portfolio, each product are in different stage of life cycle, Boston consulting group

35

model will help us to identify product life cycle and will help to design appropriate

strategy for product portfolio. High growth market is emerging market where market

size is expanding and profit potential is high, while high share is the proportion of our

organization in total market.See Appendix 4 For BCG detailed Analysis and

appropriate strategies for portfoilio management..

5.1 BCG Matrix

Stars(High growth/high share)

Television

Cell phones

Tablets

Green printers

Smart home

Question marks(high growth/low share)

Wearable gadgets

Laptops

Digital cameras

Cash cow(low growth /high share)

Microwave

Monitors

Refrigerators

Washers

Dogs(low growth/low share)

Handy camera

Mp3

5.2 Head-on Attack

.SE has greater scope to gain synergies through internal and external integration of

processes.in 2013 partial integration between IM and camera imaging division was a

fruitful strategy it should be progressed further to complete integrated division to get

further benefits of synergies and cost reductions., wide array of product which range

from home appliances to mobile and communication products, this give us an

opportunity to cut profit margin and receive average lower margin on portfolio of

products, without cutting the differentiated benefits of smart phones.Target

36

marketing to highlight differentiated benefits makes product superior i.e. quality of

components, source of hardware etc.

Management can also consider the use of discriminatory prices in low-end market to

directly attack on low cost competitors it has greater scope to beat on price level

than any other player.

5.3 Collaboration

To successfully compete with local manufacturers, changes in distribution networks

is mandatory, strengthen the links with local and provincial distributors via tri-lateral

agreements is highly recommended. Samsung success in smartphone market along

with Apple give them extra advantage over new comers in the market in terms of

brand recognition, we are the major supplier of DRAM memory chips to Apple icon

possible rationale to follow this strategy is that Apple and Samsung are pursuing

product differentiation strategy, their product is better than low cost rivals and offer

premium advantages ,they can establish collaboration to avoid their traditional rivalry

in tough competition face from low-frills companies and put their attention jointly to

reduce their power.

5.4 Lock-in Strategy

A lock-in strategy is another approach to keeping a competitive advantage, when

customer has made initial decision to purchase a SE product it is committed to make

more purchases in future. this strategy usually complements differentiation strategy,

it is quite common in high tech markets, our rival apple has not lose market share

due to its successful lock-in strategy, it has gained advantage through running their

own operating systems(ios) in mobile phone which is designed to play nice with its

own devices, which make it difficult for customer to switch to completely different OS

because it takes time to get familiar with functionality and features and would be

cumbersome to use utterly new software.it created the reinforcing cycle across the

two platform. On the other hand Samsung phone run on open-source android

operating system. A headline in recent business journal states that “Xiaomi possess

a big threat to Samsung in china, apple does not have to worry as much because of

two advantages it has a unique level of brand cachet and its own operating system.

(fool.com) we have already launch mobile phone z1 possess our own operating

37

system in India, we should implement this in or new mobile phones market is in

growing stage and it will take time for individual to get familiar with newer OS.

5.5 Multi-channel Structure

Manufacturers, wholesalers and retailers as well as other channel members exist in

channel arrangement to perform one or more of the following generic functions;

carrying of inventory, demand generation, or selling; after sales service or physical

distribution to customers(Coughlan et al1998) China distribution structure can be

distinguish in to national distributors, provincial distributors and local distributors.

National distributors are state-owned and have covering to 1 and 2 tier cities. On the

other hand provincial/fulfilment distributors are private companies they are strong in

their territory. They can better reach 3rd and 4th tier cities Samsung basically rely on

national distributors for channel structure which is not adequate to cater all

segments.Tri-lateral Agreements would be helpful bring the benefits of national

distributors risk sharing and local distributors reach to market. A combination of each

could make their network coverage complement each other as national distributors

losing their dominance to provincial and local distributors. Operators are having more

and more dominance in mobile phone distribution

Rise of E-commerce:

Our Major problem is that we are focusing too much on in major urban areas like

Guangdong and Shanghai in which we have most retail outlets, but neglecting low

tier cities which are predicted to be transform to high middle class by 2022,as Xiaomi

mainly target on low tier cities and have little presence there give Xiaomi to capture

this segment,”Xiaomi product has been widely successful and popular in china

because of its fan base and online approach for selling low-end phone”(Michael

Ahitt :2016)

Perhaps the most import way to challenge low-end competitor is to establish online

retail channels by new refined online retail channels, in china there is very high

proportion of total sales carry out online, digital consumer in low tier cities are rising

very rapidly.it has more internet user than any other country account for 22% of

internet user globally. Moreover Labour in china is cheap so it is possible to hire as

many sales peoples as needed. Moreover there is a need to segment market not

only on the basis of demographic and life style but also psychographic segmentation

38

is required. Demographic as descriptive variables and unable to characterized

customer needs at psychological level.

5.5.1 Marketing Strategies:

Bucklin(1966) define marketing functions “a distinct type of task found in the product

and/or flows and whose component activities are so interrelated that they are

generally performed or closely controlled by a single institution”.SE spend millions on

marketing budget each year put emphasize on direct form of marketing throughs

Ads and print media,On the other hand Xiaomi buzz spreads organically through

Word of mouth and social media, consumers in china tend to be influenced by word

of mouth(WOM)marketing especially in buying decision about mobile phones,

according to recent research conducted by Accenture & co reveal that 60% Chinese

learned about mobile phone products through family members ,colleagues and

friends. A source of information about mobile phone products.as well as internet and

social media now have greater influence than traditional media.(See figure below )

Source(Accenture china consumer survey)

What actually means the word of mouth marketing is the phenomenon of three E’s.

Engagement: is to listen to what they are telling, and be a presence in fans

live.@nikesupport is the prime example of customer service.

Equip: Give them reason to talk, will greatly reveal consumer choices and needs.

Sources of Information For mobile Phone

Recommendation fromFamily/work Network

Mobile Phones Sales counter

online Search

Official Websites

Tv Advertising

Shopping Websites

39

Empower: Let them know that they are important for us and sharing their opinion is

valuable.

For this customer centric approach we need to unleash the power of word of mouth.

6.0 Managing strategic change

According to (Beer & Eisenstat;2004)”Most powerful way for leaders to realign their

organization is to publicly confront the unvarnished truth about the barriers blocking

strategy implementation”. Successful strategic implementation required the effective

conversation in every part of the organization, because these are the peoples in

organization which make change successful, effective communication with everyone

who going to be affected by new strategy should be a part of two way

communications with superiors. Management should carefully and meticulously

listen employees concern and communicate them why change is necessary. From

the Samsung plc. past analysis it seems that our management will proceed with

Vertical integration and cross channel network. These two options are more align

with the acceptance criteria in our organization. According to David Aaker,”strategic

choices should be accepted as they meet following criteria” they are responsive to

external environment, they involve a sustainable competitive advantage(feasible)

and are consistent with other strategies in organization(strategic

fit)”(Cpaireland.com)

These strategic would have been impact on other areas of the organization, which

need to be managing thoroughly. To implement these options we need to identify

other areas of organization that would be affected.in order to simplify his

analysis(McKinsey :1981) publish 7S model to better analyse diverse affected areas

in to single framework.

6.1 McKinsey 7S Framework

Change in any element has knock on effect on other elements of this model, and

failure to take in to consideration could have serious implications for other six factors.

vertical forward integration and Implementation of E-commerce online retail

networks programme to capture low-end market is change in strategy which has

wider implication in every area, change will occur in following areas;

40

Hard Factors: Soft Factors

Strategy Staff

System

Style

Structure Skills

Share values

6.1.1 Change in in staff: New retail stores will required more staff.especially sales

peoples.marketing staff etc and to organize them properly.

6.1.2 Change in skills: Build up E-commerce facilitates require IT staff to operate

online stores.

6.1.3 Change in values: senior managers will need to promote the importance of

low-end market ,customer centric approach strategies would be spread throughout

organization.

6.1.4 Change in system: new procedures and policies need to be developed to

guide employees how to target different market through different strategic

direction.psychographic segementation help to visible entirely new segment and

product development process will incorporate these segment.

6.1.5 Change in system/Processes: strategy required to delegate responsibility

downward and minimal supervision of employees, empower local managers to take

decision swiftly and adapt market changes they have greater operational knowledge.

6.1.5 Change in structure:

The most appropriate structure for our entity to help achieve strategic objectives is

matrix form of structure, horizontal relationship across different functions needed to

41

work closely together, it will encourage communication and place emphasis on

“getting job done”.

7.0 Conclusion

As devices become intelligent, consumer are expecting more from their digital lives,

the traditional boundaries of the communication media and internet industry are

broken down and stated to converge. China is the large market for mobile phone

manufacturers, it is expected to grow at an annual rate of 39.8% by 2020.Samsung

plc. is the global leader in the industry and well-known for its premium products.it is

losing market share by 10% in previous in mobile phones which is the major

contributor of its revenue nearly contribute 60% in total group revenue New

emerging competitors which mainly segmented Low-end market now thriving very

rapidly. Xiaomi” is forerunner has become number three largest mobile phone

company by shipment. Its flamboyant entrepreneur “junlie logo” today known as

“Chinese Steve job “Rely primarily on social media ,dynamic supply chain,E-

marketing to sell their products, emphasis on global expansion(Hbr.com)

Samsung has competitive value chain and virtual capabilities existence on every

important location has very good brand loyalty ,wide range of recognized products

which are highly demanded by peoples.xiaomi current success is mainly achieve

through cost advantage and by targeting low-tier cities which was neglected by

foreign organization, this current trend may be temporary if Samsung take strategic

initiatives by expanding its distribution channels to local area in country side and

cater the market on distinct needs, for high end market Samsung could build their

own OS which enhances consumer loyalty and ensure future purchase by consumer

because widely used application such as tunes and games could not be run on other

devices. Furthermore xiaomi major reliance on mobile phone make it more

vulnerable to strategic price war, on the other hand SE has a wide array of products

it has greater scope for price competition on both the product basis and on portfolio

average basis,SE can reduce price of products in the response to competition. .in

2011 the list of fortune ranked second position to Samsung in CSR investment.

Technological adoption and the rise of E-commerce has greatly benefitted local

organizations which they are using for competitive advantage and producing low cost

phones imitate design and style of market giants, through various adjustment in

42

value chain, targeting low-end market which is characterized to be a price

conscious.xaiomi use of android operating system in its product which makes

product more standardised in every aspect to other devices which also running

Android OS except the quality of hardware and enduring parts.

government regulation are in favour of domestic supplier but china growing concern

toward CSR has greatly benefitted SE in building relationship with government

officials and business partners, these relationships can greatly enhance the potential

of Samsung in multiple areas where improvements are required, it can help to

transcends in to local and provincial level ,utilize strong marketing platform to

manifest the distinctive value proposition of its products which of course its

innovative design.

8.0 Recommendation

Transcend in rural areas by and countryside. Establish tri-lateral agreements

with local retailor and provincial distributor is highly recommended. Gaining

insight in to customer habits establishing multiple channels to connect with

them.

Samsung one size fit to all policy should be abandoned ,china as mainland

population size is over one billion ,customer can be distinguish by variety of

needs and requirments,R&D and production should be focus toward particular

segment. Such as psychographic segmentation is necessary to become all-

segment brand by aligning the business and marketing strategy.

Establishment of data centres to track market and consumer trends which

help to reinforce forecasting capabilities, these findings should be incorporate

in to product development process.

Initiatives required to develop own operating system, which should be capable

of unique functionality and easy to use. This can be done in phases as it

would be cumbersome for users to immediately switch to new software, Trial

should be done in small scale ,benefits derived from test transfers should be

highlighted and elucidate to mass market.SE should diversified product line

from premium smartphone to the mass market models.

Authorizes local managers to take decision in response to local changes

without recourse to senior manager in head office. Expand their span of

43

responsibility and enrich them with the resources required to identify key

trends and patterns in the market.Autonomus managers should have freedom

to take action and go extra mile.

Develop cross distribution channels to cater the isolated segment, building E-

commerce platform, online payments and home delivery options will be highly

regarded. Surge in the use of internet and E-commerce provide various

opportunities in virtual business environment.

Partial Structure re-alignment carried out in 2013 between (IM) and camera

Imaging division, massively reduce the manufacturing cost and help to

differentiated products by combining capabilities of these two division, but it is

still partially integrated, in order to realised further benefits ,wholly integration

of these two division would be beneficial.

Marketing budget should be diverted to Word of mouth (WOMMA) and

internet social media marketing, for the effective success of (wom) marketing

,we need to focus on three E’s,engage,equip,empower.in short better

customer service and listen to them is most effective way to increase sales in

china.

Report Abbreviations:

SE: Samsung Electronics

IM: Samsung Mobile and communication

OS: Mobile operating system

Ceo: Chief executive officers

R&D:Research and development

Guanxi:Term use in china for “clout”

44

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46

Appendix 1

Strategic Groups:

When all companies in industry are put in to strategic group and analysed strategic

space become apparent.. Strategic clock was suggested by bowman(1996) as a way

of looking combination of prices and perceived benefits. 2.1 Strategic PositioningIn

the strategic clock Xiaomi can be placed No.2 Low price/medium quality

product.xiaomi business model stand on the principles of cost/quality balance, ease

of delivery, moreover ever increasing E-commerce growth has risen online

sale.xiaomi realized this and gain competitive advantage over other rivals in same

segment of market and surpass other local brands such as Lenovo,Oppo,gionne on

the other hand threatening the existence of market leaders apple and Samsung.

(See figure for strategic positioning).

Source (Tutor2U.com)

47

Appendix 2

VRIO (Uniqueness of Resources)

Value chain

SE able to achieve economies of scale in production and distribution by leveraging

its ability to produce components parts and assemble its products on large scale, its

ability to produce effectively is a source of both differentiation and cost effectiveness,

unlike Apple and Xiaomi which trust on relationship ,alliances and supliers,As a

result ,Samsung is able to get cost advantage from its internally generated

components, that is borne by some integral parts of smartphones such as DRAM

,flash drive and memory chips ,SE overall cost is 24% lower than other players in the

market, two most significant elements of the cost structures are Raw material and

labour, by 2016 overall superiority in cost over its competitors exceeded 51%.cost

advantage also stem from the SE geographically collocated network which Help to

reduce distribution and shipping cost, other factors include more efficient larger

silicon wafers. According to Hooley “The strategy that matches best with Samsung is

cost leadership, which is mainly a low cost competitive strategy pursuing cost

reduction from experience, capacity utilisation ,linkages ,degree of integration and

many other cost drivers”(hooley,piercy and nicouland;2013).

Research and development:

Appropriate R&D expenditure resulting in one of the strongest portfolios among

technology companies. Innovative culture begins with accepting that world really has

changed and being open to more changes to come.Research conducted by strategy

and places Samsung as the second largest R&D spender in the world and the

largest in consumer electronic industry and now employs a total of 63628 staff

members in the department no other smart phone manufacturer even break in to the

top 20.samsung hopes to develop more technical talent in china to meet industrial

needs.

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Samsung R&D centres are the key to innovation, In Samsung innovation is two

types, innovation in utilizing capital and innovation in reducing transaction for SE the

activities of basic research, product development and design are primary activities,

unlike porter original value chain model that classified these as support activities in

value chain the recognition of R&D explicitly in primary activities enhance the

commitment for continuous innovation, Audit report for 2014 shows that it spend

just under 14 billion on R&D.SE currently uses 5.7% of its revenue toward research.

As a result Samsung has culture of innovation based on extensive training,

methodology and creative elite formation backed by highest level of management

competency.SE possess extensive R&D facilities with state of the art technologies,

talented team of engineers and scientist where ideas are regarded, collaboration and

creative thinking is encouraged and rewarded. from three decades Samsung

scientist have been working in collaboration with American companies in silicon

valley which gave Samsung a higher level of tacit knowledge, silicon valley is

strategic location for collecting cutting edge information. Giving rise to Samsung

capability to assimilate the licensed technologies.

Appendix 3 Boston Consulting Group:

Cash cow

Products in cash cow quadrants, are those products, where growth is stagnant and

market reach to saturation point ,Best action is to reduce research and development

expenditure and curtail marketing investment in this area because these are already

established brands but try hard to maintain market share of cash cow, which

required to be cognizant of technological change and improvements, limited and

focus Research to improve current products design, technology, because these

products generating plenty of cash flow ,Our dependence on these products for cash

flow generation is very high in order to develop new products, increase competency

and other major expenditures, the positive cash flow form these products would be

used to strengthen high growth stars like cell phones, which are in growing market

and required lot of investment in terms of marketing and innovation.

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Question Mark

This market is slow growth due to cheaply available mobile phone cameras SE is not

a market leader in these products, it required lot of investment to become a market

leader, digital cameras market lead by canon and Sony, while wearable gadgets

market leader are APPLE and FITPIT. And laptop market is headed by DELL and

HP.these powerful brands, we need a lot of investment to compete with them in

terms of brand awareness, marketing and R&D, although wearable gadgets such as

smart watches and smart glasses market is on introductory phase, and predicted a

rapid proliferation by 2020.growth is slow in wearable gadgets, SE must decide at

this point of time whether it want to highly invest in new tech which going to shape

the future or abandon or withdraw from this market. As it will required a lot of focus

and diversion of resources in this area.

Stars

A future cash cow product in this array are usually cash neutral or negative cash,

Smart phones and Led’s required lot of investment to maintain share in continuous

growing markets should be invest fund for increase brand awareness and visibility by

extensive marketing campaigns, sponsoring events, allocate human and financial

resources to improve product design and functionality, technology disruption IS very

high in this market, to maintain current position of market leader Samsung need to

be cognizant of disruptive change in market and look for new ways to improve

product and to stay ahead from competitor.SE should use cash generated from

cash cow to develop these line of products, should use fund from them to enhance

or maintain competitive advantage in stars(smartphones).

Dogs

Handy camera,mp3 technology is getting obsolete and market is in declining phases

should analyse the future of these product and invest accordingly as they have

limited future in current technological landscape ,extra investment to maintain market

share not advisable.as these products are eroding profitability .

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