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EXECUTIVE SUMMARY

This paper is about the Electronic Appliance maker, Samsung. In this

paper, I analyze the company and its strategies from a variety of perspectives including

framework analysis using tools and techniques like PESTEL, Porters Five Forces etc.

The companys strategy vis--vis its competitors and its entry strategy into foreign

markets is also analyzed. The focus throughout the paper would be on understanding

the company from various perspectives and suggested possible courses of action that

the company might follow which flow from the analysis presented in the first two

sections. A chart is provided in the fourth part that details the global market share of the

company and that of its competitors in the various product categories that they operate

in.

Samsung is an ideal company for analysis because of its unique and

innovative approach to business. The business model of the company is indeed one of

a kind in the consumer appliances segment and this paper analyzes the company in

detail using the frameworks described above. The paper is divided into separate parts

with the first two parts concerned with the introduction to the company and the next two

parts concerned with the conclusion about the future outlook as well as data about the

company. This paper has used two frameworks for analysis as given in the instructions

and it follows the guidelines set forth for this paper.


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PART ONE

FOUNDATION

Samsung is the world leader in consumer electronics and it is a household

name in many parts of the world. Samsung was founded in 1939 by the family of the

present CEO Lee Soo-bin family who for generations has run this company. The

company is a classic example of a family run conglomerate or chaebol that is an integral

part of the South Korean business landscape. The company is headquartered in Seoul

and operates in over 100 countries across the world. The Samsung group of companies

forms the worlds largest conglomerate in terms of revenues and the fact that Samsung

accounts for 20% of South Koreas exports gives an idea about its size and breadth of

operation. (Samsung.com, 2010, 1)

The following excerpt gives an idea of what Samsung is in terms of size

and revenue: Samsung is the world leader in consumer electronic goods and is

arguably the best among its competitors as far as quality and range of products are

concerned. With annual revenues of $60 billion, recent profits of $10 billion, a market

value of over $100 billion, and world leadership in key technologies such as LCD

displays and DRAM, Samsung is now consistently seen as the innovation leader in the

consumer electronics sector (Lee, 2006, 5-8)

PRODUCT/INDUSTRY

The company operates in the consumer appliances and consumer

electronics industry and manufactures and markets a range of products that include


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TVs, Mobile Phones, and Washing Machines etc. The company is focused exclusively

on the consumer electronics segment and given its competitive edge (the reasons for

which I will analyze later in the paper); the company has managed to garner the

maximum market share for itself. The rise of the company has been synonymous with

the growth of the so-called Asian Tigers (the countries of South East Asia). It has

successfully leveraged the booming global market for consumer electronics and has

managed to stay on top of the race.

MARKET/COMPETITORS

The main advantage that the company has over its competitors is that it

has a product range that is marked by a high degree of quality and responsiveness to

the needs of the customer. The features of its products come with superior design and

use of AI (Artificial Intelligence) characteristics in the way in which it makes it products.

With the advent of innovative products, Samsung took the market for consumer

electronics by storm and managed to gather the maximum market share by offering

value propositions that combine price elasticity with quality leading to an unbeatable

combination that has served it well. Samsung is a pioneer in the consumer electronics

space and is the world leader in the market for consumer appliances and household

goods. The company followed a bottom-up approach to growth included launching

products targeted at the lower end of the market and then steadily climbing to the higher

end segments and niche products as well. (Lero, Article Click, 2010, 1)

DEVELOPMENTS TILL NOW

From the time of inception till the late 1980s, Samsung was a follower

rather than a leader. The turnaround came with a conscious decision by its


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management to follow the path of innovation and become an innovator and a leader

instead of a follower. As the following excerpt shows, Since its strategic decision in

1993 to become a "rule breaker" and create a corporate culture of "innovation is

everything," Korea's Samsung Electronics has driven itself up-market by making a

world-leading shift from innovation follower to innovation leader. To help identify the

core opportunities to out-compete its peers, in the late 1990s, Samsung opened a

dedicated Value Innovation Program Center in Suwong. This is an integrated five-floor

facility where value innovation is taught as a process and applied across many product

lines: While the second, third and fourth floors are available for project teams to work on

value innovation projects, ranging from strategy development to new business models

to new products, the first floor is devoted to value innovation training and the fifth floor is

a mini-hotel where teams often stay until the project is finished! By identifying and

exploiting value innovation opportunities across all six innovation tracks, this facility has

fast become a key source of new concepts that have helped grow market share and

margins. (Dick Lee, 2006, 5-8)

The focus on innovation has paid off handsomely for Samsung which is

now the world leader when it comes to introducing innovative products and product lines

that provide top quality services to its customers.

PART TWO

PESTEL ANALYSIS

In this section, I analyze the companys strategy by the PESTEL analysis.

Each of the elements of this framework is analyzed in detail.


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Political: Samsung faces significant political risks in the countries where it operates

though in the majority of the countries, the political situation is conducive for the

operation of the country. In recent times, the political climate in South Korea has

become a worrying factor for Samsung and the country faces political instability at home

as well. However, the situation is not that serious as compared to some of the other

countries where it operates. This is particularly the case in countries in the African

continent and the South East Asian countries where Samsung is at a distinct

disadvantage because of the hostile business environment. In countries like China and

India, the company has a conducive political environment which allows it to concentrate

on the markets in a better way. (Yu, 1998, 57-60)

Socio-Cultural: Despite being a South Korean based company, Samsung has

managed to integrate itself well in the emerging markets where it does business. This

has resulted in a think global, act local mindset that has effectively bridged the cultural

and social gap between its home countrys business landscape and the markets where

it operates. One troubling aspect has been the companys attitude towards local officials

in the matters concerning bribing them to get its business done. The company tries to

strike a balance between the aspiration values of the consumer classes and the levels

of income that they possess.

Technological: As has been mentioned elsewhere in this paper, the company prides

itself on its innovative approach to technology and harnessing the same for rolling out

products that use cutting edge technologies in their design and features. The

technological capabilities of Samsung are well known and the company is especially

strong on this element. The companys innovation drive is its biggest strength and the


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company can take pride in the fact that it is a pioneer for many of the technological

innovations that it has introduced through its products in the global marketplace.

Economic: Samsung certainly follows good strategies in the markets it operates based

on the economic size and the strength of the consumers in terms of variables like

disposable income. Given the fact that the company needs high levels of disposable

income from its consumers to buy the products that it makes, the company has followed

a targeted marketing strategy aimed at the middle classes in the countries in which it

operates. Further, the company enters markets where the business cycle for the

products that it sells is in the initial stages unlike the developed countries where the

product lifecycle for its range of products is in the decline or the maturation phase. This

strategy of entering countries where the products find a readymade market has indeed

paid off.

Environmental: The Company has started to be conscious of its environmental and

social obligations as evidenced in its approach to CSR and green policies. Many of the

manufacturing facilities of the company are built on environmentally sustainable designs

and the company is adopting other practices as well in this regard.

PORTERS FIVE FORCES

In this section, I analyze Samsung using Porters Five Forces model. As

stated in the instructions, the model is not explained but the model is applied to

Samsung. The five forces are analyzed with an additional element The impact of

Stakeholders on the business prospects of the company. Each of the forces is

analyzed in detail and presented with respect to the companys macro and micro

environment.


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Samsung

0

50

100Industry Rivarly

Market Entry

Power of Buyers

Threat of Subst itutes

Power of Suppliers

Stakeholders

Suppliers: The bargaining power of suppliers is relatively limited as there are a number

of suppliers in the market for consumer electronics. For instance, there are well over a

thousand suppliers in South Korea and across the world for the kinds of parts that

Samsung needs for making its electronic appliances. However, the fact that the

suppliers make parts that are unique for each appliance maker gives the suppliers an

advantage that is hard to ignore. The point here is that like in any other industry, the

consumer electronics industry needs a wide network of suppliers for the vendors to

function effectively. Hence, Samsung depends on its suppliers for timely delivery of the

components and hence any disruption to the supply chain can be troublesome.

Market Entry: The impact of Market Entry is high as Samsung has found it easy to

enter markets where it desires to do business. For instance, Samsung has entered Chin

and India, two emerging markets that provide the much needed volumes for its

expanding business. The fact that Samsung has entered these markets with relative

ease makes this a force that can be harnessed for the companys good. However, it

might not be easy for Samsung to capture markets with ease as it has done previously


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because of the rise of protectionist tendencies in the wake of the global financial crisis.

The rivalry from existing players is a factor that needs to be considered when deciding

upon the market entry into foreign companies. This is something that Samsung needs to

take into account when deciding upon its foreign market entry strategy.

Power of Buyers: The power of buyers is indeed an element that is something of a

mixed bag. This is because of the fact that the buyers have a wide variety of choices

and a range of products to choose from. There are many models of mobile phones and

other consumer electronics gadgets in the market and the buyers can easily switch to

alternatives. Hence, the impact of this element on the company is a bit high. The

bargaining powers of buyers are high since the market for consumer electronics is

essentially a buyers market with so many players in the fray to sell consumer

electronics to the consumers. This is reflected in the endless price wars that Samsung

is engaged in with respect to the mobile phones and other electronic goods. However,

the factor that is to Samsungs advantage is because buyers cannot switch brands

immediately and they take their time to adjust and adapt and only when they are

completely dissatisfied with the company do they switch brands. This is the decline of

the so-called repeat customers when they lose faith in the brands ability to deliver the

goods.

Threat of Substitutes: The threat of substitutes is indeed high for a company like

Samsung. Given the fact that the consumer durables market is characterized by intense

competition with competitors introducing products similar to those of Samsungs with

regular frequency, it is no wonder that the company needs to be on its toes to keep

pace with the blistering pace of new products entry. Further, there are many me-too


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products that are introduced that are the clones of the products that established brands

like Samsung introduce in the market and this leads to a situation where the company

constantly needs to innovate to be ahead of the pack. The threat of substitutes is indeed

high for Samsung given these facts and this is one element of the Five Forces that pose

a significant threat to the company. However, the buyers who switch to the substitutes

are the price conscious segment and those who prefer price over quality. Hence, this

puts Samsung at an advantage over other competitors as the quality conscious

customers stay loyal to the company.

Industry Rivalry: The impact of this element is certainly high because of the presence

of other competitors like LG, Ben Q, Motorola and Nokia. The competition is so fierce

and intense, particularly in the emerging markets like India, where the wars between

these competitors are akin to the equivalent of cola wars between Coke and Pepsi. To

give an example, both LG and Samsung spend huge amounts of money in India on

sponsorship of sports events (cricket championships) and teams. Though the advent of

these companies has certainly altered the landscape of sports partnerships, sometimes

the rivalry is taken too far resulting in lot of bad blood between the rivals.

Stakeholders: The impact of this element has been evident in recent times because of

the rise of the environmentally conscious movement and the drive towards CSR

(Corporate Social Responsibility) that has seen the likes of Samsung receptive towards

the concerns of these groups. The fact that the shareholders are increasingly

demanding more accountability and transparency following the recent scandals is proof

of their growing power in making the management of Samsung accountable and

responsible.


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COMPANY STRATEGY

Samsung's growth path along the product dimension may be viewed best

from the perspectives of: (1) the product life cycle (PLC); (2) product price level; (3)

diversification, and (4) product characteristics, which together provided a foundation for

building SEC's unique competitive advantages. As outlined in the introduction, the

company has followed a rather unique strategy and its business model is indeed one of

a kind in the industry.

First, Samsung's product development from the PLC perspective shows a

clear pattern of the company following the PLC in reverse order. When it started its

operation in 1971, Samsung selected monochrome television sets as its first product,

even though they were already in the declining stage of the market in the advanced

countries. Second, from a price-level perspective, the growth path began from products

at the low end of the price range and gradually moved up in parallel with rising incomes

and technological capability.

Third, regarding diversification, Samsung Electronics initially operated with

a rather simple product structure, mainly concentrating on television receivers and

home appliances. From the early 1980s, the company began to diversify its product

lines. The fourth characteristic of the product path is that Samsung's first product choice

(monochrome televisions) was a commodity product that was insensitive to brand name

but highly price-elastic.

The above analysis is indicative of the unique approach that it has

followed in its strategy towards the markets it operates in and the products that it

launches. (


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PART THREE

Samsung's history is unusual, if not unique. In just a few decades it has

managed to catch up with, and in many instances surpass, rival larger and exceptionally

competitive companies in the United States and Japan. Moreover, this success was

achieved in the cutting-edge field of technology, requiring Samsung not only to adapt

acquired technologies successfully but also to develop its own. To the CEOs of other

firms and to researchers, observing the successes and flaws of a firm that progressed

from simple monochrome television sets to state-of-the-art semiconductors provides

important clues, benchmarks, and ultimately recommendations for the study of newly

emerging high-tech companies.

The implication here is that Samsung faced a unique set of circumstances

in the 1970s and the 1980s which led to its adoption of the reverse order strategy. In

the changed business environment of the 21st century where the WTO (World Trade

Organization) regime has ushered in a new economic and trading order, Samsung has

to take the leap of imagination once again. Given the fact that it has had troubled

times in the recent past because of various internal and external factors, the

management of the company may have to decide soon on what kind of strategy should

it adopt for the changed business landscape. (Economist, 2009, 1)

After analyzing the company in detail, it is my suggestion that the

company adopt what is called a Glocalizing (Friedman, 2005, 156) approach which

means that the strategy has to be global in conception and local in execution in the

markets that it services. Since the markets in the developed world have matured, it may

be time for Samsung to go global in an aggressive manner and tap the markets of what


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have been called the bottom of the pyramid (Prahlad, 2007, 142). This would

necessitate a reorientation of its strategy and adoption of lower end pricing models (a

strategy that paid off for it in its younger days).

In conclusion, given the onset of the global economic crisis and the

sluggish recovery that we are witnessing now, it may be prudent for Samsung to go

back to the basics in search of the right strategy that it should adopt. Further, the recent

past has been bumpy for Samsung with several scandals rocking the company. It may

be time for the new management to re-invent Samsung and what better time to do this

than now with a paradigm shift that is happening in the business and economic worlds.

PART FOUR

SAMSUNGS GLOBAL MARKET SHARE

Products

Samsung's

Global Market

Share

CompetitorsMarket

ShareYear

DRAM 34.3% Hynix 21.6% Q1 2009

NAND Flash 40.4% Toshiba 28.1% 2008

Large-size LCD Panel 26.2% LG Display 25.8%2009

February

PDP panel 30.5% LG Display 34.8% Q1 2008

Active-Matrix OLED 90.0% LG Display - Q2 2008

Lithium-ion battery 19% Sanyo 20% Q2, 2009LCD Monitor 16.1% Dell 14.6% 2008

Hard disk drive 9.5%Seagate

Technology34.9% 2007

Multifunction printers 16.4% HP 19.2% Q1 2009
http://en.wikipedia.org/wiki/NAND_Flashhttp://en.wikipedia.org/wiki/Toshibahttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/Active-Matrix_OLEDhttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/Lithium-ion_batteryhttp://en.wikipedia.org/wiki/Sanyohttp://en.wikipedia.org/w/index.php?title=LCD_Monitor&action=edit&redlink=1http://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Hard_disk_drivehttp://en.wikipedia.org/wiki/Seagate_Technologyhttp://en.wikipedia.org/wiki/Seagate_Technologyhttp://en.wikipedia.org/wiki/Printer_(computing)http://en.wikipedia.org/wiki/HPhttp://en.wikipedia.org/wiki/Toshibahttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/Active-Matrix_OLEDhttp://en.wikipedia.org/wiki/LG_Displayhttp://en.wikipedia.org/wiki/Lithium-ion_batteryhttp://en.wikipedia.org/wiki/Sanyohttp://en.wikipedia.org/w/index.php?title=LCD_Monitor&action=edit&redlink=1http://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Hard_disk_drivehttp://en.wikipedia.org/wiki/Seagate_Technologyhttp://en.wikipedia.org/wiki/Seagate_Technologyhttp://en.wikipedia.org/wiki/Printer_(computing)http://en.wikipedia.org/wiki/HPhttp://en.wikipedia.org/wiki/NAND_Flash


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Television sets (LCD,

PDP, CRT)23% LG Electronics 13.7 %

Q3'09

Revenue

Share

French

doorrefrigerator(U.S.

market only)

18.79% Whirlpool 23.83% 2009 January

Mobile phone 21% Nokia 37.8% Q3 2009

Digital camera 9.1% Canon 19.2% 2007

Drillship 80%

Daewoo

Shipbuilding &

Marine Engineering

20% 2000~2007

PART FIVE

C.K.Prahalad. The Fortune at the Bottom of the Pyramid. New York: Simon and Schuster, 2007.

Economist, The. The succession at Samsung. 4 Jun 2009. 11 Apr 2010

.

Friedman, Thomas. The World is Flat. New York: Viking , 2005.
http://en.wikipedia.org/wiki/Television_sethttp://en.wikipedia.org/wiki/LG_Electronicshttp://en.wikipedia.org/wiki/Refrigeratorhttp://en.wikipedia.org/wiki/Whirlpool_Corporationhttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Nokiahttp://en.wikipedia.org/wiki/Digital_camerahttp://en.wikipedia.org/wiki/Canon_(company)http://en.wikipedia.org/wiki/Drillshiphttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineeringhttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineeringhttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineeringhttp://en.wikipedia.org/wiki/Television_sethttp://en.wikipedia.org/wiki/LG_Electronicshttp://en.wikipedia.org/wiki/Refrigeratorhttp://en.wikipedia.org/wiki/Whirlpool_Corporationhttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Nokiahttp://en.wikipedia.org/wiki/Digital_camerahttp://en.wikipedia.org/wiki/Canon_(company)http://en.wikipedia.org/wiki/Drillshiphttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineeringhttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineeringhttp://en.wikipedia.org/wiki/Daewoo_Shipbuilding_%26_Marine_Engineering


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Jonathan C. Ho, Chung-Shing Lee. "The DNA of Industrial Competitors ." Research Technology

Management. Volume: 51. Issue: 4. (2008): 17-21.

Lee, Tim Jones and Dick. "Samsung, Others Adopting Value Innovation." Research Technology

Management. Volume: 49. Issue: 5. (2006): 5-8.

Lero, Nicole. A Brief History of the Samsung Company . 01 Dec 2009. 11 Apr 2010

.

Samsung. Samsung Profile. 01 Apr 2010. 11 Apr 2010

.

Sangmoon Park, Youngjoon Gil. "How Samsung Transformed Its Corporate R&d Center ." Research

Technology Management. Volume: 49. Issue: 4. (2006): 24-28.

Search, Display. Market Share for LCD Monitors. 21 May 2008. 11 Apr 2010

.

Yu, Seongjae. "The Growth Pattern of Samsung Electronics: A Strategy Perspective." International

Studies of Management & Organization. Volume: 28. Issue: 4. (1998): 57.

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