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BUSI1271: Global Strategy: Analysis & Pr

Group case analysis
VJ Torlo

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B/PG
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30.00%
Submission Deadline 12/11/2015

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Strategic analysis: case of

Samsung Electronics

Submitted By:
Rohit Dixit
000865483
Kuldeep Singh 000853425
Kewin
000865455
Sandeep Kadilya 000867907
Pawan Bellam
00088050

Global Strategy: Analysis & Practice|Mba International Business

Table of Contents
Coursework Header Sheet............................................................................................................. 0
Introduction....................................................................................................................................... 3
Strategic Overview of Samsung............................................................................................................ 3
External environment analysis.............................................................................................................. 3
Pestle analysis................................................................................................................................... 3
Porters 5 forces analysis.................................................................................................................... 4
SWOT analysis.................................................................................................................................. 6
Internal Environment Analysis.............................................................................................................. 6
Internal analysis........................................................................................................................... 6
External analysis.......................................................................................................................... 7
Value chain analysis........................................................................................................................... 9
Inbound logistics............................................................................................................................. 9
Operations..................................................................................................................................... 9
Outbound logistics......................................................................................................................... 10
Marketing and sales...................................................................................................................... 10
Services...................................................................................................................................... 10
VRIO Framework............................................................................................................................. 10
Reflection on strategic position of Samsung......................................................................................... 11
Conclusion...................................................................................................................................... 12
Reference....................................................................................................................................... 13

Introduction
Samsung is a South Korean company headquarters in Samsung town, Seoul. it was established in 1938, It is
a worldwide electronic company with 161 subsidiary companies throughout the world including nine related
headquarters for CE (consumer electronics)

and IM (information technology and mobile communication)

division and five related headquarters for the DS (device solutions) Division, company separately operate
each and every division ( Samsung.com, 2015)
The company offers an all home appliances like refrigerator, dryers, toasters, televisions, mobile phones and
tablets. The vision of the company is vision2020 (inspire the world, create the future) depends on the vision
company make a strategy (Samsung.com, 2015)

Strategic Overview of Samsung

Samsungs aim is to increase the corporate and brand value in global consumer market. Company is
consistently stressing on their research and development (Samsung Electronics Co., Ltd' 2014). They have a
diversified geographic presence, which reduces their exposure to risks associated with a particular market.
Building an In-House Competency to compete with their competitors. Alliancing with leading global technology
players for standardization and to secure stable supplies for its products. Diversified products and marketing in
the major global events like Olympics. (Olympic.org, 2015)

External environment analysis

Pestle analysis
Political

In general, Samsung is operated in countries with politically stable environment.

Political instability in Korean peninsula due to rising tensions with North Korea.
Profitability of company getting affected by developing political pressure in Latin American and African
countries due to frequent shift in governmental regimes.

Economical

There exists a need of finding a perfect strategic solution. As the, purchasing power of consumers have

been reduced, Due to ongoing global economic crisis.

Rise in liberalization of emerging and developing economies, creates an investment and market
opportunities for multinational enterprises (MNEs) like Samsung.
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Surge in Samsungs profit in developing economies would help in compensating lost business within
developed economies.

Social

Organizational culture of Samsung is significantly influenced from national culture of South Korea.
Need for self-adaption and restructuring according to rapid change within preferences of consumer is
culturally different emerging markets.

Technological factors

Low entry barriers due to usage of Google android OS platform, leading to difficulties in product

differentiation (BAGUR, 2015).

Heavy investments by Samsung in Research and Development to gain sustainable competitive

advantage among its rivals (LEE and CHENG, 2015).

Higher gains and product differentiation to companies offering proprietor OS. For example, Apple
differentiates itself clearly by offering is self-owned IOS operating system (Fox News, 2015).

Legal

Lawsuit filed by Apple in context of imitating key features of iPad and iPhone jeopardized companys
reputation. Moreover, it affected profitability and cash flow of the company as a hefty sum needed to be
paid as penalties.

Environmental

No direct effect of environmental concerns on profitability or business of Samsung.

Recycling and processing waste in an environment friendly manner would help Samsung in gaining
better reputation.

Porters 5 forces analysis

To visualize an overview of existing competitiveness within industry, porter five forces analysis framework tool
is utilized.

Figure 1: Porters five forces Framework (www.investopedia.com, 2015)

Rivalry among competitors: Significantly High
Within a slow growth industry such as consumer and mobile sector, presence of a significant number of
companies with comparatively similar manufacturing and distribution capabilities increases rivalry among the
companies. Price based competition among companies is one of the attribute of such an industrial environment
(Managementstudyguide.com, 2015).
Threat of potential entry: Not significant
To tackle threats from potential entrants there exist significantly high entry barriers within consumer electronics
and mobile sector such as 1) existing number of large players in similar domain such as Apple, Samsung, HTC
etc. 2) low cost advantages due to operations in economies of scale 3) product differentiation challenges 4)
new entrants in this sectors are usually discouraged from investors and government authorities (Wilkinson,
2013).
Threats of substitutes: Potentially high
There exists a high potential threat from substitutes as the switching costs are low for buyers. Moreover,
product differentiation becomes more difficult on basis of hardware and design, due to adoption of Google
Android OS as operating platform for smartphone by large number of companies including Samsung (Cheah et
al., 2013).
Bargaining power of Buyers: significantly high
Increasing price sensitivity of consumers on product specification leads to high bargaining power of buyers, as
Samsung customer can easily shift any other company such as Apple, Nokia, and HTC with no extra additional
cost. Moreover, rising commoditization and standardization of mobile Operating Systems of mobile phones
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further enhances buyers bargaining power as they fails in providing addition economic value or cost saving
(Dudovskiy, 2015).
Bargaining power of suppliers: High for suppliers of essential components
Due to lack of alternative platform for its smartphones and high dependency on Googles android platform for
its OS, Samsung have to cope with the substantially high bargaining power of Google. In contrast, the other
components suppliers of Samsung smartphone do not hold a similar strong position like Google in bargaining
power, as major share of their business is dependent upon bulk volume of orders given by Samsung
(Dudovskiy, 2015).

SWOT analysis

Figure 2: Situational analysis of Samsung.

Internal Environment Analysis

Internal analysis
Strength
Solid market share and brand value
Samsung holds a high brand equity index and market share, as it is a leading player in memory business with
market share over 38% for NAND Flash memory and 39.8% in global dynamic random-access memory. In
addition, it is global leader in flat TV with a global market share of 26.8% in FY 2013; Samsung had historic
sales 100 million units of its mobile devices by capturing a market share of 32.3% of global smartphone market
(Samsung Electronics Annual Report, 2015).
Research and development
With over 4676 registered patents in US, Samsung is highly focused on innovation and research and
development by increasing R&D expense of 24.3% in FY2013 (LEE and CHENG, 2015). In addition, by
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establishing an open innovation system which further enhances its partnership with foreign research institutes
and facilitates in gaining competitive advantage in market.
Diversified geographic presence
It benefitted Samsung by reducing risk associated with constrained geographical market, Moreover, by
providing proximity to customers by building close relation to its customer.

Figure 3: representation of sales revenue of

Geographical market (Samsung Electronics Annual Report, 2015).
Weakness
Legal issues relating Patents
Due to increasing patent litigations against Samsung, negative implications on the companys revenue,
performance and financial position can be seen. Recently Apple filed a $1.05 billion lawsuit against Samsung
on charges of patent infringement, this could affect negatively on companys profitability, cash flow and brand
value (Fox News, 2015).
Dependency on Android OS
As smartphones hardware and design differentiation is susceptible to fade or eroded with time, Samsung is
posed to an evident strategic disadvantage due to dependency on Google android OS for its smartphone. In
contrast, Apple possesses its self-owned iOS for its smartphones.
External analysis

Opportunity
Growing smartphone and tablet market.

Handset market, dominated by smartphones by 50% is estimated to grow at the compounded annual growth
rate (CAGR) of 13.3% between years 2013 to 2017. In addition, Samsung holds the second largest market
share of tablets with 19.1%. Therefore, growing market would further enhance companys sales in coming
years.
Growing smart TV and Flash memory market
Strong brand positioning of Samsung in smart TV which is valued at $255 billion by 2017, and in 3D flash
memory market would enable Samsung to capture maximum return out of growth trends. As, demand for flash
memory is driven by surging usage of tablets and smartphones would provide an topline growth opportunity.
Threats
Commoditization of mobile sector
A downward pressure on pricing is being witnessed due to commoditization of mobile sector; due to presence
of Google android ecosystem which reduced the entry barriers of mobile sector product differentiation have
become extremely difficult (BAGUR, 2015). With the combined effect of risk of direct and indirect litigations of
intellectual property rights in android ecosystem, intense competition and increasing commoditization would
impact companys profitability and share in market.
Foreign exchange risks
As Samsung is exposed to various currencies of its countries of operation, there exists an evident risk of
impact on companys balance sheet, cash flow and income statement in conversion or translation of foreign
currency in Korean Won, due to currency exchange fluctuations.

Value chain analysis

Samsung value chain is based broadly on the Oracle value chain for hi tech businesses, with the
expansion of logistics, which assume such a critical part in an organization of the extent of Samsung.

Figure 4: value chain analysis of Samsung (Samsung, 2015).

Inbound logistics
The dominant part of Samsung suppliers are situated in Asia and accordingly, 79.4% of its supplychain expenses occur in Asia. This is followed by Americas (14.8%), Europe (4.4%) and other places. All
together control inbound logistics part of the business all the more adequately; Samsung possesses various
logistics firms as its backups. (Chul Jung Sang, 2015)

Operations
As of December 31, 2014, the company maintained 213 worldwide operations hubs that included
subsidiaries, sales subsidiaries, design centres, and research centres. Samsung manufacturing operations
comprise the following:

General manufacturing: semiconductors and components;

System manufacturing: application and software.
Device assembly packaging: batteries and other components, label assembly.

Outbound logistics
Introducing modern smartphones, Samsung has turned out to be exceptionally quick in launching
its own products to compete with Apple. Viable outbound logistics framework assumes an imperative part for
Samsung as far as having the capacity to convey upgrades of its well-known items to customers in a timely
manner. (Chul Jung Sang, 2015)

Marketing and sales

The target client segment to the apparent upper hand of the brand connected with amazing and
advanced functions and capabilities of products. Samsung has adapted sales promotion as one of the centre
components of its marketing technique. (Chul Jung Sang, 2015)

Services
Samsung strives to convey the client administrations of the most elevated measures. The
organization conducts consumer loyalty overviews oversaw by outside gatherings in a customary way keeping
in mind the end goal to accomplish and maintain elevated amounts of consumer loyalty (Chul Jung Sang,
2015)

VRIO Framework
To understand the source of sustained competitive advantages, internal resources and capabilities of an
organisation is analysed using VRIO Framework.

Samsung has various assets and abilities that give a managed upper hand. Dangers from Chinese maker
output turn out to be huge over the long haul in the event that they make up for lost time with worth drivers in
the transitory maintained upper hand class. These incorporate variables, for example, manufacture limit,
quality and item blend/customization capacities. Our investigation highlights Samsung's quality drivers as far
as mechanical focal points and protected innovation in their boondocks items. These quality drivers avert
impersonation by new contestants. Samsung's quality and dependability esteem driver keeps clients from
changing to contenders items.
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Samsung has a value-for-money positioning strategy which is a competitive parity. By offering value-formoney products, Samsung address the clients' issues outstandingly well since it can offer fantastic item with
generally sensible cost. Then again it is not uncommon in light of the fact that there are organizations with such
exchange off between value and quality of product. So essentially there is no separation between Samsung a
large portion of its rivals as far as of value-for-money. (Lam wayne, 2012)
The product innovation (design) of Samsungs smartphones/mobile phones is just a transitory upper hand on
the grounds that regardless of the possibility that it is profitable, uncommon and all around abused by the
organization, it is not troublesome for the contenders to copy it. It is an upper hand just amid pretty much 6
months and afterward it gets to be out of date, regardless of the fact that the organization tries to patent
everything.
Samsung has completely used its capacity to adjust in a quick changing business sector can be considered as
its economical upper hand. It is extremely profitable to the organization particularly in a quick cycle cell phone
market. It is imitable and supreme as not each organization can anticipate and have the capacity to change
with the constantly evolving environment. (Yun joo sung, 2011)
Human Capital is the last upper hand that Samsung has. In spite of the fact that it is profitable because of its
expertise employees and preparing projects, it is not uncommon in light of the fact that different organizations
for instance, additionally have great choice and training projects in their own specific manner, Thus just turning
into an aggressive equality (Don, 2012).

Reflection on strategic position of Samsung

In 2015, Samsung regains its number 1 position in smartphone market globally and continues to be a market
leader in consumer electronics goods. On the strategic front, Samsung has done exceptionally well by its
geographical diversification to both emerging markets and developed economies, resulting in high growth and
profits. In addition, high R&D expenses and other significant moves ensured Samsung gaining competitive
advantage and labeled as an innovative company. Moreover, high dependency on Google android platform
have affected its product differentiation and thus margins, as now smartphones can only be differentiated on
basis of hardware and design.
Overall, understanding the strategic position of Samsung, there arises need of strict compliance management
strategy to mitigate risk of cost penalties involved in patent infringement lawsuits. In addition, to increase profit
margins and create product differentiation, Samsung need to accelerate its own Operating system
development program to help its products gaining competitive edge compared to Apple iPhone series.

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Conclusion
Samsungs Internationalization strategy is to maximize the brand equity and market share through superior
design, marketing and customer service and to constantly deliver the highest quality products. To be known as
best and most respected brand in the world.

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Reference

BAGUR, H. (2015). The Commoditization of the Smartphone. Wired. [online] Available at:
http://www.wired.com/insights/2012/12/the-commoditization-of-the-smartphone/

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Nov.

2015].
Fox News, (2015). Apple wins lawsuit against Samsung, as jury awards $1B for patent infringement.
[online]

[Accessed

Available

at:

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samsung-case.html [Accessed 11 Nov. 2015].

LEE, M. and CHENG, J. (2015). Samsung, Google Sign Patent-License Deal. The Wall Street Journal.
[online] Available at: http://www.wsj.com/articles/SB10001424052702303277704579345791388237228

[Accessed 11 Nov. 2015].

SAMSUNG ELECTRONICS ANNUAL REPORT. (2015). 1st ed. [ebook] samsung. Available at:
http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2013/20

13-samsung-electronic-report.pdf [Accessed 11 Nov. 2015].

Samsung Electronics Co., Ltd. SWOT Analysis' 2015, Samsung Electronics Co., Ltd. SWOT Analysis,

pp. 1-9, Business Source Premier, EBSCOhost, viewed 10 November 2015

Cheah, M., Liu, Y., Pan, J. and Qiu, L. (2013). CASE SYNOPSIS FOR: SAMSUNG. 1st ed. [ebook]

Available at: http://www.sfu.ca/~sheppard/478/syn/1131/Group_Y.pdf [Accessed 11 Nov. 2015].

Dudovskiy, J. (2015). Samsung Porter's Five Forces Analysis - Research Methodology. [online]
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analysis/ [Accessed 11 Nov. 2015].

Managementstudyguide.com, (2015). Porters Five Forces Analysis of Samsung. [online] Available at:
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[Accessed

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Wilkinson, J. (2013). Threat of New Entrants (one of Porter's Five Forces) The Strategic CFO.
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