Table of contents

Executive Summary.......................................................................................................3
Introduction....................................................................................................................4
Overview of Samsung....................................................................................................4
Development of Samsung...........................................................................................4
Company structure......................................................................................................5
Samsungs international strategy................................................................................5
Samsung mobile external environment analysis............................................................6
PEST Analysis............................................................................................................7
Political factors.......................................................................................................8
Economic factors....................................................................................................8
Social-cultural factors.............................................................................................9
Technological factors..............................................................................................9
Porters five forces analysis......................................................................................10
Bargaining power of Suppliers.............................................................................10
Bargaining power of Customers...........................................................................11
Rivalry among existing firms................................................................................11
Threats of new entrants.........................................................................................12
Threats of substitute products of services.............................................................12
Key drivers of the mobile industry to influence Samsung international performance 13
Technology...............................................................................................................13
Regulatory................................................................................................................13
Cost reduction...........................................................................................................14
Buyer power.............................................................................................................14
Historical Examples.....................................................................................................15

Recommendations........................................................................................................15
Conclusion....................................................................................................................16
References....................................................................................................................17

Executive Summary
Samsung Group is a giant multinational enterprise composed of more than thirty
affiliated corporations in various industries. Samsung Group is acting a significant of
roles including supplier, designer, engineer and producer etc. As a global
conglomerate, Samsung has achieved a great success in both domestic and foreign
markets. Samsung mobile business has contributed enormously to the whole
company, providing mobile phones that satisfy consumers needs. Samsung maintain
the first position with innovated products, such as the Galaxy S5, Galaxy Note 4 and
Galaxy Note edge across the whole mobile and smartphone markets in the world in
2014 (Samsung annual report, 2014). A closer look will be taken on Samsungs
mobile communications business. As Samsung intends to expand global footprint,
international business strategy would be adopted inevitably by the company. The
purpose of this paper is to exam a case of Samsung Mobile and explores how the
environment impacts on Samsungs international strategy by using appropriate
strategic tools.

Introduction
Samsung Mobile is positioned as one of the best mobile phone manufacturers
successfully. It is developing quickly and wins a great amount of market share in
mobile industry. The business philosophy Samsung follows is to devote all the talents
and technologies to create superior products and services that make the society better
in a global range (Samsung n.d. Values&Philosophy). This report will firstly take a
brief look at Samsung by viewing the companys development history, corporate
structure and what international strategy it is now undertaken. Then strategic tools are
going to be used to deeply analyzing both the companys internal and external
environment. Key drivers of the mobile industry will be identified and how they
interact to Samsungs international strategy will also be explained in this report.
Finally, historical examples will be provided to support the findings above.

Overview of Samsung
Development of Samsung
Samsung Electronics was founded as affiliated corporation in Korea in 1969 for the
purpose of promoting growth for the Samsung Group (Samsung n.d. History).When
Samsung decided to start mobile phone business, this move was considered
thoughtless by industry observers. However, entering mobile phone business helps
Samsung own a lot of profit and obtain high reputation, and finally achieve a great
success in global market. About 320 million people are hired by the corporation in 84
countries (Samsung annual report 2014). The corporation has acquired KRW 206
trillion sales and KRW 25 trillion profits in 2014 (Samsung annual report 2014).
Samsung Mobile is one of the three segments of Samsung Electronics.

Company structure
As the figure1 shows below, the company is divided into three departments, including
component department, consumer electronics department and IT/mobile department
(Chun 2015). IT/mobile department has three divisions including wireless divisions,
network divisions and media solution division (Chun 2015).

Figure1-Organizational structure chart of Samsung Electroincs (Chun 2015)

Samsung mobile external environment analysis

When formulating an international business strategy, Samsung should take external
environmental factors into consideration. There are various theoretical tools that help
analyzing the external environment, such as PEST analysis, five forces analysis and
external factor evaluation matrix. Due to the lack of internal resources, external factor
evaluation matrix cannot be applied to exam the company.

PEST Analysis
None of the enterprises can prevent itself from the impact of the macro environment,
thus knowing how the environment will change seems to be vital. There are a great
number of factors that can influence the company; therefore, it would be impossible to
identify all the factors and the extent they affect. Finding the key factors and clarify
how they interact would be more practical. PEST analysis is used to explore external
macro environment independent of the firms size, including political environment,
economic environment, social-cultural environment and technological environment;
however they are also composed of different aspects respectively as the graph shows
below (CIPD 2011).

Figure2PEST analysis

Political factors
Political stability should be taken into consideration if the company wants to sustain
long-term development. Recently, the strained relationships between North and South
Korea may result in war breaking out in the Korean Peninsula. The future of China
seems to be uncertain from political and economic perspective. Moreover, there are
rising tensions in Russia, Middle East and Brazil. Instabilities in African and Latin
American countries which lead to frequent changing governing structures also put
pressure on Samsung. In addition, political laws and regulations established by
governments should be taken into concern as companies must follow those rules. A
higher tax rate, an increase in minimum wage, and stricter environmental standard and
would lead to an adverse impact on the company, increasing its cost and decreasing
profitability. Anti-unfair competition law helps protect domestic corporations from
competing with foreign firms. On the other hand, a preferential trading rule
encourages investment from abroad. Since laws and regulations are different in
different nations, which makes international trade more complex. It is found that
Samsung is involved in political a scandal which damages its brand image (Ji-Young,
2010). Overall the political risk of Samsung is quite low because of geographical
diversification, administrative representation only in main capital cities and indirect
sale through retail dealers (Simonin 2014).

Economic factors
Economic factors are critical in formulating business strategy since growth of
economy, inflation rate, standard of consumption, and undergoing economic cycle
significantly affect the companys profitability. Appreciation in Won reduced profits
by 25% in the second quarter (NewEconomy 2014). Financial crisis in 2007 affect the
companys profit significantly from 2.07 to 1.02 trillion won (Dudovskiy 2015). The
global economic rescission is still ongoing, which will have an adverse impact on
consumer purchasing power as consumers are reluctant to buy products. British exit

from European Union leads to a quick depreciation in Great Britain Pound. The
uncertainties of currency values arise which increase the price of gold. Because of the
dramatic decrease in the crude oil prices, there will be an increase in US interest rates
which leads to a higher investment cost. Additionally, financial risks in developing
countries and economic depression in Eurozone may occur. In the unpredictable and
instable economic environment would lead to higher risks in business and make the
competition even fiercer. Thus expanding into the emerging and developing markets
may help the company increase profitability and retrieve a loss from the mature and
developed markets.

Social-cultural factors
Social-cultural factors are mainly demographic and cultural aspects of the external
environment, including beliefs, habits, life-style, and status that may changing
customer needs. Finding these factors implies size of potential market is predictable.
Nowadays, almost everyone has a mobile phone, using it to communicate, find
information, and have fun. Also, trend of sharing via social applications boosts the
consumption of mobile phone produced by Samsung. The company should identify
ways to adapts itself to various markets where it launches branches by tailoring
products that can fulfill customers fast changing preferences. Samsung should behave
in a local way to get itself used to the emerging market.

Technological factors
Technological factors can be regarded as the key force in mobile industry (Kim 2002).
It is composed of manufacture and infrastructure (FreeManagementBooks n.d.).
Technological advances include automation, quality improvements, incentives, cost
saving and outsourcing (FreeManagementBooks n.d.). A mobile manufacturer has to
keep up with the technical advances otherwise it will be soon left behind and leave

opportunities for other competitors. Nokia would be a good example that is too slow
to embrace smartphone technologies (FreeManagementBooks n.d.). In order to
maintain the market share, companies need to follow and monitor the latest
technology, seizing any opportunities available. To support the technical development,
investment should be made to buy the equipment and hire top-talents. Using patents
and licensing is a vital strategy to protect the companys achievement as well.

Porters five forces analysis

Five forces framework emphasized five individual forces can determine the degree of
competition in a particular industry (Porter 1979). The five forces are showed in the
figure below.

Figure3-Porters five forces

Bargaining power of Suppliers

There are hardware and software suppliers in mobile industry as mobile hardware and
software can be separated (Savov 2012). The hardware suppliers seem to have weak

bargaining power since there are a large number of equipment makers. Samsung
Mobiles success in early years is contributed mainly by the releasing profit margin
friendly products, since Samsung Mobile can buy cheaper manufacture components
than almost other competitors (Covert 2014). Samsung has the right to choose the
partner they want to corporate with. Nevertheless, software suppliers may have a
strong bargaining power as there are only a few, such as Microsoft. Firm would be
placed in a weaker position when negotiating with monopolies. Overall, the company
can have a high power if it can develop software by its own, like the case of Apple
which develops iOS system.

Bargaining power of Customers

As customers have a plenty of purchasing choices in mobile industry, the bargaining
power of customers is strong (Katkyama 2010). The highly aggressive pricing
strategy is taken by Samsung and it spends a huge amount of money in marketing to
target all segments (CCS 2014). Customers are price-sensitive and respond quickly by
switching to another choice when product price increase as the competition is fierce in
mobile industry. However, bargaining power of the firm can be strengthened if
customer loyalty is built. In that situation, customers may be unwilling to change
purchasing decisions if the mobile phone can show high social status and good taste.

Rivalry among existing firms

The competition in mobile industry is fierce (Mustonen 2010). The smartphone
market is estimated as a duopoly with Apple and Samsung capturing most of the
market share (CCS 2014). A great amount of investment should be made in R&D to
keep up with the latest technological development (Brostoff etc. 2014). Only
innovated products and creative technologies can differentiate products from others. It
is reported that Samsung surpassed Apple and ranks first as largest smartphone

manufacturer world-wide in the first quarter of 2015 (Rossignol 2015). However,

iPhone is more advanced and dependable from customers view. It is noted that
Samsung cannot match Apples marketing capability as data shows Samsungs market
share declined by 2.3% while Apples increased by 34.9% from 2014 to 2015
(PESTLEanalysis 2015). Samsungs android system is considered inferior to Apples
iOS. Moreover, Huawers share increased by 48.1% and Xiamis share increased by
29.4% (PESTLEanalysis 2015).

Figure4-rank of global Smartphone (Rossignol 2015)

Threats of new entrants

The entry barrier is low in mobile industry. An open-source solution is provided by
Google known as the advent of Android (CCS 2014). Completed packaged solutions
are provided by chipset companies such as Qualcomm known as the advent of turnkey
reference designs (CCS 2014). All these trends benefit new manufacturers, especially

China-based firms (CCS 2014). On the other hand, it would be difficult for firms to
differentiate from other competitors and gain market share because of intense
competition. Heavy investment in R&D is needed which lead to high cost that new
entrants can rarely afford.

Threats of substitute products of services

Traditionally, the main function of a mobile phone is to make phone calls and send
messages. These functions can be achieved through internet with multiple
applications. A laptop and a pad would be a substitute for a mobile phone; however, it
would be inconvenient to carry them around. It is predicted that there may be
possibility that laptop being replaced by smartphone (Greenbot 2015). The threat of
substitute is low, but new substitutes may be created in the future as technology
develops quickly.

Key drivers of the mobile industry to influence Samsung

international performance
Technology
Being viewed as the worlds leading innovative company; Samsung acquires
advanced technology that enables the company creating latest innovative
smartphones. Multiple layouts of functions besides browsing websites, listening to
music, drawing pictures, taking photos and playing games are required. Product
quality, reliability, and software compatibility also matters as rational customers
would take these factors into consideration. Samsung Mobile as the largest Samsung
community around holds the concept of providing fashion-leading technology.
Since the early 1970s, Samsung was devoted to catching up with foreign technologies.
After nearly twenties years, the new product development gap behind leading firms is

reduced to less than a year (Verbeke 2009). Effects has been made by Samsung in
enhancing R&D and in investing high-tech firms such as AST Research and LUX
(Verbeke 2009).Samsungs technological position is improved by building an R&D
lab in Silicon Valley and employing experienced engineers from leading companies
such as Intel and IBM (Wilkins &Schroter 1998). A large amount of investment is
made by Samsung in expanding R&D and hiring top talents, which ultimately create
innovative products and achieve remarkable performance, including the smartphone
with curved display. Samsungs strategy of heavy investment in technology leads it
the way to future success.

Regulatory
Lessons should be learnt from Apple of which design and technology has been
imitated by other competitors, bringing legal and regulatory troubles and scrutiny
(Buckler 2012). Samsung is facing with lawsuits related with patents and copyrights
and has to spend billions on them (Simonin 2014). Therefore, application for patent
on creative designs and innovative technologies should not be made immediately. It is
not only how fast the product presented to customers that matters, but also how
difficult the techniques can be copied and utilized.

Cost reduction
As the bargaining power of customers is relatively high due to fierce competition, cost
reduction would enables the product be more competitive and appealing. To reduce
cost, Samsung decide to be internationalized and standardized to achieve economies
of scale. Samsung considered that differences in products would be costly and
unnecessary in techno-electronics. Hence, most of the hardware products from
Samsung are standardized to meet most countries taste and Samsung can customize
the product quickly to fit the special needs of a market (Simonin 2014). However,

software should be customized as well as the inern OS (Simonin 2014). International

strategy of economies by location choice is implemented by Samsung as labor cost is
cheap in China and Vietnam, manufactures and R&D centers are built there (Simonin
2014). In addition, Samsung is seeking for economies of tax when expanding on a
worldwide geographical scale. Tax discount was provided by the Californian
government to attract Samsung to set a center in the Silicon Valley (Olson 2013).

Buyer power
Samsung plans to adopt a strategy that develop corporate customers and build B2B
business (Samsung annual report 2014). The company is trying to increase
competitiveness through enhancing soft competiveness, creating must-have content
and improving service platforms. Differentiation helps improving the business by
boosting its sales of high-value-added products when the global demand is declined
and the competition is becoming intense as the annual report shows (Samsung annual
report 2014). Also, customers are becoming more willing to pay a bit extra for
individuation and excellent appearance. People may buy fashionable design with nice
color, sensational user interface and portability to feed their vanity. Ease of use may
be another driver as customers want to buy product that can facilitate life. The
smartphones are produced in a more creative way HTC with beautiful design,
iPhone with iOS software, Google Moto X with interesting little tricks etc (Covert
2014). To formulate business strategy, the company should correctly segment
customers into different groups. The company decides to lead the high-priced market
with the Galaxy S6 and Galaxy S6 edge and maintain mid- and low-priced markets by
supplying products that differentiated from others. Moreover, market communication
and advertising can be made in a different way in different countries to target certain
groups. By adopting this strategy, different customers from various segments of
markets are targeted at the same time.

Evaluation and recommendation

Samsungs growth strategies are proactive, possibility and partnership. Proactive
stands for well preparation for the future. Possibility reveals Samsungs braveness to
take challenges. Partnership represents talented partners from Samsung with a lot of
passion aiming at creating a better future. Global strategy adopted by Samsung is
described as a high rate of global integration, cost efficiencies, low responsiveness,
and differentiation, promoting the brand into international market successfully
(Simonin 2014). Manufactures and R&D centers are built in countries with
comparatively low costs. Experience curve economies are developed by learning from
different activities. Standard products are made and a massive economy of scale is
achieved. Samsung is implementing a strategy that strengthens the companys
competitiveness and improves profitability. It is intended to market leadership by
delivering fascinating consumer experience with innovative design and differentiated
high techniques. Strategy that Samsung plans to use is presenting high-value service,
creative smartphones with high premium and well-made mid-price products with
impressive quality.

It seems that Samsung does not care much about those political factors. Finding
growth engines, pursuing superior technology and achieving innovative solutions is
what Samsung Electronics mainly interested in. A great amount of money is spent by
Samsung to protect patents and copyrights, defend interest, recall products and pay
fees. It would be easier for the firm to expand in a country with favorable rules and
regulations. Cost reduction is achieved by economies of scale and vertical integration
through world expansion. With the rise of android system and numerous reference
design platforms, the entry barrier declines. Since the mobile phone industry is a
duopoly, what actions Apple take should be considered by Samsung. Apple maintains
price at high level while Samsung targets all segments. Samsung is likely to lose
market share because of Apples ecosystem advantage. Although Samsung tries to
follow Apple to create an ecosystem advantage, the heavy reliance on Android would

conflict with the imitation. Samsung should maintain its advantages and take the
strategy of diversification to win the battle. Moreover, efforts should be made to
improve its software as well as service.

Conclusion
In conclusion, social-culture factors and technological factors may comparatively
affect Samsungs international strategy more. Samsung has a quit strong barging
power with supplier while a weak barging power with customer. The internal rivalry
is extremely high, however the threat of substitutes tend to be low. Key drivers of
mobile industry are technology, regulatory, cost reduction and buyer power. Pursuing
innovative technology and provide differential service is what Samsung concern most
when formulating international strategy. Samsungs relative strong bargaining power
enables it to lower cost. Moreover, Subsidiaries are built in countries worldwide help
Samsung gain economic of scales. Substantial advantages of scale, vertical integration
and supply chain enable Samsung to compete profitably. However, regulatory issues
are sometimes ignored by Samsung which leads it to a dangerous situation. Fees
should be paid on protecting copyrights and patents. Customers needs should be
firstly taken into consideration when company is making international strategy.
Samsung should adapt the strategy to particular markets for consumers. A strategy
would be formulated in a more effective way if Samsung categorized different
customers from different countries into segments and launching products best feed
their taste respectively. The appearance and design of the product is not so care by the
company resulted in unattractive experience with useless features offered by software
and service. As a result, sales and profits decreased over recent years due to poor
smartphones and other performance.

References
Brostoff, B., Levin, H. & Bower, B. 2014, Samsung Client Report: dangerzone
consulting, available at: http://economicsfiles.pomona.edu/jlikens/SeniorSeminars/Likens2014/reports/samsung.pdf (Accessed
10 August 2016).

Buckler, C. 2012, Five Business Lessions You Can Learn From Apple, Sitepoint,
available at:
https://www.sitepoint.com/5-apple-business-lessons/ (Accessed 10 August 2016).

CCS Insight, 2014, Global Smartphone Market Analysis, available at:

http://www.lenovo.com/transactions/pdf/CCS-Insight-Smartphone-Market-AnalysisFull-Report-07-2014.pdf (Accessed 11 August 2016).

Chun, J 2015, How Samsung Electronics organizational structure and culture affect
its innovation, available at: https://ibpunion.files.wordpress.com/2012/02/otexam2.pdf (Accessed 10 August 2016).

CIPD, 2011, PESTLE Analysis, Chartered Institute of Personnel and Development,

http://www.cipd.co.uk/hr-resources/factsheets/pestle-analysis.aspx (Accessed 10
August 2016).

Covert, A. 2014, Samsungs strategy is failing, CNNMoney (New York), first

published in Jan.21 2014, available at:
http://money.cnn.com/2014/01/21/technology/mobile/samsung-strategy/ (Accessed 8
August 2016).

Dudovskiy, J. 2015, Samsung PESTEL Analysis, Research Methodology, available at:

http://research-methodology.net/samsung-pestel-analysis/ (Accessed 11 August 2016).

Free Management Books n.d. Technological factors, available at: http://www.freemanagement-ebooks.com/faqst/pestle-06.htm (Accessed 11 August 2016)

Greenbot 2015, Ten years your smartphone has already replaced your laptop,
available at: https://www.google.com/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwif_6O
f-rbOAhVX72MKHa7xAT0QFggcMAA&url=http%3A%2F%2Fwww.greenbot.com
%2Farticle%2F3006339%2Fsmartphones%2F10-ways-your-smartphone-has-alreadyreplaced-your-laptop.html&usg=AFQjCNETDeXijOCvFwSzEGTZ6akRcKr2yg
(Accessed 10 August 2016).
Ji-Young, K. 2010, The Korea Herald, available at:
http://www.koreaherald.com/view.php?ud=20051216000027 (Accessed 11 August
2016)
Katkyama, H. 2010, Significance of lean management and contribution toward
customer satisfaction, Industrial Engineering Magazine, vol. 47.
Kim, J. et al. 2002, Future of IT industry: technology and direction, SERI (Samsung
Economic Research Institute) CEO information.
The New Economy, 2014, Samsungs profits fall again as smartphone market
declines, Available at: http://www.theneweconomy.com/technology/samsungs-profitsfall-again-as-smartphone-market-declines (Accessed 11 August 2016).

Olson, P. 2013,. How Samsung Is Getting Its Mojo In Silicon Valley. Forbes. Available
at: http://www.forbes.com/sites/parmyolson/2013/10/30/how-samsung-is-getting-itsmojo-insilicon-valley/ (Accessed 11 August. 2016).

PESTLEanalysis, 2015, SWOT analysis of Samsung, available at:

http://pestleanalysis.com/swot-analysis-of-samsung/ (Accessed 11 August 2016)

Porter, M. 1979, How Competitive Forces Shape Strategy, Harvard Business Review.

Rossignol, J. 2015, Samsung overtakes apple to reclaim title of worlds largest

smartphone maker, MacRumors, first published in April 29 2015, available at:
http://www.macrumors.com/2015/04/29/samsung-apple-strategy-analytics-q1-2015/
(Accessed 9 August 2016).

Samsung (n.d.) history. Available

at:http://www.samsung.com/uk/aboutsamsung/samsung/history_08.html(Accessed 8
August 2016).

Samsung (n.d.)2014 Samsung ElectronicsAnnual Report, Available at:

http://www.samsung.com/common/aboutsamsung/download/companyreports/2014_E.
pdf (Accessed 8 August 2016).

Samsung (n.d.) Values&Philosophy. Available at:

http://www.samsung.com/uk/aboutsamsung/samsung/valuesphilosophy.html(Accessd
8 August 2016).

Savov, V. 2012, Mobile hardware and software are separable, no matter what
manufacture tell you, The Verge, Available at:
http://www.theverge.com/2012/6/1/3056660/mobile-hardware-software-editorial
(Accessed 10 August 2016).

Simonin, D. 2014, International strategy: the strategy of Samsung group, Research

Gate, available at:
https://www.researchgate.net/publication/285370984_International_Strategy_The_Str

ategy_of_Samsung_Group (Accessed 10 August 2016).

Verbeke, A. 2009,International Business Strategy Rethinking the Foundations of

Global Corporate Success, Cambridge University Press, New York.

Wikins, M. &Schroter, H.G. 1998,The free-standing company in the world economy,

1830-1996, Oxford University Press, Oxford.