SAMSUNG
Contents Page
Introduction 3
Samsung Products 3
Macro Environmental Analysis 4
Economic Issues 4
Political/Legal Issues 4
Technological Issues 4
Social/Cultural Issues 4
Environmental Issues 5
Industry Analysis 5
Threat of New Entrants 5
Bargaining Power of Suppliers 5
Bargaining Power of Buyers 6
Power of Substitutes 6
Industry Rivalry 6
Internal Analysis 6
Resource Analysis 6
Dynamic Capabilities Analysis 7
Strategic Capabilities Analysis 7
VRIO/ Core Competencies 7
Gap Analysis 8
Macro-Environment 9
How does the strategy match the macro-environment? 9
Industry Environment 9
How does the strategy match the industry-environment? 9
How does strategy match performance? 9
How does strategy match capabilities and those of competitors? 9
Recommendations 9
References: 11
Appendix Four– Macro Environment Summary For Multi-Media Technology Solutions Industry 12
Appendix Two – Industry Environment Summary For Multi-Media Technology Solutions Industry 13
Appendix Three – Internal Analysis For Samsung 16
Capabilities 17
Dynamic Capabilities 17
Strategic Capabilities 17
VRIO Framework 18
Operations 18
Marketing 18
Human Resources 18
Research and Development 18
Distribution 18
Manufacturing 18
Head Office 19
General 19
Appendix Four: Gap Analysis 20
Macro-Environment – Business Strategy Gap 20
Industry Environment – Business Strategy Gap 20
Key Competitor – Business Strategy Gaps 20
Introduction
The multi-media technology solutions industry is dynamic and the trends are continuously changing with the ever-evolving society and the shifting wants of the world’s population. This analytical report focuses on the revamped business Samsung, who is led by Jong-Yong Yun. According to Samsung the company’s business strategy leverages its ability through the design and development of its own operating system and hardware. Samsung aims at bringing customers around the world gripping new products and solutions with innovative, industrial design, integration and ease-of-use. (Marino, Hattaway & Jackson, 2008)
Samsung competes in the multi-media technology solutions and provides products for people in need of recreational use, business orientated cliental and for educational purposes. Samsung provides buyers with an extensive range of desktop and laptop computers, a widespread range of mp3 players designed for different purposes that suit social facets and their latest device in the iPhone, which is a mobile phone that contains all aspects of Samsungs range in products by including the internet and the ability to play mp3’s.
Samsung Products
Samsung still thinks its core business is computers despite the mp3 iPod being main revenue raiser. Samsung as of 2008 holds just 8.5% of the PC Market share and is sitting in third spot behind successful Dell Inc (31.9%) and Hewlett-Packard (25.3%). Its product line of desktop computers consists of the:
Mac Pro, aimed at professional and business users iMac, targeted at consumer, educational and business use
Mac mini, made specifically for consumer use
Their product lines for notebooks are:
MacBook Pro, for professional and advanced consumer users
MacBook, designed for educational users and consumers
MacBook Air, intended for professional and consumer use
The Samsung iPod is an mp3 player and has recently being the primary source of revenue for Samsung. With the Samsung iPod comes the online software and music shop of iTunes. These products connect with one another and have been influential in the success of Samsung. The product lines of Samsungs mp3 players are: iPod Shuffle, a basic flash-based player, the cheapest of the mp3 players and good for people when conducting exercise iPod Nano, a multi-media player that allows videos and songs to be played, as well as the viewing of photos. iPod Classic, the largest of the mp3 players containing more memory iPod Touch, another mult-media flash based player controlled through an innovative touch
The last product to mention is Samsungs latest invention in the iPhone. Samsung’s iPhone was named Time Magazines Invention of the Year in 2007 and was bought by over 270,000 people in its first thirty-hours. Similar to the tandem relationship of the iPod and iTunes the iPhone had a relationship with the App Store, which allowed users to build applications for their phone. Ninety percent of these applications would cost under ten dollars while some applications were free.
Macro Environmental Analysis
In reference to Appendix One, the analysis showed that the multi-media technology solutions industry is complex and has a number of issues from a technological, political, environmental, social/cultural and economic outlook that can boom the industry and stun the industry from growing.
Economic Issues
The overall growth position for the industry from an economic perspective is positive. Even with the world in a degree of recession and people’s attitudes being hesitant to buy because of it, still shouldn’t affect the industry in growing. The disposable income of people today is a good sign for the industry even with the recession currently occurring people are still willing to spend. The increased wealth in countries should help the distribution of the organisations products in the industry. The latest economic trend to occur is the shift in cheap labour, noticeably in Australia businesses now are shutting down operations and product lines and moving it to Asian countries where the same function can be carried out at a lower price. This saves production costs for businesses.
Political/Legal Issues
Privacy laws, copyrights and trademark laws all contribute to the growth of the industry. If a company thinks of an idea it can then use these laws to secure its product and make sure it is not replicated by competing or new organisations. The recent push from Governments to implement broadband and advanced computers in all educational departments is a major positive for the growth of the industry.
Technological Issues
The growth is positive for the industry as the growth for technology is growing in countries, the price of technology is becoming affordable and the use of the internet is allowing businesses within the industry to compete online and to promote their business to the world. The push from the Government in learning with technological materials is a benefit for the industry. However, while technology is cheap and easy to access too much technology can stunt the growth as many products may overlap with each other and stop the need of other products existing.
Social/Cultural Issues
The social and cultural issues have a negative effect on the industry. Today’s population is ageing and this can affect the industry as it eliminates a large percentage of the audience. Levels of quality and expectations are a negative factor on growth as expectations rise and consumers can become rather picky on what they want. Another downfall to the industry is cyber-bullying, as most organisations in the industry involve the use of the internet it could potentially reduce the volume of young to middle age children. The most concerning negativity for the industry is the cultural barriers that exist, some companies in this industry may be struggling to enter the international market with their products because of the breakdown in communication and relating to the customers needs that suit their geographic situation.
Environmental Issues
Environmental issues are seen as the most concerning and organisations within the industry must start to adopt new procedures and products that support the environment. The most obvious industry is the car manufacturing industry in implementing electric and power operated cars to keep the world pollution free. Businesses in the multi-media technology solutions industry need to do the same. The effect on growth is deemed as a positive effect, and it might not be a positive effect straight away but the industry will grow once these provisions are installed. Companies when making and designing new products can embrace the use of recycling and the exclusion of toxic materials, which has been embraced universally. In applying these conditions sales may rise, as buyers are aware that the products aren’t a health hazard and recognize the company in doing their bit to save the environment. Responsible manufacturing is also a positive for the growth of the industry in the long run as people will want to work for a company that’s environmentally friendly.
Industry Analysis
When conducting the analysis of the multi-media technology solutions industry, Porters Five Forces Analysis was applied. Porter’s analysis focuses on the threat of new entrants, bargaining power of suppliers and buyers, power of substitutes and rivals on profitability in an industry. (Hubbard, Rice & Beamish, 2008)
Threat of New Entrants
The are several forces working against new entrants to this industry, the capital requirement of a new company must be high, as marketing, production, human resource and staff costs would need to be considered. Brand identity and absolute cost advantages would severely favour established companies as they have their name out to the public already and have experimented with designs and products. However, there is still room for a new entrant to gain market space and even though economies of scale may seem an obstacle there is no scale regarding the internet, so there is room to establish yourself online first before retail shops and factories are needed.
Bargaining Power of Suppliers
The bargaining power of suppliers is rated medium because even though the suppliers input is crucial to the output of the final product, companies inside the industry gather parts from a range of suppliers and make it work themselves. The supplier concentration is limited so little power is gained however there is no threat of forward integration as most companies that supply for businesses within the industry would probably make more money in providing these companies with their requested needs.
Bargaining Power of Buyers
The bargaining power of buyers is high as they determine what product they want to buy and when they want to. There isn’t much brand loyalty anymore because products are continuously changing and new and better-developed small technology solutions get released every few months. Consumers will buy for price, convenience, design and for what they like. Buyers know about what products can do and cant do compared to its competitors and they are aware of the competitors products, which increased power for buyers. However, there would be no chance of backward integration and no power is gained through buyer concentration.
Power of Substitutes
The power of substitutes is high because the switching costs between organisations within the industry are non-existent and the relative substitutes within certain categories of products are known by the buyer and are based on price and performance and have worthy alternatives. Buyer prosperity in the industry is medium rated because the number of competitive and useful substitutes in the mp3 market is appalling with Samsung dominating it. However, the prosperity of the buyer is good in mobile phones and the PC market.
Industry Rivalry
The buyer creates a fierce rivalry between organisations because they know product differences and information on products and because switching costs don’t apply. Brand identity can save some business from heading to the competition but the competition in the multi-media technology solutions industry remains strong.
Internal Analysis
(With reference to appendix three)
Resource Analysis
The tangible resources for Samsung are it’s financial, physical, technological and organizational resources. The financial resources for Samsung indicate that their shareholder equity has doubled in two years and their total net sales have increased by $11 million in the space of two years. However, what’s concerning is that the liabilities of Samsung have tripled in two years and that 60% of net sales are American based. Organisational resources have helped Samsung grow with contractual agreements made by Samsung to major music labels and arch nemesis Windows. These agreements opened up Samsung to a greater audience and profited both Windows and major music organisations as they gained from Samsung’s profits. Samsungs culture is based on innovation and will continue to do so with Jong-Yong Yun at the helm, however the leadership style he possesses is rather autocratic and analysts wonder if Samsung can sustain their innovative edge against competitors when he leaves. Physical resources are strong with Samsung within America and online. Samsung’s technological resources are the reason why Samsung is dominating the music market; the online store is the number one site for legal music downloads.
Intangible resources for Samsung’s are its Human Resources, innovation and reputation resources. The key to success in Human Resources for Samsung is its revamped Board of Directors, the board is experienced and contains CEO’s of major companies including Google and Avon. Knowledge management is also apart of Samsungs success as Samsung is segregated into seven divisions, all responsible for their own functions. Innovation is what Samsung prides itself on but interestingly enough it can be said that money put into research and development is questionable. The Income Statement for Samsung states that only 3% of net sales make up research and development. The reputation of Samsung is strong and even with Samsung thinking themselves as computers being their core business their perception amongst the population may differ. Undoubtedly the quality and durability of Samsung products are respected and if a problem eventuates, as there has been, Samsung will take the necessary correctional measures in satisfying their customers.
Dynamic Capabilities Analysis
Dynamic capabilities such as knowledge management do exist but there can be stronger use for it within Samsung, Jong-Yong Yun is an innovative leader and his business associates take more care of the business side. When Gil Amelio was in charge of Samsung the decision to split Samsung in to divisions was a smart business move, the only notable move towards KM since was the revamping of the board. It now holds other CEO’s of major companies and one former Vice-President of the USA.
The ability for Samsung to learn has helped them succeed as a business, each product they put out on the market is improved since its last and meets the needs and wants of buyers and suits today’s evolving society. Innovation within Samsung is interesting, it’s bewildering to know that research and development makes up only 3% of net sales considering Jong-Yong Yun is an innovative leader and the companies philosophy is the continued achievement would depend heavily on research and development, innovative products and services, and competitive prices. There is more room for improvement in innovation for Samsung.
Strategic Capabilities Analysis
Overall the strategic capabilities are reasonably strong for Samsung, based on the areas of operating, distribution, marketing, human resources, head office, general, research and development and manufacturing.
Operations such as speed of response, reputation of quality and product line breadth are strong capabilities for Samsung. The marketing function is the strongest of the functions as Samsung has an effective brand creation, promotion and they understand customer’s needs. Head Office capabilities were rather weak as they struggle to attain good management, an example of this is that Jong-Yong Yun wasn’t at Samsung for a period and there were several CEO’s. Decision making processes is also weak as I see the leadership styles at Samsung being autocratic. General aspects are strong with a shared vision for innovation and a good reputation for quality.
VRIO/ Core Competencies
Samsung’s speed of response is a core competency and the only one in the operations of Samsung. A quick response from an organization competing in the industry is important. The industry rivalry is very high and organizations want to remain on top and because customer loyalty is low the response to a product is crucial.
Samsungs ability to advertise their products to the world is a key factor in them being a leader in the industry. However, there is no tangible value added via marketing. In contradiction to that I believe that Samsungs effective advertising, image creation, brand creation and promotion is a core competency for them and does give them a competitive advantage.
Research and development is critical to Samsung and over years they have gained a considerable advantage over competitors from this area of business. The speed of a new product development has occurred with its laptops and mp3 players. The Samsung iPhone was slow to be released and did contain problems with its first version but the second version of the iPhone was released quickly after with new features and corrected problems related with the old version. The iPhone still gives Samsung a competitive advantage as sales soared 123% during the quarter to $3.79billion. (Biztech, 2009)
The product design and quality can lead to any organization gaining a competitive advantage but unfortunately it’s not a core competency. Any business can imitate the product providing its in appliance with copyright and trademark laws. Even though Samsungs layout is very unique, the design has been executed by companies already and will be in the future. A good example of this is the iPhone, it was a touch screen phone for leisure and this technique has been adopted by Samsung and Nokia.
Samsungs ability to a have a reputation for quality is a core competency and will always provide them with a competitive advantage over other businesses competing in the industry. This accreditation is hard to achieve and harder to sustain so Samsung must ensure that their focus continues on delivering quality products. Some Samsung products have been faulty but Samsung took the blame and implemented correctional measures to satisfy their buyers.
Gap Analysis
Macro-Environment
The major trends in this area revolve around carbon footprints and recycling, the ageing population and need for leisure but also the current recession the world is in. These trends will continue to halt and provide growth within the industry.
How does the strategy match the macro-environment?
For Samsung, there is large gap between their impacts in different cultures. Samsung is struggling in the international stage and the current recession the world is in may hinder sales so a gap is slowly opening. However Samsung matches the macro-environment with the disposable income of most individuals and Samsung’s work to remove harmonious materials from their products matches the populations’ views on recycling and carbon footprint.
Industry Environment
The industry is a reasonably profitable industry that reduces the threat of new entrants, has a strong rivalry amongst competitors and fights for the buyer’s money. Aspects such as rivalry and buyer power are high, which indicates that organisations should remain innovate and have a proactive strategy.
How does the strategy match the industry-environment?
Samsung suffers like many of the organisations in the industry with maintaining power over buyers. The buyers have considerable power as they determine what to buy. The industry rivalry is strong and the power of substitutes is threatening to Samsung besides the mp3 market.
How does strategy match performance?
Samsungs strategy is to “leverage its abilities through the design and development of its operating system, hardware and many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior ease-of-use, seamless integration and innovative industrial design.” (Marino etc al 2008)
It appears that Samsung have implemented many software applications and technologies that have attracted buyers. Their product depth is impressive and they have an innovative design. However, Samsungs strategy to bring products to customers of the world has not matched its performance.
How does strategy match capabilities and those of competitors?
Samsung’s strategy matches their capabilities well, their objectives are achieved due to strong general, operational and marketing resources competencies. Samsung’s competitors may have similar capabilities but may not have the competitive advantage Samsung gains from them.
Recommendations
Samsung is a successful business in a good industry with a number of quality substitutes waiting for Samsung to make a mistake. Samsung has been excellent in their innovational ideas and has really excelled in marketing their products and making their products compatible with societies ideas and customers needs. However Samsung still has room for improvement and should consider the following:
Samsung must put more money in to research and development as only 3% of net sales arise from this. This clearly identifies that Samsung need to improve especially if the company’s philosophy is to reach continued achievement based on research and development. More research needs to be conducted to the international stage, which brings me to my next point.
Samsung must be aware that 60% of net sales are American based, for a company competing in a strong industry and with a strategy to supply products to the whole world they sure are missing a great proportion of the world. Countries such as India and China have the greatest population levels per country of the world and Samsung only gain 7% of net sales from the Asia Pacific. This is deplorable and Samsung must break the culture barriers of these countries if they want to ascertain a larger share of the market.
Samsung’s products are really only based around three devices; a computer, mp3 player and more recently the mobile phone. Samsung should look into what industry they can break into and assert their authority. Samsung has the power to do this because of their strong brand name. Maybe Samsung should look at computer products such as printers or scanners. Samsung could further develop and break through in the camera/video recording industry. One industry Samsung tried to enter was that of the PDA’s. The PDA industry is a one-company race, with Blackberry dominating the market. Samsung had tried once with the Samsung Newton but it failed miserably. I think that if Samsung researched the industry and what the Blackberry has then it could become an opposing threat and steal some cliental.
With an ageing population Samsung could start to target what older generations could gain and use in the multi-media technology industry, it might involve money and research but open up money making opportunities
Samsungs future remains uncertain and with Jong-Yong Yun being in an unfit state due to his battle with cancer. Analysts are concerned whether Samsung has the skills and innovative mind and ideas that Jobs possessed to move further into the future. My recommendations to Samsung are:
While Jong-Yong Yun is still alive, he helps Samsung build a strong succession plan that helps the company overcome competitors in all fundamentals
He resigns from CEO of Samsung and passes on his ideas, knowledge and nurtures the new CEO into the role and teaches him/her what they can do and what they should be doing.
That Samsung implements a strong decision making system if one doesn’t exist and build a culture that isn’t autocratic and uses knowledge management, innovation and teamwork to beat other competitors.
Samsung is a strong business with a superior online presence, a good reputation for quality and a powerful product line. Its ability to dominate the mp3 market is a true indication of what Samsung can do and what it plans to do. If Samsung continue their methods of innovation and maintain the secrecy it has, you should see Samsung become more powerful and enter more industries with a range of new products.
Word Count: 2974
References:
Samsung Inc, 2009, viewed on 27 May 2009 <http://www.Samsung.com/about/>
Biztech. 2009, ‘Samsung shows how to weather the recession’, viewed on 22 May 2009, <www.smh.com.au>
Hubbard, G & Rice, J & Beamish, P 2008, Strategic Management: Thinking, Analysis, Action, 3rd edn., Pearson Prentice Hall, French Forest, New South Wales, Australia,
Jashapara, A. 2004, Knowledge management: an integrated approach, Pearson Education Limited, Essex England
Macworld Staff, 2006, ‘Inside Samsung’s Ipod factories’, Macworld, Viewed on May 25 2009, URL: < http://www.macworld.co.uk/news/index.cfm?NewsID=14915>
Marino, L. Hattaway, J. Jackson, K. 2008, ‘Samsung inc. in 2008’, University of Alabama
Appendix Four– Macro Environment Summary For Multi-Media Technology Solutions Industry
FACTOR:
ISSUE ANALYSIS:
+ and – Effect on growth
Economic
Recession
Disposable Income
Shift to cheap labour
Increased wealth in countries
-
+
+
+
Conclusion: Positive effect on growth
Political/Legal
Privacy Legislation
IP, Copyright Privacy Laws
+
+
Conclusion: Positive effect on growth
Technological
Internet
Cheap availability of technology
Technology overload
Technology growing in developing countries
+
+
-
+
+
Conclusion: Positive effect on growth
Social / Cultural
Service and quality expectations
Ageing population
Culture barrier across countries
Young generation want all in one gadget
Need for leisure
Cyber-bullying
Brand adherence
-
-
-
+
+
-
+/-
Conclusion: Negative effect on growth
Environmental
Energy efficiency – carbon footprint
Recycling
Responsible manufacturing
+/-
+
+
Conclusion: Positive effect on growth
Appendix Two – Industry Environment Summary For Multi-Media Technology Solutions Industry
Items:
ISSUE ANALYSIS:
Impact
Threat of New Entrants
Economies of Scale: The need for large-scale production in order to be cost efficient
Need a substantial number of assets (Head Office, Factories, Retail Outlets)
However, the internet has no scale therefore room is available and businesses wont need head offices, factories and retail outlets to coordinate
Brand Identity: When customers buy for the brand because of its experience, record etc
Sales in America are 60% of net sales worldwide for Samsung
Vary with products and offer a range under each category. E.g. Samsung Computers
Make products compatible with the latest trends
Capital Requirement: The amount of money needed to run a technological retail company. Limits entrants.
Need millions of dollars to make new products
HR and staffing costs
Adapting to change
Marketing costs to get the product in consumers heads
Absolute Cost Advantages: When existing companies have absolute cost advantages over new entrants.
Existing companies like Samsung and Samsung have had the production experience and opportunities to polish practices and procedures, which may hard for new entrants to mimic.
Access To Distribution: Entrants having access to distribute their product to the market.
There is no reason why new entrants cant distribute their product to the market.
Expected Retaliation: Retaliation from existing competitors, important barrier.
Capital they posses, well known businesses such as Samsung can cut prices to drive off others
Would reproduce limited editions or a different version of an already known product
Overall: Low - Medium
Low
High
High
High
Low
Medium
Bargaining power of suppliers
Differentiation of Inputs: The input of the supplier – if scarce supplier has power
Parts (microchips, screens, chemistry to remove toxic carbons)
Labour (engineers)
Presence of Substitute Inputs: If crucial to the performance of the producer than supplier has power
The use of specific parts that suppliers make is crucial to the overall performance. The final product must be reliable and durable.
Supplier Concentration (compared to industry): if only small number of suppliers – suppliers will have power.
The number of suppliers are limited so they have some power Threat of Forward Integration: if suppliers have ability to enter industry, then suppliers will have considerable power.
A supplier will need huge amounts of capital for this to happen along with economies of scale, probably make enough money outsourcing for multi-media technology solutions retail companies
Overall: Medium
Medium
Medium
Medium
Low
Bargaining power of buyers
Differentiation of Outputs: buyer output – crucial to final product. Therefore, buyer has power.
Customer service
Price
Products
Convenience
Switching Costs of Buyers: lock buyer into a contract – alliances – cost of switching becomes high.
- Not really applicable to majority of buyers. Involves business customers as they choose to implement a particular computer through the entire industry. However, would only sign into an agreement if there were a discounted price or something in the companies interest. Locking customers into telephone contracts exists between the phone company and the individual. Samsung would have a contractual relationship with phone companies to sell their products but switching costs wouldn’t apply.
Presence of Substitute Outputs: Crucial as buyer may have alternative and cheaper substitutes. Power is with the buyer.
Computers (Dell, HP, Toshiba, Apple)
Music Players (Samsung, SanDisk, iRiver)
Mobile Phones (Nokia, Sony Ericsson, Apple)
Buyer Concentration (relative to industry): if only small number of buyers – buyers will have power.
There isn’t a small number of buyers, buyers have no power
Cost Relative to Total Buyers Purchases: buyer purchases – huge part of total purchases in industry; industry concerned, buyers have power.
Purchases by buyers play a part in a multi-media technology solutions industry; buyer has the power because they can determine how much their willing to pay for a specific small technology appliances, providing there is a substitute.
Buyer Information about the industry output: When the buyer knows on what the technological appliance can do.
Most buyers will know what they’re buying, what the product can do and would have researched on a competitor’s similar product.
Threat of Backward Integration: When a buyer becomes a manufacturer of products that the multi-media technology solutions Industry sells.
Overall: High
High
Low
High
Low
Medium
High
Low
Power of Substitutes
Relative Substitutes: price changes and performance of substitutes within industry, changes threat of substitutes to product.
A reasonable number of substitutes as there are several substitutes for computers and mobile phones in particular.
Switching Costs: The ease of buyers to switch products within industry.
Buyers switching services is very easy as buyers will majority of the times buy one product.
Buyer Propensity to Substitute: tendency of buyers to switch to substitutes.
The multi-media technology solutions industry buyer switching services is frequent as they base decisions on cost mattered issues. However, this is would only be applicable to mobile phones and computers as the mp3 market have no real substitutes.
Overall: Medium to High
High
High
Medium
Intensity of Industry rivalry Product Difference: products are different, resulting in market segmentation – rivalry low. Non-existing difference – rivalry high.
Small multi-media technology solutions industry companies have various products including TVs, monitors, mobile phones, laptops and mp3 players. Apart from the mp3 category, other small technology areas have competitors in their fields. Rivalry is fierce.
Brand Identity: brands – important, reduces competition & rivalry.
Is very significant in the multi-media technology solutions industry as most consumers will trust the brands they have previously bought of that have been recommended.
Switching Costs: easy for buyers to switch, rivalry will be increased.
Very easy for buyers to switch companies. Rivalry high.
Concentration & Balance: The fewer the numbers the lesser the rivalry, the more the competitors the higher the rivalry.
There are many organisations in the small multi-media technology solutions industry including Samsung, Dell, Nokia and Apple therefore the rivalry is high.
Informational Complexity: When rivalry is increased because buyers know the product that the industry sells.
- Buyers know the products that the industry sells so informational complexity doesn’t exist.
Overall: High
High
Medium
High
High
High
Appendix Three – Internal Analysis For Samsung
AREA (TANGIBLE)
TANGIBLE RESOURCES
Financial Resources
- Shareholder equity has doubled to $14m in two years.
- Current liabilities are increasing being tripled in two years.
- Samsung sales in America are 60% of total net sales
- Total net sales have increased by $11m in two years.
Organisational Resources
- The agreement Samsung made with Microsoft boosted the sales of Samsung’s iPod and especially their laptops. The agreement made Samsung software compatible with Microsoft’s desktop.
- The management structure of Samsung is led by Jong-Yong Yun, its very much an autocratic leadership with characteristics of a delegative leadership.
- Mission Statement:
- The joint venture with the major music companies in allowing ITunes to sell music from their signed artists at a price was a big step forward to their success.
- Employee culture is based on innovation and divisions, there are seven divisions within Samsung and all of them are responsible for their profits and losses
- Revamping of the board, the board has changed considerably to cope with ever changing society
Physical Resources
- -Samsung sets up in house design school, the Innovation Design Lab of Samsung.
Design labs in Los Angeles and London
-“usability laboratory” inaugurated in downtown Seoul.
- Head office, which is located in California USA
- Factories, Samsung have a plant in Cork, Ireland but most of Samsungs technology is outsourced. Samsung doesn’t own the factories but there appliances are made in factories owned by other businesses.
- International presence, Samsung has retail stores in the United Kingdom, Japan, Australia, China, Germany, Canada, Italy and Switzerland. However, Samsung has an online store which all parts of the world can access with the internet.
Technological Resources
- televisions technology borrowed from SANYO
- 1981 focus on undercutting Japanese rivals with me-too products.
- largest flat penal televisions, cell phone with a variety of features such as cameras and PDAs, ever thinner notebook, speedier and richer semiconductors.
- This agreement opened iTunes and Samsung to a greater audience
- Trademarks
- Copyrights
AREA (INTANGIBLE)
INTANGIBLE RESOURCES
Human Resources
- New board of directors implemented, the board now consists of former Vice-Presidents of the USA and CEO’s of Google, Intuit Corp and Avon
- Software and design developers are a key unit in Human Resources as its their knowledge that contributes to the final product
- Knowledge Management exists as Samsung was split into seven distinct divisions and they are in charge of their profits and losses
-
Innovation Resources
- Continue invested more than any of its competitors in R&D.
- Jong-Yong Yun (Samsung CEO) is an innovative man his current situation and
-New product concept to rollout to as little as six months.
- 550 designers employed in 2006
- Designing for digital home
Reputation Resources
- The brand Samsung represents innovation and is associated with quality small technology items.
- The perception of product quality, durability and reliability are good with consumers as they are the number one in many markets
Capabilities
Dynamic Capabilities
Knowledge Management: Jashapara (2007) defines knowledge management as being the effective learning processes associated with exploration, exploitation and sharing of human knowledge. Samsung has some degree of knowledge management existing in their business. The move by former CEO in Gil Amelio to split Samsung into seven distinct divisions would allow knowledge management to be created as more focus would be on the task at hand as the seven divisions would primarily focus on their assigned responsibility instead of scanning all functions.
Learning: The ability to learn has helped Samsung tremendously, from their first product in the Samsung 1 to learn what customers would need and want and take what they learnt from that and implement it into the Samsung 2 and has been that standard from Samsung since. Samsung has learnt from their mistakes, instead of fighting with the most powerful software company Microsoft they have made agreements in which they both benefit.
Innovation: Samsung prides itself on being innovative and coming out with better devices and new age appliances that adapt to the evolving society. With Jong-Yong Yun at the helm and for him being renown for his ability to innovative, Samsung could continue their run as a leader in the multi-media technology solutions industry. Samsungs ability to innovate is identified with their deep product breadth but most importantly with the introduction of the iPod. The iPod wasn’t the first mp3 player made but was the first to have the strong connection with computers and now controls over 70% of that market.
Strategic Capabilities
Function
Strategic Capability
Rating (Strong, Medium, Weak)
Operations
Operational flexibility
Medium
Speed of response
Strong
Reputation of quality
Strong
Product line breadth
Strong
Marketing
Effective brand creation and promotion
Strong
Understanding of customers needs
Strong
Customer service/product support
Strong
Installed base of satisfied customers
Strong
Effective advertising and image creation
Strong
Customer loyalty
Medium
Human Resources
Selection processes
Strong
Research and Development
Speed of new product development
Medium
Ability to find and link with leading-edge research in other organisation
Strong
Continuing product innovation
Medium - Strong
Customised design
Strong
Distribution
Size and location of distribution
Medium - Strong
Manufacturing
Design and production skills yielding reliable products
Strong
Product design and quality
Strong
Head Office
Decision-making system
Weak - Medium
Ability to retain good management
Weak - Medium
General
Reputation for quality
Medium – Strong
Shared vision and culture
Strong
Successful implementation of acquisitions
Strong
Well-known, powerful parent
Strong
VRIO Framework
Operations
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Operational flexibility
Yes
Yes
No
Speed of response
Yes
Yes
Yes
Yes
Reputation of quality
Yes
No
Product line breadth
Yes
Yes
No
Marketing
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Effective brand creation and promotion
Yes
Yes
Yes
Yes
Understanding of customers needs
Yes
Yes
No
Customer service/product support
Yes
No
Installed base of satisfied customers
Yes
No
Effective advertising and image creation
Yes
Yes
Yes
Yes
Customer loyalty
No
Human Resources
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Selection processes
No
Research and Development
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Speed of new product development
Yes
Yes
Yes
Yes
Ability to find and link with leading-edge research in other organisation
Yes
No
Continuing product innovation
Yes
Yes
Yes
Yes
Customised design
Yes
Yes
No
Distribution
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Size and location of distribution
Yes
No
Manufacturing
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Design and production skills yielding reliable products
Yes
No
Product and design quality
Yes
No
Head Office
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Decision-making system
Yes/No
No
Ability to retain good management
Yes/No
No
General
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Reputation for quality
Yes
Yes
Yes
Yes
Shared vision and culture
Yes
Yes
No
Successful implementation of acquisitions
Yes
Yes
No
Well-known, powerful parent
Yes
No
Appendix Four: Gap Analysis
Macro-Environment – Business Strategy Gap
How does the major strategy fit with the major trends projected for the environment?
Trend
Date Of Impact
Business strategy match or mismatch
Environmental Action – Carbon Footprint and Recycling
Current and continuing
Match – More energy efficient, allows the designing of products and the making of products to be from recycled and non-toxic materials
Economic Recession
Current and continuing
Mismatch – May decrease the sales of products as majority of the population may be inclined to save money
Ageing Population
10-15 years
Match – Samsung is attempting to target a younger generation
Need for Leisure/ Disposable Income
Now and to the next 15years
Match – Samsung is a recognised brand name and items they sell are mainly for leisurely use
Support from Governments with Education departments implementing broadband and advanced computers to assist with students learning
Now and to the next 10years
Match – Samsung can use this opportunity to push their presence within the computer market. Must be a computer designed for learning, not leisure
Culture barrier across countries
Currently and Continuing
Mismatch – Samsung must ease the transition into foreign markets and breakthrough the barriers for their products to be more internationally successful
Industry Environment – Business Strategy Gap
Industry Environment Element
Opportunity of Threat
Effect on Industry Profitability
Business Strategy Consistency of Inconsistency
Suppliers
-
Average
Consistent
Buyers
Threat
High
Inconsistent
Substitutes
Threat
High
Consistent
Threat of new entrants
Opportunity
Low
Consistent
Industry rivalry
Threat
Average
Consistent
Key Competitor – Business Strategy Gaps
Competitor
Financial Performance
Market Position
Technological Performance
Service Performance
Dell
Excellent
Good
Excellent
Good
Hewlett Packard
Good
Good
Excellent
Good
SanDisk
Poor
Poor
Average
Average
C
Another good C paper with excellent analyses – these are of a D level. I wasn’t convinced of your findings from the industry analysis - this would indicate and industry with only average profitability and that simply isn’t the case. Don’t confuse competition and substitutes. An assessment of current strategy using the frameworks from Hubbard would also have helped broaden out the recommendations, some of which are worthwhile.
References: Samsung Inc, 2009, viewed on 27 May 2009 <http://www.Samsung.com/about/> Biztech Macworld Staff, 2006, ‘Inside Samsung’s Ipod factories’, Macworld, Viewed on May 25 2009, URL: < http://www.macworld.co.uk/news/index.cfm?NewsID=14915> Marino, L
Introduction 3
Samsung Products 3
Macro Environmental Analysis 4
Economic Issues 4
Political/Legal Issues 4
Technological Issues 4
Social/Cultural Issues 4
Environmental Issues 5
Industry Analysis 5
Threat of New Entrants 5
Bargaining Power of Suppliers 5
Bargaining Power of Buyers 6
Power of Substitutes 6
Industry Rivalry 6
Internal Analysis 6
Resource Analysis 6
Dynamic Capabilities Analysis 7
Strategic Capabilities Analysis 7
VRIO/ Core Competencies 7
Gap Analysis 8
Macro-Environment 9
How does the strategy match the macro-environment? 9
Industry Environment 9
How does the strategy match the industry-environment? 9
How does strategy match performance? 9
How does strategy match capabilities and those of competitors? 9
Recommendations 9
References: 11
Appendix Four– Macro Environment Summary For Multi-Media Technology Solutions Industry 12
Appendix Two – Industry Environment Summary For Multi-Media Technology Solutions Industry 13
Appendix Three – Internal Analysis For Samsung 16
Capabilities 17
Dynamic Capabilities 17
Strategic Capabilities 17
VRIO Framework 18
Operations 18
Marketing 18
Human Resources 18
Research and Development 18
Distribution 18
Manufacturing 18
Head Office 19
General 19
Appendix Four: Gap Analysis 20
Macro-Environment – Business Strategy Gap 20
Industry Environment – Business Strategy Gap 20
Key Competitor – Business Strategy Gaps 20
Introduction
The multi-media technology solutions industry is dynamic and the trends are continuously changing with the ever-evolving society and the shifting wants of the world’s population. This analytical report focuses on the revamped business Samsung, who is led by Jong-Yong Yun. According to Samsung the company’s business strategy leverages its ability through the design and development of its own operating system and hardware. Samsung aims at bringing customers around the world gripping new products and solutions with innovative, industrial design, integration and ease-of-use. (Marino, Hattaway & Jackson, 2008)
Samsung competes in the multi-media technology solutions and provides products for people in need of recreational use, business orientated cliental and for educational purposes. Samsung provides buyers with an extensive range of desktop and laptop computers, a widespread range of mp3 players designed for different purposes that suit social facets and their latest device in the iPhone, which is a mobile phone that contains all aspects of Samsungs range in products by including the internet and the ability to play mp3’s.
Samsung Products
Samsung still thinks its core business is computers despite the mp3 iPod being main revenue raiser. Samsung as of 2008 holds just 8.5% of the PC Market share and is sitting in third spot behind successful Dell Inc (31.9%) and Hewlett-Packard (25.3%). Its product line of desktop computers consists of the:
Mac Pro, aimed at professional and business users iMac, targeted at consumer, educational and business use
Mac mini, made specifically for consumer use
Their product lines for notebooks are:
MacBook Pro, for professional and advanced consumer users
MacBook, designed for educational users and consumers
MacBook Air, intended for professional and consumer use
The Samsung iPod is an mp3 player and has recently being the primary source of revenue for Samsung. With the Samsung iPod comes the online software and music shop of iTunes. These products connect with one another and have been influential in the success of Samsung. The product lines of Samsungs mp3 players are: iPod Shuffle, a basic flash-based player, the cheapest of the mp3 players and good for people when conducting exercise iPod Nano, a multi-media player that allows videos and songs to be played, as well as the viewing of photos. iPod Classic, the largest of the mp3 players containing more memory iPod Touch, another mult-media flash based player controlled through an innovative touch
The last product to mention is Samsungs latest invention in the iPhone. Samsung’s iPhone was named Time Magazines Invention of the Year in 2007 and was bought by over 270,000 people in its first thirty-hours. Similar to the tandem relationship of the iPod and iTunes the iPhone had a relationship with the App Store, which allowed users to build applications for their phone. Ninety percent of these applications would cost under ten dollars while some applications were free.
Macro Environmental Analysis
In reference to Appendix One, the analysis showed that the multi-media technology solutions industry is complex and has a number of issues from a technological, political, environmental, social/cultural and economic outlook that can boom the industry and stun the industry from growing.
Economic Issues
The overall growth position for the industry from an economic perspective is positive. Even with the world in a degree of recession and people’s attitudes being hesitant to buy because of it, still shouldn’t affect the industry in growing. The disposable income of people today is a good sign for the industry even with the recession currently occurring people are still willing to spend. The increased wealth in countries should help the distribution of the organisations products in the industry. The latest economic trend to occur is the shift in cheap labour, noticeably in Australia businesses now are shutting down operations and product lines and moving it to Asian countries where the same function can be carried out at a lower price. This saves production costs for businesses.
Political/Legal Issues
Privacy laws, copyrights and trademark laws all contribute to the growth of the industry. If a company thinks of an idea it can then use these laws to secure its product and make sure it is not replicated by competing or new organisations. The recent push from Governments to implement broadband and advanced computers in all educational departments is a major positive for the growth of the industry.
Technological Issues
The growth is positive for the industry as the growth for technology is growing in countries, the price of technology is becoming affordable and the use of the internet is allowing businesses within the industry to compete online and to promote their business to the world. The push from the Government in learning with technological materials is a benefit for the industry. However, while technology is cheap and easy to access too much technology can stunt the growth as many products may overlap with each other and stop the need of other products existing.
Social/Cultural Issues
The social and cultural issues have a negative effect on the industry. Today’s population is ageing and this can affect the industry as it eliminates a large percentage of the audience. Levels of quality and expectations are a negative factor on growth as expectations rise and consumers can become rather picky on what they want. Another downfall to the industry is cyber-bullying, as most organisations in the industry involve the use of the internet it could potentially reduce the volume of young to middle age children. The most concerning negativity for the industry is the cultural barriers that exist, some companies in this industry may be struggling to enter the international market with their products because of the breakdown in communication and relating to the customers needs that suit their geographic situation.
Environmental Issues
Environmental issues are seen as the most concerning and organisations within the industry must start to adopt new procedures and products that support the environment. The most obvious industry is the car manufacturing industry in implementing electric and power operated cars to keep the world pollution free. Businesses in the multi-media technology solutions industry need to do the same. The effect on growth is deemed as a positive effect, and it might not be a positive effect straight away but the industry will grow once these provisions are installed. Companies when making and designing new products can embrace the use of recycling and the exclusion of toxic materials, which has been embraced universally. In applying these conditions sales may rise, as buyers are aware that the products aren’t a health hazard and recognize the company in doing their bit to save the environment. Responsible manufacturing is also a positive for the growth of the industry in the long run as people will want to work for a company that’s environmentally friendly.
Industry Analysis
When conducting the analysis of the multi-media technology solutions industry, Porters Five Forces Analysis was applied. Porter’s analysis focuses on the threat of new entrants, bargaining power of suppliers and buyers, power of substitutes and rivals on profitability in an industry. (Hubbard, Rice & Beamish, 2008)
Threat of New Entrants
The are several forces working against new entrants to this industry, the capital requirement of a new company must be high, as marketing, production, human resource and staff costs would need to be considered. Brand identity and absolute cost advantages would severely favour established companies as they have their name out to the public already and have experimented with designs and products. However, there is still room for a new entrant to gain market space and even though economies of scale may seem an obstacle there is no scale regarding the internet, so there is room to establish yourself online first before retail shops and factories are needed.
Bargaining Power of Suppliers
The bargaining power of suppliers is rated medium because even though the suppliers input is crucial to the output of the final product, companies inside the industry gather parts from a range of suppliers and make it work themselves. The supplier concentration is limited so little power is gained however there is no threat of forward integration as most companies that supply for businesses within the industry would probably make more money in providing these companies with their requested needs.
Bargaining Power of Buyers
The bargaining power of buyers is high as they determine what product they want to buy and when they want to. There isn’t much brand loyalty anymore because products are continuously changing and new and better-developed small technology solutions get released every few months. Consumers will buy for price, convenience, design and for what they like. Buyers know about what products can do and cant do compared to its competitors and they are aware of the competitors products, which increased power for buyers. However, there would be no chance of backward integration and no power is gained through buyer concentration.
Power of Substitutes
The power of substitutes is high because the switching costs between organisations within the industry are non-existent and the relative substitutes within certain categories of products are known by the buyer and are based on price and performance and have worthy alternatives. Buyer prosperity in the industry is medium rated because the number of competitive and useful substitutes in the mp3 market is appalling with Samsung dominating it. However, the prosperity of the buyer is good in mobile phones and the PC market.
Industry Rivalry
The buyer creates a fierce rivalry between organisations because they know product differences and information on products and because switching costs don’t apply. Brand identity can save some business from heading to the competition but the competition in the multi-media technology solutions industry remains strong.
Internal Analysis
(With reference to appendix three)
Resource Analysis
The tangible resources for Samsung are it’s financial, physical, technological and organizational resources. The financial resources for Samsung indicate that their shareholder equity has doubled in two years and their total net sales have increased by $11 million in the space of two years. However, what’s concerning is that the liabilities of Samsung have tripled in two years and that 60% of net sales are American based. Organisational resources have helped Samsung grow with contractual agreements made by Samsung to major music labels and arch nemesis Windows. These agreements opened up Samsung to a greater audience and profited both Windows and major music organisations as they gained from Samsung’s profits. Samsungs culture is based on innovation and will continue to do so with Jong-Yong Yun at the helm, however the leadership style he possesses is rather autocratic and analysts wonder if Samsung can sustain their innovative edge against competitors when he leaves. Physical resources are strong with Samsung within America and online. Samsung’s technological resources are the reason why Samsung is dominating the music market; the online store is the number one site for legal music downloads.
Intangible resources for Samsung’s are its Human Resources, innovation and reputation resources. The key to success in Human Resources for Samsung is its revamped Board of Directors, the board is experienced and contains CEO’s of major companies including Google and Avon. Knowledge management is also apart of Samsungs success as Samsung is segregated into seven divisions, all responsible for their own functions. Innovation is what Samsung prides itself on but interestingly enough it can be said that money put into research and development is questionable. The Income Statement for Samsung states that only 3% of net sales make up research and development. The reputation of Samsung is strong and even with Samsung thinking themselves as computers being their core business their perception amongst the population may differ. Undoubtedly the quality and durability of Samsung products are respected and if a problem eventuates, as there has been, Samsung will take the necessary correctional measures in satisfying their customers.
Dynamic Capabilities Analysis
Dynamic capabilities such as knowledge management do exist but there can be stronger use for it within Samsung, Jong-Yong Yun is an innovative leader and his business associates take more care of the business side. When Gil Amelio was in charge of Samsung the decision to split Samsung in to divisions was a smart business move, the only notable move towards KM since was the revamping of the board. It now holds other CEO’s of major companies and one former Vice-President of the USA.
The ability for Samsung to learn has helped them succeed as a business, each product they put out on the market is improved since its last and meets the needs and wants of buyers and suits today’s evolving society. Innovation within Samsung is interesting, it’s bewildering to know that research and development makes up only 3% of net sales considering Jong-Yong Yun is an innovative leader and the companies philosophy is the continued achievement would depend heavily on research and development, innovative products and services, and competitive prices. There is more room for improvement in innovation for Samsung.
Strategic Capabilities Analysis
Overall the strategic capabilities are reasonably strong for Samsung, based on the areas of operating, distribution, marketing, human resources, head office, general, research and development and manufacturing.
Operations such as speed of response, reputation of quality and product line breadth are strong capabilities for Samsung. The marketing function is the strongest of the functions as Samsung has an effective brand creation, promotion and they understand customer’s needs. Head Office capabilities were rather weak as they struggle to attain good management, an example of this is that Jong-Yong Yun wasn’t at Samsung for a period and there were several CEO’s. Decision making processes is also weak as I see the leadership styles at Samsung being autocratic. General aspects are strong with a shared vision for innovation and a good reputation for quality.
VRIO/ Core Competencies
Samsung’s speed of response is a core competency and the only one in the operations of Samsung. A quick response from an organization competing in the industry is important. The industry rivalry is very high and organizations want to remain on top and because customer loyalty is low the response to a product is crucial.
Samsungs ability to advertise their products to the world is a key factor in them being a leader in the industry. However, there is no tangible value added via marketing. In contradiction to that I believe that Samsungs effective advertising, image creation, brand creation and promotion is a core competency for them and does give them a competitive advantage.
Research and development is critical to Samsung and over years they have gained a considerable advantage over competitors from this area of business. The speed of a new product development has occurred with its laptops and mp3 players. The Samsung iPhone was slow to be released and did contain problems with its first version but the second version of the iPhone was released quickly after with new features and corrected problems related with the old version. The iPhone still gives Samsung a competitive advantage as sales soared 123% during the quarter to $3.79billion. (Biztech, 2009)
The product design and quality can lead to any organization gaining a competitive advantage but unfortunately it’s not a core competency. Any business can imitate the product providing its in appliance with copyright and trademark laws. Even though Samsungs layout is very unique, the design has been executed by companies already and will be in the future. A good example of this is the iPhone, it was a touch screen phone for leisure and this technique has been adopted by Samsung and Nokia.
Samsungs ability to a have a reputation for quality is a core competency and will always provide them with a competitive advantage over other businesses competing in the industry. This accreditation is hard to achieve and harder to sustain so Samsung must ensure that their focus continues on delivering quality products. Some Samsung products have been faulty but Samsung took the blame and implemented correctional measures to satisfy their buyers.
Gap Analysis
Macro-Environment
The major trends in this area revolve around carbon footprints and recycling, the ageing population and need for leisure but also the current recession the world is in. These trends will continue to halt and provide growth within the industry.
How does the strategy match the macro-environment?
For Samsung, there is large gap between their impacts in different cultures. Samsung is struggling in the international stage and the current recession the world is in may hinder sales so a gap is slowly opening. However Samsung matches the macro-environment with the disposable income of most individuals and Samsung’s work to remove harmonious materials from their products matches the populations’ views on recycling and carbon footprint.
Industry Environment
The industry is a reasonably profitable industry that reduces the threat of new entrants, has a strong rivalry amongst competitors and fights for the buyer’s money. Aspects such as rivalry and buyer power are high, which indicates that organisations should remain innovate and have a proactive strategy.
How does the strategy match the industry-environment?
Samsung suffers like many of the organisations in the industry with maintaining power over buyers. The buyers have considerable power as they determine what to buy. The industry rivalry is strong and the power of substitutes is threatening to Samsung besides the mp3 market.
How does strategy match performance?
Samsungs strategy is to “leverage its abilities through the design and development of its operating system, hardware and many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior ease-of-use, seamless integration and innovative industrial design.” (Marino etc al 2008)
It appears that Samsung have implemented many software applications and technologies that have attracted buyers. Their product depth is impressive and they have an innovative design. However, Samsungs strategy to bring products to customers of the world has not matched its performance.
How does strategy match capabilities and those of competitors?
Samsung’s strategy matches their capabilities well, their objectives are achieved due to strong general, operational and marketing resources competencies. Samsung’s competitors may have similar capabilities but may not have the competitive advantage Samsung gains from them.
Recommendations
Samsung is a successful business in a good industry with a number of quality substitutes waiting for Samsung to make a mistake. Samsung has been excellent in their innovational ideas and has really excelled in marketing their products and making their products compatible with societies ideas and customers needs. However Samsung still has room for improvement and should consider the following:
Samsung must put more money in to research and development as only 3% of net sales arise from this. This clearly identifies that Samsung need to improve especially if the company’s philosophy is to reach continued achievement based on research and development. More research needs to be conducted to the international stage, which brings me to my next point.
Samsung must be aware that 60% of net sales are American based, for a company competing in a strong industry and with a strategy to supply products to the whole world they sure are missing a great proportion of the world. Countries such as India and China have the greatest population levels per country of the world and Samsung only gain 7% of net sales from the Asia Pacific. This is deplorable and Samsung must break the culture barriers of these countries if they want to ascertain a larger share of the market.
Samsung’s products are really only based around three devices; a computer, mp3 player and more recently the mobile phone. Samsung should look into what industry they can break into and assert their authority. Samsung has the power to do this because of their strong brand name. Maybe Samsung should look at computer products such as printers or scanners. Samsung could further develop and break through in the camera/video recording industry. One industry Samsung tried to enter was that of the PDA’s. The PDA industry is a one-company race, with Blackberry dominating the market. Samsung had tried once with the Samsung Newton but it failed miserably. I think that if Samsung researched the industry and what the Blackberry has then it could become an opposing threat and steal some cliental.
With an ageing population Samsung could start to target what older generations could gain and use in the multi-media technology industry, it might involve money and research but open up money making opportunities
Samsungs future remains uncertain and with Jong-Yong Yun being in an unfit state due to his battle with cancer. Analysts are concerned whether Samsung has the skills and innovative mind and ideas that Jobs possessed to move further into the future. My recommendations to Samsung are:
While Jong-Yong Yun is still alive, he helps Samsung build a strong succession plan that helps the company overcome competitors in all fundamentals
He resigns from CEO of Samsung and passes on his ideas, knowledge and nurtures the new CEO into the role and teaches him/her what they can do and what they should be doing.
That Samsung implements a strong decision making system if one doesn’t exist and build a culture that isn’t autocratic and uses knowledge management, innovation and teamwork to beat other competitors.
Samsung is a strong business with a superior online presence, a good reputation for quality and a powerful product line. Its ability to dominate the mp3 market is a true indication of what Samsung can do and what it plans to do. If Samsung continue their methods of innovation and maintain the secrecy it has, you should see Samsung become more powerful and enter more industries with a range of new products.
Word Count: 2974
References:
Samsung Inc, 2009, viewed on 27 May 2009 <http://www.Samsung.com/about/>
Biztech. 2009, ‘Samsung shows how to weather the recession’, viewed on 22 May 2009, <www.smh.com.au>
Hubbard, G & Rice, J & Beamish, P 2008, Strategic Management: Thinking, Analysis, Action, 3rd edn., Pearson Prentice Hall, French Forest, New South Wales, Australia,
Jashapara, A. 2004, Knowledge management: an integrated approach, Pearson Education Limited, Essex England
Macworld Staff, 2006, ‘Inside Samsung’s Ipod factories’, Macworld, Viewed on May 25 2009, URL: < http://www.macworld.co.uk/news/index.cfm?NewsID=14915>
Marino, L. Hattaway, J. Jackson, K. 2008, ‘Samsung inc. in 2008’, University of Alabama
Appendix Four– Macro Environment Summary For Multi-Media Technology Solutions Industry
FACTOR:
ISSUE ANALYSIS:
+ and – Effect on growth
Economic
Recession
Disposable Income
Shift to cheap labour
Increased wealth in countries
-
+
+
+
Conclusion: Positive effect on growth
Political/Legal
Privacy Legislation
IP, Copyright Privacy Laws
+
+
Conclusion: Positive effect on growth
Technological
Internet
Cheap availability of technology
Technology overload
Technology growing in developing countries
+
+
-
+
+
Conclusion: Positive effect on growth
Social / Cultural
Service and quality expectations
Ageing population
Culture barrier across countries
Young generation want all in one gadget
Need for leisure
Cyber-bullying
Brand adherence
-
-
-
+
+
-
+/-
Conclusion: Negative effect on growth
Environmental
Energy efficiency – carbon footprint
Recycling
Responsible manufacturing
+/-
+
+
Conclusion: Positive effect on growth
Appendix Two – Industry Environment Summary For Multi-Media Technology Solutions Industry
Items:
ISSUE ANALYSIS:
Impact
Threat of New Entrants
Economies of Scale: The need for large-scale production in order to be cost efficient
Need a substantial number of assets (Head Office, Factories, Retail Outlets)
However, the internet has no scale therefore room is available and businesses wont need head offices, factories and retail outlets to coordinate
Brand Identity: When customers buy for the brand because of its experience, record etc
Sales in America are 60% of net sales worldwide for Samsung
Vary with products and offer a range under each category. E.g. Samsung Computers
Make products compatible with the latest trends
Capital Requirement: The amount of money needed to run a technological retail company. Limits entrants.
Need millions of dollars to make new products
HR and staffing costs
Adapting to change
Marketing costs to get the product in consumers heads
Absolute Cost Advantages: When existing companies have absolute cost advantages over new entrants.
Existing companies like Samsung and Samsung have had the production experience and opportunities to polish practices and procedures, which may hard for new entrants to mimic.
Access To Distribution: Entrants having access to distribute their product to the market.
There is no reason why new entrants cant distribute their product to the market.
Expected Retaliation: Retaliation from existing competitors, important barrier.
Capital they posses, well known businesses such as Samsung can cut prices to drive off others
Would reproduce limited editions or a different version of an already known product
Overall: Low - Medium
Low
High
High
High
Low
Medium
Bargaining power of suppliers
Differentiation of Inputs: The input of the supplier – if scarce supplier has power
Parts (microchips, screens, chemistry to remove toxic carbons)
Labour (engineers)
Presence of Substitute Inputs: If crucial to the performance of the producer than supplier has power
The use of specific parts that suppliers make is crucial to the overall performance. The final product must be reliable and durable.
Supplier Concentration (compared to industry): if only small number of suppliers – suppliers will have power.
The number of suppliers are limited so they have some power Threat of Forward Integration: if suppliers have ability to enter industry, then suppliers will have considerable power.
A supplier will need huge amounts of capital for this to happen along with economies of scale, probably make enough money outsourcing for multi-media technology solutions retail companies
Overall: Medium
Medium
Medium
Medium
Low
Bargaining power of buyers
Differentiation of Outputs: buyer output – crucial to final product. Therefore, buyer has power.
Customer service
Price
Products
Convenience
Switching Costs of Buyers: lock buyer into a contract – alliances – cost of switching becomes high.
- Not really applicable to majority of buyers. Involves business customers as they choose to implement a particular computer through the entire industry. However, would only sign into an agreement if there were a discounted price or something in the companies interest. Locking customers into telephone contracts exists between the phone company and the individual. Samsung would have a contractual relationship with phone companies to sell their products but switching costs wouldn’t apply.
Presence of Substitute Outputs: Crucial as buyer may have alternative and cheaper substitutes. Power is with the buyer.
Computers (Dell, HP, Toshiba, Apple)
Music Players (Samsung, SanDisk, iRiver)
Mobile Phones (Nokia, Sony Ericsson, Apple)
Buyer Concentration (relative to industry): if only small number of buyers – buyers will have power.
There isn’t a small number of buyers, buyers have no power
Cost Relative to Total Buyers Purchases: buyer purchases – huge part of total purchases in industry; industry concerned, buyers have power.
Purchases by buyers play a part in a multi-media technology solutions industry; buyer has the power because they can determine how much their willing to pay for a specific small technology appliances, providing there is a substitute.
Buyer Information about the industry output: When the buyer knows on what the technological appliance can do.
Most buyers will know what they’re buying, what the product can do and would have researched on a competitor’s similar product.
Threat of Backward Integration: When a buyer becomes a manufacturer of products that the multi-media technology solutions Industry sells.
Overall: High
High
Low
High
Low
Medium
High
Low
Power of Substitutes
Relative Substitutes: price changes and performance of substitutes within industry, changes threat of substitutes to product.
A reasonable number of substitutes as there are several substitutes for computers and mobile phones in particular.
Switching Costs: The ease of buyers to switch products within industry.
Buyers switching services is very easy as buyers will majority of the times buy one product.
Buyer Propensity to Substitute: tendency of buyers to switch to substitutes.
The multi-media technology solutions industry buyer switching services is frequent as they base decisions on cost mattered issues. However, this is would only be applicable to mobile phones and computers as the mp3 market have no real substitutes.
Overall: Medium to High
High
High
Medium
Intensity of Industry rivalry Product Difference: products are different, resulting in market segmentation – rivalry low. Non-existing difference – rivalry high.
Small multi-media technology solutions industry companies have various products including TVs, monitors, mobile phones, laptops and mp3 players. Apart from the mp3 category, other small technology areas have competitors in their fields. Rivalry is fierce.
Brand Identity: brands – important, reduces competition & rivalry.
Is very significant in the multi-media technology solutions industry as most consumers will trust the brands they have previously bought of that have been recommended.
Switching Costs: easy for buyers to switch, rivalry will be increased.
Very easy for buyers to switch companies. Rivalry high.
Concentration & Balance: The fewer the numbers the lesser the rivalry, the more the competitors the higher the rivalry.
There are many organisations in the small multi-media technology solutions industry including Samsung, Dell, Nokia and Apple therefore the rivalry is high.
Informational Complexity: When rivalry is increased because buyers know the product that the industry sells.
- Buyers know the products that the industry sells so informational complexity doesn’t exist.
Overall: High
High
Medium
High
High
High
Appendix Three – Internal Analysis For Samsung
AREA (TANGIBLE)
TANGIBLE RESOURCES
Financial Resources
- Shareholder equity has doubled to $14m in two years.
- Current liabilities are increasing being tripled in two years.
- Samsung sales in America are 60% of total net sales
- Total net sales have increased by $11m in two years.
Organisational Resources
- The agreement Samsung made with Microsoft boosted the sales of Samsung’s iPod and especially their laptops. The agreement made Samsung software compatible with Microsoft’s desktop.
- The management structure of Samsung is led by Jong-Yong Yun, its very much an autocratic leadership with characteristics of a delegative leadership.
- Mission Statement:
- The joint venture with the major music companies in allowing ITunes to sell music from their signed artists at a price was a big step forward to their success.
- Employee culture is based on innovation and divisions, there are seven divisions within Samsung and all of them are responsible for their profits and losses
- Revamping of the board, the board has changed considerably to cope with ever changing society
Physical Resources
- -Samsung sets up in house design school, the Innovation Design Lab of Samsung.
Design labs in Los Angeles and London
-“usability laboratory” inaugurated in downtown Seoul.
- Head office, which is located in California USA
- Factories, Samsung have a plant in Cork, Ireland but most of Samsungs technology is outsourced. Samsung doesn’t own the factories but there appliances are made in factories owned by other businesses.
- International presence, Samsung has retail stores in the United Kingdom, Japan, Australia, China, Germany, Canada, Italy and Switzerland. However, Samsung has an online store which all parts of the world can access with the internet.
Technological Resources
- televisions technology borrowed from SANYO
- 1981 focus on undercutting Japanese rivals with me-too products.
- largest flat penal televisions, cell phone with a variety of features such as cameras and PDAs, ever thinner notebook, speedier and richer semiconductors.
- This agreement opened iTunes and Samsung to a greater audience
- Trademarks
- Copyrights
AREA (INTANGIBLE)
INTANGIBLE RESOURCES
Human Resources
- New board of directors implemented, the board now consists of former Vice-Presidents of the USA and CEO’s of Google, Intuit Corp and Avon
- Software and design developers are a key unit in Human Resources as its their knowledge that contributes to the final product
- Knowledge Management exists as Samsung was split into seven distinct divisions and they are in charge of their profits and losses
-
Innovation Resources
- Continue invested more than any of its competitors in R&D.
- Jong-Yong Yun (Samsung CEO) is an innovative man his current situation and
-New product concept to rollout to as little as six months.
- 550 designers employed in 2006
- Designing for digital home
Reputation Resources
- The brand Samsung represents innovation and is associated with quality small technology items.
- The perception of product quality, durability and reliability are good with consumers as they are the number one in many markets
Capabilities
Dynamic Capabilities
Knowledge Management: Jashapara (2007) defines knowledge management as being the effective learning processes associated with exploration, exploitation and sharing of human knowledge. Samsung has some degree of knowledge management existing in their business. The move by former CEO in Gil Amelio to split Samsung into seven distinct divisions would allow knowledge management to be created as more focus would be on the task at hand as the seven divisions would primarily focus on their assigned responsibility instead of scanning all functions.
Learning: The ability to learn has helped Samsung tremendously, from their first product in the Samsung 1 to learn what customers would need and want and take what they learnt from that and implement it into the Samsung 2 and has been that standard from Samsung since. Samsung has learnt from their mistakes, instead of fighting with the most powerful software company Microsoft they have made agreements in which they both benefit.
Innovation: Samsung prides itself on being innovative and coming out with better devices and new age appliances that adapt to the evolving society. With Jong-Yong Yun at the helm and for him being renown for his ability to innovative, Samsung could continue their run as a leader in the multi-media technology solutions industry. Samsungs ability to innovate is identified with their deep product breadth but most importantly with the introduction of the iPod. The iPod wasn’t the first mp3 player made but was the first to have the strong connection with computers and now controls over 70% of that market.
Strategic Capabilities
Function
Strategic Capability
Rating (Strong, Medium, Weak)
Operations
Operational flexibility
Medium
Speed of response
Strong
Reputation of quality
Strong
Product line breadth
Strong
Marketing
Effective brand creation and promotion
Strong
Understanding of customers needs
Strong
Customer service/product support
Strong
Installed base of satisfied customers
Strong
Effective advertising and image creation
Strong
Customer loyalty
Medium
Human Resources
Selection processes
Strong
Research and Development
Speed of new product development
Medium
Ability to find and link with leading-edge research in other organisation
Strong
Continuing product innovation
Medium - Strong
Customised design
Strong
Distribution
Size and location of distribution
Medium - Strong
Manufacturing
Design and production skills yielding reliable products
Strong
Product design and quality
Strong
Head Office
Decision-making system
Weak - Medium
Ability to retain good management
Weak - Medium
General
Reputation for quality
Medium – Strong
Shared vision and culture
Strong
Successful implementation of acquisitions
Strong
Well-known, powerful parent
Strong
VRIO Framework
Operations
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Operational flexibility
Yes
Yes
No
Speed of response
Yes
Yes
Yes
Yes
Reputation of quality
Yes
No
Product line breadth
Yes
Yes
No
Marketing
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Effective brand creation and promotion
Yes
Yes
Yes
Yes
Understanding of customers needs
Yes
Yes
No
Customer service/product support
Yes
No
Installed base of satisfied customers
Yes
No
Effective advertising and image creation
Yes
Yes
Yes
Yes
Customer loyalty
No
Human Resources
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Selection processes
No
Research and Development
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Speed of new product development
Yes
Yes
Yes
Yes
Ability to find and link with leading-edge research in other organisation
Yes
No
Continuing product innovation
Yes
Yes
Yes
Yes
Customised design
Yes
Yes
No
Distribution
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Size and location of distribution
Yes
No
Manufacturing
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Design and production skills yielding reliable products
Yes
No
Product and design quality
Yes
No
Head Office
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Decision-making system
Yes/No
No
Ability to retain good management
Yes/No
No
General
Potential Strategic Capability
Valuable for customers
Rare
Difficult to imitate
Effectively arranged & deployed in organisation
Reputation for quality
Yes
Yes
Yes
Yes
Shared vision and culture
Yes
Yes
No
Successful implementation of acquisitions
Yes
Yes
No
Well-known, powerful parent
Yes
No
Appendix Four: Gap Analysis
Macro-Environment – Business Strategy Gap
How does the major strategy fit with the major trends projected for the environment?
Trend
Date Of Impact
Business strategy match or mismatch
Environmental Action – Carbon Footprint and Recycling
Current and continuing
Match – More energy efficient, allows the designing of products and the making of products to be from recycled and non-toxic materials
Economic Recession
Current and continuing
Mismatch – May decrease the sales of products as majority of the population may be inclined to save money
Ageing Population
10-15 years
Match – Samsung is attempting to target a younger generation
Need for Leisure/ Disposable Income
Now and to the next 15years
Match – Samsung is a recognised brand name and items they sell are mainly for leisurely use
Support from Governments with Education departments implementing broadband and advanced computers to assist with students learning
Now and to the next 10years
Match – Samsung can use this opportunity to push their presence within the computer market. Must be a computer designed for learning, not leisure
Culture barrier across countries
Currently and Continuing
Mismatch – Samsung must ease the transition into foreign markets and breakthrough the barriers for their products to be more internationally successful
Industry Environment – Business Strategy Gap
Industry Environment Element
Opportunity of Threat
Effect on Industry Profitability
Business Strategy Consistency of Inconsistency
Suppliers
-
Average
Consistent
Buyers
Threat
High
Inconsistent
Substitutes
Threat
High
Consistent
Threat of new entrants
Opportunity
Low
Consistent
Industry rivalry
Threat
Average
Consistent
Key Competitor – Business Strategy Gaps
Competitor
Financial Performance
Market Position
Technological Performance
Service Performance
Dell
Excellent
Good
Excellent
Good
Hewlett Packard
Good
Good
Excellent
Good
SanDisk
Poor
Poor
Average
Average
C
Another good C paper with excellent analyses – these are of a D level. I wasn’t convinced of your findings from the industry analysis - this would indicate and industry with only average profitability and that simply isn’t the case. Don’t confuse competition and substitutes. An assessment of current strategy using the frameworks from Hubbard would also have helped broaden out the recommendations, some of which are worthwhile.
References: Samsung Inc, 2009, viewed on 27 May 2009 <http://www.Samsung.com/about/> Biztech Macworld Staff, 2006, ‘Inside Samsung’s Ipod factories’, Macworld, Viewed on May 25 2009, URL: < http://www.macworld.co.uk/news/index.cfm?NewsID=14915> Marino, L
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