Finance and Strategic Management of Samsung

Samsung’s financial statements offer a very wide range of information, from the number of sales they make per year to the amount of money they pay out out in dividends. Higson (2012) and Bragg (2018) provide tips on how to interpret financial statements. Samsung has been experiencing overall growth in sales over the years; there was a slight increase in sales from 2015 to 2016 and and even bigger rise in 2017, accompanied by a similar increase in operating profit and net income. When looking at Samsung’s sales by business division it can clearly be seen that the IT & Mobile Communications division records the highest amounts of money from sales over the last three years, followed by the DeviceSolutions_Semiconductor division, Consumer Electronics, Device Solutions_Display and Harman division respectively.

The Device Solutions_Semiconductor division recorded an increasingly growing rate of sales and a significantly higher amount of money from sales in 2017 than in 2016 and although the IT & Mobile Communications division made more money from sales, it recorded a lower percentage of overall sales during that same period. This was due to an even larger amount of sales within the semiconductor solutions division, which corresponds to recent innovations in technology that suggest semiconductors are better to be used in the place of metals especially in phones, cars and computers. There was also a slight decrease in the sales of consumer electronics from 2016 to 2017. This alongside the slow progress of sales within the IT & Mobile Communications division could have been because they invested more of the money into acquiring the new business Harman, which offers harmonious integration of many in-vehicle technology solutions to make the driving experience easy, including rear-views and wide-angle camera applications to keep drivers aware of their surroundings. There is a high need for semiconductors solutions in the Harman business; this could also explain the increase in sales within that division.

From Samsung’s overall sales by region, it can be seen that they have a stable market in Americas and Europe, with America leading in overall sales by region followed by Europe and with slight fluctuations within the Chinese, Korean and African/Asian markets. Korea’s market was stable throughout 2015 and 2016 and experienced slight growth in 2017.

Despite growing amounts of money made from sales in Asia/Africa and Asia over the years, there has ben a general reduction in the overall percentage of sales in these areas owing to an even larger growth in the American and Asian markets. The data also shows a way sharper increase in total sales from 2016 to 2017 as compared to the rise from 2015 to 2016. From my investigation it was due to the introduction of the Samsung Galaxy S8 phone alongside more effective marketing and distribution techniques. The Samsung Galaxy S8 was first released on April 21st 2017. On April 24th 2017, Samsung announced that sales of the S8 was at its best ever. Although it did not release specific sales numbers it announced that sales of the S8 were 30% higher year-over-year than the Galaxy S7. The Galaxy S8 has a sleeker screen with a buttonless screen allowing for much more display into a body that is only marginally larger than the Galaxy S7. To achieve this, the fingerprint scanner was moved to the back of the phone. The overall appearance of the phone was greatly improved and with new software tweaks that improve picture processing, its photo-shots looked slightly sharper than its major competition’s phone out at the time - the iPhone 7 Plus.

In the economic value distributed section, the main areas of assessment will be the amounts of dividends and the pay-out ratio. The amount of money paid as dividends has been increasing over the years with a sharper increase from 2016 to 2017 than from 2015 to 2016 corresponding to the increase in money made from sales during these years. The pay-out-ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. Payout ratio = (Total dividends paid / Net income) x 100Although there was a significant rise in total dividends paid in 2017, the pay-out ratio was quite lower than that in 2016. This means that despite the rise in dividends paid, there was a proportionally larger net income made which Samsung must have used to reinvest into the business in anticipation of a better overall performance in 2018.

Recommendations to samsung

Samsung should keep excelling markets constantly growing while making improvements on sales in the less excelling ones through more effective marketing. They could add more effort into product development by adding certain features such as video screenshots, developing a better and less vulnerable operating system with minimal bugging, and improved picture picture quality. Also, Samsung could use the curve and sleek phone screen idea into the making other gadgets, such as a laptop with a curvy screen, a touchscreen keyboard and a feature to unlock laptops with fingerprints.

Nevertheless, growing demand for technology especially Samsung products such as smart tv’s and mobile phones for social media and mobile banking in developing nations a lot of which are in Africa is an opportunity to increase their sales so they might need to open up more stores and train more employees. They can also benefit from the cheap labour in Africa they open a manufacturing branch there.Furthermore, it is not completely out of the picture that in the future, Samsung could develop a smart car or smart house with a common connection to other Samsung gadgets, which could have certain commands given via the smart phone or other connected devices.