Samsung Electronics

Global companies face various challenges that in a way jeopardize their operations in the global market. To develop an understanding of how global companies operate a consideration of operations of Samsung is described in this essay. The primary focus of this discussion is stipulating the locations in which Samsung operates a number of its employees and profit margins of the organization. Together with discussing the mentioned issues, the essay will make use of definite tools to analyze Samsung strengths and weakness. Specifically, the easy will provide an analysis of Samsungs operations based on VRIO analyses, PESTLE analyses, and SWOT analyses. Additionally, the essay will provide an analysis of both macro and microenvironments in which Samsung electronics operate.

Company Highlights

Samsung electronics was invented in 1969 in Daegu South Korea. After its establishment, Samsung has displayed an overwhelming growth rate that has seen to it its expansion to other countries making it attain a multinational status. Specifically, the organization has plants and sale network in 61 countries across the entire world. With the wide scope in which Samsung electronics operates, the organization has employed around 308, 745 people across the world. Even though the organization like other global companies faces operational challenges, as of October 2017, the market capitalization of the organization stood at $372.0 billion (Lee, 2006). The indicated value was an increment of the net profit that the company had gathered in 2016. Precisely, in 2006, Samsung posted consolidated revenues of (Korea Republic Won) 53.33 trillion and an operating profit of 9.22 trillion. The overall performance of Samsung in 2016 displayed revenue of KRW 201.87 and a profit of 29.14 trillion.
Despite indicating the noted profits Samsung Electronic have been subjected to a major operational challenge of global competition. Making use of key performance indicators, challenges experienced by Samsung Company can be broken down into fewer complex measures that can be easily understood. Some key performance indicators that can be used to depict Samsung’s performance are, for instance, the rate of earning per share, the number of the intercompany transaction within related parties and lastly the number of transactions among joint venture members. Making use of the noted above key performance indicators, it can be argued out that despite the organization facing a global challenge, it has displayed an increase in earnings per share of 24.9 in 2011 than 2010 (Lee, 2006). Additionally the organization number of the intercompany transaction within related party circles. For instance, the company involved in the inert joint venture analysis with companies such as Coming Precision Glass and Siltronic Samsung Water.

The biggest challenge that Samsung electronics have experienced over time is high levels of competition from its rival companies Apple and Sony companies. Following the challenges Samsung is currently experiencing, the company had embraced various trends that have seen it maintaining a competitive advantage over other organization. Recently Samsung has invented the curve television technology that has put it in a better competitive position than other organizations. Despite making use of the noted innovations, Samsung is fighting battle due to the invention of other phones manufacturing companies such as Apple, Huawei, Lenovo, and +Motorola.
It is important for any firm or organization to identify elements of macro environment as any change in the economics associated with electronics products would affect many organizations. The Samsung electronics are used in many parts of the world including Asia, United States, and Europe. All organizations are affected by the aspect of the macro environment as they capable of determining the buying power of the consumer and their ability to fulfill the longing for material goods. The natural elements of the macro environment should not be neglected by any firm, particularly those that function in the industry of electronics where heavy metal such as cadmium and mercury are applicable. The PESTEL analysis thus focuses all external macro environments within which firm’s functions and in most cases; they are uncontrollable by the business.

Macro Environment

There are many external factors that influence the electronics industry globally and one of them is the political environment. The influence of politics affects many firms globally to an extent of some regimes supporting the certain brand in their countries. Others firms are even forced to withdraw certain gadgets in certain nations as a result of political tension. The social environment is another trend that is changing globally as new services and technology is changing the needs and wants of many clients worldwide. The main challenge that is facing the electronics industry is that many individuals are finding it difficult to use the products in a proper way and more so the new gadgets such as tablet phones (Nuovo, & Salazar, 2015). Many people need to be trained on how to use various electronics and this remains a huge problem for the industry. In addition, the legal issue is another factor that has been affecting many firms in this industry while marketing their products. Samsung electronics faces many challenges of elements from the macro environment as any organization and hence necessary steps need to be laid out to overcome these challenges.

The microenvironment of any firm involves all close entities that interfere with effective service or product delivery. Having a favorable internal environment is essential for any firm as it increases the productivity and benefits the company positively. The stakeholders as members of the microenvironment in most cases affect the business directly. The profit made by the business sometimes influences the stakeholders, and through voting, they influence the company. Even though stakeholders are part of a short-term financial gain for any organization, their request for profits and excessive control may affect the organization’s practices, employees and product, and services. Also, the industry needs to be cautious with media as it is capable of benefitting or destructing the firm. Thus, an organization needs to create a positive working relationship with media in order to promote the advancement and reduce the impact created by a negative event on their status (Nuovo, & Salazar, 2015). Suppliers remain one of many factors that determine the direction of a business and therefore a supplier behavior may directly influence the running of a business. For instance, if Samsung product supplier provides a poor service this may in many cases increases the product quality or timescales. Having a close relationship with a supplier is the only ways that can ensure the business remains secure and competitive.

Employees working in any organization act as the pillar of the business and a business that has effective employees remain competitive in the market. Employing staff with appropriate experience and skills is important. The process of having effective employees need to start at the recruitment stage and move on an employee’s employment through ongoing promotion opportunities and training. In the service sector marketing in which Samsung Company operates development and training play an essential role in acquiring a competitive edge. If a company operates with staff without skills, motivation or experience may affect customer services or sometimes sales. Another microenvironment that affects the success of a business is its customers as all businesses need customers. Any company marketing plan should be planned in a way that attracts and retain customers via products that meet their “wants and needs” and outstanding client service (Nuovo, & Salazar, 2015). Globalization that is the amalgamation of individuals with world markets –is may be the most important and inescapable economic expansion of the late 20th and early 21st Centuries. Globalization impacts various internal factors that have affects the business as it acts a double-bladed sword, one can be detrimental and beneficial to industry and thus firms need to be equipped to deal with such effects and attempt to exploit on global market prospects while prudently handling its intrinsic coercions.

The value chain analysis seems a difficult model to duplicate and offers a substantial competitive advantage for Samsung. The most variables relevant to analysis in this situation include customization, technology, quality, and brand. The history of an organization is a relevant factor that backs to its brand equity. The brand value factor is mostly calculated using the number of years in operation. On the technology, the design rule is applied to measure the technical competence. For quality, better process engineering and R&D gives improved quality products. The weight of Quality is measured using the level of company investment in R&D. Overall, when compared to its competitors in the industry; Samsung has the highest V-C. Conferring with V-C analysis Samsung is both value and cost leader in the market and this ensures it is able to create the highest buyer and firm surplus in the industry that it controls. As it is the case with any other leading firm in the market, cost and value are important for Samsung’s presentation.

VRIO analyses of Samsung Company

Samsung has many capabilities and resources that offer a sustained competitive advantage over its competitors based on the VRIO analysis. Various threats from competitors and more so from China may be more important if they happen to catch up on values drivers in the provisional continuous modest benefit category. Mostly, this involves various factors such as product and quality mix/customization capabilities and fabrication capacity. The analysis highlights the organization values drivers in terms of intellectual property and technological advantages in their edge products. The importance of the drivers is that they prevent the imitation by other new entrants in the market and thus the company reliability and quality value driver keeps customers from swapping to rivals products.

A VRIO analysis is a complement to PESTLE analysis that examines the macro-environment of an organization. Making use of the VRIO analysis one can find out a company’s state from inside situation by examining its resources, competitive implications and the possibility of improving the organization environment with the aim of making better strategic management of the organization. The best way in which Samsung electronics an be assessed is through utilization of six force models. A combination of the six force model and VRIO analyses makes it possible to identify the companies threat and opportunities in the market. Industrial competition of the company in consideration indicates that there is a medium to high competition since despite having many competitors, Samsung has emerged as a market leader in the electronic business (Australia, 2016). The VRIO results of Samsung electronics indicates that the organization has competitive advantage in the DRAM market a fact that can be proven by the amount of capital in R&D and the strong leadership practiced at Samsung Electronic.

Important to mention about Samsung electronics is that the organization makes use of human relationship management strategy that gives the employees an opportunity to take part in ethical decision making within the companies premises. Utilization of human relationship management strategy has impacted the Samsung positively because through it, high levels of productivity are ensured, employees are presented with a chance of taking part in ethical decision making and more importantly a sense of belonging is inflicted to the employees. A consideration of VRIO analysis of Samsung Electronic indicates that the capability of the resource of the organization is partly fair as compared with its competitors
As it was noted in the latter sections of the essay, Samsung electronics are subjected to high levels of competition from other mobile makers companies such as Apple, Huawei, Lenovo and +Motorola (Australia, 2016). Even though the companies in consideration are managed differently from Samsung, they display medium level competition for Samsung. For instance, the mentioned companies product prices are cheaper than gadgets made by Samsung. Taking a case of Sanyo and L.G companies that enjoy a better global recognition than Samsung, they display a better market position than Samsung reason that presents a competitive disadvantage to Samsung. Despite subjecting Samsung to the mentioned competitive strengths, the competitors of the organization bears major weakness that in turn ensured the market prevalence of Samsung company. For instance, Apple products are very expensive compared to products provide by the Samsung company. Additionally, compatibility of Apple products as compared to Android products manufactured by Samsung products is relatively low.

Utilization of KSF and VRIO to determine Samsung’s weakness

Making use of the mentioned tools, it is fact clear that despite being a global organization, Samsung bears much weakness that if not addressed promptly, may lead total failure of the organization. The primary weakness that Samsung faces is lack of their Operating system and software. Development of such software subjects the organization in consideration to face indefinite losses following the high cost of their development. An additional weakness that Samsung faces is focusing on too many products. Samsung is at losing end since it loses focus as a result of competing with too many companies (Australia, 2016). As compared to products offered by Chinese companies, Samsung products are expensive a fact that subjects Samsung to facing instances of too low-profit margin.

Porter’s five forces reaction

Porters five forces in relation to Samsung electronics revolves around the five stages which are present through the industry as it aims to gain dominance or control of the world market as the management moves in to improve innovations and production. The competitive rivalry is one of the porter’s forces where Samsung is supposed to look into the type of competition which they have across the board. Samsung, as seen earlier, has got a variety of brands which it manufactures and due to this reason, there are competitors in every sector of its production. The first competitors and who seem to be giving Samsung management a headache are Apple Inc. who have gone to the extent of using them in violation of infringement of innovation and property rights (Dögl, et al, 2915). The second batch of competitors in consumer electronics involves LG and Sanyo electric limited which have been in existence as long as Samsung electronics. Samsung in this competitive field has been ahead of their competitors because they have been improving their style of electronic production to fit their markets and target clients across the globe. The second porters five force formula is the supplier power which has seen Samsung products being used even in the remote areas of the world due to the easy movement of their products by their suppliers. Samsung electronic products have had reasonable prices meaning that they have good business dealings with the suppliers. The third porter’s force is buyer power and for Samsung electronics, it is strong as their products are well accepted by many consumers across the board and due to the variety of the products which they produce. The fourth porter’s force is the threat to substitution and where the products that compete with Samsung electronics are concerned is it should continue to improve on the products that it is manufacturing lest it loses the market share which it enjoys across the globe.

Porters Diamond model

Porter’s diamond model also works to improve the business edge of any organization and for Samsung electronics, it needs to ensure that it has continuity and long-term goals for survival. Samsung has got a strong backing from the South Korean government because of it one of the global giant nations which are bent on innovation and invention of electronics. Firm strategy, structure, and rivalry that is used by Samsung have helped the company to grow and improve over the years to an extent of posting $175 billion over the year ended 2016 (Porter, 2008). Demand conditions for the electronic and mobile industry mean that Samsung electronics still need to work on their innovations because that is where the new frontier for competition lies (Porter, 2008). The demand by consumers in different regions across the globe ensures that the products that Samsung makes are in line with the guidance and policies that are instituted in those countries. The porter’s diamond model also focusses on related supporting industries that essential for the growth of any industry and how they ensure that there is mutual existence. The proximity of these industries ensures helps them to share any relevant information that may be useful to their companies and in doing that it creates a continuous exchange of ideas. Under the diamond model factor conditions that are needed for the growth of an industry are supposed to be created not inherited. There are specialized factors of production that have been making industries to function and run well and they include capital, infrastructure, and skilled labor (Porter, 2008). Other general factors like raw materials, unskilled labor which can be obtained by any of the companies do not have any big impact on the sustainability of a company. Therefore, Samsung electronics must be able to balance the porter’s diamond initiatives even if they are applicable at a departmental level as every sector is allocated its goals and targets over a given period of time. The role of the government also features in the diamond model because it is supposed to act as a catalyst and challenger as it checks on acts and balances of the companies because they cannot be left unchecked (Dögl & Schuster 2915). This is because there are regulations that are supposed to ensure that corporations that are based in any country are able to work within certain governmental parameters so as to avoid conflict which may arise within their competitors or the state.

SWOT analysis

A SWOT analysis that is ethical in the decision-making process of Samsung electronics involves the way in which they are able to dispose of electronic waste that is brought by their products. While the world moves to ensure that there is green energy sustainability in all sectors of the economy, Samsung also moves to ensure that they conform to those regulations. This is because Samsung is a giant global company that is supposed to ensure that it also leads to combating environmental degradation. This strategy is a weakness for the firm because it cannot stop its production of electronics but it is supposed to prove to the relevant authorities that it can be able to combat any e-waste products that arise from its products (Dögl, Schuster, 2015). The other SWOT dilemma that Samsung is embroiled in involves the production of defective products which are becoming a health hazard to the consumers. The recalling of the note 8 which was blowing up due to overheating also shows the weakness that is faced by Samsung in a bid to ensure that they have tech-savvy products which are supposed to compete with their rivals. These are some of the challenges that Samsung faces due to globalization as it continues to establish itself as a reliable source of authentic electronic devices across various countries. The moment that Samsung is unable to fulfill such mandates means that there is a loophole which is left by its management and it can be exploited by their rivals.

According to Miles and Snow strategic plans, it shows that Samsung electronics also uses the reactor strategy in its implementation, innovation, and the invention of its electric and telecommunications products. This is because Samsung has used the prospector approach in its manufacturing industries so that it can increase their market share on the products which they are manufacturing. Initially the company was founded to produce one set of the brand but currently, it has waded into different sectors which operate under its umbrella. It further continues to defend its markets by ensuring that products which their loyal customers were used to buying are still available while improving their variety. Under such context, it shows the maturity which the Samsung electronics has grown since its inception.