Strategic Analysis of Samsung:

Summary:

Samsung is a South Korean multinational company with its headquarters situated in Samsung Town, Seoul, South Korea. The company owns several subsidiaries and businesses under the largest business conglomerate in South Korea (CNBC, 2012). However, Samsung is popular in the world for its smartphone products (Samsung, 2016). Samsung was established as a trading company in 1938 by Lee Byung-Chul (Samsung, 2016). During the next three decades of operations, Samsung diversified its business into other areas including retail, securities, insurance, textiles, and food processing, etc. In the late 1960s, Samsung entered the electronics industry which contributed to the subsequent growth of the company (Samsung, 2016). Today, the biggest subsidiary of the company is Samsung Electronics which is the largest company in the world in Information Technology industry (The Economist, 2016). The purpose of this report is to conduct a strategic analysis of Samsung. It develops a strategic plan for Samsung Electronics. A detailed internal and external analysis of Samsung has been conducted. The tools of PEST analysis, Porters five forces analysis, competitor analysis, financial analysis, value-chain analysis and TOWS analysis have been employed for Samsung Electronics (smartphones).

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1. Introduction:

Samsung is a South Korean multinational company with its headquarters situated in Samsung Town, Seoul, South Korea. The company owns several subsidiaries and businesses under the largest business conglomerate in South Korea (CNBC, 2012). However, Samsung is popular in the world for its smartphone products (Samsung, 2016). Samsung was established as a trading company in 1938 by Lee Byung-Chul (Samsung, 2016). During the next three decades of operations, Samsung diversified its business into other areas including retail, securities, insurance, textiles, and food processing, etc. In the late 1960s, Samsung entered the electronics industry which contributed to the subsequent growth of the company (Samsung, 2016). Today, the biggest subsidiary of the company is Samsung Electronics which is the largest company in the world in Information Technology industry (The Economist, 2016).

Samsung Electronics, like its other subsidiaries, holds the vision of emerging and sustaining its position as a preferred supplier of the services and products offered by the company. However, the strategies adopted by the brand are in accordance with its specific market focus, which demonstrates company’s adaptability (Kovach, 2013). This strategic plan has been developed for Samsung Electronics, with a particular focus on Smartphones. Though Samsung Electronics manufactures other products besides Smartphones. However, to conduct a focused analysis, this report discusses its strategies in the smartphones industry.

1.1. Current Challenges for Samsung Electronics (Smartphones):

The industry of consumer electronics is highly competitive and versatile. It has a number of giant rival organisations like Apple Inc., Samsung, Huawei, and Nokia, etc. All of the rival companies strive to beat the competition through innovation, promotions, and changing their strategies according to the changes in external and internal environment (Teece, 2010). According to Tanner (2016), both Apple and Samsung have encountered a slowdown in sales of smartphones in the market that has impacted their sales revenue. There are several reasons for the sales decline of Samsung smartphones, which include entrance of new players in the industry and increased reliance on the market on made-in-China smartphones and local brands that are relatively cheaper and affordable. Sales reports of fiscal years 2014 and 2015 demonstrate that Samsung has held its position as the market leader (see figure-1); however, the sales of Samsung have dropped in the fiscal year 2016 (Tanner, 2016).

FIGURE – 1 Top Smart Vendors’ Sales in FY2014-2015

[Source: Tanner, 2016]

During the financial crisis of 2007-2008, Samsung Corporation encountered a serious plunge in its net profits (Financial Times, 2008), which depicts a lack of strong strategic basis to deal with the crisis. Furthermore, it’s smartphones are witnessing a decline in its profits (“Samsung slashes profit forecast over Galaxy Note 7 crisis,” 2016). The brand is also going through “Note 7 crisis”, as several of its recently launched smartphones have exploded (Kharpal, 2016). Consequently, Samsung Electronics (smartphones) needs to develop strategies to maintain its brand image and sustain its growth.

2. External Analysis of Samsung Electronics (Smartphones):

2.1. Forecast of Business Competition Sustainability:

PEST analysis is a tool developed by Aguilar (1976), and it covers the political, economic, socio-cultural, and technological factors that can have a positive or negative impact on an organisation.

Factors Implications
Market Position:
Samsung has created and sustained its position as the market leader in Smartphones industry (IDC, 2016) (see appendix-1).

From the year 2010, Samsung leads the market in total sales of mobile phones leaving behind LG, Nokia, and Apple, etc. (IDC, 2016).

Although Samsung holds a strong market position, Apple can overlap its success due to several ethical and technological factors, such as ‘Note 7 crisis’ (BBC, 2016)
Despite the emergence of Apple in 2014, Samsung has engrossed more customers as its new product’s demand overlapped its production capacity (CNET, 2015). The growing technological advancements of Apple and entrance of cheaper mobile phone manufacturing companies can be a threat for Samsung.
From 2015-2020, the smartphone industry is predicted to have growth rate of 3.9%, 3.1%, 1.6%, 0.3%, 1.6% and 1.2% respectively (Kahn 2014). Samsung will need to reconsider its strategies and strengthen its market position to cope with the forthcoming decline in industry’s growth strongly.
Political/Legal Factors:
South Korea faces political instability. There is a constant threat of war between South and North Korea Political unrest in which company is headquartering may impact its position either financially or morally.
The smartphone industry has always been governed by a number of laws like safety laws, environmental laws, consumer protection laws and product regulatory laws (Moon, 2016).

In 2012, Apple filed six allegations against Samsung on issues of patent and technology imitation, out of which 5 were ruled in Apples’ favour and the company had to pay $1 billion as fine (The Guardian, 2012; Fortune, 2015).

Samsung needs to make sure that it follows the regulations related to patents, technology, copyrights, and consumer protection, etc. Research, product development, and innovations should be guided by the legal framework.
Economic Factors:
An economic or financial crisis can negatively influence Smartphone industry. The financial crisis of 2008 had an adverse effect on Smartphone industry. The profits of Samsung fell badly during the financial crisis of 2008 (Financial Times, 2008. Samsung needs to develop strong strategies to maintain its profits during such crisis.
The smartphone industry is influenced by a change in exchange rates and inflation. Samsung’s profit declined in 2014 due to a falling currency exchange rate of South Korea as well as growing competition in local markets.
A decline in per capita income of customers impacts the profits and revenue for luxury products like mobile phones and vehicles (Kahn, 2014). According to Apple Insider (2014), Samsung Smartphones’ demand declined due to the overpriced phone which was the result of lack of economies of scale. Samsung needs to shape its pricing strategies so that it can maintain its dominant market share.
After 2010, an increase in per capita income of consumers has increased the demand for luxury brands (Kahn, 2014). Samsung can cater maximum market share by developing products that are according to the demand of consumers. Appropriate pricing strategies should be developed in this regard.
Sociocultural Factors:
Changing lifestyles, attitude, taste, behaviour and beliefs of the people can tremendously increase or decrease the demand for luxury products (Moon, 2016). Changing lifestyle of the people have been a boom for Samsung and other luxury smartphones companies, as the demand for luxury products has tremendously grown in last five years (Samsung, 2016).
Culture may become a hurdle if companies do not handle it with utmost care especially while operating a multinational organisation (Curtis & Cobham, 2008). The culture of Samsung company is very rigid, and it is completely held by one family. However, the vision of Samsung is frequently changing than the culture of its country where are sceptical to the foreigners and never allow them to hold senior posts (Moon, 2016).
Technological Factors:
Constant advances in technology are at the core of smartphone industry, as people are willing to buy latest technology smartphones even at very high prices (Kaplan and Haenlein, 2010). Samsung is being considered as leading innovative company after Apple and has the advantage to harness the technological power and drive the innovation for sustainability in the market.

2.2. Porters Five Forces Model:

Bargaining Power of Suppliers:

The smartphone industry has a large number of suppliers, who are willing to supply materials to companies (Hemmert, 2012). The bargaining power of suppliers in Smartphone industry is moderate to low. Samsung enjoys a low risk and threats from suppliers. As Samsung is the leader in Smartphone industry, suppliers are eager to sell raw materials to Samsung. However, some suppliers like Google have the monopoly as the supplier of a platform for Android for which Samsung do not have the close substitute.

Bargaining Power of Customers:

The smartphone industry has a large number of buyers. In 2013, there were 968 Million consumers of smartphones in the global market. There are a large number of substitutes and low switching cost between the brands which makes the bargaining power of the buyer moderately high in the smartphone industry (Dudovskiy, 2015). Buyers of Samsung smartphones can easily switch to LG, Apple, Blackberry, Nokia and Apple without bearing the extra cost, which tremendously increases buyers’ bargaining power. So, Samsung needs to focus on Product development to cater the maximum number of buyers

Threats of New Entrants:

New entrants lack technical know-how, gigantic capital and popular brand name which are the backbone to be successful in this industry. The threat of new entrants is neglectable for Samsung, as the company enjoys a strong brand position, large market share, high technological advancements, and a high control over channels of distribution.

Threats of Substitute Products:

All smartphone brands launch 10s of their product models each year which provides hundreds of substitute products in the market (Dudovskiy, 2015). Furthermore, the smartphone industry has low differentiation in its products. In a specific price range, smartphones from different brands have almost same features. This can be a great threat for Samsung as the smartphone market is flooded with many substitutes offering slightly differentiated products in term of price, quality, technology and compatibility. However, Samsung’s pricing strategy is quite differential and successful to combat this threat as it caters the needs of each income group (Hemmert, 2012).

Competitive Rivalry:

There is a strong competitive rivalry among competitors in Smartphone industry. Few giants compete for market share because the industry is still growing (Dudovskiy, 2015). Samsung holds a strong position in the Smartphone industry. It has held the largest market share of this industry throughout the last five years (Moon, 2016). However, Samsung needs to make the strategic decisions to retain this position, especially to maintain its position against the growing customer base of Apple Inc.

2.3. Critical Success Factors:

Cheap Labor:

Most of the smartphone companies rely on supplies of components from low labour cost areas like China and Korea (Lee, 2014). Samsung has created five large complexes to manufacture the products in 1990 in Brazil, China, UK, Malaysia, and Mexico to save labour cost and strengthen presence in the global market (Hemmert, 2012). However, increasing labour cost in China is causing the slight increase in total costs of Samsung products (Lee, 2014).

Stakeholders:

It is necessary to maintain strong relationship with customers, suppliers, staff and partners, to thrive in the modern day corporate world. Samsung enjoys a strong relationship with its stakeholders (Ameen, 2012).

Sales and Marketing:

Desigining strong marketing strategies allow smartphone manufacturers to maximize their sales. Samsung has a strong marketing strategy. It has adopted of a mix of traditional and contemporary marketing strategies and channels (Saxena, 2009).

Research and Development-Product Range:

Through extensive R&D, Samsung has a diversified group of telecommunication products including Tablets, the smartphones, laptops, etc. In the smartphone market, Samsung has the largest number of models of its phones available (Samsung Geeks, 2015).

The implications of these critical success factors for strategy of Samsung Smartphones will be discussed in ‘Differentiators’ of SAVED model (see 5.2.4.).

2.4. Brand Competition:

Brand Strengths Weaknesses Implications for Samsung Threat
Apple Cash reserves of billions of dollars for investment, expansion and research.

Strong supply chain to cater orders.

Loyal customers, as it has become a status symbol.

Powerful brand image due to superior design and quality (Whirax, 2012).

Limited products and delay in the launch of next model compel users to switch to other brands.

Very high prices for competitors.

Do not cater the needs of middle-class which comprises the most of the customer base for smartphones (Whirex, 2012).

Positive

Limited product models are launched once or twice each year to draw potential customer’s attention towards Samsung.

Negative

Apple’s image as a status symbol can hurt future profits of Samsung.

Samsung was caught imitating Apple and resulted in reputational loss for Samsung

Moderate
Nokia Strong global brand image

Stylish designs and a strong perception of durability.

Experienced local partners.

Worldwide presence

Not good at software

The poor performance of Symbian Operating system.

Less variety of products.

Positive

Samsung has greater software and technical know-how demonstrated by its product and satisfaction of customers.

A Large variety of products than Nokia makes Samsung a market leader.

Negative

Nokia has the presence in more countries and hence stronger supply chain management.

Samsung’s durability like battery issues let Nokia enjoy a better reputation in the eyes of customers.

Low
LG The strong presence in segment of LED

A Strong network of retailers with 20,000 retail points.

Lower prices than rivals.

The high budget of advertisement i.e. 550-600 million in 2013 (Ranka, 2013).

Late entrance in the audio market.

Research and Development challenge from counterparts.

Lack of appropriate user-friendly interfaces (Ranka, 2013).

Positive

Samsung enjoys better research and development systems than LG or other counterparts.

Negative

Low prices of LG products helped LG to engross Samsung’s potential customers.

Low
Huawei Low prices, due to reduced cost of labour in home country China.

High level of research and development, innovation and technical automatisation.

Customer-focused, complete selling network and effective localised services (Skema, 2013).

Needs improvements in quality, to compete against rivals.

Insufficient financial resources and the company not listed on stock exchange.

Weaker brand name due to lack of appropriate marketing strategies.

Low level of humanisation, which causes the outflow of talent (Skema, 2013).

Positive

Despite having a good market share, Huawei has weaker brand recognition, which helps Samsung to earn more profit.

Negative

Low pricing of Huawei (due to China’s low labour cost factor) can be a threat for Samsung.

Low

3. Internal Analysis of Samsung Electronics:

3.1. Financial Analysis:

Financial ratios analysis is conducted by using the data collected from Samsung (2016).

Financial Ratio 2012 2013 2014 2015
Net Profit Margin 11.53% 13.04% 11.19% 9.32%
Asset Turnover Ratio 1.19 1.16 0.93 0.85
Return on Invested Capital 18.64 20.19 13.41 11.06
Interest Coverage Ratio 108.80% 121.14% 48.01%
Return on Assets 13.77% 15.09% 10.39% 7.91%
Financial Leverage 1.55 1.48 1.42

Strengths:

  • Financial leverage ratio has declined from 2012 to 2015, which shows that company has become less risky, as demonstrated by the decrease in dependence upon debt finance.

Weaknesses:

  • Return on Asset has also declined in percentage from 2012 to 2015, which shows that company is not utilising its assets efficiently to earn revenues.
  • From 2013 to 2014, the interest coverage ratio has decreased dramatically, which shows that company’s net earnings are highly unsustainable to pay its interest expenses.

3.2. Value Chain Analysis:

Value chain analysis of a company provides a framework for analysing the competitive advantage and creates value for the organisation.

Inbound Logistics:

The majority of suppliers of Samsung are located in Asia where the company spends 79.4% of its expenses of the supply chain. The company has many logistics companies as subsidiaries like Electronics Logitech which provides flawless inbound logistic support to the company (Dudovskiy, 2015). Samsung has established strong relationships with its inbound logistic agents.

Operations:

Samsung adopts the strategy of establishing and expanding its R&D centres across the globe (Kamis, 2012). It has developed regional and divisional development teams for commercialising its products. Samsung has the largest number of international operational hubs in the smartphone industry. In the year 2014, there were 213 hubs of Samsung’s global operations (Dudovskiy, 2015). These operations include general manufacturing, system manufacturing, and device assembly packaging.

Outbound Logistics:

Outbound logistics of Samsung is a strength of the company as the majority of its operations are localised in Seoul. Hence, the products of Samsung are efficiently stores, gathered and distributed (Dudovskiy, 2015). Most of its outbound logistics are handled by its specialised subsidiary agent i.e. Logitech, which helps to develop efficient logistic solutions for the company (Kamis, 2012). Hence, having own logistic specialised subsidiary is one of the biggest core competency of Samsung.

Marketing and Sales:

Marketing strategies of Samsung are the main focus of the company as its total marketing budget in 2013 was USD 14 billion (Dudovskiy, 2015). Samsung’s high sale promotion spending was marked as biggest marketing budget in history (Gilbert, 2013) that simply makes the company most powerful brand in the smartphone industry. These strategies of Samsung cannot be imitated by its rivals easily, as it needs a large budget.

Procurement:

Samsung provides a proposal system to all suppliers so that they can supply the components in three simple steps including application, review/feedback, and partnership. Samsung has made its contracts easy and simple to attract maximum suppliers from the market. Samsung believes in win-win policy for benefits of both parties (Dudovskiy, 2015).

Human Resource Management:

Samsung has the largest team of professional in the smartphone industry. With 275,133 employees in 2013, Samsung left behind Apple, Google and Microsoft (Amadeo, 2014). In its more than 300 offices with diversified employees, Samsung manages to facilitate, support and encourage its employees. Samsung has decentralised management system which makes its employees motivated and committed.

Technology Development:

Samsung has specialisation in system integration, memory, semiconductor, digital media, and appliances. The main focus of the company is on innovation and increasing product range (Kamis, 2012). Samsung has a competitive advantage in case of technological development with its larger range of products than any other smartphone company. However, Apple can give it a hard time.

3.3. TOWS Analysis for Samsung:

Strengths Weaknesses
Samsung has the advantage of growing economy of the smartphone market in Asia, with manufacturing plants in India and China. Hence, the supply chain and logistic expenses of Samsung are less than its competitors (S1)

Samsung has the portfolio of product with the widest range including accessories, memory cards, printers, PC, home appliances, camcorder, Camera, TV/Video/Audio, mobile phones, etc. (S2)

Dominate the South Korean market in different lines of product (S3).

Huge budget for research and development purposes.

Large Human capital and numerous manufacturing hubs spread across the world (S4)

Largest spending on marketing, in the history of the smartphone industry.

Samsung operates under product diversification and differentiation strategy. (S5).

Largest market share and biggest revenue earning corporation in the industry (S6).

Allocation of marketing and sales promotion budget do not possess regional proportions (W1)

Samsung is market leader for hardware of its product, but it heavily relies on third parties for developing software (W2)

Technological failures and unreliability issue without a solution over the years (W3)

Opportunities Maxi-Maxi Mini-Mini
Customers from emerging markets find the products of Samsung affordable and delightful (O1)

The emerging market of China has the prospect of 5 million customers who start using smartphones each month (O2)

Diversify in South Korean telecommunication industry with more focus on software technologies (S3, O3).

Build or acquire retails showcase outlets in major cities of Russia, China and the USA (S2, S5, O4, O5).

Introduction of more corporate social responsibility actions to enhance reputation of the brand (W3, O1)

Make products with own software developments for lower middle-class potential customers. (W2, O2)

Threats Maxi-Mini Mini-Mini
Rising Chinese products in the smartphone industry with low prices (T1)

Aggressive competitors like Apple, Sony and Nokia, etc. (T2)

Failure of one product line damages the reputation of others as well. (T3)

Apple is emerging as a status symbol (T4)

Biggest rivals like Nokia and Apple are focusing on both hardware and software (T5)

Enhance product differentiation and digital technology, to compete with its aggressive rivals (S3, S5, T2, T3)

Modify the technological innovations, to cater the needs and preferences of potential customers across the world (S2, S4, S5, T3, T1)

Enter software building industry, to compete for big rivals, especially Apple (W4, T3, T4)

Make its advertisement company which may save billions of dollars each year

4. Strategic Objectives for Samsung:

4.1. Short Term and Long Term Goals:

The short-term goals of Samsung Electronics (Smartphones) are mentioned below:

  • To increase market share in China, by 7%, by the end of 2019
  • To increase net profits in India, by 10%, by the end of 2019.

The long-term objectives of Samsung Electronics (Smartphones) are stated below:

  • To optimise the sales smartphones through online and retail channels in Asia Pacific region
  • To entering into new markets across the world
  • To improve the vertical integration

The justifications of these objectives are given in Appendix-2.

5. Strategies for Samsung Smartphones:

To achieve the long term and short term strategic objectives, strategies have been devised for Samsung Electronics (Smartphones).

5.1. Current Strategies of Samsung Smartphones:

The current strategies of Samsung Corporation and its Smartphone strategies are discussed in Appendix-3.

5.2. Strategies for Achieving Strategic Goals of Samsung:

The strategies developed for Samsung Smartphones are aligned with its current strategies (see Appendix-3). This section applies the SAVED model- Arena, Vehicle, Economic logic, Differentiators, and Staging- Samsung, to meet the objectives that were mentioned in section 4.1.

5.2.1. ARENA-International Expansion:

To attain maximum growth and market share, Samsung Smartphones need to develop a strategy of international expansion. The sales by region statistics of Smartphones from 2013-2016 (see Appendix-4), shows that the maximum number Smartphones are shipped to China, followed by North America, Western Europe, Middle East, and Asia-Pacific (Statista, 2016). However, sales forecasts demonstrate a great potential of first-time Smartphone sales in China and India (Goovaerts, 2016).

The International expansion strategy of Samsung for three different regions is mentioned below:

  • Asia-Pacific: In the Asia-Pacific region (specifically India and China) Samsung Smartphones should focus on achieving maximum sales and market share. The Short-term objectives have been specifically developed for this market
  • North America and Western Europe: In North-America and Western Europe, Samsung needs to maintain and grow its market share. However, the growth will be slower as compared to Asia-Pacific region, as the markets of Smartphones in these regions don’t have a strong potential for robust growth (Business Insider Intelligence, 2016).

5.2.2. Vehicles for Expansion:

The product-market expansion grid enables a company to shape its strategy for growth (Kotler, 2008, p.41). In the Asia-Pacific region, Samsung needs to focus on product development, market penetration, and market development (see figure-3).

Figure-3: Product/Market Expansion Grid

Image result

(Kotler, 2008, p.41)

  • Market Penetration: Samsung Electronics should focus on developing new online distribution channels in the Asia-pacific region. The potential for online shopping in China is increasing (Team 2015).
  • Product Development: Launching new products in Asia-Pacific region to cater the market growth potential. R&D is one of the CSFs for leading the smartphones industry. Samsung Electronics already focuses on developing new smartphones through R&D.
  • Market Development: The Asian-Pacific region will be having first-time buyers of smartphones for the next few years (Business Insider Intelligence, 2016). Samsung can target these users through market development, by developing different sales channels, using marketing segmentation and marketing mix strategies to target different demographic and psychographic segments than their normal customers.

In North America and Western Europe, Samsung needs to maintain and grow its market share. To maintain the market share, Samsung Electronics should create customer-focused strategies and develop its infrastructure as well, as suggested by Liabotis (2007).

(Liabotis, 2007)

Furthermore, in all three regions, Samsung needs to focus on Marketing and promotional activities.

5.2.3. Economic Logic:

Activities Budgeted Costs Incurred
Research and Development 100 Million Dollars
Patents, copyrights, legal fees, etc. for New Product Development 10 Million Dollars
Cost of establishing online shopping networks 20 Million Dollars
Hiring and training employees to support expansion 35 Million Dollars
Marketing and Advertising 500 Million Dollars

These costs seem large enough at the start. However, expansion through product development will bring more revenues and profits towards Samsung Electronics. Once, the online shopping network is established in the Asian-Pacific market; it will benefit the company by increasing sales and reaching a wider market. Marketing and Advertising will increase its brand value. Samsung Electronics already spends huge budget on marketing and advertising of its smartphones. In 2015, the company spent 45 Million Pounds on marketing and promotion of its product ‘Galaxy S6” (Williams, 2015). Within three weeks of launching the phone in market, 6 Million units of Galaxy S6 were purchased by consumers (Reuters, 2016). In Korea, the sales of Galaxy S6 broke previous sales records. Hence, the costs spent on marketing and advertising will pay off its returns to Samsung Electronics.

5.2.4. Differentiators:

Samsung Smartphones can provide increased value to its customers by taking the following steps:

  • Focusing on Research and Development to create high-quality and innovative products. R&D will become the basis of product development strategy. R&D is one of the critical success factors for operating in smartphone industry.
  • Establishing strong distribution networks in Asian Pacific region will enable Samsung to differentiate it from its competitors
  • Through its promotional campaigns, Samsung will be able to increase its brand value in Asia-Pacific, Europe, and North-America. Developing strong marketing strategies is one of the CSF. Samsung already focusses on its marketing, sales and promotion. The company needs to keep building on its marketing strategies in future.
  • Building on its core competencies and reducing costs, by achieving economies of scale. Cost can be reduced by employing cheap labor, which is one of the critical success factors for functioning in smartphone industry.

5.2.5. Staging:

For the next 10 years, the focus of Samsung will be on establishing its online distribution channel and expanding aggressively in the Asia-Pacific region, and slowly in the North-American and Eastern Europe market. Expansion will be achieved by targeting Chinese and Indian market, establishing an online platform in China and through improving vertical integration.

Focus Action Plan Timeline
Establish online distribution channel Develop strong IT infrastructure

Improving network to address safety and security issues

Penetrate into Chinese and Indian e-commerce markets

2017-2020

2017-2020

2020-2025

Aggressive Expansion in the Asian Pacific Region Developing new products

Targeting new users

Advertising and promotions

2017-2027

2017-2025

2017-2027

Moderate expansion in North-American and Eastern Europe market Developing new products

Advertising and promotions

2017-2027

2017-2025

Improving Vertical Integration Build a strong international outbound logistics network with vendors at moderate costs

Attain a higher ROI through organic development

2017-2023

2017-2023

6. Evaluation and Control:

6.1. Balanced Score Card:

See Appendix-5

6.2. Budget:

See Appendix-6

7. Conclusions:

The strategic plan for Samsung Electronics (Smartphones) has been developed by conducting a detailed internal and external environmental analysis. The strengths, weaknesses, opportunities and threats identified from the analysis formed the basis of strategic planning. The overall plan is for Samsung Electronics to achieve international expansion. The Asia-Pacific region has potential for robust growth; market development and product development strategies have been devised in this regard. The European and American markets have the potential for slow growth; Maintaining and growing market share and sales through market penetration has been suggested. The analysis has been limited to ‘smartphones’ of Samsung Electronics, as the smartphone industry is a thriving and expanding industry.

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Appendix-1: Market Share and Sales of Smartphone Developers

Market share of smartphone companies

Sales

Appendix-2: Justifications of Objectives for Samsung

With the advancements in technology, more customers are shifting towards online shopping. There is a huge potential for Samsung to increase its sales of smartphones in China through the online shopping channel. It is expected that by 2020, the number of online shoppers in China will surpass 750 Million (Team 2015). Furthermore, by 2018, the monthly active smartphone users will reach to 704.1 Million (Team, 2015). Samsung can cater this growth by achieving maximum sales through online shopping in China.

Over the next few years, the smartphone industry will witness a steady growth, because of the adoption in emerging markets (Business Insider Intelligence, 2016). In mature markets, like the US and Europe, the majority of sales growth will be achieved by phone upgrades. However, in emerging markets, like India and China, sales growth will come from both first-time buyers and phone upgrades (Business Insider Intelligence, 2016). Hence, there is a potential for Samsung to enter into new and emerging markets across the globe. Furthermore, the corporation should focus on improving its vertical integration.

Appendix-3: Current Strategies of Samsung Electronics (Smartphones)

The strategy of Samsung Electronics is aligned with the corporate strategy of Samsung. The strategy of the company is to become the leading global company in 21st Century (See figure below).

(Source: Jung, 2014)

The vision of Samsung electronics for 2010-2020 is “Inspire the world, create the Future” (Samsung, 2016). It focuses on offering creative solutions, innovative products, and new technology to meet the changing demands of customer (see figure below)

Samsung Vision 2020

Descriptions about Samsung's Vision

(Source: Samsung 2016)

Samsung Smartphones is facing the strategic issue of decreased market share. Its market share decreased from 24.4 % in 2014 to 22.7% in 2015 (Tanner, 2016). Samsung and Apple are competing on increasing market share.

(Financial Times, 2016)

To increase its market share, Samsung is focusing on product development (Tanner 2016). Samsung is very good at following and learning from its competitor (Nisen, 2013). Samsung launched Galaxy S7 to compete with iPhone 6S. It focuses on innovation and new product development. Samsung uses 5.7 % of its revenue on Research and Development, as compared to Apple that spends 2.4% of its revenue on R&D (Nisen 2013).

APPENDIX-4: Smartphones Sales by Region

(Statista 2016)

APPENDIX-5:

Critical Success Factor Strategic Control
Financial Expand to new markets

Establish strong supply chain in existing markets

Cash flow

Net Margin

Gross Profits

Return on Investment

Customer Developing strong relationship with customers Collect feedback from customers

Conduct surveys to measure customer satisfaction and loyalty

Internal Business Establishing strong supply chains

Developing e-commerce channels for distribution

Automation in supply chain to reduce the costs of labour

Conducting surveys to monitor the effectiveness of e-commerce channels

Innovation and Growth Developing new products

Exploiting new technologies

Focusing on software development

Encourage creative thinking among employees

Training employees to equip them with software development skills

APPENDIX-6: Budget

International Expansion Total Cost Rationale
Entering new markets 300 Million Dollars Increasing sales, market share, and profits by investing in new markets
New Product Development 100 Million Dollars Focusing on Research and Development, exploiting new technologies, testing and developing new products
Marketing and Promotion 500 Million Dollars Advertising (print, online, broadcast)
Total 800 Million Dollars

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