Manu1054: Engineering Economic Strategy - Samsung - Case Study Assessment Answer

Engineering Economic Strategy Assignment

Assignment Task

The assessment is based on the preparation and submission of a major Case Study of an engineering or technology based organisation. The case study should identify and examine both the external economic environment and the internal economic environment of the selected enterprise and in particular should address the following:

• The impact of the surrounding economic environment on the selected enterprise or project
• The impact of the enterprise or project on its surrounding economic environment
• The potential impact of changes in the surrounding economic environment on the enterprise/project.

There are five components to the assessment requirements for the Case Study Report as follows:

Part 1.

An introduction and background statement that outlines and describes the chosen organisation, its products and services.

Part 2.

A detailed discussion and analysis of the Internal Economic Environment of the selected company/organisation.

Part 3.

A detailed discussion and analysis of the External Economic Environment in which the company/organisation operates.

Part 4.

A detailed discussion and analysis of the impact of the External Environment on the company/organisation.

Part 5.

A detailed discussion and analysis of the potential impact of the company/organisation on the external economic environment.

Samsung Electronics was founded in the year 1969. It sooner developed as a huge manufacturing firm in Korea. In this phase, huge improvement in the mushrooming electronics segment has been witnessed with and Samsung started its export business. It acquired a 50% share in the Korea Semiconductor and thereby becoming the market leader in this sector. During the 1970s period, it started the TV production and made exports to Panama.Later, it started this production of Black and White TVs in the local markets.It also started the production of washing machines and refrigerators in this period. After the acquisition of Korea Semiconductor company it produced color TVs and exported to various countries.It also acquired Korea Electronics Information Company and manufactured VHS and VCRs. Samsung Electronics' core technology businesses diversified and expanded globally during the late 1970s and early 1980s.

The company during the 1980s merged with Samsung semiconductor. During this period, it reorganized its old business and entered new segments to lead the market. It also acquired U.S. firm HMS. In 1990s it started to design and develop mobile phones. In spite of the downturn in finance of many companies in Korea, Samsung sustained its growth due to its leader position in the world of digitization and electronics (PARK & BARJOT, 2003).

The market witnessed a revolution as a result of digitization. This paved way for International market entry opportunities for Samsung. This led the company to go for new product innovations through upgradation of technology. Today, it is recognized as a market leader in the electronics sector by attaining the top 10 position in the list of global brands.

PRODUCT RANGE

Samsung Electronics possesses a wide product range of consumer electronics. This includes Mobile phones, Home appliances, TV, IT, SPen Camera, Accessories and Memory devices. The following are a brief description of its product range:

• Mobile: In its mobile phone range, it has Galaxy Note 7, Galaxy S7, Tablets, and other Accessories. It also includes various mobile apps for its target customers.
• Home Appliances includes Washing machines, Refrigerators, Cooking appliances, AC and Vacuum Cleaners.
• Memory devices include USB Flash Drives, SD Cards etc.
• In computing category, it holds Laptops, PCs, Printers, Monitors.
• It also has Samsung Smart Home, Home Theater and Audio to mention a few.
• It provides services such as launching and tracking online complaints, extended warranty, Samsung service locator, Samsung Tutor to provide solutions for any technical problems. Apart from this for the benefit of its customers it has an updated website for current news and alerts about its products and services are present. It has 24x7 customer service center as well as customer contacts through SMS for any issues.

MARKET PLACE, TARGET CUSTOMERS, SUPPLIERS & CLIENTS

According to Gartner Samsung leads the smartphone sales with an approximate shipment of 81 million units as a result of the launching of the Galaxy S7 and Galaxy S7 edge.It has held a market share of 20-30% in the smartphone segment from 2012. Its important product range of smartphones is the Galaxy series, which was launched in the year 2009. Samsung found a great surge in smartphone shipments to nearly 84.5 million in the year 2015. Also, in the year 2015, it touched nearly 100 million sales in the smartphone category. In the year 2013, Samsung held 20.8% of the global LCD Television market share. Samsung is the 3rd most valued brands in the Asian continent. (Sun, Sun, & Xu, 2008)

Target Market: Samsung has a target group of customers, which includes both household and industrial users. Its target market is in the age group between 20-50 majorly. The teenage group, i.e., (14-25) are usually the target customers of smartphones because they are more concerned with updating themselves with modern gadgets. Its teenage target customers are rapidly mushrooming in number in the recent years. In the adult category (26-50) the company has a huge customer base. This is because this group of customers possesses higher Purchase Power Parity (PPP) to purchase smartphones, home appliances and other electronic goods. This target group of customers is found to increase in the future.

Major Clients

Few of the major clients of Samsung are:

United Arab Emirates government: A syndicate of organizations in South Korea, which includes Samsung has acquired transaction worth of $40 billion for building nuclear plants in the UAE.

Ontario government :The Ontario Government has signed the globe’s biggest renewable energy project. In this agreement, an association lead by Samsung and Korea Electric Power Corporation would be managing the expansion of development of2,000 MW-worth of newwind farmsand500 MWof solar capacity.

Suppliers:

Samsung is a market leader in the smartphone segment and has huge revenues from the same. But at the same time its revenues have been affected by the increase in the market value of few of the small companies of South Korea which delivers special parts for Samsung company’s devices. But now due to the increased competition in this sector, there are huge threats lying for few network of suppliers who depend on revenues from the nation’s largest firm in the context of sales. In the initial period of 2009, where Samsung was a smaller firm in the smartphone segment, its market share value heavily surged as a result of the contribution to the operating profit by its handsets. Iljin Display that makes sale of touch screen panel has made 95% of its sales to Samsung. Its sales revenue has grown to Won596bn ($531m) in 2012. Again Patron that produces antenna and camera modules for Samsung had an increased market share of 1543%. Shares in S-MAC, a keypad module maker and one of the suppliers of Samsung has an increased revenue of Won 485bn.

The new apex phone of Samsung i.e., Galaxy S4, made its sales within a short period of launching. But at the same time it expects tough price competition in this segment, especially from Chinese handsets such as Lenovo. These tend to reduce the prices of handsets and as a result the price burden would be passed to the suppliers of parts. At the same time, the suppliers of very highly specialized goods like Jahwa Electronics (Supplier of high-end camera module) face lesser risk. Patron again faced similar low level competition in the camera modules segment.

When there are more vendors available for supply of components their margins are severely affected. For those parts where there are only a few vendors, their margin is not adversely affected.

STRATEGIC PLAN OF SAMSUNG

VISION: The vision statement of Samsung is "Inspire the world, create the future."This reflects Samsung’s mission to create new solutions and innovations in products as well as services. It is most suited for the modern environment and business which is technology based.

Samsung largely relied on its flagship model smartphone Galaxy S4 to beat its major competitor Apple. It is able to get its strategies designed based on the moves of the competitors. Samsung has a proactive strategy of bringing new versions of devices in order to stay ahead of competition. Its success strategy is manufacturing products/devices that are more responsive to its customers. The company has formulated a differentiated strategy of developing much less expensive iPhone with distinctive features and effective promotion that would satisfy the customer base. For the purpose of handwriting with pen Samsung Note is found through market research. It’s designed Phablet which is a huge success in the market. It focuses on market research and spends heavily on it which nearly 5.7% of its revenue. It also has a mass advertising strategy. Samsung spent in advertising to a greater extent more than its competitors in the Android market.

Samsung manufactures parts for its smartphones to attain economies of scale. In the context of distribution, Galaxy S4 is made to be available in nearly 36% more carriers and also at 55% additional nations. Thus, its growth strategy is indicated by manufacturing digital batteries to international leader. To retain its customer base, it chooses differentiation strategy in this segment. Samsung has invested in Silicon Valley largely to excel in software segment also.

Samsung depends largely on Research & Development to create core competency. Its R&D is an important strategy to design new products for enhancing the lives of people. It has a large team consisting of 50,000 research people and engineers. This is spread over 42 international centers that integrates with strategic technology to enter newer markets and set benchmarks.

The R&D division of Samsung has 3 sectors. The Samsung Advanced Institute of Technology (SAIT): It forms growth engines and manages technology. Samsung’s international R&D centers focuses on technological upgradations that delivers valuable solutions. It also has division product development teams in every center that are accountable for launching the products in shorter time span in the markets. It invests in R&D nearly 9% of its sales revenue each year to standardize technological innovations and attaining intellectual property rights. Samsung has major R&D networks in Korea and in U.S, U.K, India, Japan, China and others stay ahead of technology.

Section 2: Internal Economic Environment of Samsung

Samsung Electronics, from its origin has made effective modifications through delivering suitable products and services to the customers for their comfortable living.

From the year 2013, the company was restructured with 3 important divisions:

IT & Mobile Communications, Consumer Electronics, and Device Solutions. This change made the company to develop its These reforms helped Samsung to develop its operations through integrating the divisions. Apart from this, the local subsidiary firms in the headquarters of the region help Samsung to empower its capabilities as a market leader through its operations like production, Research and Development, Sales, services that are customized (Lee, 2003).

The company’s headquarters is in South Korea. Its IT and Mobile Communications, Consumer Electronics divisions are operating in 10 regional headquarters. The Device Solutions division operates in 5 regional headquarters in various countries. In the year 2014, the company had 213 offices which include manufacturing, sales subsidiaries, research facilities around the globe. The IT and Mobile Communications, Consumer Electronics, Device solutions also operate on autonomy to enhance its strengths for different product categories on nine units. The IT and Mobile Communications division includes product range like smartphones, PCs. The Consumer Electronics divisions comprise Digital Televisions, monitors, refrigerators, washing machines, printers, etc. The Device Solution divisions operate and involves selling of product category like DRAM, NAND, and mobile AP in the semiconductor business.

Business Divisions and Major Products

The IT & Mobile Communications divisions lead the international smartphone business with its diversified product line range to develop in mass marketing of products. The network equipment and solution business unit helps to design the 4G network development all over the global market. The company has sustained its investments in the growth engines during 2014 that includes health care on mobile. It also improved its Research and Development activities for providing value added services to its customers (Kovach, 2013).

The Consumer Electronics Divisions witnessed leadership in the international market for continuous nine years. In the year 2013, Samsung launched UHD TV and OLED TV, with better quality of image display. While in the year 2014 the company pioneered the commercialization of UHD TV and Curved TV. The consumer home appliance divisions developed in the market through innovations in product designs.

In the year 2014, the Device Solutions Division produced 20-nano DRAM products with appropriate technological upgradation as well as cost-effectiveness. This helped Samsung to excel than its competitive brands. The company focuses on the manufacturing of commercial memory solutions as well as providing a feasible solution for the future Information Technology products and services. In the category of cloud servers and mobiles the Device Solutions divisions would differentiate its product line.This helps the company for leading the market in the memory manufacturing products that provide real-time solutions.

During the year 2014, the global economy shrank with low growth in China. Further, the economy still weakened in the local markets. But still, the company had greater sales revenues of KRW25. It also continued a strong finance structure with return on equity ratio of 14.7%. In the same year, Samsung had an increased brand value of KRW45.5 billion, which is 15% higher when compared to the past. Based on Interbrand report, Samsung is the 7th highest in terms of brand value in the globe in 2014. The company had the capacity to integrate the mass manufacturing of server DRAM module that which is led by improved performance and capacity.

Corporate Governance

Samsung ensures that it leads the market by sustaining flourishing environment. This could be achieved by retaining higher standard of corporate governance and as well as ensuring transparency in its operations. The company’s Board of Directors is involved in administration by setting top level policies, that are helpful for strategic decision making. This will be based on adhering to the appropriate rules, Articles of Incorporation and the resolution passed at the annual general meetings of the shareholders. Also, this Board of Directors held six committees for taking efficient decisions. This also enables to make decisions for contingencies in the environment.

The Board of Directors (BOD) team consists of four Executive Directors and an independent director of five members. This team is helpful to ensure transparency in decisions that are based on resources from external expert committee. These Directors would meet separate from the BOD for encouraging ideas on all major issues affecting the company. According to Article 24 of AOI, the Board of Directors consists of three to fourteen members. They are elected by the General Meeting of the shareholders.

The Directors are All directors are forbidden from dealing with any businesses in the same sector without the consent of the Board of Directors.

The company refers the Korean Commerce Act to make judgments with respect to the autonomy of non-executive directors. The Independent directors are appointed according to the legal provisions and are choosen by completely assessing the qualification are nominated in accordance with the legal procedure and selected after thorough assessment of qualification requirements such. It also ensures that the company objectives and the Directors are synchronized for avoiding any conflicts. The full time employees, the personnel who are associated with the shareholders, the direct relations of the Directors are not eligible as independent directors. Further, the retired executive members in the previous 2 year period are also not qualified for assuming the position of the independent directors.

Committees under the BOD: In the year 2014, the Board of Directors held 7 meetings. They also formed committees for making effective judgments. It has at present the following committees: Management Committee, Audit Committee, Independent Director Recommendation Committee, Related Party Transactions Committee, Compensation Committee, and Corporate Social Responsibility (CSR) Committee.

Human Resources:

The company’s international HR team has the vision of recruitment, employee retention and talent management. The Human Resources team has expert group members who focus on Training, Organizational culture, etc. Also, the HR team members are envisaged in each unit of the company for meeting the dynamic wants of the employees.Specifically, the Samsung Electronics Leadership Center (SELC) has a wide spectrum of T&D programs to develop a stream of talented potential leaders. During 2014, SELC launched the training area with a success rate of 270,000 employee participation.

Samsung formed Creative Development Center (CDC) in the year 2013, for motivating the work force by giving opportunities to deliver their valuable ideas for new product development.

Learning and Development Process at Samsung

The company conducts a well established learning and development systems to provide training for the workforce. It consists of 3 vital elements core, leadership and expertise. Samsung also provides scope for the employees to perform in various other market segments. Through this, the employees gain knowledge on performing various innovative programs by partnering with companies to attain the organizations’ needs.

Samsung Leadership Program (SLP): The company nurtures global leadership through its training and development programs. This program helps the employees to gain knowledge on leadership skill sets. The SLF delivers the executive members and staff to empower themselves as a leader. The company spreads the programs that are based on SLF to all the employees. Global standard programs based on The Samsung Leadership Framework are spreading throughout the company. These programs offer opportunities for enriching talented leaders globally.

Work Place: The company focuses on designing a safe and secured workplace with all the necessary amenities. Samsung has framed safety monitor practices to avoid accidents.

It has over 38 production plants in various nations around the world where it develops the majority of its own goods. The company pursues its employees to comply with its code of conduct. For which it raises the level of awareness of compliance by imparting training rightly (Jung, 2014).

Policy: It developed the ‘Samsung Electronics Code of Conduct’ that relies on fundamental principles of management. It ensures that its supplier teams adhere to its policy. For this purpose, it established ‘Samsung Electronics Suppliers Code of Conduct’ in 2012.

Risk management:

The company forms risk diagnosis through proper data analysis by the internal environment. During 2014, Samsung enhanced its risk management systems to make sure that it protects the safety and well being of the workers in the production plant.

The companies’ workers operating in sites where the risks are high acquire improvisation on categories that include communication between management and vendors, effective organizational design.

Remuneration

The company evaluates to motivate the employees to extract the best performance from them. The data gathered about every staff member are used to decide their remuneration, job promotion, career planning, etc. (Robert C. Merchant, 2000) Samsung also conducts analysis of the staff performance annually as well as determination of their competency. Based on the appraisal, decision of their compensation is provided.

Competency-based Promotion

Samsung conducts appraisal of employee Performance accordingly it provides promotion to them. It also established Human Resources policy for providing staff promotions that are based on the promoting the staff -based compensation is an essential component in the company’s personnel management policy. As a part of our effort to nurture next-generation leaders, Samsung has instituted a HR policy to promote employees based on personal contributions to the organizational performance.

Work place Diversity

Samsung adopts work place diversity with staff of various backgrounds across age, gender and nationality. Thus, the company has an organizational culture of diversified work force. The workplace consists of 27% women employees in Korea and 49% of the organization’s total employee base. Samsung has programs for maintaining work-life balance by adopting flexibility in work schedules, day care centers, maternity leave for women, etc. It makes attempts to motivate the women and providing them career opportunity to excel as team leaders. This is ensured through implementing training and development programs for them.

Section 3: Samsung – External Environment Analysis

Electronics Industry:

Samsung is the global leader in the electronics segment. It is the leading producer of TVs, LCDs, smartphones and other appliances. Its market share was 21% in the year 2015. Its major competitor is Apple in the smartphone category. Samsung has a well established market for its smartphone category in developing countries like India (Han, 2011).

It has a huge demand potential for its smartphone solutions app like for example, Samsung Pay. Due to the increase in the middle class population in the developing countries, a huge surge is expected in consumer electronics. Samsung has made various strategies for tapping this sales potential (Barnat, 2015). Similarly, due to the growth in the E-tailing sector, Samsung has witnessed much demand from the online customer base as well as from mobile apps.

Samsung faces a major threat from Apple in terms of quality of the smartphones. To overcome this, it becomes inevitable for Samsung to invest heavily in R&D. This can enhance its market share consistently.

Supply Chain:

Any business to prove success relies heavily on its supply chain. Samsung too, depends and believes on effective management of its supply chain. Right amount of material flow in the right time is crucial for the profitability of a business venture. Samsung faces various issues in supply chain management. It is vital for the company to maintain a profitable and effective relationship with its supply chain partners to sustain profitability of its ventures. Procurement Process: During the year 2014, Samsung launched a collaborative system that permits the procurement department in conducting cost and benefit analysis on the purchase of parts. This has been initiated in all the plants of the company throughout the globe. Roughly, there are 2800 supply chain partners throughout the world for Samsung (GVC_Analysis, 2012). These suppliers provide 90% of raw materials and parts. They are termed to be ‘Critical’ suppliers of the company. Every year, the suppliers are undergone performance review and evaluation. They are evaluated on various critical elements that includes quality, timely delivery, environment friendliness, legal compliances etc. Those suppliers with higher results of evaluation are given preference in allotments of supply in the upcoming years. They also get an opportunity for participation in the supplier support programs. The suppliers with lower ratings in the evaluation process, are given an opportunity to make improvements and decisions on maintaining the contract with them is made based on that (Khanna, Song, & Lee, 2011).

Samsung performs a wide range of programs for enhancing the performance of its suppliers, thereby maintain a strong rapport with them. The company formed various finance based programs for supporting the SME to procure financial resources. It has created funds for its suppliers in synchronization with the Korean Bank. The company also provides a program where for well established suppliers the interest rates are provided at a lower rate. Also, Samsung provides a program for assisting financially in collaboration with the Korean Bank to promote the exports of its supply chain partners. It also helps them by providing the payment earlier to ensure smooth supply of materials.

To promote the suppliers and motivate them, the company has also organized a benefit sharing program. Through this program, Samsung operates joint transactions for improving the productivity and sharing the benefits as well. This helps to create a mutual trust and benefit of lower procurement cost, handling costs etc. This program also helps to enhance the quality, rate of production, adoption of indigenous technology etc.

Pestel Analysis Of SAMSUNG

Political factors

This refers to the policies of the Government, which comprises the nature and type of economy, Products delivered to the society, Governmental subsidies, supporting activities of the businesses. A nation’s political aspect has an impact on the sectors like education, health care, basic facilities. Samsung faces various risks in the context of politics. These risks differ from one nation with that of the other. The political climate of Korea has become a turbulent issue for Samsung. The company is facing unsteadiness in its home nation. The climate in Korea is not very much intensive when compared with other nations. Few of the nations where Samsung is facing uncomfortable scenario comprises of Africa and South East Asia. The industry in these nations is not friendly and it has an abusive effect on the Samsung. While, China and India offer more attractive industrial climate which helps the company to attain its targets successfully.

Economic factors

The economic aspects include the integration of financial aspects of the nation. These include the countries’ rate of interest, tax patterns, economical issues, rate of inflation, foreign exchange. All this economic factor has a great effect on the businesses of any organization. The High rate of interests can decrease the company’s borrowings, as it adds to the cost of capital. But, at the same time the rate of inflation increases the employees’ salary and as a result the productivity improves. These aspects have an impact on the financial decisions of Samsung in any nation. Samsung has formed appropriate policies in its market depending on the economic advantages as well as the size of its customer base in that particular nation. It also takes into consideration while making policies the relative Purchase Power Parity (PPP) and level of disposable income of its customers. Samsung adopts an effective marketing strategy based on the income level of its customers. Also, it makes investments in nations in which its products are in the nascent stage. The company’s policy of making forays into a welcoming market with much demand potential has been successful.

Social-cultural factors

Socio-cultural The social environment comprises of the norms, values, habits, civilizations which differ from one society with that of the other. Differences in the social strata impacts the demand patterns for goods and services. One of the social factor is the customers’ age level. It makes the company to provide a hike in the pensions for its employees. This increases the company’s cost of operations significantly. Demand patterns vary according to the customers’ age factor. The company has tackled the various challenges in this context by penetrating into new target segments. Its strategy of taking global decisions and implementing in its local target market has effectively linked the society and cultural gaps in between its domestic and foreign nation.

Technological factors

Innovations are inevitable to sustain in a modern environment. It includes e-tailing, bar codes, CAD etc. The main advantage of technological upgradation is to reduce the production costs and improve the quality of its deliverables. Samsung is a well established company in terms of technological innovations. The decisive factor of success is its level of innovation. Also, it has been the pioneer for a large number of new product innovations globally.

Environmental factors

The environmental aspects include the climatic conditions within which any organization operates. The present issue of global warming is a major aspect affecting the operations of any company. Further, in order to protect the environment the firms are taking measures like green marketing and producing green products that are considered to be safe. Samsung has taken initiatives for protecting the climate through its CSR activities. This is achieved through enabling production of plants that are environmentally safe.

Legal factors

The Legal environment is concerned with the legislations under which any company has to operate. These legislations form the framework within which any firm has to perform. These legal issues affect the day-to-day operations of any business. For instance, the implementation of minimum wages acts by having a great influence on any firm as it adds to its cost of operations. Samsung, is also influenced by these governmental legislations. It strictly adheres to the countries’ governmental policies where it has established its venture.

Competitors:

Samsung faces stiff competition from organizations that are making new innovations in the markets. To meet such competition the company has to adhere to intense R&D and market research. For instance, Samsung to meet the competition from Sony with respect to 3D Television it has formed strategies for pricing and supply that would help to sustain its target customer base. Samsung has made new innovations in the 3D Televisions that can help it to create a niche in this market. It proudly has formed a touch screen based remote control to operate the Television.

Sony Bravia also possess similar features and it has a global leader in the Television segment. Hence, in this TV sector, Sony is a major competitor for Samsung. Similarly, Panasonic is again a big competitor for Samsung. To meet this, the company has designed various pricing strategies. LG which is a Korea based company is termed to be second in the LCD Television market. LG targets middle income groups for its TV sales and hence made the pricing to be less expensive comparable. These companies are the major competitors for Samsung with respect to Television business.

Customers:

Samsung designed customer care facility centers and websites to help the customer queries. Through this channel, the company tries to solve various customer complaints and provides timely assistance to them. The VOC system helps the customer need to be adhered and it is communicated to the staff of the company. This helps to enhance the service quality of the company as well. Samsung also conducts various surveys to perceive the satisfaction of customers towards its products and services. Based on the survey, Samsung forms various strategies to enrich the product and service quality. Any dissatisfaction if found through the survey, is prone for further analysis and developments in that area is striving for. So, through this the number of satisfied customers for Samsung is found to grow consistently each and every year.

Section 4: Impact of external environment on the Samsung Corporation:

There are different ways to analyse the influences of external environment on the functioning of an organisation. The usual way is to study the political, economic, social, technological, legal and environmental influences that are external to an organisation on its effective functioning. In this section we will take up the LoNGPEST analysis for Samsung Corporation as it would include the changing political, economic, social and technological environment at Local, National and Global level and hence it is known as the LoNGPEST analysis.

Samsung is a multinational corporation and hence it has influences of local, national and global environment on its internal functioning. The main competitors of Samsung are LG and Apple. Since Samsung dominates the smart phone market by 32.1% we would analyse the LoNGPEST of Samsung from the context of Smart phones.

Strengths and Weaknesses of Samsung smart phones:

Samsung is a globally recognised brand for smart phones and other electronics. In the context of other electronics, its main competition is from LG where as in the context of smart phones, its main competition is from Apple. Samsung Corporation has a great deal of support and power from the South Korean Government as it is one of the major corporate in South Korea that has made its stand in the electronics industry as a whole.

In the smart phones sector, the improvements in the technology and continuous launch of new versions of smart phones has broadened its market share however there are various problems associated with some of the models launched like battery explosions and heating ups that has resulted in the low brand loyalty towards Samsung smart phones. As there is heavy competition in the smart phones industry, there is very small profit margin for the company as the supply chain in the smart phones market is very costly as compared to the lower profit margin.

Opportunities and Threats for Samsung Smart phones:

There is a constantly growing demand for Samsung smart phones from the developing countries particularly the BRIC countries. (Brazil, Russia, India and China) and its financial support from the parent company Samsung Corporation has led it to be the Cost leader in these countries (since these help in launching the economy models that are easily affordable); There are both high end models and low end models in smart phones as launched by Samsung that broadens its customer base for smart phones. However the major threats for Samsung smart phones is the decreasing prices for the smart phones with newer innovations the older technologies become cheaper and obsolete and the investments in R & D are not covered up before the launch of the new models. And since the smart phone market is saturated in developed countries, it has to venture in other developing and under developed countries that has resulted in various local, national and global environments affecting its functioning at various levels.

Local PEST:

In many countries, the functioning of the Samsung Corporation has been affected by its local conditions which have affected the functioning of the company locally. For example, in Brazil, during the year 2013, the Samsung Corporation has been sued on account of poor working conditions for its employees, in one of the largest plants of Samsung at Manaus. This factory employs more than 6000 workers where the working conditions are poor and repetitive activity has led the workers towards Health risks and this has been sued against by the government where $108 million USD has been sought by the GOVT for meeting the collective moral damages for the employees. Labour problems can affect the company’s primary activities and support activities as the factory employs more than 6000 workers who work day and night for the mass production of its products. This Manaus plant already has more than thousands of legal complaints against Samsung (Presse, 2013). Not only this, the political pressure in various countries had to be considered by the Corporate in which its operations are continuing. For example, it has to consider the threat of war and political Unrest in the Korean peninsula that might affect its core functioning. The heavy reliance of the country’s GDP –South Korean GDP on a single company, has caused concerns among the politicians about its dominance and influence on its suppliers and competitors which have failed to keep up with the rapid growth of Samsung.

In some of the countries, consumer spending has become low after the onset of financial crisis in 2008 which has led to lower profitability in some of the countries. Local preferences of consumers might continuously change according to the fashion and socio cultural environment of the countries. When socio cultural environment of the countries keep on changing the Samsung corporation has to adapt its products to the changing preferences of the consumers in local, national and global context. Similarly limited access to wifi networks and internet connections has led to satellite signal based electronic products that would cater to the changing technological innovations and needs. Local environment that includes political, economic, social and technological factors of local countries affect the working of the company in those countries. For example when marketing in UK and USA, the corporate must adapt its marketing technologies to suit the requirements of the consumers in that countries.

National PEST:

As Samsung is one the south Korean giants, it contributes nearly 20% of the total GDP in the country which generates its political influence in the country. Both the government and the corporation are interdependent on each other as they both have some political constraints. Increase in GDP, will create more employment opportunities and more per capita income which would result in more consumer spending on the goods and services and would have particular increase in the purchase of electronic durable products. Samsung has higher brand loyalty in its home country and in east countries, but has a very tough competition with Apple in the West. This creates competitive edge for Samsung in eastern countries, whereas competitive rivalry with Apple in Western countries like US or Canada. Higher input prices like increase in the copper prices will cause increasing costs conditions for Samsung which will result in declining profitability for certain hardware products.

Global PEST:

Globally Samsung Corporation has it operations in many countries and this has led to both advantages and disadvantages. There are many lawsuits against Samsung corporation for labour and human resources problems and political lawsuits for copyright infringements. However the existence of strong relationships with foreign countries and their political environment has turned favourable to the company particularly in eastern continents. When the import tax for electronic products in developing and under developed countries are reduced, this becomes favourable for multi national corporations like Samsung and others electronic goods producers (Song, 2013).

However the last few years of the past decade, was a recession for most of the countries that got affected by global financial crisis in 2008 which reduced the global sales for most of the multinational corporations. However due to the fluctuations in the exchange rates particularly after the global economic crisis, has had its impacts on the costs of exports and imports and this has resulted in increased prices to consumers and lowering of sales to the Samsung corporation.

There is poor brand loyalty for Samsung products in western countries as compared with its competitor Apple which has resulted in declining sales of Samsung in these countries. This calls for designing of products to fit the socio cultural needs of these countries such that these products become more appealing to the western customers.

Rapid technological changes in the Samsung products as brought out by the substantial investments in Research and Development has affected the product life cycle of Samsung products more quickly and drastically which has resulted in lower return on investment for investments made on technological products as they become obsolete in a short span of time. Though this is a disadvantage in terms of costs, it also has given a remarkable name of one of the most innovative companies in the world.

How external environment of Samsung does affect its operations?

Even though Samsung is a global corporation, it maintains its family owned business status. It is a Koran company from within but manages its many aspects of business to suits the local conditions in various countries. This has led to adapting its products to the consumer tastes and preferences of the different countries in which it operates and as these socio cultural preferences vary from country to country, Samsung has to reorient itself to adapt to the country in which it is operating.

Similarly Samsung has its technological advantage to become the market leader with the technological power it has in its sustainable innovations. Though it facilitates the corporation in staying ahead in the innovative curve, and dominate their competitive products in the market, there are many legal and copyright accusations from Apple that its products have been imitated by Samsung (The_Guardian, 2014). This has led the corporate to learn to do the basics right such that such accusation from its competitors can be avoided.

The economic environment of many countries has affected the operations and profitability of the Samsung Corporation in many accounts whenever there is a recessionary trend in those countries. However the company has adjusted well to keep both low-end and high end models of consumer products that cater to the needs of all the sections of people and also to the emerging and developing economies and this has led to get higher market share in the developing economies in the east and Asian countries and make up for the market lost in the western countries.

Section 5: Impact of internal functioning of the Samsung Corporation on the external environment

In this section, we would analyse how Samsung Company has sustained itself in the context of global financial crisis and has tapped the available resources- in the context of human, technological and financial resources to enhance its competencies such that it could sustain in the midst of changing environmental issues across nations. It all began with the declaration of the new management in the year 1993 in Frankfurt where it transformed itself to evolve as a world class corporation building on a strong brand image and the development of finest products. The New management that came up in the year 1993 declared a open HR policy for Samsung where it completely abolished all forms of discrimination based on educational background, age and gender which has maximized tapping the budding capabilities in the human resources it employs. There were basically four major approaches of the Samsung Electronics to build and succeed in competitive innovation. First approach was to build layers of advantages over the past three decades. The first approach of the company during the 1970’s was to catch up with the global corporations by making investments in production systems, acquiring the technological know how and also becoming competitive through these efforts. It entered the market with innovations in TV and color TVs. Then expanded to other markets. At each stage of market entry, the company selected the right pricing strategies to position the brand and commodity in the market. The second approach of Samsung was to look for loose bricks, that is in order to get the technological knowhow it entered into various joint ventures and licensing agreements with various competitors like Sanyo in Japan (1971), Toshiba in 1981 for microwave ovens, Philips in 1982 for color TVs (Harrigan, 2006). After getting the critical technologies it positioned itself as a low end commodities available and affordable to lower and middle income people in almost all the countries in which it was marketed. The third approach of the Samsung was to Change the terms which the industry or the market has predefined. For example, when Samsung entered the TV market, it was in the declining stage. However Samsung created a new segment space and introduced LCD TVs prior to the Japanese producers at various sizes and affordable prices. Samsung commands technological innovation and leadership while launching technological products like the nanometer, WiMAX, wireless communication technologies, etc. The last approach was to use collaboration with various foreign companies to acquire technoligcal know how and also to form strategic alliance with the competitors (Jeffs, 2008).

There is a continuous overlapping of the company’s internal and external environment where the dependence of one on the other causes interchangeable actions and reaction that keeps on changing over time. Michael Porter has emphasised the importance of value chain that enhances the support activities and primary activities of any organisation (Porter, 1998).

The Samsung Electronics Company has transformed its value chain over the years and has taken a newer approach in the case of personnel management systems, newer strategies in the marketing and design of its products, quality based management that is built on technological R&D, Hybrid Management systems, etc. While primary activities relate to the core products and services that the company sells to its customer’s world over, support activities include the supportive functions of the internal infrastructure of the firm that assists in effectively performing the primary functions of the corporate. The activities whether it be primary or supportive for the organisation, they are interdependent on each other and help the organisation to be successful in the competitive environment.

In the recent years, the company has adopted more transparent personnel management systems which gives more autonomy and encourages the employees creative ideas and also supports them to try out their ideas by reducing the obstacles. This transparency in the HR management systems is done simultaneously with transparency with the customers. This has promoted equal opportunities at workplaces, putting the skills and talents of employees first and encouraging them to perform effectively.

The new HR system enhances the employees’ skills, knowledge and capabilities through the training, education, resource allocation towards human capital. It also helpd the employees to enter into appropriate relationships and promotes effective performance of employees with copperation with the management and other employees. There is also promotion of new work cultures and processes across the various branches in various countires that builds the organizational capital. The transperant HR system also allows the employees to know where the organization is heading and its priorities and also their role in that organizational path of development. All these things encourages and engages the employees and changes their attitudes towards work as a result of which they put in extra effort and take the Samsung organization to greater heights.

Marketing Strategies and Design:

The strategic imperatives in marketing design and brand is discussed as follows

Samsung has a strong attitude towards customers’ needs and wants and focuses on what they need rather than what it can sell. The second imperative is the well designed producted targeted towards satisfying these needs thorugh various products and serives that functionally and emotionally satisfy the customers needs globally. The third imperative is the strong design in its products which are both simple, efficient and intuitive. Fourthy, these designs to cater to the users’ demands and lifestyles which creates both intelligent and unique product offerings. This enables the Samsung to launch new products and also enter new markets.

Samsung’s Hybrid System:

Samsung’s hybrid system of mixing the western practices with the traditionally Japanese business practices has led to its huge success. This is highlighted by the samsung’s hybrid approach of diversification with more focus (where Diversification is a traditional japanse strategy and focusing is a western strategy). Similarly while traditional Japanese depended on internal capital markets and western depended on external capital markets, Samsung used its ability to tap both internal and external capital markets. While traditional strategies focused on continous operational improvement for competitive edge and western focused on innovation and brand building, Samsung used both focusing on continous improvements of its products, applied R&D, marketing,etc. While traditional Japanese strategies focused on internal labour market and western focused on external labour market attracted by competition, Samsung focused on interweaving both the internal workforce with the external stakeholders with market based competition. While traditional approach is to focus on innovation and design for brand building and setting premium prices, and Western focuses on contingent relationship with contractors and suppliers for market pricing, Samsung focuses on building long term relationships with the suppliers and internal cooperation. While traditional approach focuses on limited recruitment at the entry level and Western approach focuses on open recruitment for all available positions as and when needed, Samsung focuses on annual recruitment for entry level and open recruitment for experienced specialists. Similarly while traditional Japanese approach focuses on seniority based promotion for employees and standardized incentives and promotions and western based approach focuses on merit based promotion and individualized incentives; Samsung encourages both seniority based and merit based promotion and compensation. It also encourages both standardized and individualized incentives.

Conclusion

The analysis of this paper is to highlight the factors that led to the success of Samsung Corporation in managing its external and internal environment and interweaving of the two in successfully emerfing from a mediocre OEM producer to a world class corporate selling elecrronic products and consumer durables. In this analysis we have found that various key factors like the Hybrid systems followed by the company and its value chain management that extends both horizontally and vertically has resulted in the success of the organization. This has helped the company in reducing the costs of production, minimizing costs of marketing and maxmisation of the value delivered to its stakeholders. The interweaving of the internal and external environment of the Samsung also has led to the competitive edge and advantage that the company has attained over the years. It would have been a miracle if somebody had predicted Samsung to be a global leader twenty years ago. But the new management which has apopted both the traditional Japanese values and practices and merged them with the western practices has led Samsung to emerge as a global leader and to be successful in its endeavours with the various stakeholders with which it interacts globally.

Samsung strategies had been very careful in positioning its brand world over and it has taken a evolutionary learning process moving towards and adopting renovative and innovative technologies and taking advantage of the opportunities at every cross road. It has a highly disciplined culture embedded in its organization but also adaptive to the changing environment. This has led to its success all over the world as a global leader.