Samsung Electronics Company | Analysis

Samsung Electronics Company | Analysis Contents (Jump to) 1. Introduction 2. Samsungs Competitive Advantage 3. Samsungs Management Analysis SWOT Analysis of Samsung 4. Samsungs Corporate Strategy 4.1 The Eco Friendly Competitiveness 4.2 Mutual Development With Business Partners 4.3 Creative Culture 5. Samsungs Competitive Analysis 5.1 Competitive Analysis on Samsung 5.2 Innovations as the Essence of Sustainable Development 5.3 International Production Capabilities 6. Key Drivers for Future Growth 6.1 Samsung Key Drivers for Future Growth 6.2 Samsung Electronic 2011 Sustainability Plan 6.3 Samsung Electronics Sustainability Reports 2012 6.4 The Live Smart Product and Samsung Stakeholders 6.5 Samsung 9 Material Issues as Key Driver for Future Growth 7. Samsung Technology Planning Exhibit 1 1. INTRODUCTION Samsung Electronics Company began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, Samsung acquired a semiconductor business which would be a milestone that initiated the future for SEC. Entering the semiconductor industry would also be the beginning of the shift phase for SEC. In 1980, SEC showed the market its ability to mass production. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well-known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch Harrington, 2008). SEC was mainly focused in manufacturing; therefore, its no surprise that the executives themselves were also focused on their manufacturing plants. Profits that SEC received were soon reinvested into Research Development, manufacturing, and supply chain activities. Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SECs sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4.6 billion, from $15 billion, over a 5 year period. Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch Harrington, 2008). In 2002, SEC posted net profits of $5.9 billion, on $44.6 billion in sales, and as a result in 2003 became the most widely held stock among all emerging market companies. Unlike other companies who chose to outsource their manufacturing process, SEC remained committed to its core competence, manufacturing (Quelch Harrington, 2008). During 1998-2003, SEC invested $19 billion into chip factories and $17 billion into manufacturing facilities for TFT-LCDs, which would be a major component for flat screen TVs and computer screens. Even though SEC was focused in the manufacturing process, it didnt make SEC a rigid company. To cope with supply-chain demands, the company remained flexible by building 12 manufacturing plants in China during 2003 and setting up RD facilities in India (Quelch Harrington, 2008). With 17,000 scientists, engineers and designers, SEC was able to create an endless amount of digital products. Due to its fast decision-making process and focus on a digital future, SEC was able to move a new product from the drawing board to its commercialization phase in only five months. This ability was almost 3 times faster than its competition (Quelch Harrington, 2008). 2. SAMSUNGS COMPETITIVE ADVANTAGE Competitive advantage  is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment. Samsung has always seeks out the opportunities for the company stay ahead of the competitors. In todays fast-paced competitive environment, Samsung face the need to be increasingly competitive and adaptive. Samsung strategic entrepreneurship as the means through which the company simultaneously exploits their current competitive advantages while exploring for future opportunities. Achieving a balance between exploration and exploitation consists of more than merely allocating resources evenly between the two processes. Exploration and exploitation are operationally, structurally, and culturally distinct processes. In order for Samsung to stay gain their competitive advantage; they have utilized their resources to maximize their output or end products. Resources such as human resources, money, machineries and materials are being strategized to stay ahead and be the leader the global market. The first advantage Samsung has created was by developing the human resources. The company acknowledged the need for the employees to work in conducive working environment. Samsung created a family-friend working environment, which allows the team members participate in the developing and improving ideas. Samsung even sponsored their employees for MBAs and PHDs program to develop and enhance their human resources skills. As a result of years of human capital investment, Samsung has a high concentration of skilled engineers and labour. The company are able to management the human resources and knowledge which will directly impacted Samsungs operation by producing a higher productivity and quality of the product s and services. The low cost strategy by Samsung allowed them to be very competitive in the global market. Samsungs ability to negotiate with supplier, gave them the advantage of cost raw material. Samsung won several awards every year since 1995 for their performance, quality and reliability of their products and services. Hence, this gave the advantage for them to negotiate with suppliers to supply them the raw material at the lowest cost possible or even at premium. Samsungs high adaptation cultural to new and fast changing market demand made them an aggressive market reader. As part of their competitive advantage strategy, Samsung setup a centralized research and development (RD) facilities. Most of their competitors have their RD facilities and productions facilities geographically scattered around the globe. The centralization gave them to opportunities to continuous explore and exploit greater products and invention for new technology, as well as innovation for existing technology. The Washington Post on 12 November 2012, in the article Apple vs. Samsung: battle of the Innovation Strategies, was number 4 in the 10 most innovative companies after Apple, Google and 3M. However Samsung was at the number 6 spot in the top 10 RD spender compared to Apple not on the top 20 list. For example, Samsung invested heavily on the new bendable screen technology for smart phone. They planned to launch the new product in 2013, where other competitors are still developing to commercialize the new technology Most of the innovation for the Samsung products shared the same core design. Samsung flexible product line able them to materialize those ideas to end products with minimal cost occurred. For every new invention and innovation, Samsung does not need to set up a new facility. The results, higher yield against the cost of the production. Lower cost of productions allowed Samsung to offer attractive and competitive price for the consumer. The relatively lower cost gives lots of rooms for the pricing strategy to work with. Centralization of the RD facilities and the production facilities, desire Samsung to maximize their resources and machinery. High adaptation to adjust the course of production, able Samsung to produce and broad market their five major products division of Semiconductor, digital technology, telecommunication, LCD and digital appliances. The results, production variety of product mix with lower cost to meet the customer demand. Offering the market with variety or multi product segment, gave Samsung the advantage to other competitors. Example, by providing the varieties of models and product features, Samsung are able to tab to a larger market segment compare to Apple or Nokia. Centralization of RD also gave Samsung the advantage to keep their intellectual property within their boundary and mass produce at the same time. Samsung is an aggressive market reader. They are the early adopters of new technology and innovation, while their competitors still in RD progress or even finding the market niche to commercialize the products. Samsung has an aggressive learning curve, which them an advantage and ability to read the market demand better than other competitors. As the result they are able to produce customized products to meet the customer demand. Samsung stable and strong financial portfolio, gave them the advantage to launch and adopt through aggressive marketing campaign and promotion. Positions themselves before any competitor does by identifying the customers need and demand to enhance their lifestyle. The information and data gathered, along with the close monitoring of the market trend, able Samsung to customize to customer need. Samsung have a large product portfolio, which cover broad market and at all level. Samsung has been in the market since the 60s and has been well established. Acknowledging and creating the competitive advantage ensure their dominant in the industries. The fact that they are in the top 5 in smart phone vendor and shipment for 3rd quarter 2012, with 31.3% market share, proofed that they are the major player in the industry. Continuous exploration and exploitation of market and technology through RD, allow Samsung to be a solution provider for human kind on their daily living. Samsung is a brand name that represents the qualities, technologies, lifestyles and benchmark in the industries. 3. SAMSUNGS MANAGEMENT ANALYSIS The management SWOT analysis covers four dimensions namely; the strengths, weakness, opportunities and threats. By going through a SWOT analysis, you become aware of the most important dimensions that have an impact on the operations of the company. Once a SWOT analysis has been jolted you can come with relevant strategies in order to succeed in the competitive environment. A good SWOT analysis can help the company and competitors place themselves in the market wisely. Therefore, here we look at the SWOT Analysis of Samsung to give you an idea of how the company is operating in the world. 3.1 (S)trengths Samsung has a wide product range, which allows them to grab ample market share from various markets. This allows Samsung to not only earn a high return but it also allows them to diversify their risk and failure. According to many magazines, Samsung holds a significant portion of the market share in nearly all its products. Samsung is a reputed name and many people are familiar with it around the world. It also has won many awards on its high quality products. It has the ability and resources to use the latest technology and offer new and exciting features frequently. It has won many awards due to its ability to make innovative, sleek and slim products. It has set up many production plants in low cost locations, thus they save on cost of production significantly. It also recently has attracted ample positive press, thus its reputation continues to grow and has a positive impact on the operations of the company. 3.2 (W)eaknesses Samsung never introduces a new design on its own; it always waits and sees to its competitors. Thus, it missed the first mover advantages. It does not charge high price for its products, therefore often people relate the low price to begin a supplier of low quality products. General perception supports that the higher the price, the higher the quality of products. Many Samsung products are not user friendly, therefore consumer often hesitate to switch to Samsung products even if the price and quality is exceptional. It does not focus on a specific niche; it offers its products to the mass market only. It does not create its own software therefore it often relies on other sources to complete the products. Samsung faces immense competition from new companies and online companies. High set up and operation cost for such a company. 3.3 (O)pportunities Samsung should make an active effort to offer unique products to customers, in order to grab more market share. It could start creating softwares for their hardware devices and reduce outsourcing. It could launch sub brands to the company, with new and improved strategies. It could open more stores to serve more customers. It could make an effort to launch creative products first, rather than after its competitors. Samsung should participate in product development and attract more customers. It should also consider participating in various events to attract attention. It could offer additional services to retain existing customers and attract new ones. Increase in the need for mobile phones, Samsung could exploit this need well. 3.4 (T)hreats Samsung has linked product lines, which means that if one product line fails due to its own reasons other product lines will also suffer. Samsung production is very scattered; it controls and operates different products while its competitors use their resources and effort on one segment only. Diversification takes a lot of effort and attention. It has set up production plants in low cost areas, which are subject to ample political and economic instability. These instabilities can have an impact overall company it the crisis gets unmanageable. It is facing threats from many other low cost companies. Various companies have realized the importance of advertising, therefore Samsung will be subject to a lot more competition as advertising creates and draws attention of consumers. Countries all over the world are experiencing a high cost due to high inflation rates in most locations. Many government legislations are now active against the innovative technology due to health and mental concerns. The above section clearly reveals the SWOT Analysis of Samsung. By going through the SWOT Analysis of Samsung you can understand and further evaluate the companys performance to your own advantages. However, the above SWOT Analysis of Samsung is limited to certain significant points only. Therefore, when evaluating a company it is best to search online for more SWOT Analysis of Samsung so that you have all the information you need to assess the company. 4. SAMSUNGS CORPORATE STRATEGY 4.1 The Eco Friendly competitiveness The company have shown high concern in develop Eco friendly products in order to reduce environmental impact. A wide range of activities were carrying out by Samsung to deliver an innovative eco friendly products to customers. These activities were guided by their focus on green management, products, workplaces and communities. Samsung green management policy was aim to boost development on greener environment through their business activities. 4.1.1 Eco Products In 2004, Samsung develop a system that manages products compliance with environmental criteria. It was named as Eco Design Assessment System. This system ensure Samsung products comply with environmental criteria such as resource efficiency and eco-friendly materials as what being stated in global environment regulation. (About Samsung 2012). The system than was being upgraded by introduces eco rating system to all developed products. This rating system will rate the product to three categories which are eco product, good eco- product or premium eco product. Recently, Samsung has set a goal to ensure that 100% of their products exceed good eco product by 2013. (About Samsung 2012). In addition, Samsung also believes that its product should have long lifecycles in order to meet environmental care requirement. Therefore, Samsung implemented a strategy that providing reasonable product warranty. Recently, Samsung also come out with innovations that extending the lifecycle of certain product type. Samsung introduce its innovative technology called smart evolution kit. This technology enables customers to simply upgrade television processor or software by plugging the business card size kit at the back of television. This technology encourage customer to upgrading rather than replacing. 4.1.2 Recycling Activity The next strategy take by Samsung is in respond of requirement of recycling laws that increasingly interested by government in Asia and America. Samsung electronics have develop a proper take back systems by collaborate with the government and related industry associations to develop an effective take back system by meeting the obligation. Samsung implement these activities by implement several voluntary take back programs for its product that at the end of their lifecycle. Among them are Samsung Recycle Direct which operates in USA, and India. This program enables people to drop off Samsung products at collection site or Samsung service centre. Samsung also offers take back service for mobile phone and portable products for consumer around the world Samsung also launched in (Samsung Take back And Recycling) STAR in 2005 to ensure proper recycling process. Under this program, all returned printer cartridge will recycle to something useable. The part that cannot be recycled will be disposed and treated in a safe way. (About Samsung,2012) 4.2 Mutual development with business partners Supplier relationship is crucial to any organization. Suppliers can directly impact the financial performance of an organization as they will influence product development cost, manufacturing schedules, inventory levels and timeliness of delivery goods or services. Samsung realize that its worthwhile to have investment focus on this relationship in order to be effective and efficient. 4.2.1 Strengthened relationship with supplier According to Olsen and Ellram (1997), the link between the characteristic between of the relationship such as trust and cooperation need for further research. In order to be a true global leader in industry, Samsung believe it business partners relationship is a key element. Samsung shared it growth with outstanding suppliers by expanded its support programs to become global companies. The support programs were involved in activities that provide training, technological supports and funds. The communication between Samsung and its supplier were being strengthened by listening to voice of their suppliers from a top management visit on a regular basis. Recently, Samsung also are in planning to put more sharing growth activity with their key suppliers such as free use of patented technologies, support for patent registration of new technology developed by supplier. 4.2.2 Corporate Social Responsibility In line with its strategy to support the local communities and its commitment to Corporate Social Responsibility (CSR), Samsung have come out with the strategy to choose and evaluate their supplier by integrating CSR element in the criteria. CSR activities are growing rapidly in many international organizations. These CSR activities provide Samsung with important opportunities and competitive advantages. Samsung take innovative strategy by conducting annual supplier evaluation including CSR activities and achievement as part of its evaluation. This strategy is aim to give supplier incentives as their participation in CSR activities structure by Samsung to fulfill common code of conduct by Electronic Industry Citizenship Coalitions (EICC). The CSR evaluation criteria consist of 20 different areas including ban of child labor, occupational safety and health and environment management 4.3 Creative Culture Samsung realize that high employees participation in the company growth is essential in order to let them feel sense of dignity, pride and ownership of organizations vision. Samsung strategy to build creative organizational culture in strengthen the competencies of their employees are giving great positive impact on Samsung competitiveness. According to Keyton (2012), organizational culture is not a tangible thing, like an iceberg, it is less to be visual seen but imagined by sets of artifacts, value, and assumption that are designed, managed and exposed by organizational members and through their interactions. Samsung comply with this theory by actively promote creative organizational culture that allows their employees to pursue a healthy work life balance in a creative and challenging work environment. Samsung also are welcoming employees that with different background and facilities. 4.3.1 Diversity Samsung is committed to create work environment that support the diversity of the global market the serve. Every employee in this company regardless of gender, race, and or country of origin should be treating equally in give a voice. Diversity management strategy takes by Samsung is classify into two basic directions. First, it focuses on diversity for minorities which concern the issues on inequality. The strategy are undertakes in upgrade policy and systems to allow people with diverse traits to work creatively. Second, it focuses on diversity perception on all employees. The strategy is aims to foster creative organizational culture that respect diversity by changing the mindset and perception of all employees. These diversity strategies are being demonstrated by offering various programs for female and disabled employees. Female employees are being offered to various programs that supports their commitment to both work and home. It includes parental leave and in house child care facilities. Samsung also have implement separate recruitment program for disabled graduate and internship program for disable students. Samsung continuously support diversity for minors by improving facilities for disabled employees in order to build culture as an ideal workplace. 4.3.2 Talent based recruiting of software and design expert Future creator challenge is a talent based recruiting process designed to hire new employees in software engineering and design which two criteria creativity and expertise are the key factors. The recruitment process were not conventionally ask for written exam but let candidate to proof their talents by submitting application as evidence to their resume or certificate. Selected applicants will undergo interview sessions to test their technical ability and evaluation on their ideas and solution. (Samsung Electronic Sustainability Report 2012) 5. SAMSUNGS COMPETITIVE ANALYSIS 5.1 Competitive analysis on Samsung A competitive advantage is an advantage gain over competitor by offering customers greater values either through extra benefit, value added criteria or price factors. Competitive advantage is essential for a company like Samsung in order to be sustainable and successful over the long term. The sustainability of Samsung today is the result from the effort has been taken to some key elements of their remarkable triumph. 5.2 Innovations as the essence of sustainable development Samsungs sustainable development is backed by innovation to several forces that become key success for Samsung. The innovation take by Samsung to overall business operation are addressing key issues surrounding quality and cost. Samsung strictly focuses in these issues by undergo innovation process to get lower manufacturing costs, high profits and reach the market swiftly. In this section well look on the factors that encourage innovation in Samsung business operation that at the eventually will lead to competitive advantage. 5.2.1 Effective RD system Samsung electronics have developed an effective RD system at headquarters and product divisions. The engineers will work on long term project or multiple division projects at corporate RD lab. The lab used by them also is supported by Headquarter and Product division. In addition, Samsung also develop their RD centers in various locations. This can help RD team to identify or observe future trends and opportunity for their technology capabilities and key technologies. This capability is manage effectively by having extensive training system to develop leadership talent. Sophisticated mechanism and evaluation system also are being used to take calculated risk when exploring new markets. This action shows that Samsung are very careful when explore new product opportunity. The team also needs to develop contingency plans to prepare different scenario that might being happen. 5.2.2 Creative talent Samsung aware that innovation is the main source to being remain competitive in this industry. The only way to improve innovation performance is by employing managers that have right set of skills and always like to experiment and take the risks. This kind of leaders are important in directs the organization in creative work culture. The brave decision take by a leader can encourage new mindset and way of thinking to the subordinates. The awareness of need for innovation has made Samsung implement several actions to demonstrate their focus on it. In four years, Samsung have double up numbers of workers working on design, budget for design were increased by 20 -30 percent annually and more design centers were opened. (Strategic Direction, 2005) 5.3 International production capabilities Recently, Samsung are facing great competition in order to sustain in industry. The competitors have recovered Samsung competitiveness by investing in offshore production. Increased overseas productions are seems to be the key major component in their strategic response. In this section, well discuss on how international production capabilities perform by Samsung lead this company to be competitive in industry by reviewing some major action taken by them. 5.3.1 Expansion of offshore production Starting in 1970s, Samsung have started to look over international linkage to acquire product designs and marketing outlet and focus on its mass production capability. In 1990s, Samsung have shown rapid expansion of offshore production as their major strategy. The strategies followed by improvement of RD capabilities to remain they are still competitive in rapidly changing environment. International production capabilities are important for Samsung in order to reap cost competitiveness by utilizing the low cost resources available in South East Asia. Youngsoo Kim (1998) claimed that Samsung implement this strategy by establishing Singapore based purchasing office in 1991 to speed up the internationalization of production. This key intermediary is aggressively played its role in purchasing and distributes huge amounts of component and its affiliates. Since 1990s, Samsung productions plants in Asia were in several countries ranging from end products to components including China, Vietnam, Malaysia and India. The presence of Samsungs production in Asia was increasingly determining its secure position in the industry by having good connection between production capabilities and marketing objectives. 5.3.2 Well trained employees in Asian affiliates Samsung have to make sure their offshore production sites are producing products that follow the specification decided by them. This is important in order to make Samsung are able to reap cost competitiveness by producing in low cost resource country. Samsung assure this condition by trained the employees in its Asian affiliates or sending Korean trainers to the affiliate. In 1990, technicians from refrigerator plant in Indonesia were sent to South Korea for conducting a training session for 3 months. One third of Samsung Microwave plant in Malaysia was also being trained in Korea. These actions have benefits Samsung when the ratio of component sourced from nearby regional suppliers had risen above 50 percent. (SMM, September 1993) 6. KEY DRIVERS FOR FUTURE GROWTH 6.1 Samsung Key drivers for future growth The involvement of Samsung in electronic and mobile market needs them to survive within the industries for the next 20 years. In the other it means that Samsung have to set their key drivers that can allow them archive as well as a benchmark for the future growth. This key driver also is based on Samsung achievements and capabilities that they have now and then to continue with adding some more new keys to guide them to realize their vision and mission. The keys driver for Samsung future growth is also known as their sustainability in present towards the future. Focusing on Samsung Electronics, Samsung sustainability showed that their performance in surviving the industries and can be also as a benchmark to survive in the future. According to Nidomulu and Prahalad (2009) company that make sustainability a goal will achieve competitive advantage in the future , that mean rethinking business models as well as technologies, products and processes. In 2010, Samsung sustainability perform ance and plan focusing on talent management, integrity management, green management, social contribution, partners collaboration and products/services. For 2011 they set 9 material issues as a guidance to sustainability in future growth; (1) Creative Organizational Culture (2) Employee Health and Safety (3) Integrity Management (4) Increasing Social Contribution (5) Patent (6) Climate Change and Energy (7) Water Management (8) Mutual Growth (9) Supplier CSR(Corporate Social Responsibilities) based on Samsung Electronics Sustainability Report 2012. 6.2 Samsung Electronic 2011 Sustainability Plan For Talent Management plan in 2011, Samsung plan to, introduce telecommuting/ work at home scheme for married employees, increase percentage of female executive, set up idea proposal system at oversea research centers and hire new recruits with disabilities. Samsung plan on Integrity Management was to improve compliance program also related activities, declare compliance management and signing of the compliance agreement by employees. Instead of talent and integrity management Samsung also focus on Green Management plan which the plan to set 96% ratio of Eco-product development, set long/mid-term targets for water management, build a global environmental management system and support for outside country partners environment management system. In developing Social Contribution Samsung plan to introduce new regional social contribution based on global guidelines (Samsung Hope for Children) and to create tools in assessing impact of social contribution programs. Samsung needs a supporti ve partner in o