Samsung Electronics Co., Ltd is one of the world’s largest technology companies in terms of revenues. It is the largest mobile phone maker and television manufacturer and second largest semiconductor chip producer. Samsung Electronics trades worldwide and has its headquarters in South Korea. It is one of the many subsidiaries of the Samsung Group.
The name “Samsung” according to the founder of the group Lee Byung Chull a migrant of a large land owning family in Uiryeong county to a city called Daegu where he founded Samsung Sanghoe explained that it means “tristars” or “three stars”; the word “three” represents something big, numerous and powerful. The “stars” represent “eternity”. Samsung has undergone lots transformation before being the giant Samsung it is today and it has proven to withstand the test of time where most Asian companies have dissolved during the Asian financial crisis.
A brief on Samsung’s background would take us back into the late 30’s in 1938 when Samsung was just a company store with 40 employees in a small area called Sudong now called Ingyo-dong. It dealt with green groceries and dried fish produced within the area. It also produced its own noodles. In 1948, Cho Hong-jai (the Hyosung group’s founder) jointly invested in a new company called Samsung Mulsan Gongsa or the Samsung Trading Corporation, with the Samsung Group founder Lee Byung-Chull. The trading firm grew to become the present-day Samsung C&T Corporation.
But after some years Cho and Lee separated due to differences in management between them. He wanted to get up to a 30% group share. After settlement, Samsung Group was separated into Samsung Group and Hyosung Group, Hankook Tire, and others. In the late 1960s, Samsung Group entered into the electronics industry. It formed several electronics-related divisions, such as Samsung Electronics Devices Co., Samsung Electro-Mechanics Co., Samsung Corning Co., and Samsung Semiconductor & Telecommunications Co., and made the facility in Suwon.
Its first product was a black-and-white television set. In the 50’s, when the Korean War broke out; Lee was forced to leave Seoul and start a sugar refinery in Busan[->1] named Cheil Jedang[->2]. After the war, in 1954, Lee founded Cheil Mojik and built the plant in Chimsan-dong, Daegu. It was the largest woollen mill ever in the country and the company took on the aspect of a major company. After the founder’s death in 1987, Samsung Group was separated into four business groups – Samsung Group, Shinsegae Group, CJ Group and Hansol Group.
Shinsegae (discount store, department store) was originally part of Samsung Group, separated in the 1990s from the Samsung Group along with CJ Group (Food/Chemicals/Entertainment/logistics) and the Hansol Group (Paper/Telecom). Today these separated groups are independent and they are not part of or connected to the Samsung Group. In the 1980s, Samsung Electronics began to invest heavily in research and development, investments that were pivotal in pushing the company to the forefront of the global electronics industry.
In 1982, it built a television assembly plant in Portugal; in 1984, a plant in New York; in 1985, a plant in Tokyo; in 1987, a facility in England[->3]; and another facility in Austin[->4] in 1996. As of 2012, Samsung has invested more than US$[->5]13 billion in the Austin facility, which operates under the name Samsung Austin Semiconductor LLC. This makes the Austin location the largest foreign investment in Texas[->6] and one of the largest single foreign investments[->7]. Our main concentration on this paper is Samsung Electronics which we would introduce later. METHODOLOGY
Our main purpose in this section is to declare what kind of tools we are going to use to analyze the competitive advantage of one of Samsung Group’s subsidiaries – Samsung Electronics. Any company in the business world would want to maintain and achieve competitive advantage if it intends to really survive the scheme of its rivals. One of these ways is to conduct a strategic analysis of the company. This enables us to adjust and monitor the position of the company, exploit new opportunities, and prepare for rainy days. There is one way of doing that- conducting a strategic evaluation of the company.
According to Peter Drucker “unless strategy evaluation is performed seriously and systematically, and unless strategists are willing to act on the results, energy will be used up defending yesterday. No one will have the time, resources, or will to work on exploiting today, let alone to work on making tomorrow”. In other words, strategic evaluation gives the company a feel of or connection to the business environment it is operating in. Strategic evaluation is vital to the organization’s well being. Strategic evaluation includes three basic activities: examining the underlying basis of a firm’s strategy, comparing expected results with actual results, and taking corrective actions to ensure that performance conforms to plans.
Samsung Electronics is the world’s largest mobile phone maker[->8] by 2011 unit sales and world’s second-largest semiconductor chip maker[->9] by 2011 revenues (after Intel Corporation[->10]). It has been the world’s largest television manufacturer[->11] since 2006 and the world’s largest maker of LCD panels for eight consecutive years. It has the largest market share worldwide in memory chips[->12]. The company is the world’s largest vendor of smart phones[->13] since 2011. Samsung has also established a prominent position in the tablet computer[->14] market, with the release of the Android[->15]-powered Samsung Galaxy Tab[->16].
This section of the paper is meant to access and assess the strategies they have been applying since their existence and to advise them on the strategic options available to them now and in the future. In this paper we would use the following analyses: SWOT analyses, PEST analyses, Porter’s Five Forces, Strategic Group and the VRIO model analyses. SWOT is the acronym for strengths, weaknesses, opportunities and threats surrounding the business in its environment. In other words, it guides you to identify the positives and negatives inside and outside your organization. SWOT analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment.
Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates. In other words, it is the foundation for evaluating the internal potential and limitations and the likely opportunities and threats from the external environment.
The strength and weaknesses give you an insight of your internal advantages relative to other companies and disadvantages relative to other companies, in other words, it measures the competitive advantage. They are usually the factors that you have control over. The opportunities and threats are considered to be the external factors that you have no control over; it could be technological change, legislation, socio-cultural change, etc.
The opportunities and threats give you an insight of the factors that the organization can exploit to it advantages and the factors that could cause trouble for the business. PESTEL is an acronym for political, economical, social, technological, environmental and legal analysis. It describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. ·Political factors are basically to what degree the government intervenes in the economy. Specifically, political factors include areas such as tax policy[->17], labour law[->18], environmental law[->19], trade restrictions[->20], tariffs[->21], and political stability.
Political factors may also include goods and services which the government wants to provide or be provided (merit goods[->22]) and those that the government does not want to be provided (demerit goods[->23] or merit goods). Furthermore, governments have great influence on the health[->24], education[->25], and infrastructure[->26] of a nation. ·Economic factors include economic growth[->27], interest rates[->28], exchange rates[->29] and the inflation rate[->30]. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital[->31] and therefore to what extent a business grows and expands.
Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. ·Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company’s products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). ·
Technological factors include technological aspects such as R&D[->32] activity, automation[->33], technology incentives and the rate of technological change[->34]. They can determine barriers to entry[->35], minimum efficient production level and influence outsourcing[->36] decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation[->37]. ·Environmental factors include ecological and environmental aspects such as weather, climate, and climate change[->38], which may especially affect industries such as tourism, farming, and insurance.
Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. ·Legal factors include discrimination law[->39], consumer law[->40], antitrust law[->41], employment law[->42], and health and safety law[->43]. These factors can affect how a company operates, its costs, and the demand for its products. Porter’s five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979.
[->0] – http://en.wikipedia.org/wiki/File:Samsung_Log[->1] – http://en.wikipedia.org/wiki/Busan[->2] – http://en.wikipedia.org/wiki/CJ_Corporation[->3] – http://en.wikipedia.org/wiki/England[->4] – http://en.wikipedia.org/wiki/Austin[->5] – http://en.wikipedia.org/wiki/United_States_dollar[->6] – http://en.wikipedia.org/wiki/Texas[->7] – http://en.wikipedia.org/wiki/Foreign_investments[->8] – http://en.wikipedia.org/wiki/Mobile_phone#Manufacturers [->9] – http://en.wikipedia.org/wiki/Semiconductor_sales_leaders_by_year [->10] – http://en.wikipedia.org/wiki/Intel_Corporation[->11] – http://en.wikipedia.org/wiki/Television#Sales_of_televisions [->12] – http://en.wikipedia.org/wiki/Integrated_circuit[->13] – http://en.wikipedia.org/wiki/Smartphone
[->14] – http://en.wikipedia.org/wiki/Tablet_computer[->15] – http://en.wikipedia.org/wiki/Android_%28operating_system%29 [->16] – http://en.wikipedia.org/wiki/Samsung_Galaxy_Tab[->17] – http://en.wikipedia.org/wiki/Tax_policy[->18] – http://en.wikipedia.org/wiki/Labour_law[->19] – http://en.wikipedia.org/wiki/Environmental_law[->20] – http://en.wikipedia.org/wiki/Trade_restriction[->21] – http://en.wikipedia.org/wiki/Tariffs[->22] – http://en.wikipedia.org/wiki/Merit_good[->23] – http://en.wikipedia.org/wiki/Demerit_good[->24] – http://en.wikipedia.org/wiki/Health[->25] – http://en.wikipedia.org/wiki/Education[->26] – http://en.wikipedia.org/wiki/Infrastructure[->27] – http://en.wikipedia.org/wiki/Economic_growth[->28] – http://en.wikipedia.org/wiki/Interest_rate[->29] – http://en.wikipedia.org/wiki/Exchange_rate[->30] – http://en.wikipedia.org/wiki/Inflation_rate[->31] – http://en.wikipedia.org/wiki/Cost_of_capital[->32] – http://en.wikipedia.org/wiki/R%26D[->33] – http://en.wikipedia.org/wiki/Automation[->34] – http://en.wikipedia.org/wiki/Technological_change[->35] – http://en.wikipedia.org/wiki/Barrier_to_entry[->36] – http://en.wikipedia.org/wiki/Outsourcing[->37] – http://en.wikipedia.org/wiki/Innovation[->38] – http://en.wikipedia.org/wiki/Climate_change[->39] – http://en.wikipedia.org/wiki/Discrimination_law[->40] – http://en.wikipedia.org/wiki/Consumer_law[->41] – http://en.wikipedia.org/wiki/Antitrust_law[->42] – http://en.wikipedia.org/wiki/Employment_law[->43] – http://en.wikipedia.org/wiki/Health_and_safety_law