Improvement in credit rating.In June of 2002 Moody’s increased the company’s credit rating to Baa1, while Standard & Poors raised its rating to A- in November 2002. This represents the highest ratings since Samsung’s previous high in 1996. This improvement suggests that the company has now recovered from the effects of the Asian financial crisis, and the higher credit rating positively impacts upon its corporate image.
Diversification as a source of competitivenessA key source of the company’s competitiveness is the continuous transformation of the business through diversification. Samsung achieved surprisingly strong results due to competitive pricing and a broadening portfolio of products catering to premium demand. This development differed from that of its competitors which had a difficult year and allowed Samsung to expand its market share.
Strength of telecommunications businessesIn 2002-2003 the firm’s advanced mobile phones with color-screens, voice dialing and cameras have strongly boosted its sales. Its handset business generated a 48% increase in sales in 2002. Samsung has now doubled its market share of mobile phones in two years, and has become the third largest mobile phone manufacturer globally.
WeaknessesDecline of Memory Chips BusinessThe company faces falling prices for its memory chips. As these constitute a substantial proportion of the company’s revenues, price decline is a major concern. In late 2002 the firm announced a major $1.2bn investment in its memory chip business by building new semiconductor facilities, however this may not halt a short term decline in sales.
Fluctuations in telecommunications demandThe Samsung Group attributes its financial success over the past year to its telecommunications business which sold over 46 million units in 2002. Thispositively impacted upon revenues, although it remained the only activity preventing Samsung from revenue decline. A slump in demand is a realistic threat and could be prompted by competitor innovations or a change in fashions. Samsung must therefore strive to invest and improve its other businesses in order to protect its financial stability and market share.
Samsung Securities suffering from poor profitabilitySamsung Securities has experienced a period of poor profitability over the past few yearsdue to significant contingent liability exposures and a reduction in brokerage commissions. Samsung Securities’ recent poor performance will affect the Group as a whole unless the trendis halted.
OpportunitiesInvestment in Supply ChainIn 2002 and 2003 Samsung has invested heavily in research and development, production, and marketing. The group intends to build a 24-hour research and development system which will continuously develop and stimulate demand. Production investment will boost efficiency and the major marketing campaigns embarked upon should add value to products and increase brand awareness through the promotion of the DigitAll brand.
Sale of affiliated companiesThe company has sold a number of its affiliated companies in recent year in an effort to reduce and restructure its debts. The number of companies affiliated to SamsungSamsung Group has dropped from 61 to 25 in the last few years. Samsung Group’s program of restructuring has enabled it to overtake Hyundai to become South Korea’s biggest company. Samsung could further streamline its operations and boost efficiency in order to combat the adverse economic trends facing the chip making business.
International ExpansionSamsung is currently preparing to enter pioneer markets such as India and Eastern Europe. In line with the scheme the group intends to build a 24-hour research and development system to link global operations by having an integrated business administrative system. By establishing a foothold in these growth markets Samsung may be able to benefit from the less competitive and saturated markets and its improvement of its international network infrastructure will position it well for future global growth.
ThreatsStrong competitionSamsung Group faces strong competition from the other Korean industrial groups. Examples of South Korean industrial groups competing with Samsung include the LG Group and SK Group. Samsung Group also faces strong competition from major organizations across all areas of its business. Samsung Electronics’ competitors include Matsushita, Micron Technology and Sony, while Samsung Life Insurance’s main competitors include Kyobo Life Insurance, Meiji Life Insurance and Sumitomo Life.
Regulatory Issues and Safeguarding of Intellectual Property Rights The regulations and legal frameworks in place in Korea have created problems for the Group as the Korean government recently halted plans for its Life Insurance division to go public due to legal concerns. With the large number of new products being designed and marketed each year, Samsung is also experiencing difficulties in safeguarding its intellectual property rights which are vital in retaining competitive edge.
Source : http://www1.pu.edu.tw/~acchang/courses/IBANA/IBA221.pdf