Managing Information and Technology in Samsung Electronics - Case Study Example

 Managing Information and Technology in Samsung Electronics Abstract For several decades, information systems (IS) and technology continue to play an essential role in business productivity in both small and large companies. Management information and technology helps organizations innovate, which in return enables them to gain competitive advantage in the marketplace over other businesses. Through information systems and technology, there have been changes in both business and industry structure and it transforms competitive environment within any given sector. Information technology is capable of supporting various competitive strategies. For instance, information systems assist an enterprise in cutting costs, differentiating and innovating its services and products. Moreover, technology helps promotion of growth, development of alliances, enhance hurdles for entry and leverages on IT resource investment. Therefore, information systems are no longer mere technologies that are useful in supporting effective business operations, enterprise collaboration or efficient decision-making in businesses. Hence, information systems are strategic since they are essential in competitive networks to help in renewal of organizations making them an indispensable investment to help an enterprise implement strategies as well as business processes that facilitate reengineering or reinvention essential in surviving and succeeding in today’s dynamic business environment (Malik, n.d). The study evaluates the role of IS in Samsung Electronics, a company in the field of consumer electronics industry. Introduction Currently, enterprise IS orchestrate intricate processes that require fine business engineering capabilities and competencies to be able to progress in a sustainable, precise and cost-efficient manner in the vigorously changing services needed (KhadraouI & Herrmann, 2007). Information systems strategic role includes utilization of information technology in developing services, products, and capabilities which offer a company considerable advantage beyond the competitive forces the company faces within the international marketplace. This helps develop strategic information systems, which support the competitive position as well as strategies for the enterprise. The various information systems like the TPS, MIS and DSS help organizations gain competitive advantage, decrease competitive disadvantage and meet strategic objectives for the enterprise (Stair & Reynolds, 2014; Khosrow-Pour, 2006). Michael Porter shows that a firm is capable of having long-term success once the business successfully creates strategies for confronting the five competitive forces which shape structure of competition within an industry. It is possible to develop various competitive strategies to assist a business confront the five competitive forces. This can be achieved through knowledge presented to business professionals by information systems that include the main forms of IS. Information systems can provide knowledge regarding strategies on cost leadership, differentiation, innovation, growth and even alliance (KhadraouI & Herrmann, 2007; Heijden, 2009). Company profile Just over a decade ago, In 1993 Korea’s Samsung launched an initiative with the goal of rising to the ranks of global leading companies. From that time onwards, the company worked hard in refining its business focus and even alter the prevailing businesses strategies to achieve the critical ambition. Today Samsung is among the finest global corporations in terms of sales and earnings as well as innovative technological design. The company’s earnings and sales performance has surprised the world. As one of the planet’s largest markers of memory chips, Samsung creates many digital consumer gadgets, appliances, semiconductors, and even telecommunications devices. Since the 1993 initiative, Samsung electronics invested heavily in establishing its presence as an international iconic brand and manufacturer (Lee, 2006). Prevailing competitive environment Consumer electronics, the industry in which the company operates shows the various features of an international industry like high level of integration, intense competition, imitation, quick product obsolescence, changes in price and profits. The high level of integration is evidenced by the high degree of trade liberalization. Apart from a few exclusions, electronic products do not have tariffs or quotas. This eases the sale of product both in local and national markets. Quick product obsolescence in electronic products is similar to fresh vegetables and fruits since they lose value daily. Electronic gadgets often become obsolete even before they show physical signs of wearing out. The high level of imitation in consumer electronic products results from two grounds. First, raw materials as well as components can easily be purchased within the international market. Second, the components are very modularised and their assembly is cheap in China and other Asian countries. Therefore, Samsung Electronics, which is a well-known consumer electronics manufacturer, is under continuous threat posed by the entry of smaller start-ups that challenge it in the industry (Mourdoukoutas, 2006). Intense competition in the industry rises from both enhanced direct as well as indirect competition. In Samsung, direct competition arises mainly from emerging and existing competitors in South Korea, Taiwan and China. The indirect competition arises from substitute technologies. Price and profit changes in the industry are propelled by high level of integration, easy imitation, and quick technological changes, which make the industry very competitive. This in return indicates that makers of consumer electronics experience substantial gyration in price and profits. Imitators are attracted to successful products, which creates excess capability and supply gluts as well as price erosion. For instance, Sony’s success in various electronic gadgets during the early 90s propelled the entry of Chinese and Korean manufacturers to the industry, which drove prices low and decreasing Sony’s profits (Mourdoukoutas, 2006). Samsung faces the same fate that befell Sony in early 90s in this highly competitive industry. Value chain Value chains acts as the framework for activities a business uses in implementing its strategy in business. Businesses evaluate their value chains to have a better understanding of the activities that add mainly to the creation of customer value and expenses incurred in completing every activity. To succeed, businesses develop value which exceeds incurred costs in producing, distributing and servicing customer products. Through analysis of a business’ value chain functions, a business is able to the activities with those shown by competitors. The interest in value chain analysis focuses on both secondary and primary activities. Primary activities incorporate inbound logistics, operations, sales, product distribution, and after-sale service. Hence, primary activities engage directly with creation of value for customers. On the other hand, support activities offer support to primary activities to ensure effective completion. Hence support activities are indirectly involved during the creation of value for customers (Ireland, Hoskisson & Hitt, 2008). Focusing on primary activities, a product changes from raw-material supplies to operations, then to inventory for finished-goods, to advertising and supply and lastly to after-sale service. Every stage in the primary activities of the value chain increases costs, but possibly also increases value. Knowledge regarding the customer is an essential component in steps taken to be able to exploit value chain. The knowledge needs to be included in every stage of activity in order to enhance chances that the activities tend to develop value for the customers. For instance, at Samsung using knowledge regarding the customers, the enterprise ensures that the quality of the raw materials is appropriate to develop a product that meets and even exceeds the needs of the customer (Ireland, Hoskisson & Hitt, 2008). Support activities remain essential elements in value creation even though their impact in customer value development is indirect. Purchasing, research and development (R&D), accounting, and even human resource management function as some instances of support activities together with IT. R&D assists in creation of new products, which are developed and distributed to customer via primary activities. Investors and shareholders are interested in reports generated by accounting in order to establish the performance and decide if they are interested in making further investment in the business. This discussion highlights the need for support activities and exhibits their effects in creating customer value via primary activities. In today’s developed technologies, certain support and primary activities are performed in fresh and very effective ways. For instance, firms are capable of using the internet to facilitate communication with customers, monitor deliveries, and even learn about customer needs. Businesses often analyse their value chains to look for ways that ensure efficient operation as a way of developing enhanced customer value. Continuous analysis of the value chain is necessary in developing competitive advantage as well as sustaining an enterprise against considerable competition. Analysis of value chain leads some businesses to outsource support activities as well s primary activities (Ireland, Hoskisson & Hitt, 2008). Growth in consumer electronics within the current business environment relies on the way enterprises comprehend and relate with the complexities in the dynamic business environment. For instance, the increasing Smartphone segment is properly understood since Samsung’s Android powered Smartphone dominate the segment owing to the innovation that is aligned with changing needs in the environment. The consumer electronics industry has dynamically increased because of advances in technology, increased level of innovation and globalization. In the industry, there are various measures businesses can use in relating with the environment to have competitive advantage over competitors. One of the responses business take to counter the increasing aggressive business environment is the creation of supply chains. There are arguments that in the current business environment competition is taking place at the supply chain level. This result from the international nature the industry functions coupled by technological developments that facilitate fast and inexpensive communication as well as collaboration. The supply chain includes methodical, deliberate coordination of conventional business functions combined with tactics in various business functions in a company and different businesses in the supply chain, with the aim of enhancing long-term performance of certain enterprises as well as the entire supply chain (Mavengere, 2013). Development in IT promotes integration of information systems by business executives. Through realization of worldwide competition in the industry, development in IT and utilization of IT provides direct impact on value creation since it integrates Samsung’s supply chain functions, which results in high quality products, improved productivity, enhanced efficiency and flexibility in logistics. Using IT provides remarkable impact on relations between activities in the value chain and physical aspects of the chain (Shajahan, n.d). IT offer enterprises competitiveness like the development of value for both companies and customers, optimising value chains in order to enhance competitiveness and supporting the development of fresh value chain. Therefore, information system functions like strategic weapon with focus on its use mainly in managerial and strategic tasks. According to Earl (1989), IT scope in an enterprise can be grouped into four: (1) IT is useful in automating or improving physical aspects in each activity; (2) Information technology is useful in physically connecting each value activity or even controlling activities at the point of connection; (3) information system is useful in facilitating management, support and implementation associated with value tasks, and (4) information systems is useful in optimizing the connection of every task. According to Kyobe (2004), strategic utilization of information technology plays an essential role in accommodating development as well as building critical and unique competencies that enable a business to develop competitive advantage. Moreover, Fedorowicz et al. (2004) point out development in information technology is a core enabler of interorganizational business practices in enterprises. Narasimhan and Kim (2001) suggested measurement of IT use through 3 sub-constructs. These constructs include: (1) information system for supporting infrastructure like accounting information system; (2) information system in management of value creation like production plan as well as processes control system, and (3) information system used in logical operations like transportation management system and resource management system. Narasimhan and Kim (2001) argue that strategic use of information technology illustrates two common points. First, the function of information system needs to move from mere information processing into the use of technology in changing the prevailing value chain or even creating a fresh value chain. Secondly, information technology should automate and enhance physical aspects of the value functions as well as creating and optimizing structural connections in the supply chain activities. Samsung value chain Samsung’s value chain relies on Oracle’s value chain used in high tech enterprises, with the inclusion of logistics that plays an essential role in the company. In Samsung, activities that include basic research, development of products and design constitute the primary activity, which is contrary to value chain Porter presents since Porter’s model classifies these activities to be supportive. Since 1990s, Samsung progressively took competitive leadership initially in designing memory chips, later on LCD expertise and now Smartphone which breaks new frontiers within product design as well as incorporated technology in every stage. Even Apple, the largest competitor in the industry, recognises these advances since the I-product line purchases elements from Samsung (global value chain analysis on Samsung electronics, 2012). Figure 1: Samsung Electronics’ value chain (Source: Profitable Innovation in High Tech, Oracle (KABC analysis) as cited in Global Value Chain Analysis on Samsung Electronics, 2012) R & D in Samsung is made up of three layers where the first two remain core to technology development as well s product planning. Procurement in the enterprise is different from others in the industry like Apple owing to intra-firm features in many components that many enterprises in the industry never produce for themselves. This poses problems to external suppliers as well as prospecting suppliers since their products can straddle other divisions sharing a component. Since most of Samsung’s tasks are intra firm, procurement process through external suppliers aims at replicating intra firm system instead of external procurement systems. Because Samsung aims at creating a family of qualified suppliers, it often publicizes opportunities only in this family making it difficult to Supply the enterprise if not in the family (Global Value Chain Analysis on Samsung Electronics, 2012). At Samsung, logistics is dealt with in an exclusive manner in order to cover various administrative processes. It is complicated compared to the description offered in the basic value chain model. Essential materials for creating components as well as other sourced components are moved to assembly factories in Korea or abroad plants by Samsung Electronics Logitech that deals with inbound as well as outbound logistics. Moreover Samsung Electronics Logitech handles payment as well as processes associated with outsourced enterprises working seamlessly through global ERP system (Global Value Chain Analysis on Samsung Electronics, 2012). Analysis It changed business processes in organizations. Many business processes are carried out through enterprise information systems driven by the business activities they support. At Samsung, IS plays a critical role in sustaining business processes (Aalst & Stahl, 2011). Samsung uses Integrated Global S-ERP system in standardizing business activities between the company’s headquarters and abroad bases; as well, it enhances risk management functions through real-time sharing of management information. The system serves like the enterprise’s base for company-wide management innovation since it enables task management in a systematic manner. The system improved work processes by eliminating inefficiencies and redundancies, increasing the access to management information and offering risk management a wide coverage. The system includes bases at the company headquarters as well as abroad and supports various business models and sharing information in real-time. The global amalgamation of different systems at the headquarters and abroad bases enable business connectivity in real-time as well as continuous evaluation of essential business metrics. Real-time connectivity between the company’s business processes abroad and its headquarters facilitates order placement between the headquarters and abroad bases. Moreover, the system synchronizes revenue between headquarter and abroad bases and improves transparency in work that in return eliminates redundancies. Through the globally-integrated information system, it is possible for Samsung to integrate management of business at the headquarters and abroad bases. These systems allow access to financial/sales information in real-time in both head office and abroad bases. As well, the system is crucial in monitoring global enterprise performance as well as sharing real-time data on risk management. Therefore, the implementation of integrated S-ERP enabled effective management as well as risk management, all which enhance global competitiveness in the enterprise (SAMSUNG C&T Trading & Investment, n.d). Sustainability in Samsung’s products requires fresh and modern technologies that sustain the enterprise in the long-term. Technology the company uses is core to sustaining it in the changes taking place in traditional trends within the industry as well as incorporating it in the Smartphone market to make appropriate use of the technology in potential sales. In terms of Porter’s five forces, the company needed various ways to neutralize those five forces in order to gain competitive advantage. Changes in technology necessitates Samsung to invest heavily in R&D in order for the firm to continue being modern and relevant. Companies in the industry compete in releasing similar or even better products than the others. Many small manufacturing businesses in Asia copied design of many of products in the sector gaining a considerable market share. Although Samsung has access to good supply as well as distribution channels, it requires extra channels in increasing success when spreading the company’s products in the current competitive environment. Owing to globalization, prices of products in the industry decreased. Entry barriers in the industry rise from effective focus on fashion. Buyer power is economically beneficial to manufacturing companies since operators buy bulk products and companies invest to keep buyers in constant need of quality products. The huge amount of money provides the crucial funds for R&D in order to meet customer needs. Samsung classifies its consumers into those who purchase based on style, price, and quality. In Samsung, buying power is powerful owing to user loyalty in fashionable products. Although Samsung’s rivals may create good designed products with better technology, the technology Samsung uses enables it to compete with other companies in the industry. Since the technology Samsung uses ensures customers are comfortable with the product since the functionality never gets out dated in a year. Conclusion Information systems are powerful change agents in businesses in the current dynamic marketplace. Information system influences change in organizations by proposing fresh business strategies as well as fresh products that are based on information and even coordinating technology development as well as planned changes within an organization. At Samsung, information systems maintain constant technology watch in search of opportunities as well as threats posed by the developing technology. It has been clear that information sstem plays a significant role in the current business environment since IS allow executives in an enterprise to make the necessary decisions in aligning businesses processes with customer needs. List of references “Global Value Chain Analysis on Samsung Electronics” (2012) Accessed November 29, 2014 Aalst, W. ., & Stahl, C. (2011). Modeling business processes: A petri net-oriented approach. Cambridge, Mass: MIT Press. Fedorowicz, J., Gogan, J. L., & Ray, A. W. (2004). The ecology of interorganizational information sharing. Journal of International Technology and Information Management, 13(2), 73-86. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: concepts and cases. Mason, OH., South-Western Cengage Learning. KhadraouI, D., & Herrmann, F. (2007). Advances in enterprise information technology security. Hershey [Pa.], Information Science Reference. http://site.ebrary.com/id/10178445. Kyobe, Michael E. (2004). Investigating the strategic utilization of IT resources in the small and medium-sized firms of the eastern free state province. International Small Business Journal, 22(2), 131-158. Lee, D. (2006). Samsung Electronics: the Global Inc. Seoul, Korea, YSM, Inc. Malik, A. G. A. (n.d) Management Information Systems. Firewall Media. Mavengere, Nicholas Blessing (2013). Role of Information Systems for Strategic Agility in Supply Chain Setting: Telecommunication Industry Study. Electronic Journal Information Systems Evaluation Volume, 16(4). Mourdoukoutas, P. (2006). Business strategy in a semiglobal economy. Armonk, N.Y. [u.a.], Sharpe. Narasimhan, Ram. and Kim, Soo Wook. (2001). “Information system utilization strategy for supply chain integration” Journal of business logistics, 22(2), 51-75 SAMSUNG C&T Trading & Investment. (n.d.). Accessed November 30, 2014, Heijden, J. G. M. V. D. (2009). Designing management information systems. Oxford, Oxford University Press. Stair, R. M., & Reynolds, G. W. (2014). Fundamentals of information systems. Boston, MA, Course Technology/Cengage Learning. Khosrow-Pour, M. (2006). Cases on strategic information systems. Norwood Mass, Books24x7.com. http://www.books24x7.com/marc.asp?bookid=13266. Shajahan, S. A. P., R. (n.d.). Management information systems. Earl, M.J. (1989). The Management Strategies for Information Technology.Prentice Hall, London Read More