Strategic Management: Samsung Electronics Company - Essay Example

? Strategic Management: Samsung Electronics Company Introduction Strategic management refers to the decisions made by the general manager in an organization on behalf of the owner to increase performance in operations. It analyzes key initiatives, which are taken by the top management on behalf of the owners, and entails specifying objectives, mission and vision, after which the resources are allocated to enhance implementation of the policies, programs and projects. The process of strategic management is complex and can be accomplished by those conversant with the internal aspects of the organization, and those who can provide information and make a prediction for the decisions made. Those involved in strategic management are responsible for the welfare of the company. They are accountable for the success of the organization. For instance, managers offer objectives and vision of the managerial goal, and plan to execute the goals. Strategic managers are also in charge of plans and policies of an organization (Expansion Management, 2009). Any organization should have the strategic management branch, which sets up mission for the company. Managerial activity encompasses information about the organization and functioning. Strategic management is a particularly crucial responsibility accomplished mostly by a single individual, and in most cases, the future success of an organization depends on the strategic management. The strategic management process is based on the transformation of working process of where the organization is at presently, and where it wants to be after some time. Transformation process is based on the people within the business, and should be by two way process where every person in the business is involved in executing the set goals and objectives (Samsung, 2009). Samsung Electronics is a multinational electronics company in South Korea with its headquarters at Suwon. The company is a flagship subsidiary of the Samsung group, which forms the largest information technology company in the world with the highest revenue. The company was established in 1969 for manufacturing of black and white television sets, 5-business decisions, and Dynamic Random Access Memory (DRAM). Samsung electronics has sales network and assembly plants in 61 countries worldwide with 221,000 employees. The company forms the largest mobile phone company in the world by unit sales in 2011. The company has the highest world market share in memory chip and has an established position in the tablet market (Samsung, 2009). Strategic management in Samsung Electronics The past few years in Samsung Electronics have been an immense advancement with different technologies taking the limelight like the liquid crystal display over cathode ray tube (Chiu et al. 2006, p. 143-165). In this paper, the strategies employed the liquid crystal display (LCD) and the dynamic random access memory (DRAM) are analyzed (Samsung, 2009). Samsung Electronics in LCD market Lee Kun-hee changed the strategy in Samsung group in 1993 from the imitating cost-leader to differentiator role through concentrating and downsizing the engineering, electronics and chemical industries. In 1995, the company had already developed the LCD technology and achieved considerable market. Since then, the company has achieved a flagship with the revenues increasing consistently over the years. The company has the highest global share in LCD (Moon, 2009). The strategic management in LCD is applicable to both internal and external environments, which are further subdivided into sections. External Environment in Samsung Electronics Company (LCD) External environment encompasses both the industry and the environments that are used in assessing the strategic position of the Samsung Electronics Company. The macro environment entails all the external factors that affect planning and performance in the company. These include the social factors, technological factors, political factors, economic factors, environmental factors and legal factors. The industry environment is analyzed using the Porter’s Five Forces (Moon, 2009). Macro Environment Social factors encompass the obsession of people to the technology that changes the relationship with each other. The electronics are playing a crucial role in many people's lives. The political factors involve the provision of tax incentives and subsidies to the industry. The industrial policies in Korea have enhanced international competitiveness through transfer of technology by the foreign firms in exchange for the market access. The economic factors involve any effect to the economy such as the economic downturn that reduces the demand for the LCD products. Environmental factors entail the environment consciousness of the people making them demand high efficiencies in energy and greener products. The legal factors involve the intellectual property that is crucial due to the constant innovations in the industry. The company filed 12000 patents in 2007 (Samsung, 2009). Industry Environment To understand the attractiveness, the likely profitability and the power distribution of Samsung Electronics, the Porter’s Five Forces will be used. The forces provide a ground work for the strategic action. Representation of the Porter’s five Forces in Samsung Electronics Company Threat of the New Entrants (Low) Threat of the new entrants is low, and the barriers to the new entry are high because of the huge requirements in capital. The company also benefits from the good differentiation of the product because of the strong identification of the brand and the innovative products. The company has developed the experience curve, access to best raw materials and proprietary technology that enhances significant cost advantages. Foreign government policy, especially in China, has encouraged the entry of the Samsung industry through the financial incentives (Moon, 2009). Bargaining power of the supplies (Low) Overall bargaining power of the suppliers is low. Purchasers and competitive suppliers are quite a number. The switching costs and product differentiation are low. The forward integration is not likely since the purchasers like Samsung will collaborate with the suppliers, as well as increase the prices for the raw materials that are to be passed on or absorbed to the customers. Suppliers will benefit through their contribution to research and development, and this has exemplified the company that has collaborated with over 1000 suppliers (Samsung, 2009). Bargaining power of the customers (Med) The overall customers have a medium bargaining power; usually a win-win situation. The product differentiation is considerably high, but the imitations provide cheaper alternatives as well as increasing the buyer power. The sensitivity to prices is high because of the large number of products that are similar and the status associated therewith though the perception of the quality allows for the premium prices. The Business-to-Business customers get relatively high earnings; thus, they can raise their prices due to the brand strength of the Samsung Electronics and this reduces their power over Samsung Company (Moon, 2009). The threat of substitute (Med) Overall threat of the substitute products is medium. As a result of the fast moving nature of Samsung Products, pressure is being put on the decreased prices and the high R&D costs that continually differentiate the products and this ensures that profitability and growth can be realized in the industry. The company has continually being innovative and it has released the OLED-HD TV, which the thinnest in the world (Moon, 2009). Competitive rivalry in the industry (High) The overall rivalry is high due to the diverse competitors like those from China. The brand loyalty is reduced by having similar products and the low switching costs. The capacity and the storage costs are usually variable, and the demand is seasonal. This can cause price cutting, which shifts the stock. The rivalry is also intensified by the high exit barriers (Moon, 2009). SWOT Analysis for Samsung Electronics Samsung Electronics Company develops and sells the electronic products such as computers, TVs and other related products such as fibre optics and semi-conductors. The Samsung brands are exceptionally strong in the market worldwide (Samsung, 2009). Strengths Production of market leading products: the company produces range products that lead globally. It leads in production of monitors, LCD, VRCs, TVs CDMA mobile phones and the microwaves. By December 2004, the company was leading in cell phone business. Being the market leader enhances the recognition of the company and this attracts the customers. Strategic alliances: the company is involved in different alliances that have been successful, like Maytag which deals with washing machines, Sony and IBM. Also, the company have a joint venture with Toshiba that provides them with optical devices. The alliances with these companies enhance the expansion of the technical knowledge. Global presence and strong brand: Samsung electronics have high brand awareness as well as the reputation the quality and innovation. The strong brand protects its market by forming a barrier to entry of other competing products. This enhances and guarantees the future sales. Weaknesses Inconsistent sales growth: the growth in sales has been uneven since 2000. In 2000, the growth rate was 31.3%, in 2001, the rate was 5.3%, and in 2004, the rate was 32.2%. This indicates inconsistency and inability aligning the operating strategies based on the market conditions. High dependence on semiconductor business: the semi conductor division has been generating a lot of income and the company has diverted the attention more towards the semiconductor production and ignored other divisions such as digital and digital appliances. This leads to disproportion in the operating profit. Product failure: some products like slide phones have poor customer reception. This makes it hard for the company to recover the expenses in R&D incurred I manufacturing such products. Opportunities The Chinese market: some leading companies in technology have turned to Asia because of the decrease in production costs. China is highly attractive ad lucrative for the Samsung Electronics. Such markets offer market opportunities and low production base. Booming semiconductor business in United States: the major presence of Samsung in US, as well as the booming market in the same place, encourages the increased demand for the semiconductor products in the United States. 3G Market: the 3G handsets and SGH-Z500 form the smallest 3G handset in the world. These products are high on demand and this help the company in winning the market share in 3G market. Threats Consolidation in PC business: PC business forms the largest customer segment in devices for computer storage. The merger acquisitions like HP-Compaq and IBM-Lenovo have formed a larger client base with high bargaining power. As a result, the company margins are affected. Slowing demand of the DRAM: the demand in DRAM is directly related to the PC requirement. The decrease in PC markets leads to decreased demand for DRAM. The shift from PC to MP3: Samsung targets the digital semiconductors and consumer products hence requiring better brand recognition and development capabilities. The demand is drifting from the performance-driven to entertainment driven products. The company has low exposure in entertainment driven products as compared to other companies such as Matsushita. Internal Environment in Samsung Electronics Company (LCD) This entails the resources and the internal competences on the basis of competitive advantage. The resources may be tangible or intangible. This can be analysed using the 6 categories of the resource identification that is similar to VRIO framework by Barney. Every resource is evaluated based on their respective competitive advantage. Also, internal environment encompasses the constant innovation, quality delivery, cost leadership and quick to market strategies (Samsung, 2009). Constant innovation The state of the art of Samsung Electronics provides a superior production capability. Samsung Company is linked to market-driven and well-financed R&D centres, and this makes it lead in the industry. The Advanced Institute of Technology in Samsung (SAIT) is currently employing more than 1,000 researchers, out of which 40% hold doctoral degree and 12% hold masters degree. The IT system as well as both the formal and informal organizations supports the effective R & D efforts which are critical in management initiatives (Moon, 2009). Delivering Quality Over the past decade, Samsung has had the biggest advertisement worldwide. The ratings are usually exceptionally high, and this is backed up by the relentless focus of the company to the quality. The company has established the Six Sigma Academy that educates the employees as well as building teams of quality specialists who have problem solving capabilities. As a result, the company has developed core competence in quality delivery (Moon, 2009). Cost leadership The accessibility to raw materials and the distribution channels and the relatively low supplier power allow for the achievement of economies of scale, which lead to decreased prices for the customers and high margins for the company. The leveraging of foreign market knowledge and experience within the industry encourages minimum costs, and this forms a core competency of the company (Moon, 2009). Quick to market The focussed growth and strong leadership in connection with the international networks allow for the end-to-end process that is owned and run by the Samsung Electronics. The leveraging of the resources enhances a deeper understanding on the fast changing markets and distinct them in their competency of launching new products to the market quicker than their competitors (Samsung, 2009). Stakeholders Analysis Samsung Electronics Company communicates with eight groups of key stakeholders. In 2010, the company experienced increased requests for the third party business inspection sites, surveys and interviews. The CSR Liaison Office was in charge of the requests. The major stakeholders in Samsung are the customers, business partners, investors and shareholders, NGOs, local communities, employees, press and the government (Chiu, Chen, Tzeng & Shyu 2006, p. 143-165). The company is making efforts in establishing trust with their stakeholder through open communication that is based on timeliness, honesty and transparency. The stakeholders take part in discussion on the issues that are relevant to electronic industry like waste management, GHG emissions, occupational safety and management targets among others. They formulate agendas like compliance to the risk management and the company responds appropriately by strengthening the compliance management organization and implementing the full compliance among the employees. Furthermore, the enquiries on main issues like activity of CSR enhance the identification of key issues affecting the company, and plans are made to address such issues. The stakeholders communicate to the Samsung Company and the company responds appropriately by taking appropriate measures (Moon, 2009). References List Adobe. (2003). Samsung Electronics. [Online] Accesed on 18 Feb. 2013. Available at http://www.adobe.com/products/acrobat/pdfs/korea_samsung_cs.pdf. Chiu, Y., Chen, H., Tzeng, G., & Shyu, J. Z. (2006). Marketing strategy based on customer behaviour for the LCD-TV, International Journal of Management and Decision Making Issue 7 (2), pp. 143-165. Moon, I. (2009). Samsung Electronics. [Online] Accessed on 18 Feb. 2013. Avaiable at http://bx.businessweek.com/samsung-electronics/ Samsung (2009). Expansion Management. [Online] Accessed on 18 Feb. 2013. Available at http://www.expansionmanagement.com/cmd/articledetail/articleid/18619/default.asp Read More