Type: Research Essays
Sample donated: Lionel Caldwell
Last updated: August 13, 2019
The strategy that Samsung implemented is a broad target one.This is because Samsung produces a wide range of products and services thatcaters for all segments. The company operates both differentiation and costleadership.
Porter warns that such strategy might lead to firms “being stuck inthe middle”. Clearly Samsung is doing something right as this is not the case.1.1 FindingsSamsung has maintained its leading position in the industrythey operate in. This is due to their outstanding research and developmentfacility and quality innovative products, but the company is not without flaws.In 2015, Samsung paid out undisclosed amount to thirty employees due to poorworking conditions that lead to disease and death which resulted in the Office of the U.N.
High Commissioner forHuman Rights getting involved. In 2016, the Galaxy Note 7 battery burnoutissues created a negative effect on Samsung’s mobile products. The companyrecalled the complete line of Galaxy Note 7. A team was put in place to investigatethe root cause of the burnout. This team produced a detailed analysis of thecause and how they went about inmitigating it.
In 2017, Samsung and the former president of South Koreawere accused of corruption. This led to the impeachment of the president andSamsung’s vice president Lee Jae-Yong facing prison sentence. Do these issuescontradict all that Samsung claims in maximising corporate value? According totheir website, corporate governance is the core of their business. Also, Samsung has made astrategic collaboration with Peugeot as well as partnering with Frenchfurniture designer to develop their Serif TV. Samsung went ahead to acquire Harman,US audio electronics maker. According to Samsung, acquiring Harman will givethem the capability to “deliver innovative and differented service in theautomotive electronics industry”.
2 PESTELThe PESTEL analysis is used in analysing the externalfactors which may have an impact on an organisation. It is used to identify thekey factors in macro-environment that might affect or have affected the way a firmoperates. Kotler (1998) described PESTELanalysis as a useful strategic tool for understanding market growth or decline,business position, potential and direction for operations.2.
1 Political FactorSamsung has been embroiled in political scandal in Korea dueto accusations of corruption. This has created a negative effect on theirbrand’s image. It shows that if a company tries to gain political favoursthrough illegal or questionable means, the effect will be damaging to thecompany’s reputation. The company said it embeds corporate governance into itsorganisation strategy. According to the report, they adhere to relevant lawsand regulations to maximise its corporate value.
From the findings, Samsung’s Dr.Oh-Hyun Kwon holds the position of the CEO as well as chairman. Thiscontradicts the corporate governance practice of Samsung. Also, Samsung express concerns regarding the Brexit uncertainty. No business wants tooperate in an uncertain market place.Samsung has to adjust to laws and regulations in all thecountries it operates in.
Again, this could affect their corporate strategy.2.2 Economic FactorThe fluctuation in the market in terms of interest andexchange rate can have effect on firm achieving economic value. In theirreport, Samsung mentioned that it aims to create economic value by maximisingprofits and shareholder value, but also act as a global corporate citizen tocreate societal values. (SES Report 2017)Samsung mentioned in their report that the sales of theirsemiconductors and other components have set a new record, hence theirfinancial record has improved.Their financial structure is on good grounds with debt-to-equity ratio valued at 35.
9%, equity ratio at 73.6% and return on equity ratio12.2%.Peteraf and Barney 2003 states that for a firm to achievecompetitive advantage, it has to create more economic value than the marginal(break-even) competitor in its product market. 2.3 Socio-Cultural FactorIn every business, demographics play important role.
Samsunghas adopted global strategy in order to adjust to the cultural environment inthe countries they operate in. Samsung manufactures products to meet consumer’spreferences in those countries.In Middle-East, Samsung recruited female engineers to helpin supporting female customers in that region. 2.4 Technological FactorSamsung’s technological capabilities stems from research anddevelopment through employing creative and talented people. The company continuedto create high quality and innovative products for its consumers.
Their System LSI Business will strengthen theirtechnological competitive edge in the segment and position them as a globalleader.The company is committed and dedicated to research anddevelopment3 Porter’sFive ForcesFive forces framework emphasized five individualforces that can determine the degree of competition in a particular industry(Porter 1979). “The Five Forces determine industry profitability because theyinfluence the prices, cost, and required investment of firms in an industry –the elements of return on investment”. Porter (1985)