The strategy that Samsung implemented is a broad target one.
This is because Samsung produces a wide range of products and services that
caters for all segments. The company operates both differentiation and cost
leadership. Porter warns that such strategy might lead to firms “being stuck in
the middle”. Clearly Samsung is doing something right as this is not the case.
Samsung has maintained its leading position in the industry
they operate in. This is due to their outstanding research and development
facility and quality innovative products, but the company is not without flaws.
In 2015, Samsung paid out undisclosed amount to thirty employees due to poor
working conditions that lead to disease and death which resulted in the Office of the U.N. High Commissioner for
Human Rights getting involved. In 2016, the Galaxy Note 7 battery burnout
issues created a negative effect on Samsung’s mobile products. The company
recalled the complete line of Galaxy Note 7. A team was put in place to investigate
the root cause of the burnout. This team produced a detailed analysis of the
cause and how they went about in
mitigating it. In 2017, Samsung and the former president of South Korea
were accused of corruption. This led to the impeachment of the president and
Samsung’s vice president Lee Jae-Yong facing prison sentence.
Do these issues
contradict all that Samsung claims in maximising corporate value? According to
their website, corporate governance is the core of their business.
Also, Samsung has made a
strategic collaboration with Peugeot as well as partnering with French
furniture designer to develop their Serif TV. Samsung went ahead to acquire Harman,
US audio electronics maker. According to Samsung, acquiring Harman will give
them the capability to “deliver innovative and differented service in the
automotive electronics industry”.
The PESTEL analysis is used in analysing the external
factors which may have an impact on an organisation. It is used to identify the
key factors in macro-environment that might affect or have affected the way a firm
operates. Kotler (1998) described PESTEL
analysis as a useful strategic tool for understanding market growth or decline,
business position, potential and direction for operations.
Samsung has been embroiled in political scandal in Korea due
to accusations of corruption. This has created a negative effect on their
brand’s image. It shows that if a company tries to gain political favours
through illegal or questionable means, the effect will be damaging to the
company’s reputation. The company said it embeds corporate governance into its
organisation strategy. According to the report, they adhere to relevant laws
and 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. This
contradicts the corporate governance practice of Samsung.
Also, Samsung express concerns regarding the Brexit uncertainty. No business wants to
operate in an uncertain market place.
Samsung has to adjust to laws and regulations in all the
countries it operates in. Again, this could affect their corporate strategy.
The fluctuation in the market in terms of interest and
exchange rate can have effect on firm achieving economic value. In their
report, Samsung mentioned that it aims to create economic value by maximising
profits and shareholder value, but also act as a global corporate citizen to
create societal values. (SES Report 2017)
Samsung mentioned in their report that the sales of their
semiconductors and other components have set a new record, hence their
financial 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 ratio
Peteraf and Barney 2003 states that for a firm to achieve
competitive advantage, it has to create more economic value than the marginal
(break-even) competitor in its product market.
In every business, demographics play important role. Samsung
has adopted global strategy in order to adjust to the cultural environment in
the countries they operate in. Samsung manufactures products to meet consumer’s
preferences in those countries.
In Middle-East, Samsung recruited female engineers to help
in supporting female customers in that region.
Samsung’s technological capabilities stems from research and
development through employing creative and talented people. The company continued
to create high quality and innovative products for its consumers.
Their System LSI Business will strengthen their
technological competitive edge in the segment and position them as a global
The company is committed and dedicated to research and
Five forces framework emphasized five individual
forces that can determine the degree of competition in a particular industry
(Porter 1979). “The Five Forces determine industry profitability because they
influence the prices, cost, and required investment of firms in an industry –
the elements of return on investment”. Porter (1985)