Business and Management
Submitted By hongkongu
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|Module Code |: |MGT 6145 |
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|Word Count |: |2867 |
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1. Introduction 3 1.1Company Overview 3
2. PEEST analysis 4 2.1 Political analysis 4 2.1.1 European Union 4 2.1.2 National laws 4 2.2 Economic analysis 5 2.3 Environmental analysis 5 2.4 Social and cultural analysis 6 2.5 Technological analysis 6
3. SWOT analysis 6 3.1 Strength 6 3.1.1 Diversified business operations 6 3.1.2 Strong brand image 7 3.1.3 Samsung Electronics ' Consistent emphasis on innovation and R&D 7 3.2 Weakness 7 3.2.1 Patent litigations with Apple 7 3.2.2 Lack its own OS and software 7 3.2.3 Labour abuses 8 3.3 Opportunities 8 3.3.1 Positive outlook for smartphone market 8 3.4 Threat 8 3.4.1 Intense competition in the smartphone sector 8
4. Conclusion & Recommendations 9
An overview of the company is given, along with key facts including contact information. This report start with background description for the company and the market it operates on; contains both PEEST and SWOT analysis and identify some major issues facing the organisation; represent confluence of the factors identified in the preceding analysis and conclude with suggestions for dealing with the identified issues.
Samsung Group (Samsung) is a diversified group, with operations in various sectors such as electronics, financial services, chemicals, and infrastructure. Samsung has operations across the world. It is headquartered in Seoul, South Korea and employs about 344,000 The company recorded revenues of KRW254,561,500 million ($229,105.4 million) during the fiscal year ended December 2010 (FY2010), an increase of 15.6% over FY2009. The net profit was KRW24,497,900 million ($22,048.1 million) in FY2010, an increase of 38.7% over FY2009. (datamonitor ,2011)
Key facts (Samsung Group. 2014)
Head Office: Samsung Group 250 2-ga Taepyung-ro Jung-gu Seoul 100 742 KOR
Phone 82 2 727 7114
Fax 82 2 727 7892
Number of employees: 489,000 (2014)
Revenue: US$ 305 billion (2014)
Web Address http://www.samsung.com
PEEST is a method which help organizations to analysis the external factors as macro environment in a more efficient way. (Businesscasestudies.co.uk, 2015)
In this section I will give you a PEEST analysis which contains political, economic, social, technological, environmental, factors in details. These factors are macro environment of SAMSUNG. These external factors will provide the organization to have a better understanding of British market and it will help the company to predict the future plans and find solutions for them.
Due to the migrant crisis in Europe, the possibility of UK leave European Union has been greatly improved. According to comments made on British annual conference, there is 50% possibility now for Britain to leave EU. (Mason, 2015)This may lead bad impact to Samsung because UK import large amount of goods from the EU every year. In 2011 only, the imported goods worth £202bn .UK Government might decide to impose large tariffs on European imports as a result of leaving the EU. (Chu, 2012)
2.1.2 National laws
Second, in 2011, when the VAT and the original 17.5% to 20%. David Cameron has vowed to introduce a law guaranteeing no rise in income tax rates, VAT or national insurance before 2020 if the Tories win the election. It is good news for Samsung, because of the VAT is the enterprise cost of operating costs and a big part of commodity prices .Maintaining rate not growth can give companies a good profit space.
The British economy is walking from the economic crisis; we are now in recovery period. (Owen, 2015)Employment rates continue to rise and in February this year reached its highest level since 1971. The retail sector employed a total of 4.4 million people in 2014, 15.8% of the Great Britain total. This is the largest broad industrial group in United Kingdoms by the number and proportion of employees.(ONS, 2015) At the same time per capita income is growing .Consumer spending grew 0.4% as disposable income increased 2.3% - the fastest rate of annual growth since the start of 2010(Mankiw, 2012, p. 97) It is a good thing for Samsung, because when disposable income increases, people will tend to purchase price high quality good products, (Mankiw, 2012)As the economy began to recover, growth in the retail sector increased more quickly. Growth in the retail sector has averaged over 5% in each quarter compared to the previous year since Q1 2013. Growth in the whole economy has averaged around 2.5% in each quarter compared to the previous year.
The number of older people in the UK is rising. Britain's current average age has reached the highest point in history, has reached 40. (Neilan,2015)[pic]
Proportion of people at older ages, UK population mid-1974 onwards
Moreover It can be seen from the above graph that In Britain, the proportion of elderly over the age of 75 in the population growth faster and faster in recent years. The Office for National Statistics projects that by 2033 there will be around 20.5 million people aged over 60 in the UK - nearly 29% of the population. The elderly need more accessible service .In terms of mobile PC industry; convenient artificial service will be more and more popular. Smartphone which can accept the online purchase delivery will be more and more preference by the market. (Barford, 2014)It is good news for Samsung; there will be a wider market for smart phones in the future.
2.4 Technological analysis
Multi-channel retailing sales have increasingly become the trend of the industry. Britain's e commerce in retail industry is developing rapidly. ‘Service robotics’ is highlighted as of growing importance, whose devices can work for humans and adapt to contexts rather than simply repeating actions through communicating. Processing provide instant feedback connected to networks will be preferred by customers. In transport and energy, the challenge is to design systems (such as multimodal transport) that take account of the behaviour of individuals and businesses.
2.5 Environmental analysis
The world’s reaction and attitude to climate change and environmental concerns increase to at an international level. Companies need to develop business strategies to ensure they assess the emerging risks and opportunities, and adapt to the challenges of operating in a low-carbon economy and in a business environment that is increasingly intolerant of excessive waste and the use of hazardous materials.
All businesses impact its environment. Some have a positive impact while others have a negative effect. The degree of impact varies too. Samsung must keep pollution or waste in mind. It can also have a positive impact on the environment by processing and cleaning waste. These factors will affect the company, but they will not have an immense toll on its trade and profit generation. This is because environmental factors have a direct effect on agricultural businesses only.
However, Samsung in this aspect is relatively large. Because Samsung’s target customer group is middle and high income groups, they have higher level of education, whether for enterprise environmental protection is more sensitive. With the idea of environmental protection gradually becoming popular, people now are willing to pay more attention to the sustainable development of enterprises. The number of green consumers, who expect company to make products in an environmentally friendly way, has increased. In such a situation, Samsung must be aware of the need to make products in a way which satiates the ethical consumer.
3. SWOT ANALYSIS
|Strengths : |Weaknesses: |
|Diversified business operations |Patent litigations with Apple |
| |Lack its own OS and software |
|Strong brand image |Labour abuses |
|Samsung Electronics ' Consistent emphasis on innovation and R&D | |
|Opportunities: |Threats: |
|Positive outlook for smartphone market |Intense competition in the smartphone sector |
A SWOT analysis of Samsung is provided which includes strengths, weaknesses, opportunities for improvement and threats.
3.1.1 Diversified business operations Samsung Electronics has been the world's largest memory chip maker since 1993..Samsung group operates in the advertising, construction, entertainment ,electronics, machinery and heavy industries, chemicals, hospitality, information, medical and health care services, retail, shipbuilding financial services, and other industries. It also develops products includes Apparel, chemicals, consumer electronics, electronic components, medical equipment, semiconductors, ships, telecommunications equipment. (Samsung, 2015)Diversified business operations enable Samsung to attract a variety of clients and reduce its business risks. If one part of the group doesn’t run well, the company can still keep operate.
3.1.2 Strong brand value
“Samsung Electronics has risen to seventh position in Interbrand’s annual ‘Best Global Brands’ report released today. The report recognized the global growth of Samsung’s brand value through creative marketing initiatives and continued market leadership across many product categories, including smartphones, televisions, digital appliances and memory devices.”
“Up one spot this year, Samsung recorded a brand value of $45.5 billion in 2014, a 15 percent increase over last year’s $39.6 billion. Since it entered into the Top 10 in 2012, Samsung continued to show significant growth in its brand value.” (Samsung Tomorrow, 2014)
Source: Samsung tomorrow
The strong brand value can give customers confidence when using its products.
3.1.3 Consistent emphasis on innovation and R&D
Samsung is one of the world’s leading innovative companies. The company’s strong focus on innovation and R&D provides a competitive advantage in using the power of technology which enables Samsung to create products efficiently to enhance profits and market share.
R&D is our key to responding to uncertain business environments and an increasingly competitive market place. Each year we invest at least 9% of our sales revenue into R&D activities with a commitment to leading technology standardization and securing intellectual property rights. Samsung’s team of researchers and engineers include over 50,000 employees across 42 global research facilities—each one collaborating on strategic technologies to forge new market trends and set new standards of excellence. ” (Samsung Group, 2015)
“Samsung’s R&D organization consists of three layers:
The Samsung Advanced Institute of Technology (SAIT): SAIT identifies growth engines for the future and oversees the securing and management of technology.
R&D Centers: Our global R&D centers for each business area focus on technology that is expected to deliver the most promising long-term results.
Division Product Development Teams: The division teams in each center are responsible for commercializing products scheduled to hit the market within one or two years.”
Source: Samsung tomorrow
To maintain a leading position in technological and innovation area, Samsung sets up a Global R&D Network.
“Our R&D network spans six Samsung centers in Korea, and 18 more across the U.S., U.K., Russia, Israel, India, Japan and China—not to mention our organizations in Universities across the globe. Our network investigates the latest technology trends and realizes technologies that offer the greatest benefits.” (Samsung Group, 2015)
3.2.1 Long Patent litigations with Apple
“Apple and Samsung Electronics have held a series of private negotiations about their patent disputes since last summer when Apple notched a victory in one case, according to legal documents and people familiar with the matter. A jury in San Jose, Calif., in August 2012, awarded Apple more than $1 billion after finding that some Samsung devices had infringed its patents. The judge presiding over the case has since reduced those damages as the case wends its way toward an appeal.” (Vascellaro ,2012)
Like I mentioned in the last section, Samsung has to face heavy penalties for charges because of its alleged imitation of the Apple’s iPad and iPhone. This has led to the public perceptions of the company becoming worse. Because of the heavy lawsuits and legal problems reported on mass media, consumers may become debt about the company’s ability of product design and lose confidence of the brand’s image. The coming damages could have negative impact on Samsung’s business management, marketing performance and financial situation.
3.2.2 Lack its own operating system and software
“APPLE'S IPHONE saw its UK market share climb between December and February, while Google's Android mobile operating system and Samsung both suffered a rare slump during the three month period. According to the latest figures from Kantar Worldpanel Comtech, The numbers show that as of the end of February, Apple's iPhone held a 32.1 percent UK market share, up 3.1 percent year on year, likely due to sales of the iPhone 5S and iPhone 5C.In comparison, despite still dominating the UK smartphone market, Google's Android mobile operating system slipped during the three month period, from 58.3 percent to 54 percent. As Kantar warned in January, Samsung had a bit of a rough time during the three month period with its market share sinking from 36.7 percent to 30.2 percent - likely the reason that Android's market share declined.” ( Page ,2014 )
Although Samsung is one of the world’s largest manufactures in the mobile market, it is almost completely dependent on Google’s Android platform. However, its major competitor, Apple has its own operating system called iOS. Software and operating system production has a high profit margin, can increase the company’s brand loyalty. Without strong software and operating system, those users of Samsung are not going to stay loyal and will eventually try a cheaper one like Huawei or Xiaomi.
3.2.3 Labour abuses There were several complaints and reports about child labor of Samsung’s supply chain in China from 2012 to 2015.
“In July 2014, Samsung cut its contract with Shinyang Electronics after it received a complaint about the company violating child labor laws. Samsung says that its investigation turned up evidence of Shinyang using underage workers and that it severed relations immediately per its "zero tolerance" policy for child labor violations.” (Don ,2014)
“One of Samsung's Chinese supplier factories, HEG, was criticized for using underage workers by China Labor Watch (CLW) in July 2014. HEG denied the charges and has sued China Labor Watch.” (Kan, 2014)
These kinds of reports may cause dissatisfaction among ethical consumers who expect company to make products in a socially responsible way. The target marketing of Samsung is middle or upper class; they are more educated and tend to care about such social issue. So in order to keep these ethical consumers, Samsung shouldn’t be involved in such news in the future. ‘Ethical consumption’ is consumption (purchase, use, disposal) of products that incorporates a salient ethical/moral dimension. The hedonic function and/or product utility are, to some extent, subordinated by concerns about right and wrong and consequences of consumption acts (Starr, 2009). ‘Socially responsible consumer’ is ‘one who purchases products and services perceived to have a positive (or less negative) influence on the environment or who patronizes businesses that attempt to effect related positive social change’ (Roberts 1993:140)
3.3.1 Positive outlook for smartphone market.
The worldwide smartphone market segment is forecast to record strong growth in coming years. Smartphones are currently witnessing high growth due to lower product cost, improved handset design and functionalities, the expansion of global mobile email and browsing services, the emergence of 3G and 4G network technologies, the rising competition among mobile carriers, and the standardization and upgrades of operating systems. The Samsung Company is a leading manufacturer of smartphones. The positive outlook for the smartphones market would provide the company an opportunity to enlarge its market share and profits. (datamonitor ,2011)
The UK mobile smartphone forecast says “At the end of 2013 we had smartphone penetration at 65.2%. Of the total market Android accounted for 33% and Apple 12.6%. By 2018 when the smartphone penetration will be almost 100%, Android will account for almost 54% of the total UK mobile market, and Apple 17.4%.” (Digital Parent, 2015)
“Brands that best deliver on the four C’s – “convenience, cost, control and confidentiality – should help consumers to realise the benefits of the connected home, and overcome scepticism from those who are less interested in smart home devices." said by Paul Davies, Senior Leisure & Technology Analyst. So if Samsung can seize the opportunity to develop a more convenient and accessible software in the future to satisfy the grey market in UK, the company will have an advantage in their potential customers.
3.4.1 Intense competition and increasing commoditization in the smartphone sector
The company faces threats of fierce competition and in the mobile sector. Samsung being one of the largest players in the Android marketplace faces increased competition from the phones also running Google's Android mobile OS, including HTC, LG, Motorola and Sony, HTC, Acer, ZTE, Huawei, Xiaomi etc. Nearly all mainstream smart phones of Samsung are based on Google's Android system, and the Android system is open to all manufacturers, make it difficult to differentiate its product from others. As the graph shows, nearly 60% of android users are from low-End class. Lower-priced smartphones with android system are increasingly reducing the market share and lowering the price of Samsung phones.
“What’s more, Samsung also faces its biggest competition company Apple using its own operating systems, whose iPhone and IPads use the iOS operating system. Samsung is losing high-end market share to Apple in smartphone battle.” (Williams, 2014)Besides Apple has already developed their own application stores, through which users of their products can access applications. Under the continuing pressure, the company's market share and profits will continually shrink in the future.
4. Conclusion and Recommendations
To conclude, Samsung has many advantages in operating business, and to be in a better position of UK market, Samsung needs to take all these factors into consideration.
Samsung have to strengthen their products’ competitiveness by reinforcing its brand image, multiple product lines, and technology.If Samsung want to avoid competition with other companies in the low-end market like Xiaomi and Huawei, it must develop its own OS and software as an ecosystem includes the entire content and other equipment manufacturer to reduce dependency on Android. This move will make Samsung inevitably compete with apple, amazon, Google and Microsoft. Although these companies' business models are not the same, but their goal is the same one that is to have all aspects of consumer online and mobile experience. However its success is likely to take much time and huge investment. In addition, Samsung should also give importance to other ethical factors. If Samsung can compromise on the labours’ age, working conditions and their wages, it will remove the negative image in people’s mind.
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