Samsung
plays a fundamental role in the world of
electronics industry in the world, and this since its foundation in 1969, as on
today, its Electronics Corporation own more
than 25 production centers in the world. This is in addition to 59 sales
branches in more than 46 countries. Recently, it can be noticed that the revenue
and profits of Samsung Company have been decreasing clearly. Samsung income and
operation profit declined in 2019 in contrasted with the earlier year. The net
revenue of the company declined as well. While the interest of cell phones is
down in 2020 because of COVID-19.
This
article is to discuss Samsung competitive positioning techniques that been developed as
its differentiation strategy by using
many competitive advantages methods such as variety of products, focus on
R&D, focus on gear and strong marketing to secure its market share and overcome
competitive challenges in many industries. We also covered Samsung SWOT
analysis.
Table of Contents
Assessment Point 1. 1
A highlight on Samsung competitive
positioning strategy to overcome market share loss to competitors. 1
Summary. 2
Introduction. 4
Methods. 7
Discussion. 8
A. Samsung Competitive Advantage. 10
1- Focusing on the long term.. 10
2- Commitment to manufacturing. 11
3- Flexibility. 11
4- Focus on gear. 12
5- A wide variety of products. 12
6- Innovation in digital products. 13
7- Focus on marketing. 14
8- Vision and goal setting. 16
9- The acquisition of customer
confidence. 16
10- Keep pace with development 17
11- Hybrid Management System.. 17
B. Samsung SWOT analysis. 17
Strength. 18
Weaknesses. 18
Opportunities. 18
Threat 18
Conclusion. 19
Appendices. 21
APPENDIX
A: smartphone market share 2020. 21
APPENDIX
B: Market share of smartphone 2020. 22
List
of References. 23
Samsung
is one of the most important companies in South Korea, and it is specialized in
manufacturing all electronic devices, and it is the most important name of any
Korean group in this field of industry. It have offices in 58 countries,
including Arab countries such as Saudi Arabia and Jordan, which employs more
than 254,000 workers. This company is active in selling and researching all
communications systems, mobile and smart devices, computer screens transportation-like
equipment and very large optical screens since 2007.
Samsung
started facing loses since long ago, they faced huge losses when financial
crises happened to many Asian companies that hit their region in 1997, which
called the “Asian Tigers crisis “. This issue has strategic implications on
Samsung investors and stakeholders.
Below
statistic shows the global revenue made by Samsung Electronics between 2005 and
2019. In 2019, Samsung Electronics recorded a revenue of around 230.4 trillion
South Korean won that is approximately 206 billion U.S. dollars. (Statista,
2020)
Figure 1: Samsung revenue 2005-2019
In
2019, the net income and revenue of Samsung have been declining consistently.
Its income and working benefit declined in 2019 contrasted with the earlier
year primarily due to more vulnerable performance on its memory specialty units
and LCD display board units. Thought the development in the quantity of
shipments in 2019 was good, the costs of DRAM continued declining prompting
lower profit for the memory Business unit of Samsung. Aside from that, the
interest for LCD boards kept on debilitating causing the LCD board business of
Samsung likewise to endure a decrease in benefits. The net income of the
organization fell in 2019 to 230 trillion KRW from 243 Trillion KRW in 2018.
The working benefit of the organization was on decrease in 2019 contrasted with
the earlier year. The working benefit of the organization was down to 27.8
trillion KRW from 58.9 Trillion KRW. While the interest of cell phones is down
in 2020 because of Coronavirus, it might fall in the other categories as well,
causing Samsung's profit to be through a more serious decrease. (Pratap 2020)
Samsung
- which is witnessing intense competition in the smartphone market with Apple
and Huawei, which at the same time rely on them in slides and screens, said
that operating profits in the fourth quarter of 2019 fell to 7.16 trillion won
($ 6.13 billion) due to weak demand for chipsets. Down 34% over the same period
in 2018.
Never
the less, Samsung released its financial report for the second quarter of 2020,
in which it revealed an increase in profits of 23% over the same quarter of
last year.
According
to BBC finance, Samsung Financial Report for the second quarter of 2020, which
starts from April to June, revealed a profit of $ 6.81 billion, as it was able
to achieve these profits despite the decline in revenues, as Samsung was able
to take advantage of the tendency of many to buy memory chips. In the recent
period, the company has also tended to raise prices and make profits.
In this report we will research
Samsung competitive advantages methods
that is being used and implemented by the company strategy to face and overcome
recent issue that the company are facing which is the continuous losses in
profit and revenue.
This
research will review Samsung clear differentiation strategy by using
competitive advantages technics explained in order to compete and overcome
financial challenges not only in recent years, but along with its long journey.
The
method of this research are mainly secondary Data Analysis / Archival Study and
Observation.
Samsung
has followed an alternate technique in its business in contrast with different
competitor in South Korea. In the beginning phases, the organization understood
the significance of innovative work in the organization and needed the world to
know it as an international brand.
Some of
the secondary data that will be researched in this study is how Samsung is reinvesting
its profits in R&D and supply chain optimization to ensure that markets are
supplied with high quality products without interruptions.
While
preparing this study, I have observed that the Company focused on manufacturing
high-quality products, leaving most of the competitors focusing on mass
production to meet the growing demand, without paying attention to the quality
of manufactured products.
This
study focus also on Samsung competitive advantage, which will be discussed in
details in the discussion section, is being enhanced and developed
contentiously to overcome revenue declining issue.
This
study will review the secondary data of how
initiative that was launched by the head of the Board of Directors
changed the path of Samsung and transferred it from an ordinary company working
on consumer electronic sector to be an international leader in that sector.
Another
observation is that Samsung planned to commit to investing in innovation, its
brand and distinctive products, along with other method as will that be discussed
in discussion section. In the same time, other Korean and other international competitors
were focusing only on short-term targets like maximizing product profits.
The
Samsung Group started its activities in 1938, and almost thirty years after,
Samsung Electronics was established, creating mainly affordable high contrast
black and white TVs. During the 1970s, it acquired the semiconductor section,
which characterized the organization's future.
Samsung
Electronics is one of the largest technology organizations on the planet in
terms of income, and its branches and industrial facilities.
Samsung
is considered the second largest supplier of mobile phones exceeding Motorola
and Nokia. Speaking about the research, the company enhanced its partnerships
with many higher education universities, such as the strategic alliance between
Sungkyunkwan University and the Samsung group.
They
are also active in other fields like the field of nature conservation. For
instance, in 2008, Samsung launched the Forest Planting Program, which planned
to replant trees in Tropical forests.
The
global strategy of Samsung Electronics focuses on eight important regions that
are located around the world, which include North America, Europe, Southeast
Asia, Central Asia, the Middle East, Africa, China, the Caribbean and Latin
America.
As a
technology leader, Samsung is continually working as per its vision of digital convergence, and this is as it
associates it to everything that exist through advanced networks through four
fundamental work units, which are “home appliances, office devices, mobile
phones, basic components”, which are included in many companies and homes.
Which helps in the creation of the most recent digital innovations that exist
in the world. Samsung is also viewed as one of the significant organizations
and one of the main industrial manufacturer of PC screens in the entire world.
Kindly
refer to appendix A to review Market share of smartphone companies based on figures
of global shipments in Q2 2020.
Samsung
hire 66,000 employees or even more in more than 50 countries in the world, and
the company is been declared by many international magazines as one of the top
important and growing brands in the world. SAMSUNG brand ranked 21st worldwide.
Samsung has achieved great success in the semiconductor sector of memory card
and this is since 1992, also it has been on the top of the semiconductor
manufacturers, TTFT screens and many more devices and ships that is related to
mobile phones and computer screens and it is the fourth in terms of sales in
the semiconductor industry and the first in terms of production of all cell
phones.
As per
Samsung differentiation strategy that require them to differentiate by
introducing new services in order not to
lose their position, The company has planned into launch a new set
of services. This may be defined as result of the company success on its recent
commercial offers that are presented by company in the field of information
technology (IT). Speaking about adding a service, Samsung started supplying optical
fibers to USA by using Corning's glass factory.
In this
study, will discuss some of Samsung competitive advantages strategy techniques
observed by using secondary data analysis. These advantages along with other
methods helped Samsung to face its continuous loses challenges and helped the
company to secure some profits in 2020 fiscal year. Again, these competitive
advantages are not new to the company, however there are continuously being
improved to face challenges
Samsung changed its viewpoint of
being an organization heading to accomplish short term objectives to being an
organization centered on long term objectives. In 1993 Samsung changed its logo
and turned into English Written name so it can catch the consideration of
purchasers around the globe. It focused on assembling top quality products and
puts its assets in R&D work to develop products with new features
consistently and always with high quality. Samsung, the technology leader in IT,
is focused on long-term goals; It is keen to manufacture its products with the
highest quality and to invest its resources in research and development in
order to reach products with new features and high quality, and let us remember
here that when a Samsung manager presented a smart phone to the President of
South Korea and some minor defects appeared in it, the manager’s reaction was
to burn the batch produced, which are 25 thousand devices in front of the
workers' eyes, and this situation had a great psychological impact on them and
a confirmation of the company's commitment to the highest possible quality.
Samsung
underlines that the organization's manufacturing field is one of the center
purposes of its plan of action, as Yun Jong said.
1997
Vice President Yong payed attention to in-house producing at Samsung as
alternative to outsourcing manufacturing processes to outside providers.
Samsung's primary concentration toward the finish of the 1990s was the
advancement of chips and connectors inside the organization. Somewhere in the
range of 1998 and 2003, Samsung put $ 19 billion in building new plants for
processors and chipsets, and this affirms the organization's heading to contend
by assembling its own items, beginning with equipment and connectors
processors. This confidence gave the organization countless upper hands, the
most significant of which was a decrease in costs and making sure about the
essential parts in the correct number and time contrasted with different
competitors who were requesting these materials from outer providers just as it
does not put itself at the mercy of the market and the supplier and consequently
control it.
As an
example of company completive strategy tactics that followed to overcome market
share losses is Samsung flexibility. Samsung's factories are not only
distributed in South Korea, but it also has factories in China and India to
take advantage of cheap labor there and near these countries from its
headquarters and provide the possibility of transportation and international
shipping.
This
great flexibility in manufacturing that Samsung enjoys allows it to manufacture
atypical and customized products, so more than half of its sales of RAM chips
are made by special orders from major companies such as Dell, Microsoft and
Nokia.
Although
the prices of Samsung products for these companies are higher than the average
available in the market, Samsung can provide orders in a timely manner, with
the appropriate quantity and with the required adjustments completely, and this
is what no other company can provide.
Samsung
decided to distance itself from developing software, systems and content in
order not to fall into the spiral of piracy, intellectual property rights and
others. So it went completely focused on making hardware. Today, it can develop
new products and new technologies more efficiently and without relying on
external suppliers.
And
because the control nerve in the manufacture of electronic devices, especially
smart phones, personal computers, televisions, and tablets is the processors of
these devices, we find that Samsung spares no effort in developing its
processors industry to provide better products than a large number of
competitors and sometimes better than companies specialized in Processors only.
This is what prompted Apple to rely on Samsung to make processors for its
iPhone phone over the past years.
5- A
wide variety
of products
What distinguishes Samsung the most
is its unique and unprecedented product range The company produces many
different types of electronic products, and the goal here has never been to
increase profit rates, but rather to strive to be a leader in the manufacture
of all kinds of electronic devices, and perhaps its most prominent products are
smartphones, TVs, computers, cameras and computer spare parts.
It is
clear that a company the size of Samsung does not depend on one sector of
products in accordance with the principle of not putting eggs in one basket, as
today it manufactures televisions, smart phones, RAM and flash drives, MP3
players and DVD players ... etc. This is only on the level of electronic
products.
Not only
does Samsung manufacture different products to meet different sectors, but it
is also the leader in them. Today it is considered the best in the sector of
processors and DRAM memory used in computers and NAND used in cameras, which
stores 3 times more storage memory than the NOR storage memory manufactured by
Intel and offered at a price close to it.
Some of
the strategic strength of Samsung is the secret of innovation in Samsung, which
is due to a methodology called TRIZ, which is based on creatively solving
management problems in the company.
As a
result of this innovative approach, Samsung began launching products that open
up new markets, such as the first 57-inch LCD TV it presented in 2003 and was
the first of its kind, which set new standards for the upcoming industry for
televisions, as users no longer accept less quality than what Samsung offers,
and here it suffered Other TV companies like LG, Panasonic and Sony have had to
take their innovations further than Samsung.
Not
only did Samsung set the new industry standards, but it was also introducing
new products to the market twice as fast as its competitors. With this high
rate of launching new products to the market, Samsung aims to reduce the prices
of its old products, thus putting pressure on competitors and their products by
force of price, which makes them capture a larger market share.
According
to this competitive strategy, other companies find themselves losing their
focus from developing their products to catching up with Samsung and responding
to their products, thus gradually losing their position in the market.
And
Samsung has the lowest level of bureaucracy and red tape despite its huge size
extending in the world, the company activates technology and volunteers to
accelerate the process of making decisions at various administrative levels.
Before
adopting the new management initiative, Samsung did not have sufficient vision
for the appropriate marketing of the company and its products, and product
managers were controlling marketing budgets, always spending less than normal
limits and designing their marketing strategies to achieve short-term goals.
In
order to move Samsung from “a company that makes cheap hardware” to a “company
that provides high-value-added products,” Samsung had to develop its brand
significantly, so it was necessary to focus on effective marketing. Samsung
assigned this responsibility to the vice chairman of the board of directors who
led the company's efforts to shift the focus of the product line instead of
making regular products for consumers to making good products, and in 1999 the
company hired Eric Kim as its Executive Vice President of Marketing and began
to emphasize the importance of looking at the Samsung brand as part.
Fundamental and vital in the company is no less important than factories and
expertise, and therefore it was necessary to establish the global Samsung
brand, not to be the Korean Samsung brand.
In
order to go further to the world, it sponsored the Olympic Games in Seoul,
which helped Samsung to attract the world's attention to its brand and create
appropriate awareness. In the late nineties, the company entered into several
marketing alliances with international companies and sponsored a number of
events and activities to raise awareness about the global Samsung brand.
Before
2001, Samsung Electronics was using more than 55 advertising agencies around
the world, and it was advertising its products with more than 20 different
logos. This dispersion was not good for Samsung so it consolidated its
marketing efforts and hired Cone & Belding (FCB), Foote Agency, to take
over the mission.
This
unification helped Samsung to build up a solitary general picture of the
worldwide brand, just as making it simple for it to dispense and recognize its
image as indicated by the neighborhood markets since this is important and up
to one agent to deals with the issue, it is in a way that is better than
scattering it.
After
adopting the new management initiative, Samsung pumped more cash into marketing
budgets, and here came the function of the supposed M-Net program that helped
Samsung put the cash in its correct spot. Where this program analyzes the
results of previous marketing campaigns carried out by the company and the
funds that were spent on them, at that point it recommends the new technique to
be followed and the suitable assets to be spent in each market and for every
item or grouping, which makes the redistribution of promoting financial plans
in a new way more effective. Kim introduced what he called “market-led change,”
an idea that helped Samsung managers view marketing as an important and vital
function of the company's business rather than as a series of procedures that
it takes from time to time to promote products. As a result of this idea,
Samsung focused on listening to customers, identifying their needs, dividing
them into classifications, and identifying the classification that can pay
higher prices in exchange for products and go to it with the appropriate
marketing strategy.
Many used to think that Samsung is
just an electronics company like any other electronics company located
anywhere, and in fact this matter is much further than that, the overriding
goal of Samsung in managing it is to become one of the major brands in the
world. This goal is one of the factors that distinguished the company from the
rest of the other companies, so it is necessary to define the goal before
starting any project, without a goal the inevitable result in the end will be
failure.
Usually a lot of companies target
consumers' pockets in order to reach the largest possible profit, which is what
Samsung did not do in its strategies, the main goal of the company was to
acquire the audience and gain the confidence of customers, and in light of the
technological revolution that the world witnessed during the recent period The
demand for electronic products has become very intense, and thanks to the great
effort made by Samsung to gain customer confidence, the demand for the
company's products has increased, which made it double the amount of its
products to meet the needs of the growing customer demands.
Perhaps we all know that a large
percentage of the profits that companies achieve goes to the bank accounts of
the owners of these companies or managers, which affects the future of the
company in the long run and threatens its continuity, as for Samsung’s
strategy, it allocates the largest part of the profits it generates annually to
spending on research and development; In order to maintain the quality of the
products offered to the customers, R&D helps outperform all competitors.
One of the main competitor advantage
strategy that Samsung follows is its management style as it’s a combination of Japanese
and American management theories (Korean management style was very similar to
Japanese management style in the early 1990s ). The company’s successful
learning potential have been used to obtain the best parts of both management
styles for long years. Kindly refer to Appendix B table for Samsung Mixed
Strategy (Adrienne Selko, 2014)
In this segment, we will utilize SWOT analysis to survey Samsung
and its current circumstance. SWOT represents strengths, weaknesses,
opportunities, and threats. . While Strengths and weaknesses are viewed as
inside elements, Opportunities and threats are viewed as outer components.
Samsung's significant strength is development,
which has empower the organization to make products that has low effects in the
climate. This has made Samsung to make an incredible picture over the world
portrayed by advancement and ecofriendly (Porter, 1979). Another quality that
make Samsung organization upper hand is the capacity to make and deliver
results of shore.
One of The significant shortcoming that has affected Samsung is
simply the need of self-owned operating system for smart phones like in Apple
Inc. Since the presentation of cell phone, Samsung has depended on working with
operation systems from Google, for example, Android. Note that Google is one of
the Samsung's immediate competitors and can hurt Samsung by increasing the cost
of its operating system, hence Samsung pries will increase (Larry, 2018). One
more danger is that the organization overall revenue is low, consequently,
relies upon high volume of deals.
Samsung has the occasion to investigate this undiscovered business
sectors, Samsung has not investigate all the business sectors accessible
globally. For instance, Samsung products are notable in India and the
organization has gained notoriety for the nature of the product it produce
(Brostoff, et al., 2015). Another open door that Samsung has number of patent
which make the organization to stay more serious.
Electronic and cell phones market is
as of now saturated and there is probability that sales of these item won't
develop at a high rate as it has been in the previous a very long time for the
short and mid-term future. The main available alternative that allow
organization to expand the sales of its devices is to adjust the costs. Over
the most recent two years, electronic and cell phones companies have occupied
with cost battles as a methods for expanding their deals (big-commerce, 2020).
Another danger confronting Samsung Company is the quick change in innovation.
Samsung's success has become a real
reality, as most of us touched this success, especially after the company
launched many modern versions of smartphones, which proved its actual success
with users.
Perhaps it is not a secret for any
of us that Samsung offers modern and advanced products that have made our life
easier and enjoy a kind of luxury and entertainment. If you have technological
devices, you must have one of the products of the leading and giant
"Samsung", and if your phone is not smart, then the TV may be Or the
laptop or something else, and perhaps this spread, expansion and growth
witnessed by Samsung made a lot of people ask: What is Samsung's strategy to maintain
the great success? What is Samsung strategy to grow and increase profit in 2020
despite COVID-19? What are the management tools that they use to count their
2019 revenue financial issues?
In this study, we have highlighted
Samsung competitive strategy to overcome its difficulties, also this study
cover Samsung SWOT analysis
Based on this study, the vital
targets and arrangements of Samsung Electronics and other divisions and
subsidiaries of the Samsung Group aim to address competition by various
innovation organizations, particularly Apple, Google, Lenovo, Sony, Dell, Acer,
LG, and Intel. These competitors have solid industry positions and
authoritative assets and capacities to disintegrate Samsung's piece of the pie.
Creating and upgrading organization methodology enables the organization to
stay a significant rival in the worldwide market (Helms,2010)
As Samsung is considered one of the
largest technology companies in the world, not only that, but also one of the
largest manufacturers of smart phones in the world, and the second largest
manufacturer of semiconductors and chips, there is no doubt that Samsung
pursues a different strategy in its work compared to other competitors, in the
first stage From the beginning of the company’s work. As an example of Samsung
techniques, the company realized the importance of research and development,
which helped it to become one of the largest global brands.
On the other hand, Some reports
indicate that Samsung has invested huge investments of time and money in its
human resources, and has spent about $ 100,000 per person on training and
preparing its senior employees annually, in addition to the opportunity cost
and the risks the company was exposed to due to missing its best employees from
for 15 Month of training period; though there were many objections expressed by
many of senior managers within the company because of the high cost of training
programs, however the CEO of the company settled this matter and implemented
the programs as per the company strategy to overcome financial issues in the recent years.
Figure: Smartphone brands market share as per number
of global shipments in Q2 2020.
Table 1: Table: Samsung Mixed Strategy (Adrienne Selko,
2014)
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Brostoff, M. and Altavilla, S. (2015) ‘Electronic medication
reconciliation and medication errors’ International Journal for Quality in
Health Care, 27(4), pp. 314–319.
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Helms, M. and Nixon, J. (2010) ’Exploring SWOT analysis–where are we
now? A review of academic research from the last decade’ Journal of Strategy
and Management, 3(3), pp. 215-251.
-
Porter, M. (1979) How Competitive Forces Shape Strategy. Brighton: Harvard
Business Review
-
Samsung Electronics Co., Ltd. (2020) Annual General Meeting of
Shareholders. . Available at Http://www.samsung.com (Accessed 30 December 2020)
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Selko, A. (2014) Disruptive technologies, sound economics and innovative.
Wisconsin: Industry Week.
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Tankovska, H. (2020) Samsung Electronics: global revenue 2005-2019.
Available at Http://www.statista.com/statistics/236607 (Accessed 30 December
2020)
