三星战略分析

Strategic Analysis on Samsung Electronics Ⅰ.Brief Introduction

Samsung Group 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 276,000 people.

Samsung Electronics was founded in 1969 in South Korea with Samsung Group as its largest shareholder.10 years ago, the brand “Samsung” was just a symbol for cheap electrical appliance among consumers but now it becomes one of the leaders in high-tech digital products.

In 1992, Samsung Electronics began manufacturing in China. Samsung set up SEHC in Huizhou. Since then, Samsung has been investing in China and keeping cooperating with operations in China. Nowadays, China is the country which Samsung put main money into.

Ⅱ.Strategic Environment Analysis

i. External Environment of Samsung

1. General Environment Analysis

The general environment of Samsung includes four terms:

Political/legal segment : A stable political environment should be formed for a company, as the situation will provide a stable development environment. For example, in 2006 China has brought some new political decisions.One is to protect the rights of consumers; the other is to promote the competition environment which is more equitable.

As to the legal force, New “Telecommunication Law” is drafting out and this law includes lots of constraint articles for electronic industry.

For Samsung:

The environment could make Samsung change its market into more stable countries such as China. And new competition policy would let it change its

strategy in competition especially in price.

Economic segment: Global economic has already came into tardiness phase, problems of high price of oil, global imbalance and the increase of high public liability of developed country would make the economic instable. The financial crisis happened in 2008 has already proved this. However, the GDP of whole world increase intensively. This might impact an organization in lots of terms such as supplier and customer.

In China economic increased intensively during the last few years. GDP of China nearly up to 10.1% in 2010. Thus the environment of economic environment in China is good for organizations.

For Samsung：

It would be impacted heavily from the declining of global economic, however, in China, stable and increasing market would let Samsung put more focus on it. And the price of Samsung’s products should be changed for the different condition of the different countries.

Technological segment: Generally speaking, technology nowadays could be described as huge new technology coming forth, especially in global information. And the pace is more and more fast. The amalgamation of information sciences, life sciences, matter sciences and cognitive sciences made information technology used in more areas.

Demographic segment (in China): We can understand the demographic distribution from the table below:

From the table we could see that population in counties is larger than in cities, male and female numbers are approaching to a balance and the largest amount of people are located between age 15 to 59. This means more potential markets are engendering by the increasing of people in China.

The government of China also does his best effort on public sanitation and speed up the development of education these years. As a result, the people quality in health aspect and education aspect both increase quickly.

For Samsung:

Huge population gives Samsung lots of new opportunities. As an electronic industry, Samsung put most of its market in areas which has high earnings such as big cities. More people in cities than before would enrich Samsung’s market. Also, potential market and potential labor market would be given since the increasing of city population.

2. Industry Environment Analysis

Porter’s Five-Forces Model of Industry Competition

SUBSTITUTES: easily

can be substituted by

other new electronic

products

Specifically, the industry environment of Samsung also includes four terms: Threats of new entrants: As we all know, there are lots of organizations do business in electronic industry and this market had already saturation. Electronic production needs high cost, so the strength of entry barriers is very huge. In this case it is not so easy for other organizations to enter this industry.

In addition, in the area of appearance few organizations could do better than Samsung and this make Samsung has a large amount of loyal consumers.

Threat of substitute production: The substitute production of Samsung’s electronic production in China includes Nokia, Moto, Sony, LG, Siemens, TCL and so on.

LG and TCL could not impact Samsung heavily because the features of

these organizations’ products have not catch up with Samsung’s now and even in the future few years. Which could be threats to Samsung’s electronic production a ctually are Nokia, Moto and Sony. These organizations’ products have wonderful features and their own loyal customers.

Bargaining power of suppliers：Samsung is an integrative company thus it has its own supplier link. Supplier link which makes Samsung proud the most let Samsung has very little impact on the bargaining power of suppliers. They only need to care about the raw materials.

Bargaining power of buyers: Because of the stable economic and political environment, the target market of Samsung’s products would stay in a dynamic balance. We also could see that, economic is increasing fast, with the buying behavior of high earning group, there would be large amounts of potential market exist for Samsung.

ii. Internal Environment of Samsung

1. Internal Resources

Tangible resources:

◆Financial resource：Through financial analysis of Samsung, we can see that it is now in a strong financial position. As the data shows, Samsung has high amount of total assets and net sales .Although its debt isn’t in a very low level, its net income still keeps growing, reaching to 13.8 billion dollars in 2009. Organizations in such a strong financial position can be more responsive to new opportunities and new threats.

◆Technological resource：Innovation is crucial to Samsung's business. As new technologies are being constantly introduced to the market, speed is essential for remaining competitive in today's digital era. In case of that, Samsung’s R&D centers are set up all over the world. The R&D network spans six Samsung centers in Korea and 18 more in nine other countries, including the United States,

the United Kingdom, Russia, Israel, India, Japan and China, as well as other research centers and universities. These centers are tasked with hiring top-notch local talent, investigating the latest local technology trends, and bringing to life those technologies that make the greatest benefits.

Intangible resources:

◆Human resource: One of Samsung's strongest assets is the team of talented researchers and engineers. More than a quarter of all Samsung employees —42,000 people—work everyday in research and development. When employing people, Samsung puts his focus on employees’ sense of responsibility as it is the core value outlook of SEC. Samsung select people who have good morals an d be innovated. Anyway, employees need to be fit with Samsung’s culture. Samsung not only puts his focus on the process of selecting employees, but also the process of training and educating employees. As statistics shows, Samsung costs about 63,000,000 dollars every year on the training of employees. In order to attract people with abilities and retain them, Samsung even programs an all-around incentive system and a scientific performance appraisal system. Those experts who have excellent performance even gain higher annual salary than top executives and managers.

◆Unique brand reputation: Samsung’s reputation is based on its corporate culture.As we all know, its vision is to lead the digital convergence revolution growing to be the best and its mission is to become a best Digital-ε company. Here, ε means most efficient productive management. Furthermore, Samsung’s service conception is to keep strong contact with customers and make their best efforts to satisfy with customers. All these operating philosophies gain a lot of reputation for SEC.

2. Value Chain Analysis

HRM Technology relationships Inbound Service Outbound Logistics Marketing Logistics and Sales Operations 3. Core Competencies Analysis

Samsung ’s core competencies are as follows：

◆ Innovation: Speaking of Samsung’s resplendence, almost every manager or ordinary employee will refer to the well-known remarks by Kun-Hee Lee, the chairman of Samsung Group, “Except wife and children, all the things ha ve to change.” In 1993, Kun-Hee Lee conducted the “New Management” program. Through continuous indoctrinization of the consciousness of crisis and the concept that only those who change can possibly survive, Samsung’s core business begun to change from mass imitational production to independent brand development based on digital technology. During its course to become a world-class company, Samsung has never stopped innovation and transformation. In 2001, in order to cope with the fast-changing information age, the program of “Digital Management” was carried out. In 2002, Samsung implemented the Wow Product system in order to maintain its leading position through the development

of a series of high-tech. Innovation now has become part of Samsung’s spirit and culture and has become the driving force of Samsung’s firm and continuous transformation.

◆ Triangle Management Structure: Samsung Group creates a “triangle management structure” in the “New Management” program aiming at the integration of knowledge capital. In such a structure, CEO Kun-hee Lee is at the vertex of a triangle. Another point is the “structural adjustment department” itself. The third triangle point is the Chief Executive Group. CEO at the vertex is in charge of guiding management direction and deploying strategic target, leading his workers struggling to create products. “Structural adjustment department” not only assists President to carry out the strategic decisions but also acts as the role of monitor in charge of regulating a few branches of the operation. Chief Executive Group is responsible for carrying out specific strategic plan regarding to how to develop the actual business activities. “Triangle Management Structure” increases Samsung’s market competitiveness, considered as Samsung’s management work milestone. Because of this structure, management responsibility is strengthened and management efficiency also improved. ◆ Human Resource Program: In order to be better in the 21st century, Samsung strengthens human resources management system, building up South Korea's biggest talent library to promote the operation’s sustainable development. Additionally, Samsung pursues the principle of “people first”, always believing that enterprise success lies in the quality of employees. Samsung divide technology into four terms: basic technology, advanced technology, core technology and future technology. As for these technologies, Samsung is equipped with corresponding personnel and establish suitable training system for each level talent.

Ⅲ. Strategic Plan Analysis

i. Corporate Strategies

At present, Samsung’s products includes: CDMA mobile phones, CDMA system, TFT-LCD monitors and other communication and office supplies; Semiconductor, 34-inch flat screen CRT and other core components; Rear projection big screen TV, DVD, home theater and other AV products; Digital camera and other optoelectronic products; Large double-door refrigerators, air conditioners and other white appliances.

Obviously, Samsung purses such a related diversification strategy.

However, as mentioned above, chairman of Samsung Group says “Except wife and children, all the things have to change.” After the financial storm happened in South Korea, Samsung decided to drastically adjust the layout of its strategies, focusing on core business. Samsung withdrew the sprawling diversity of business rivaling with Sony and Philips，concentrating on the core business in 21st century: digital products.

Samsung compressed business in BP machines, switches, small-scale household appliances, focusing on multimedia, information and communication appliances (third generation mobile phones) and semiconductor as three areas of core business. In 1999, Samsung invested 1.2 billion in R&D of digital products in 2000 reached 1.7 billion, seeking to occupy the advantageous position in the digital revolution. Samsung also adjust the organizational structure and lay off employees. In the end of 1999, Samsung's affiliates and subsidiaries reduced from 65 to 40.Furthermore, Samsung closed a large number of overseas institutions. As to the layoff, Samsung cut down 35% of employees in three years with capita sales increasing from $ 2,250,000 in 1997 to $ 4,300,000 in 1999.

In such ways, Samsung highlight their core capabilities, concentrating on preponderant resources to enhance the key markets. Consequently, 1999 annual sales reached 100 billion U.S. dollars, net profit of 1.1 billion, an increase over 1998—respectively 24% and 85.8%. From then on, Samsung is focused on restructuring the business of digital products as an international enterprise group.

ii. Business-Level Strategies

Samsung’s business-level strategies change from cost leadership strategies to differentiation strategies.

From the very beginning, Samsung pursued cost leadership strategies

with a consideration to Samsung’s strengths and weaknesses combined with opportunities and threats of the environment. Samsung insists such a strategy which is suitable for itself, reaching to the top of the world in several fields such as black-and-white television, microwave oven and video.

Instead of pursuing cost leadership strategies unchanged, Samsung began to change its competitive strategies in 1992, as the external environment develops so fast. China is becoming the “World Factory” replacing South Korea. Therefore , Samsung’s advantage of cost is under a dangerous situation. Since then Samsung shifted to innovation-based differentiation strategies.

Samsung’s differentiation strategies can be understood in the following four aspects.

◆High-end brand positioning：Samsung positions the core value of brand in the “Digital E, Leading technology, High -end and high-value, style of fashion and simple”. It achieves this position through advertising, public relations, price, channels and other strategic support. For example, Samsung adjusted the low-end brand marketing channels for high-end. It quietly retreated from the Wal-Mart and other discount stores, as these places are against with the high-end brand positioning. Samsung then moved the DVD, TV and computer products into Best Buy, Sears, Circuit City and other stores in higher-level consumptions instead. Samsung also use dozens of advertisers replaced by one advertiser to make Samsung’s advertising appearance consistent.

◆Sport marketing: Samsung’s involvement with the Olympic Games began in 1988 when it became a local sponsor for the Seoul 1988 Olympic Summer Games. In 1997, the company then became a member of The Olympic Partner (Top), Worldwide Olympic Partner in the wireless communications equipment category, continuing its contribution to the Olympic Movement for five consecutive Olympic Games. Through its advanced wireless telecommunication technology

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and products, Samsung is recognized for providing the Games with crucial, real-time information service in support of the world’s largest sporting event. Samsung regard Top as its highest strategy in sport marketing. Except for the Olympic Games, Samsung also hold Samsung Mobile Explorer to invite university men to participate in the games Samsung sponsored as reporters. With continuous investment in such campaigns, Samsung build up its complete system of sports marketing through advertising, sales promotion and public relations. In such a market penetration strategy, Samsung obtains good brand effect, greatly enhancing Samsung's brand value.

◆Brand alliance: As entered into era of mobile digital convergence, Samsung calls for cooperation with some major software and chip manufacturers. Therefore it develops some newest products through strategic alliances formed with Intel and Microsoft. What’s more, Samsung form alliances with upstream manufacturers in each link of industry chain. For example, in panel manufacturing, Samsung and SONY constitute strategic alliance. In 2004, they jointly invest 2.1 trillion to establish the S - LCD Company producing the seventh generation LCD panel. In CDMA field, Samsung and QUALCOMM Incorporate have been strategic alliance for years. In 2005, QUALCOMM even make manufacturing business outsourcing to Samsung.

◆R&D in product differentiation: In order to keep differentiation in products, Samsung continue investing in R&D and technology development. In 2005, Samsung put 9% of its income (about 5.4 billion) into R&D. And in 2010 Samsung cost 240 billion to build new semiconductor production line. Additionally, as is mentioned, Samsung’s R&D centers are set up all over the world. All these factors lead to Samsung’s product differentiation.

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