Executive Five Forces. Samsung Electronics Co., Ltd.

Executive SummaryThis report identifiesthe five key microenvironmental drivers affecting Samsung Electronics Co., Ltd.The analysis of these microenvironmental drivers will allow them to determinethe current conditions within the smartphone/mobile phone industry and how theyaffect their business operations. The analytical model used within this reportto evaluate Samsung’s strategic response is ‘Porter’s Five Forces’.This report will includethe following key micro-environmental drivers:·      Rivalry Amongst Existing Competitors·      Threat of New Entrants·      Bargaining Power of Suppliers·      Threat of Substitute Products·      Bargaining Power of BuyersAdditionally, this reportoutlines several possible managerial recommendations.

These being an increasedfocus on research and development, to create more cohesion with internalsupplier and to be aware of new entrants that become more established.           Table of ContentsPageNo.1.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Introduction…………………………………………………………………………42. Analytical Model……………………………………………………………………43. Key EnvironmentalDrivers…………………………………………………………43.1. Rivalry Among ExistingCompetitors…………………………………………….43.1.1.

Samsung’sStrategic Responses…………………………………………………43.1.2. Evaluation ofStrategic Responses………………………………………………53.2. Threat of NewEntrants ……………………………………………………………53.

2.1. Samsung’sStrategic Responses………………………………………………….63.2.

2. Evaluation ofSamsung’s Strategic Responses…………………………………..63.3. Bargaining Power ofSuppliers…………………………………………………….63.3.

1. Samsung’sStrategic Responses………………………………………………….73.

3.2. Evaluation ofSamsung’s Strategic Responses……………………………………

73.4. Threat of SubstituteProducts……………………………………………………….73.4.1. Samsung’sStrategic Responses…………………………………………………..

83.4.2. Evaluation ofSamsung’s Strategic Responses……………………………………83.

5. Bargaining Power ofBuyers…………………………………………………………83.5.

1. Samsung’sStrategic Responses……………………………………………………93.5.2.

Evaluation ofSamsung’s Strategic Responses……………………………………..94. ManagerialRecommendations…………………………………………………………95. Reference List………………………………………………………………………….

.116. The Appendix……………………………………………………………………………13 1.IntroductionThe purpose of thisreport was to analyse and evaluate the microenvironment for Samsung ElectronicsCo.

, Ltd. (Samsung) within the smartphone and mobile industry. The method to beused to analyse the environment will be Porter’s Five Forces.

Samsung Electronics Co.,Ltd. is part of the Samsung Group, which is based in Gyeonggi-do, South Korea(Marketline, 2017a, p.3). The multi-national company is the market leader within the smartphone industry with a 22.

2% market share in 2016 (Marketline,2017a, p.21).Samsung’s strategicapproach is made up of four parts. These being: Human-centric, innovative,fundamental and proactive (Samsung, 2018a). As well as this Samsung has a focuson being sustainable, by creating economic value and social value through theirproducts and charity work (Samsung, 2018b).

2. Analytical ModelThe analytical model tobe used in this report will be Porter’s Five Forces. This model will be used toidentify and evaluate the key micro-environmental drivers affecting Samsung.Porter’s Five Forces is made up of five sections: Rivalry Among ExistingCompetitors, Threat of New Entrants, Bargaining Power of Suppliers, Threat ofSubstitute Products, and Bargaining Power of Buyers (Appendix A) (Porter, 2008,p. 80).3. Key EnvironmentalDrivers3.

1. Rivalry AmongExisting CompetitorsCompetition amongstexisting competitors is strong with but only within the top few companies.These being Samsung, Apple, Sony, Microsoft, Google.Samsung’s strongestcompetitor would be Apple Inc. (Apple).

Apple having the second highest marketshare promotes this. As Apple is diversifying their product range into morewearable technology, it would suggest there will be a market shift in the nearfuture (Marketline, 2017b, p.7).3.

1.1.Samsung’s Strategic ResponsesIn 2009 the first iPhonewas released in Korea which brought a huge shock to Samsung’s home mobile phonemarket (Lee, et al., 2015, p.2).

When the Apple shock struck the world, Samsungwasn’t a major player in the newly expanding smartphone market. This had hitthe company hard because, the rate at which smartphone technology over tookfeature phones, which Samsung was well known for (Song, et al., 2016, p.118). In response to thisSamsung spent the next three years developing the first smartphone in theirnewly created range. This smartphone being the Samsung Galaxy. This phone andits next generations focusing on developing hardware, to meet consumer demandand to make their smartphones more powerful than other competitors.3.

1.2.Evaluation of Strategic ResponsesSamsung’s strategicresponse although somewhat risky, was well thought out and necessary. The riskinvolved in Samsung switching their main range to something new and untestedwas substantial. With this being the case if consumers tastes had not shifted tomore innovative handsets, then Samsung may have not have ever recovered.However, given the iPhone’s success it was clear customers wanted somethingfresh and new.

Whether Samsung could dothis in the future is an unknown quantity. This may be mainly due to Samsungrecognising when a competitor was gaining momentum. Furthermore, especiallywith such a close competitor as Apple, they should always be aware of what theyare doing. Whether this be them diversifying their product profile, or justupdating their OS.

Another reason why it maynot be possible for Samsung to replicate this may be due to the lack ofinnovative ideas within the research and development division. Although,Samsung do invest a good portion of their profits in to research and development,so this may not be as likely (Marketline, 2017a, p.22).3.2.

Threat of New Entrants In the mobile-phonemarket there seems to be high turnaround of new entrants. The main reasonbeing, any electronics company can easily switch production from one kind ofelectronic equipment to another. An example of this happening recently was theannouncement from the gaming hardware and electronics firm Razer. As they willbe releasing a new smartphone. Based on this smartphone’s specs it “couldhandily beat Apple’s iPhone X, Google’s Pixel 2, Samsung’s Galaxy devices”(Villas-Boas, 2017).However, it is hard fornon-electronic companies to gain a foothold.

This being the case as the highsunk costs involved in the setting up and manufacturing smartphones. Furthermore,they would be entering a highly competitive market where branding is hard toestablish; but is essential to gain high profits. Meaning the threat of newentrants is low. Although, there can be some exceptions.3.2.1.

Samsung’s Strategic ResponsesThe current identifiablethreat to Samsung regarding the threat of new entrants would be the fourleading smartphone manufacturers in china. With three of the four also havingover 5% of the global market share as of Q3 2016 (Cendrowski, 2017, p.70).Huawei, being the third largest manufacturer in the globe should be watched asthey have started to shift their focus to the western markets (Cendrowski,2017, p.67).

However, Samsung have notpublicly mentioned them as the threat, or have shown concern of Huawei’s expansion.3.2.2.Evaluation of Samsung’s Strategic ResponsesSamsung’s strategicresponse is extremely poor, due to there being little to no response. This maydue to Samsung feeling that they have a different target market. For example,as Samsung makes high quality, high spec devices at a high price.

Chinesemanufacturers like Huawei make low cost, medium spec devices at a low, cheaperprice. Furthermore, another reason why Samsung may not feel threaten is due tothem having a large well establish brand image. Which they know is a big partof financial success in western countries. Whereas, for Huawei they arerelatively an unknown in the western markets.Although during October2016 their market share rose above Samsung’s to take the top spot in the smartphonemarket there (Cendrowski, 2017, p.68). Overall, Samsung should show morecaution when it comes to new firms, especially when they have a rapidly risingmarket share and are able to influence consumers.

3.3.Bargaining Power of SuppliersIn the smartphone marketthe ratio of suppliers to smartphone distributors and manufactures are low.This implying they have large bargaining power. They can shape the futureindustry by proving some manufactures with high spec/new technology. Whilesuppling others with lower spec/ current technology.

This can be done as manyof the suppliers supply many manufactures at once (Appendix 2) (Kwok and Lee,2015, p.8).  3.

3.1.Samsung’s Strategic ResponsesSamsung is in the unusualposition that they design, develop and manufacture their own hardware for theirdevices (Kwok and Lee, 2015, p.10).

This allows them to benefit from increasedeconomies of scale. In addition to thisSamsung has developed over the years vertical co-opetition within theirbusiness group (Appendix 3). Co-opetition being the mix of cooperation betweentwo businesses in a group, and competition against each other. Usually beingused to describe horizontal co-opetition.

Therefore, vertical co-opetition is abuyer and supplier relationship with the same principles (Lacoste, 2012,p.649).3.3.2.

Evaluation of Samsung’s Strategic ResponsesAs Samsung manufactureshardware for themselves as well as, their competitors it could allow for anindirect increase in market power. This is already being shown as, Kang (2017)stated ‘the California-based company couldn’t really avoid Samsung’ and ‘won’tbe able to circumvent using Samsung’s DRAM memory chips, as it commands about60% of the mobile DRAM market’, when talking about Apple. That increase inindirect market power would allow Samsung to withhold their innovativesmartphone parts, to use in their handsets only.Samsung’s use of verticalco-opetition, allows them many benefits. One of these being that the Samsungelectronics mobile division, will get parts for a lower price than in the freemarket.

Another benefit is that the mobile division can cooperate with othersuppliers, to create more innovative parts. However, there are several pitfallsto the concept of vertical co-opetition. For example, a main part of it isvalue-sharing and the buyer’s side of this relationship tends to take more thanit gives (Lacoste, 2012, p.649-650).

The internal supplier has the choice oftrying supply Samsung entirely, but would have the trade-off of certainty ofsales over profitability. The other option being to share Samsung with othercompetitors.Overall, though the useof vertical integration is a good strategic decision as it beneficial forSamsung Electronics. Samsung does need to bear in mind that the rest of thegroup may be affected by their action in this case. Whether it be positively ornegatively.

3.4.Threat of Substitute ProductsFor the mobile phoneindustry there is little substitutes of the same quality or standard,smartphones provide.

These substitutes being mobile phones, where thetechnology is outdated. The main reason for this being is that, the onlyfeasible substitutes will be what comes after the ‘era of smartphones'(Weinberger, 2017). This being things such as promotion of AR by companies likeMicrosoft, Google, Facebook. Even in the longer term the Neuralink which wasco-founded by Elon Musk, which the focus of internalising the device in to ouractual bodies (Weinberger, 2017).  3.4.1.

Samsung’s Strategic ResponsesSamsung has over the pastfew years started to branch out to perform Market Diversification. An exampleof this being the launch of Samsung’s range of smart watches, with them beingone of the first manufactures to do so.Samsung have alsointroduced a new AI named Bixby which Samsung Global Newsroom (2018) states”Samsung’s advancements in artificial intelligence and smart technologies arehelping the company usher in an era of more open and connected IoTexperiences”. The addition of Bixby on Samsung’s newest smartphones and smartwatches,displays that Samsung is seeing the future in AI, and thinking long term.

3.4.2.Evaluation of Samsung’s Strategic ResponsesThis is a good strategicresponse for Samsung as the rates at which wearable technology is being boughtis on the increase. As in 2018 the number of units sold is predicted to doublefrom the previous year (Appendix 4) (LinkedIn, 2016).In addition, Bixbyalthough not just for Samsung’s smartphones is a step in the right directionfor the future market place. The AI also makes consumers who already have aSamsung smart device, whether it be a tv or a microwave incentivised to buy aSamsung smartphone or watch (Samsung Global Newsroom, 2018).

Therefore, makingconsumers gain brand loyalty and increased profits for not only the Smartphonedivision, but the whole of Samsung Electronics, and subsequently the entireSamsung group. 3.5.Bargaining Power of BuyersFor the consumers andcustomers of smartphones there is a need to have the latest up to date softwareor hardware in their smartphone. Although with this true, consumers have littlebargaining power, due to brand loyalty or to be in trend.However, consumers stillhave some power due to preferences. For example, consumers prefer an androidoperating system (Samsung’s and other major smartphone manufacture’s operatingsystem) rather than the IOS (Apple’s current operating system).

This also beinga major deciding factor in purchasing a smartphone (Attri et al., 2017,p.27-28).It is shown that hardwarespecifications have the maximum influence determining consumer’s preferences onsmartphones (Attri et al., 2017, p.33). These means that if Samsung’s hardwarewas quantifiably the best out of its competitors with in the market, it wouldsee an increase in sales.3.

5.1.Samsung’s Strategic ResponsesSamsung over the yearshave noticed the change in consumer preferences. Going back to when theyswitched their product line from Omina range, to the well-known and popularGalaxy range. The switch was a demonstration of Samsung’s response to thechange in consumer preferences from mobile phones to smartphones.

The Galaxyrange also meant an increase in hardware specs, as well a switch to the at theandroid operating system.In addition to thisSamsung while being innovative, listened to their consumers, and know what theyprefer in having in a smartphone. Unlike their competitor Apple, who for theiPhone 7 removed the audio jack in a failed innovate move. Many consumers whodisagreed with that decision, and decided not to upgrade to the newer iPhone atthat time (Silver, 2017).  3.5.

2.Evaluation of Samsung’s Strategic ResponsesSamsung’s choice ofdeveloping new and more consumer-friendly hardware/software did increase itsunit sales. These peaking when the Samsung galaxy S4 and Samsung galaxy note 3were released in the latter of 2013(Appendix 5) (tecake.com). This wouldsuggest that if Samsung were to keep innovating and listening to consumerspreferences they would have continued success within the smartphone industry.4.Managerial RecommendationsThere are keyrecommendations that Samsung should consider.

Firstly, the need to keep focuson the research and development in to the software and hardware of theirhandsets. This being as technology is becoming more and more powerful, thelifecycle of a smartphone even high quality and high-priced ones, isdecreasing. As well as consumers preference tend toward higher specs. Samsungshould also develop their own internal operating system. Which then could besold to other smartphone manufactures. This ultimately would reduce theoutgoing costs for Samsung in the long term.

However, while developing theoperating system they would have to pay Google for the continued licence forandroid. Therefore, to keep consumers interested in Samsung’s products theymust keep up with the technological curve and innovate.Linked to this,alternatively Samsung could choose to focus on the idea of marketdiversification for the same reasons as previously stated for the need ofresearch and development in the smartphone industry. However, whether consumerscould accept a new version/alternative to smartphones currently is an unknown,but it would be like what Apple did when their released their first smartphoneand may be worth the risk if executed correctly. Meaning high profits andrenewed brand awareness.

The possibility of theexpansion of their manufacturing of smartphone parts, is also something toconsider. As there would be less production costs in the long run as well asmore opportunities to become more of an integral part of the entire industry’smanufacturing process. The expansion should be focused on productdiversification. This also would allow Samsung some indirect market power; ifthe internal supplier patented new parts, to be only used in Samsung devices.

However, as Samsung has the strategy of vertical co-competition with that partof the company it could possibly hurt the internal supplier, Samsung  and the Samsung group.The final possiblerecommendation would be to be weary of Chinese competitors such as Huawei. Asit is likely many more companies after their success in China, may decide toexpand in to western markets where Samsung’s foothold is stronger. To combatthis Samsung should make sure their brand is as recognisable and trustworthy,so consumers aren’t as tempted by the cheaper Chinese manufacturers.

They coulddo his buy publishing more about their sustainability programs.      5.Reference ListAttri, R., Maheshwari, S.and Sharma, V., 2017.

Customer Purchase Behavior for Smartphone Brands. The IUP Journal of Brand Management. 14(2), 27-33Cendrowski, S., 2017. IsThe World Enough For Huawei?. Fortune. 1st Feb 2017, 67-70Kang, J., 2016, ‘SamsungWill Be Apple’s Top Supplier For iPhones Again In 2017’, Forbes.

Com, p. 1,Business Source Complete, EBSCOhost, viewed 9 November 2017.Kwok, J.J.M. and Lee,D-Y., 2015. Coopetitive Supply Chain Relationship Model: Application to theSmartphone Manufacturing Network.

PLoSONE. 10(7), 10Lacoste, S., 2012.”Vertical coopetition”: The Key Account Perspective. Industrial Marketing Management. 41(4), 649-650Lee, J., Lee, K.

, Heo,J., 2015. Supplier Partnership Strategy And Global Competitiveness: A Case OfSamsung Electronics. Eurasian Journal ofBusiness and Management. 3(4), 2LinkedIn. n.

d. Smartwatch unit sales worldwide from 2014 to2018 (in millions). Statista. Available at: Accessed 16th January 2018Marketline., 2017a.

Company Profile Samsung Electronics Co., Ltd., 3-22Marketline., 2017b.Company Profile Apple Inc., 7Porter, M.

E., 2008. TheFive Competitive Forces That Shape Strategy. Harvard Business Review.

86(1).78-93Samsung., 2018a. Believe in Potential.

Available at: Accessed 16th January 2018Samsung., 2018b. Our Approach to Sustainability. Availableat: Accessed 16th January 2018Samsung Global Newsroom.

,2018. How Bixby is Ushering in a MoreConnected Future. Available at:

samsung.com/global/how-bixby-is-ushering-in-a-more-connected-future>Accessed 17th January 2018Silver, C., 2017. Apple Takes A Hit On iPhone 7 Sales, iPhone8 May Be Worth Waiting For. Available at:

forbes.com/sites/curtissilver/2017/05/03/apple-takes-a-hit-on-iphone-7-sales-iphone-8-may-be-worth-waiting-for/#6ec0cd207d31>Accessed 17th January 2018Song, J., Lee, K.,Khanna, T., 2016. Dynamic Capabilities at Samsung: Optimizing InternalCo-opetition. University of California,Berkeley. 58(4), 118-120tecake.

com. n.d.

Global market share held by Samsung in themobile phone market from 2009 to 2015. Statista. Available at:Accessed 17th January 2018Villas-Boas, A. 2017. A Gaming Company Just Announced aHigh-Powered Smartphone Geared for Games – But its Best Feature is its Price.

OnlineAvailable at: Accessed 20th October 2017.Weinberger, M.

2017. The Smartphone is Eventually Going to Die,and Then Things Are Going to Get Really Crazy. Online Available at: Accessed 20th October2017

x

Hi!
I'm Morris!

Would you like to get a custom essay? How about receiving a customized one?

Check it out