Strategic Analysis of Samsung
Strategic Analysis of Samsung Research Paper
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Updated: Jul 15th, 2022
Internal and External Environments
Industry Life Cycles
Risks and Risk Strategies
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Samsung is one of the largest South-Korean multinational corporations. It deals in advertising, construction, entertainment, finances, IT, medicine, retail, semiconductor production, and ship construction. It has the 8th largest global brand value in the world and employs almost 300,000 workers worldwide (Iwai 2020). The company made over 212 billion dollars in 2020, marking it as a very profitable year for Samsung (Iwai 2020). The purpose of this paper is to evaluate the key components of the companys function in order to understand its successes and failures. The emphasis will be placed on organizational culture as a means of promoting, cultivating, and retaining talent, internal and external environments, marketing strategies, industry life cycle, and risk management. The importance of these six parameters to Samsung lies in their key role in guiding company strategy at various levels and enabling it to accomplish its announced vision and purpose.
Samsungs vision statement is as follows: Inspire the world with our innovative technologies, products, and design that enrich peoples lives and contribute to social prosperity by creating a new future (Iwai 2020, 39) The company achieves that vision by fostering an organizational culture that puts a significant emphasis on nurture and cultivation of individual talent and retaining of personnel. Samsung has an innovation-centered organizational culture. The main characteristics of that culture include the development of opportunities for employees, passion for excellence, high ethical foundations for integrity, willingness to change, and an emphasis on prosperity for all (Omer 2019). South-Korean cultural imprint is strong, as prosperity for all is achieved through collective action. Nevertheless, individual talent is acknowledged by offering employees the opportunity to master and improve their skills. Some challenges revolve around cultural dimensions of branches outside of South Korea, as the collectivistic Asian mindset is not easily transferable to other regions, such as Europe and the US (Omer 2019). Thus, achieving prosperity for all may require different approaches depending on where the company operates.
Internal and External Environments
Samsung faces numerous internal and external challenges but has just as many opportunities in dealing with them. Samsungs external threats largely come from foreign competitors offering similar products, and various litigation processes for contested technology. Examples of such include numerous Samsung-Apple feuds (Omer 2019). Chinese companies offer customers cheaper alternatives, claiming Samsungs market share, and have the potential to compete in the premium segment. At the same time, litigation processes can cost Samsung money and force them to abandon contested technologies (Iwai 2020). The company can respond to these threats from the external environment by expanding into the realm of cheaper models to contest Chinese dominance there and use its large research and development (R&D) sector to create and patent its own technologies, becoming less likely to be challenged on legal grounds.
The companys internal strengths include a robust corporate culture, a penchant for innovation, and an emphasis on collective success. While it allows for a stable internal environment within South Korean branches, it makes adjusting to regional cultures more difficult (Omer 2019). Cultural management issues constitute the main weakness of Samsung. The company also experiences language barriers when operating outside of the Asia-Pacific, as most countries utilize the English language as a primary medium of communication (Omer 2019). These issues could be overcome through the increase in cultural competencies and frequent professional exchange programs.
Some of the solutions to internal and external threats to Samsung could involve the adoption of radically innovative strategies like those utilized by Apple when they invented the smartphone. Coming up with a revolutionary piece of technology would help propel Samsung forward and help claim additional markets, as well as solve the issues with Chinese and foreign competitors and legal rights. Another solution for internal issues would have to do with switching the existing Korean-centric corporate culture with one to accommodate an internationalized approach. While it would allow to integrate other branches better, it might alienate Korean workers due to the departure from the original culture.
Samsung utilizes a Limited Growth strategy, which focuses largely on the products it is currently producing while developing a smaller portion for the potential market. Under limited growth, the market penetration strategy is aimed at retaining the existing market share by offering new products and services to the existing customers to keep them content and entertained (Iwai 2020). It does not make any significant pushes into other markets, beyond maintaining an obligatory presence. In terms of product development, Samsung focuses on selling new items to old customers. The marketing push is for them to upgrade to new products every now and then, which is showcased by the marketing efforts around the Galaxy series (Iwai 2020). Product development emphasizes evolution rather than direct innovation all the new flagship phones feature improved qualities of previous models, such as camera, battery, or insignificant add-ons, without offering any radically new technologies and functions.
While this strategy is typical of large corporations in a mature development life cycle, it might not be enough to retain advantage against the rising Chinese companies like Huawei and Xiaomi (Omer 2019). With their aggressive pushing into Samsungs traditional markets, the company will likely have to adopt a more proactive strategy to win background. As it was stated, expanding into the low-cost sector and focusing on developing new technologies would allow Samsung to regain its momentum, which was slightly lost in the light of the emerging COVID-19 pandemic. The existing trend of matching or outdoing Apple in an ongoing rivalry between the two companies is likely to become more difficult with additional entrants to the market (Omer 2019).
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Industry Life Cycles
Industry life cycle consist of 5 stages, which include start-up, growth, shake-up, maturity, and decline. The first stage is classified by virtually no profits, little starting cash, and unsubstantial revenues, whereas the latter sees a slow drop from high margins, gradual loss of market share, employee cutbacks, and a general fall from previous positions of dominance (Iwai 2020). As it stands, Samsung is in its maturity stages. It competes with some of the largest and most dominant companies in the IT market, has expanded into other industries and maintains solid (if not dominant) positions there, and sees increases in revenue margins almost every year (Omer 2019). At the same time, the innovativeness it used to have at the start has diminished, and the companys growth is not as spontaneous as it used to be. Overall, Samsung is at its peak and not showing any significant signs of decline that could be associated with the external competition or internal issues (Omer 2019). The only drop it suffered happened during the first COVID year, when the entire worlds economy plummeted.
Nevertheless, the slowdown caused by the pandemic and the emergence of new competitions may hasten Samsungs transition from maturity to decline, should the company fail to maintain its existing positions in the market. As discussed in the previous section, the company should alter its strategies and not assume that competition will not be able to catch up to them. A more proactive risk-taking strategy could be part of the potential alterations and is discussed below.
Risks and Risk Strategies
Samsung faces several risks associated with 2021: COVID-19 crisis affecting shipments and employment, world economic recession continuing, increased competition from the outside sources, Korean government meddling with the companys affairs, and various litigations (Iwai 2020). The company adopted conservative risk management and risk-taking strategies, seeking to minimize its losses rather than promote daring and potentially risky strategies to increase revenue. Samsung views at least some of the existing problems as temporary and is preparing to maximize growth after the storm had passed. However, it does not appear that COVID-19 would be departing any time soon, and the Chinese company positions are likely to become stronger in the future, as entities like Huawei and Xiaomi are relatively young and are in their rapid growth phases (Iwai 2020). With litigations against Apple continuing for at least several more years, Samsung may find its conservative risk strategy to not provide the results wanted and would be forced to adopt a more risk-accepting stance.
The proposed focus on innovation and aggressive marketing to increase revenue increases the risks of potential losses, should the strategy not play out. Investment in potential revolutionary technologies might not be worth the effort and might end up copied by competition at a lower cost. At the same time, the push might put a strain on the companys profits, which, while maintaining a steady growth, do not advance as quickly as they were before the pandemic.
Samsungs vision is to inspire the world with our innovative technologies, products, and design that enrich peoples lives and contribute to social prosperity by creating a new future. In order to accomplish its purpose, the company has tailored its organizational culture, responses to internal and external environments, corporate strategy, risk strategy, and industry lifecycle position towards that goal. The importance of these topics to the company is shown in a myriad of ways. Organizational culture focuses specifically on prosperity for all, the generation of new ideas, and cultivating talent within the company. That way, Samsung is making sure that its investments in personnel are being preserved. Realizing the companys internal and external threats allows it to modify its risk and operational strategies, highlighting its importance. Samsung is following a limited growth strategy, which is in line with its current positioning in the industry lifecycle, with the goal of preserving its competitive and marketing advantage.
Understanding the six topics stated above is extremely important in todays corporate economy, as these principles guide HR policy, internal management, external strategic vision, and risk management, and allow the company to best achieve its goals. Ignoring these key assets would have had a profound effect on Samsung and possibly caused it to lose its leading positions in IT and other areas. At the same time, the provided analysis shows that the company would be forced to alter its risk, HR, and market strategies soon in order to cope with long-term external issues.
Iwai, H. 2020. Practicing the Company Philosophy to Survive: The Competitive World of Samsung Group. In Cultural Translation of Management Philosophy in Asian Companies, 121-135. Springer, Singapore.
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Omer, Soran K. 2019. SWOT Analysis Implementations Significance on Strategy Planning Samsung Mobile Company as an Example. Journal of Process Management. New Technologies? 7 (1): 56-62.
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