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BG009 Internal And External Environment Analysis For Generic Strategy

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  • Course Code: BG009
  • University: The Open University
  • Country: United Kingdom

Question:

Write the Introduction to the firm and the generic business strategy of samsung
 
 

Answer:

Samsung is a global conglomerate that has its origins in South Korea and the headquarter of the organization is located in Samsung Town, Seoul. Samsung company comprises of different types of affiliated businesses that are united under brand of Samsung. Samsung was established in the year 1938 by Lee Byung-chul. The operations of the company had started with trading business and in the next few years Samsung had been able to diversify its operations in different areas like, textiles, food processing, insurance, retail, securities. The organization has also entered the electronics based industry in the later part of 1960s. Samsung further started expanding its operations in the construction based industry in 1970s. The company has been able to develop the sixth highest position in terms of the global value of brand of Samsung (Samsung.com., 2019).

Generic strategy of Samsung - Samsung has implemented a mixed strategy of the differentiation and cost leadership based strategy. Low cost strategy - The low cost strategy is implemented with the help of proper development if the lower cost based structure that is based on the ways by which research and development facilities are formed in single locations. This is helpful for solving the issues within a short period of time that has a major impact on the costs. The levels of yield of the organization are also higher as compared to its competitors in the industry. The core design of the products developed by Samsung are shared by the organizations (Barros, Hernangómez & Martin-Cruz, 2016). Differentiation strategy - Samsung is leading the industry based on the technologies that are developed and implemented in the products of the company. The company has made high levels of investment on the research and development in order to develop innovative products. The high value which has been developed by the brand of Samsung is considered to be a significant aspect that is able to influence the levels of reliability of the products. The margins that are gained by the organization based on its products are high due to the differentiation from products offered by its competitors in the same industry (Daspit, Chrisman, Sharma, Pearson & Long, 2017). The overall cost based structure of the company has not been affected in a negative manner by the differentiation of products. 

 

Internal Environmental Analysis 

Values and company culture 

Mission statement – The mission statement of Samsung is based on the simple business based philosophy related to the devotion of technology and talent in order to create the superior products and the services which can contribute to a better society on a global basis.

Vision statement – The vision that has been set by Samsung for the year 2020 is based on the methods by which the organization is able to create a new future and inspire the world as well. This vision is considered to be a major part of the commitment that has been made by the company in order to develop a better world.

Values – Samsung mainly aims at becoming the leading organization in the world with the help of proper use of the human resources and the technologies for development of new services and products. The most important factors that are a part of the values of Samsung are excellence, people, integrity, change and co-prosperity.

Company culture – The organizational culture of Samsung is highly seniority-oriented in nature that is able to reflect national culture of the home country, South Korea. The levels of employee loyalty are high and the speed of decision making is also fast (Demir, Wennberg & McKelvie, 2017).

Organizational divisions and organizational structure 

A divisional organizational structure has been implemented by the Samsung company. The three major divisions of the company mainly include, Consumer electronics, IT and mobile communications and device solutions. A mechanistic structure has been developed by the organization which is based on a huge number of rigid hierarchies. The relationships that are developed between the employees and their managers or supervisors are highly rigid in nature (Durand, Grant & Madsen, 2017). 

 

Primary activities

Inbound logistics – The operations of Samsung are based on activities in manufacturing process and inbound logistics are refined in nature.

Operations – The second most important part of change in the organization is based on the operations after the sales and marketing activities of Samsung.

Outbound logistics – The outbound logistics of Samsung are also solid and operations are localized in the Samsung Town.

Marketing and sales – Sales and marketing is able to play a main part in the achievement of goals that are based on the new game strategy of Samsung.

Service – Services are able to add value to the operations of Samsung in the technology based industry (Dyer, Godfrey, Jensen & Bryce, 2015).

Secondary activities

Firm infrastructure – The infrastructure of Samsung company is based on the production and research and development facilities.

Human resources – The employees who are a part of the community service based team and different stores of Samsung are important for the profits that are gained.

Technology development – Samsung has developed its position as a leading electronic company in the world with the help of its specialized digital equipments and appliances.

Procurement – The process of product development and corporate culture of Samsung Electronics is based on the contribution that is provided to global community (Engert, Rauter & Baumgartner, 2016).

External Environmental Analysis 

PEST analysis 

Political and legal factors affecting the company 

Political disruptions are able to play a main part in the procedures by which an organization is able to operate and its supply chain can be maintained as well. Turmoil in the political environment can cause loss of business for an organization. The business operations of Samsung are spread in greater than 80 countries all over the world. The geographical turmoil in different areas or regions can lead to huge losses for Samsung Company in the technology based industry. Terrorism is also considered to be an important that has an impact on the business operations of Samsung in some countries (Ethiraj, Gambardella & Helfat, 2018). Legal risks are considered to be quite severe for the operations of Samsung. The tax based laws in different countries can have a major impact on the labour and operations of Samsung. Regulations and rules are enforced by Samsung on the suppliers. The suppliers need to abide by the regulations and laws in order to continue the operations in an effective manner (Frynas & Mellahi, 2015).

Economic factors affecting the company

International or global business organizations are affected in a deep manner by the economic factors. The changes that had taken place in the global economy in the year 2015 in monetary policies of the US have a major impact on prices of different products that are offered by Samsung. The Korean economy had also faced major levels of issues at the same time due to restructuring of different industries and high stages of household debts as well. Despite the difficulties that had taken place in the economy, Samsung had managed to develop sales of KRW 200.7 trillion (South Korean Won). The economic activities and employment levels have increased on a global basis and has been able to impact the sales of Samsung in a positive manner (Hill, Jones & Schilling, 2014).

Social cultural factors affecting the company 

The socio cultural factors or trends have a major impact on the business organizations and the sales are affected in a huge manner by the trends that exist in the market. Socio cultural trends are able to lead to the rise in levels of profits of global companies. Samsung has however been favoured by socio cultural trends in different countries. Demands of the consumers have started changing and the screen size of smartphones have also increased. The popularity levels of the products have grown in the Asian market based areas of Samsung. Socio cultural factors and trends therefore have a direct as well as indirect impact on the profitability levels and revenues that are earned by Samsung (Kasemsap, 2014). 

 

Technological factors affecting the company

Technology is able to play a major role for development of different organizations in the 21st century. Different factors that are able to affect the operations of global organizations range from the operations to the services that are offered to the consumers as well. Samsung is an organization that operates in the technology based industry and manufactures different products like, smart phones and many different electronic appliances as well. Technologies are also used by Samsung for the marketing based purposes and providing effective services to the customers as well (Lee, Park & Kim, 2015). Technology is able to play a crucial role in the development of the business operations of Samsung in the industry. For example, the SUHD televisions of Samsung have been able to gain the special attraction of customers within a short period of time. The competitive pressure is also reduced by Samsung with the help of implementation of new and modern technologies. Samsung has tried to acclimatize to the changes that have taken place in technological environment and to develop products that are able to attract the consumers in an effective way (Aydalot & Keeble, 2018).

Any other relevant factors 

Environmental factors can be considered to be highly important for the sustainable operations of global companies. The major responsibilities that are considered to be an important part of environmental factors are based on the ways by which organizations can save energy and reduce the levels of carbon footprint as well. Samsung has provided huge amounts of focus on the reduction of energy that is consumed by different production based processes and proper management of risks based on water resources as well. Chemical management based policy has been enforced by Samsung along with proper implementation of pollution management based program (Michael, Storey & Thomas, 2017).

SWOT Analysis 

Strengths of the company 

Samsung has been able to develop a strong image of the brand in the industry and has gained the trust of millions of consumers with the help of its quality products. The customer base that has been formed by the company is also loyal in nature and they tend to wait for the new products to enter the market. The product portfolio of Samsung is huge which is based on home appliances, consumer electronics and semiconductors. The research and development based activities of the organization are effective and helpful for implementation of innovation in Samsung (Morschett, Schramm-Klein & Zentes, 2015).

Weaknesses of the company

The presence of huge number of products under the brand of Samsung has affected the brand image of the organization. Samsung has been affected in a negative manner by the lack of proper perception of the brand in minds of people. On the other hand, Apple, that is a major competitor of Samsung in the technology industry has been successful in developing a proper image of the brand in the market and in minds of the consumers as well. Brand positioning of Samsung is not proper and has failed to create its position in the industry (Sakas, Vlachos & Nasiopoulos, 2014).

Opportunities in the environment 

The expansion of Samsung in different geographical areas is a major opportunity that is provided to the organization. Huge competition is faced by Samsung in Chinese market from Vivo and OPPO. The organization can aim at increasing its operations in new markets or geographical areas. The investments made on research and development can be increased in order to improve the levels of innovation. The middle class or mid-tier segment of customers can be targeted by the organization in order to improve the revenue levels (Steinbach, Holcomb, Holmes, Devers & Cannella, 2017).

Threats in the environment 

The growth of major Chinese organizations like, Vivo and OPPO has been able to provide major threats to Samsung. The mid-market segment has been captured easily by the Chinese organizations and this has been able to affect the share of Samsung in the market. The loyalty levels of customers are being affected in a negative manner by changes that take place in the dynamic market. The customers are quite open to the new and advanced products that are being introduced in the market (Trigeorgis & Reuer, 2017). 

 

Summary of SWOT 

The SWOT analysis of Samsung has depicted that the company is affected in a negative manner by the changes in external environment. However, the organization is provided with major opportunities in order to improve the operations in the fast changing technology based industry (Wheelen, Hunger, Hoffman & Bamford, 2017).

Porter’s Five Forces Analysis 

Threats of New Entrants 

The threats based on entry of new organizations quite low for Samsung Group due to the requirement of huge investments and capital to develop a proper infrastructure. The advantages which are provided to the global organizations cannot be used by the companies that enter the industry. This is considered to be a main barrier that is based on the entry of new companies (Trigeorgis & Reuer, 2017).  

Threat of New Substitutes

The threats that are provided to Samsung by the substitutes are high. The number of consumers who use laptops, different gadgets and tablets that are offered by different organizations in the technology based industry. The consumers have a lot of options to choose from and this has a major influence on the products that are offered by the comnpany. The threats from other companies can be reduced by Samsung with the help of a diversified base of products (Sakas, Vlachos & Nasiopoulos, 2014).

Bargaining Power of Suppliers

The suppliers of Samsung have moderate levels of power that is dependent on their types and the components which are provided by them as well. For example, Google is a supplier who is able to exert pressure on the organization based on the platform that is provided. However, the organization has been successful in developing strategic relationships with the suppliers in order to maintain the prices that are offered by them (Hill, Jones & Schilling, 2014).

Bargaining Power of Buyers

The buyers of Samsung Group have a huge bargaining power as they are provided with different options from the other major organizations in the industry which include, LG, HTC, Apple Inc., Nokia. The customers can change the company and products without any extra cost (Michael, Storey & Thomas, 2017).

Rivalry among existing competitors

The technology based industry is highly competitive in nature and faces fierce levels of competition from different established organizations that include, LG, Nokia, Sony, Motorola and Panasonic. Although Samsung has been able to develop its operations in an ethical manner, the organization still needs to develop the strategies which can help in sustaining its position (Engert, Rauter & Baumgartner, 2016).

Conclusions and Influences 

The report can be settled by stating Samsung has been successful in developing its place in the technology based market with the help of its generic strategies. However, the company needs to use the opportunities that are provided in order to increase the awareness of its products in the industry. The external industry based factors are able to influence the methods by which Samsung is able to function in the technology industry in a sustainable manner for a long period of time.

 

References 

Aydalot, P., & Keeble, D. (2018). High technology industry and innovative environments: the European experience. Routledge. Retrieved from https://www.taylorfrancis.com/books/9781351369541

Barros, I., Hernangómez, J. & Martin-Cruz, N. (2016). A theoretical model of strategic management of family firms. A dynamic capabilities approach. Journal of Family Business Strategy, 7(3), pp.149-159. Retrieved from https://www.sciencedirect.com/science/article/abs/pii/S1877858516300742

Daspit, J.J., Chrisman, J.J., Sharma, P., Pearson, A.W. & Long, R.G. (2017). A strategic management perspective of the family firm: Past trends, new insights, and future directions. Journal of Managerial Issues, 29(1), p.6. Retrieved from https://www.researchgate.net/profile/Joshua_Daspit/publication/313469153_A_Strategic_Management_Perspective_of_the_Family_Firm_Past_Trends_New_Insights_and_Future_Directions/links/58a06fc245851598bab84c21/A-Strategic-Management-Perspective-of-the-Family-Firm-Past-Trends-New-Insights-and-Future-Directions.pdf

Demir, R., Wennberg, K. & McKelvie, A. (2017). The strategic management of high-growth firms: a review and theoretical conceptualization. Long Range Planning, 50(4), pp.431-456. Retrieved from https://fardapaper.ir/mohavaha/uploads/2017/10/The-Strategic-Management-of-High-Growth-Firms-A-Review-and-Theoretical-Conceptualization.pdf

Dobbs, ME (2014), 'Guidelines for applying Porter's five forces framework: a set of industry analysis templates', Competitiveness Review, vol. 24, no. 1, pp. 32–45. Retrieved from ttps://www.uniba.it/docenti/somma-ernesto/CR0620130059.pdf

Durand, R., Grant, R.M. & Madsen, T.L. (2017). The expanding domain of strategic management research and the quest for integration. Strategic Management Journal, 38(1), pp.4-16. DOI: 10.1002

Dyer, J.H., Godfrey, P., Jensen, R. & Bryce, D. (2015). Strategic Management: Concepts and Cases. Wiley Global Education. Retrieved from https://scholar.google.co.in/scholar?hl=en&as_sdt=0%2C5&q=Dyer%2C+J.H.%2C+Godfrey%2C+P.%2C+Jensen%2C+R.+%26+Bryce%2C+D.+%282015%29.+Strategic+Management%3A+Concepts+and+Cases.+Wiley+Global+Education.&btnG=

Engert, S., Rauter, R. & Baumgartner, R.J. (2016). Exploring the integration of corporate sustainability into strategic management: a literature review. Journal of cleaner production, 112, pp.2833-2850. Retrieved from file:///C:/Users/acer1/Downloads/2017-Daspitetlal-Astrategicmanagementperspectiveofthefamilyfirm-JMI%20(1).pdf

Ethiraj, S.K., Gambardella, A. & Helfat, C.E. (2018). Theory in strategic management. Strategic Management Journal, 39(6), pp.1529-1529. Retrieved from https://scholar.google.co.in/scholar?hl=en&as_sdt=0%2C5&q=Ethiraj%2C+S.K.%2C+Gambardella%2C+A.+%26+Helfat%2C+C.E.+%282018%29.+Theory+in+strategic+management.+Strategic+Management+Journal%2C+39%286%29%2C+pp.1529-1529.&btnG=

Frynas, J.G. & Mellahi, K. (2015). Global strategic management. Oxford University Press, USA. Retrieved from https://books.google.co.in/books?hl=en&lr=&id=QYJ1BQAAQBAJ&oi=fnd&pg=PP1&dq=Frynas,+J.G.+%26+Mellahi,+K.+(2015).+Global+strategic+management.+Oxford+University+Press,+USA.&ots=aax1UtHwu9&sig=kJQecCBBG393m3imXG75Zm2bT9c#v=onepage&q=Frynas%2C%20J.G.%20%26%20Mellahi%2C%20K.%20(2015).%20Global%20strategic%20management.%20Oxford%20University%20Press%2C%20USA.&f=false

Hill, C.W., Jones, G.R. & Schilling, M.A. (2014). Strategic management: theory: an integrated approach. Cengage Learning. Retrieved from https://books.google.co.in/books?hl=en&lr=&id=Qy8aCgAAQBAJ&oi=fnd&pg=PP1&dq=Hill,+C.W.,+Jones,+G.R.+%26+Schilling,+M.A.+(2014).+Strategic+management:+theory:+an+integrated+approach.+Cengage+Learning.+&ots=o9oDQjQUsr&sig=yu7L3LNaAS1Nzz7vdw4meEFypOs#v=onepage&q&f=false

Kasemsap, K. (2014). Strategic innovation management: An integrative framework and causal model of knowledge management, strategic orientation, organizational innovation, and organizational performance. In Strategic approaches for human capital management and development in a turbulent economy (pp. 102-116). IGI Global. Retrieved from https://www.igi-global.com/chapter/strategic-innovation-management/177568

Lee, S. H., Park, S., & Kim, T. (2015). Review on investment direction of green technology R&D in Korea. Renewable and Sustainable Energy Reviews, 50, 186-193. Retrieved from https://www.sciencedirect.com/science/article/pii/S1364032115004281

Michael, S., Storey, D. & Thomas, H. (2017). Discovery and coordination in strategic management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset, pp.45-65. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1002/9781405164085.ch3

Morschett, D., Schramm-Klein, H. & Zentes, J. (2015). Strategic international management (pp. 978-3658078836). Springer. Retrieved from https://scholar.google.co.in/scholar?hl=en&as_sdt=0%2C5&q=Morschett%2C+D.%2C+Schramm-Klein%2C+H.+%26+Zentes%2C+J.+%282015%29.+Strategic+international+management+%28pp.+978-3658078836%29.+Springer.&btnG=

Sakas, D., Vlachos, D. & Nasiopoulos, D. (2014). Modelling strategic management for the development of competitive advantage, based on technology. Journal of Systems and Information Technology, 16(3), pp.187-209. Retrieved from https://www.researchgate.net/profile/Nasiopoulos_Dimitrios/publication/265857601_Modelling_strategic_management_for_the_development_of_competitive_advantage_based_on_technology/links/561f984708aea35f267deea0/Modelling-strategic-management-for-the-development-of-competitive-advantage-based-on-technology.pdf

Samsung.com. (2019). Home. Retrieved from https://www.samsung.com/us/

Steinbach, A.L., Holcomb, T.R., Holmes, R.M., Devers, C.E. & Cannella, A.A. (2017). Top management team incentive heterogeneity, strategic investment behavior, and performance: A contingency theory of incentive alignment. Strategic Management Journal, 38(8), pp.1701-1720. DOI: 10.1002/smj.2628

Trigeorgis, L. & Reuer, J.J. (2017). Real options theory in strategic management. Strategic Management Journal, 38(1), pp.42-63. DOI: 10.1002/smj.2593

Wheelen, T.L., Hunger, J.D., Hoffman, A.N. & Bamford, C.E. (2017). Strategic management and business policy. pearson.

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