Analysis Of Samsung Electronics As A Multinational Corporation - Essay.

In this section, you will need to present and analyse key data supporting the status of your company as a multinational corporation.

1: Please explain your company’s profile as an MNC.

2: Please use one theory related to ‘globalisation of business’ to analyse the status of your company.

You will need to focus on ONE factor from the host country that influences the internationalisation process of the firm. As we focus on politicaleconomy and socio-cultural factors in the first part of this course, we recommend you to answer the following questions in this section:

3: What are the key country/regional factors affecting your firm’s choice of country? Why?

4: Please use one theory from the course to support your argument(s). The application of some theories from this course such as Uppsala internationalisation theory, Eclectic paradigm, and Porter’s diamond theory can also be useful at this point.

Question 5: What is entry strategy performed by the company? Please use academic resources (i.e. journal articles) to explain the concept of the company’s entry strategy and its benefits/pitfalls. Please identify some constraints of the selected entry strategy. It is important that you combined points from academic sources (i.e. academic journal articles) and information from the company to analyse potential constraints of the entry.

6: What are the key international business challenges for your company?

7: From the UN Global Compact Principles/Sustainable Development Goals, which area(s) that your MNC will need to focus in their current and future business? Why?

MNC Analysis

Business activities in the corporate arena keep changing trends as days go by. This phenomenon could be attributed to the numerous variations in consumer preferences, market stability, changes in demand as well as the differences in the organizations’ abilities to fulfill the client needs (Amoako, 2003). When business is done at a local level, it may involve a number of policies which in most cases are manageable. However, for a business organization to prosper at an international level, there are various effective strategies which have to be installed in order to achieve this. Most successful multination corporations in the world today are those organizations which have stood the test of hard times by adequately countering the related challenges. In this paper, we analyze a multinational corporation (Cairns and Sliwa, 2008). The analysis which focuses on Samsung Electronics shall highlight the organization’s profile, entry strategies in the selected country as well as the challenges faced in line with its operations in the international font.

Samsung Electronics

Samsung Electronics Co. Ltd. is one of the largest information technologies multinationals in the world. The level of the company is characterized by a sophisticated leadership and ownership structure which also comprises elements such as circular ownership. The company is one of the leading producers of information technology related gadgets only second to Apple Company (Cantwell and Narula,  2004). Despite the fact that its headquarters is in Suwon, Korea, the operations of the company expands internationally thereby covering over 70 countries worldwide. Samsung Electronics serves as one of the core components of Samsung group. This could be emphasized by the group’s annual report in 2012 which indicated that it contributes to over 70% of the group’s revenue. The company is the world’s largest producer of smartphone as well as mobile phones and the popularity of its brand, the Samsung Galaxy s basically a testimony of the level to which the organization has gripped the international market for its products and brands. The company also has assembly and networking points spread in each of the countries where its affiliate operations are based (Calof, 2009). Apart from mobile phones, the company also manufactures numerous electronic components for instance lithium batteries, flash memory, semiconductors, chips as well as hard drive devices. As a networking strategy, the company works together with other organizations such as Nokia, Apple, HTC and Sony.

According to the globalization theory of liberalism, the aspect of globalization is viewed as the extension of the modernization through the application of market led strategies (Harvey, 2007). This theory outlines the aspect that the global expansion basically arises from the human desires for economic progress through the fulfillment of their innate wants (Caves, 2006). The individual desire to prosper, in this case, plays crucial role in giving room for worldwide interrelations between societies. Liberalism advocates for individual freedom to seek economic empowerment, a desire which does not confine one within their origin but allows them the freedom to explore the planet in search of this special satisfaction. With reference to this theory, Samsung Electronics can be said to have harnessed the elements of liberalism in order to achieve global recognition. It is a fact worth noting, technological advancement is basically a core functioning of global modernization. Samsung Electronics has therefore risen to its current status in the global arena by putting in place the necessary strategies which do not only enhance the extension of its market but also gives adequate room for human connections across the planet. This is one of the core elements of liberalism. In addition to the application of various aggregation strategies like political and organizational networking, the company is one of the leading producers of the very gadgets which allow effective human networking. For instance, the products such as mobile phones, tablets and smartphones serve as crucial tools for networking. The company is also the world’s leading manufacturer of television a product which has equally offered the right platforms through which individuals across the globe are able to interact with one another.  Furthermore, the company has extended its market presence through networking with other IT based companies and establishing outlets in various countries across the planet.

Samsung Electronics

The operations of Samsung Electronics spread to over 70 countries across the globe. In order to achieve such levels of success, the organization’s management must have carried out the necessary prior studies of the host country in order to establish its suitability for business. Most of the operations of Samsung are based in Asia and Europe (Dicken, 2008). The company has a number of subsidiaries in developing regions such as Africa especially in South Africa which is a relatively advanced country compared to the others within the continent. However, for this section, we focus on Australia as one of the host countries where Samsung Electronics has established its operations since the early nineties.

One of the key factors which affected the company’s choice of Australia as a host country is the relatively advanced level of infrastructure within the country. The country is served with a good network of roads and communication systems which adequately link the major cities such as Sydney (UNDP, 2007). The good infrastructure gives room for easy movement of both workers as well as materials on their way to the assembly points which is one of the strategies used by the company in order to avail their finished products to the market. Despite the fact that the materials are manufactured at the headquarters, most of these are then exported to the host countries for final assembly and finishing of the products.  A good network of roads, transport and communication systems therefore play a crucial role in enhancing these movements.

The other factor is the good political climate in the host country. Australia has since defied the challenges of political turmoil experienced in the past to establish a relatively stable political environment (Dunning, 2003). This has given room for the establishment of conducive government policies especially those meant to control international trade. This has in turn allowed a liberal ground especially for the international investors who find the government set conditions on international trade not only attractive but also manageable enough for the establishment of their own corporations. Furthermore, the country boasts a relatively stable economy which in turn plays a key role in enhancing a stable market for the company’s products. The stable economy also ensures stability in market prices.  When the market prices are stable, the loses associated with drastic changes in product prices as set by the government policies are equally minimized (Flyvbjerg, 2001).

According to the Uppsala internationalization theory, companies tend to take various crucial measures before instilling their influence in foreign markets. One of the core strategies in this case involves monitoring the local experience before venturing into the international spaces of operation. Samsung electronics carefully observed this strategy by analysis the social and cultural similarities and differences between the domestic market and the foreign countries. Despite the fact that the social cultures in Korea may be slightly different from the case in Australia, the analysis revealed that the two nations share a number of aspects in terms of economic and communication cultures. The company therefore regulated its operations in order to ensure that they perfectly fitted the social, cultural and economic needs of the market in Australia. This strategy did a lot in ensuring the establishment of Samsung Electronics in some of the major cities in Australia. From the Uppsala model, companies learn the foreign markets by gradually starting with occasional exports which is then followed by more regular exploits before the eventual establishment of subsidiaries. Through the gradual steps, the company is able to establish the market conditions, government policies, political environment in addition to other regional factors worth considering before establishing itself in the host country. Through a careful consideration of each of these factors, Samsung Electronics has since managed to gain a good ground in Australia in addition to expanding its operations to other parts of the globe.

Globalization of Business Theory

According to Friedman (2006), before entering a foreign market, it is crucial for an organization to put in place the necessary considerations which would ensure the effectiveness of the strategies. To begin with, there is need for a good understanding of the foreign market apart from establishing the most effective timing for the entry process. The company may also need to contemplate on the mode and scale of entry to use but most importantly, there is need to choose the right form of entry which would involve the least cost implications in addition to other related challenges.

Despite the various entry strategies used by most multinational organizations, Samsung Electronics largely employs the use of strategic alliances. As one of the core aggregation strategies, companies highly depend on networking in order to gain a better ground of the foreign market. In addition, the strategic alliances enable the company to reduce the cost implications associated with establishment of foreign ventures (Harrison, 2011). As a strategic alliance, the company works together with other IT firms for instance HTC, Sony and Apple just to mention but few. While Samsung does the main manufacturing work of the components, the partner companies deal with the final assembly and hence finishing the final products. In this case, the costs involving the production of these products are shared between the involved organizations.

Through these strategic alliances, Samsung Electronics identified and merged its operations with other companies in Australia  (Hartt, Mills and Durepos, 2012). These include transport industries as well as the assembly points. The company therefore manufactures the key electronic components such as chips, flash memory and hard drives before exporting them to the clients such as Apple with whom these alliances are formed.  In a nut shell, Samsung’s entry strategy involves the following basic steps: to begin with, the company manufactures the components at home basically in Suwon. This strategy is cheap and cost effective. The components are then subjected to either a direct or indirect export to the host country and received at the subsidiaries established at the host country (Johnson and Turner, 2010). Once the materials are in the host country, they are then assembled and mixed to obtain the final products. Some of the potential constraints of this strategy can be derived from the fact that the process may at times take quite a long time before reaching the final destinations. This may be as a result of the formal procedures involving the clearing of the goods at the ports and borders. However, this strategy has proved effective in enhancing the establishment of Samsung Electronics Co. Ltd. in Australia.

Despite the fact that the company has adequately established its roots especially in most countries in the world, the multinational company is still faced with a number of challenges especially in the host countries (Kegley & Wittkopf, 2001). For instance, the varying policies on foreign investments may soon catch up with the company thereby eliciting negative feedbacks. Most countries, especially in the developing world are currently coming up with relatively stringent policies meant to govern the operations of international investors. As such, when these conditions are such that they don’t favor the culture and operational objectives of Samsung, its operation in these host countries becomes minimized. In Australia, the government is keen on securing as much opportunities for the local investors before allowing much room for the foreign investors. It would therefore be crucial for Samsung to establish the most effective strategies which would ensure their relevance in the foreign market (Long and Mills, 2008).

Host Country Analysis

The other challenge faced by the company is the potential conflict which may arise between it and the partners especially in the strategic alliances. Such conflicts may arise when the partners feel less favored by the terms of business and hence the need to work as an independent entity.  The other cause in this case may be the availability of cheaper alternatives especially for the affiliate companies (Siqqiui and Alam, 2009). When the partners are able to obtain the same electronic components from other companies at affordable arrangements, they are likely to pull out of the alliances. This may work against the development and expansion strategies established by Samsung Electronics.  Finally, the company faces the challenge of variation in prices mainly as a result of the emergence of competitors and cropping up of smaller industries offering the same products at affordable rates. The competitors who mainly target the average members of the society are likely to take away a portion the international market. For instance, when a local company in Australia manufactures assembles and supplies the same IT related products exported by Samsung, the locals are likely to divert their allegiance to the domestic producer (Vargas-Hernández and Noruzi, 2010). Loss of market for products may lead to an adjacent loss in revenue for the company.

The United Nations through its global compact principle has outlined a number of aspects needed for consideration especially by multinational corporations. Despite the fact that the body has laid down about ten principles, Samsung Electronics needs to focus on the principles of labor and the environment both in their current and future business. The principle of labor emphasizes on freedom of workers, lack of forced labor and non-employment of underage workers. In the past, the company has been faced with cases of underage employment especially at the headquarters in Korea. As a result, the company needs to readjust on its employment codes both at local and international levels and hence ensure the rights and freedom of the workers are observed at all times (Harvey, 2007). At the same time, the rising challenges associated with industrialization have led to a number of environmental issues. The environmental principle encourages corporations to employ environment friendly operations in their strategies.  As a result, Samsung Electronics needs to focus on healthy strategies in the current and future operations and hence ensure that its local and international operations lead to the least effects on the environment.

Conclusion

With reference to the challenges projected above, there is an inevitable need for Samsung Electronics to establish the most effective strategies which would not only ensure its current stability but also its market dominance in future. The company needs to continuously study the subsequent trends in the foreign market in order to establish the reasons behind the changes. With a good understanding of the foreign cultures, customer needs as well as the political systems, the company can then come up with the right counter measures in a bid to ensure that the dynamic nature of the foreign market eventually leads to the least implications.  The current success and international expansion as exhibited by Samsung Electronics is clear indication that the company’s strategies towards globalization and internationalization have been effective. The organization may only need to stay consistent and more innovative to counter the anticipated future challenges.

References

Amoako, G. (2003) ‘The relationships among selected business environment factors and manufacturing strategy: insights from an emerging economy’, Omega, 31(1), pp. 287- 301.

Cairns, G. and Sliwa, M. (2008) A Very Short, Fairly Interesting and Reasonably Cheap Book about International Business, London: Sage Publication.

Cantwell, J. and Narula, R. (2004) ‘International business and the eclectic paradigm: developing the OLI framework’, Journal of International Business Studies, 35(1), 456 -458.

Calof, J. (2009) ‘Adapting to foreign markets: explaining internationalization’, International Business Review, 4(2), pp. 115-130.

Caves, E. (2006) Multinational Enterprise and Economic Analysis, 2^nd Edn., Basingstoke: Palgrave Macmillan.

Dicken, P. (1998) Global Shift: Transforming the World Economy, 3^rd Edn., New York: Guilford Press.

Dunning, J. (2003) Multinational enterprise and the global economy, Addison-Wesley Publishers, England, Viewed 7 April 2016.

Flyvbjerg, J. (2001) Making Social Science Matter: Why Social Inquiry Fails and How It Can Succeed Again. Cambridge: Cambridge University Press.

Friedman, T. (2006) The World is Flat: A Brief History of the Twenty-First Century, California: Farrat, Straus, and Giroux.

Harrison, A. (2011) ‘International Entry and Country Analysis’, A lecture programme delivered at technical university of Kosice, viewed 7 April 2016.

Hartt, C., Mills, A., Mills, J. and Durepos, G. (2012) ‘Markets, organizations, institutions and national identity: Pan American Airways, postcoloniality and Latin America’. Critical Perspectives on International Business, 8(1), pp. 14 – 36.

Harvey, D. (2007). A Brief History of Neoliberalism, London: Oxford University Press.

Johnson, D. and Turner, C. (2010) International Business, 2^nd Edn., London: Routledge.

Kegley, C. & Wittkopf, E. (2001) World Politics: Trend and Transformation, Boston: Bedford/St.Martin’s

Long, B. and Mills, J. (2008)’ Globalization, postcolonial theory, and organizational analysis: lessons from the Rwanda genocide’. Critical Perspectives on International Business, 4(1), pp. 389-409.

Siqqiui, K. and Alam, Q. (2009) Diplomacy and Statecraft, Melbourne: Tilde University Press

United Nations Development Programs [UNDP]. (2007) Annual Report, Geneva.www.undp.org

Vargas-Hernández, J. and Noruzi, M. (2010) ‘An Exploration of the Status of Emerging Multinational Enterprises In Mexico’. International business and Management, 1: 7-15. available at:  https://www.cscanada.net/index.php/ibm/search/results