Market Analysis And Investment Feasibility Report For Samsung

Developing a multi-criteria decision making model for PESTEL analysis’,

Samsung-Apple patent war case analysis: focus on the strategy to deal with patent litigation.

Introduction to Samsung and its business

Write a brief introduction for the existing business/or the business idea/ or concept you have chosen to investigate in your report.

Samsung is the world well-known company for its products which are technologically based such as laptops, computers, mobile phones and home electronic appliances. The organization mission is to have a full dedication of its technology and talent to develop products and services that are based on innovation (Samsung 2017). The firm faces stiff competition from its rivals in business such as apple. Apple Company is in battle with Samsung firm due to the patent infringement. Samsung has a marketing strategy that focuses on the promotion of the brand image and sales increment with the aim of achieving its strategic and financial goals. The customer rang can be expanded and the sales revenue increased if the company adopt and effective marketing strategies. This report focuses on providing the financial feasibility and the organizational and market of the suggested investment(Samsung,2017)

Identify a market need or opportunity by analysing the current market situation based on the following dimensions:

• Consumer taste along with preference
• The potential for profitability and growth in the market
• Competition from competitors
• Other needs

Dimension	Analysis/Discussion
customer wants, needs and preferences	The recent growth in the technological development has brought a significant shift in the smartphone industry. The industry is the most significant industry in business and has produced a dynamic environment. The consumer has over the years preferred a phone that has improved life battery would prefer a battery life that can go past a day without being charged. The smartphone comes with various features such as WI-FI, Bluetooth, EDGE, GSM and a different color display all depending on the battery life of the phone. With all these features, consumers are more addicted to their phones and would prefer a phone that has longer battery life.
Competition	The Chinese brand market has continually increased while Apple and Samsung market share decline over the years based on the most recent Gartner data below. There was a marginal yearly growth n the iPhone sales. However, there was a 9% market growth during the same period which resulted in market share decrease. The global share of apple decreased from 14.8% to 13.7%. However, the Samsung having the more significant market share saw a decline from 23.3% to 20.7%(Kim, Park,&Kim,2015). On the contrary, oppo saw the most significant growth in the market share of 4.6% to 8.1%.Huawei and vivo saw an increase in the market share too.
market growth and profitability potential	The smartphone market is expanding at a rapid speed globally, justifying for the 14% of the cell phones in the world. The rapid growth in the technological development has backed up the high increase. Some of the technological development comprises of the professional data management, fast internet browsing, advanced personal data management and the 4g and 3 G network evolution technologies. Smartphone hotspot has been linked to the Asian region mainly in China and India. The region has seen a continuous development in the cellular market and an increment in the 3G expenditure and penetration on customer electronics across the region. In the markets that there is saturation, the growth of smartphone in the region has been fueled by the subsidies of the operator and the carrier wars. In the year 2014 the smartphone market is been estimated to reach $150.3 billion compared to the year 2009 where it attained $55.4 billion (Lee, Kim,&Park 2015)
other relevant (if any)

• Provide more than two creative ideas that rae capable of handling the need identified based on the analysis above.the creative ideas can take any of the form below.
• Service
• Productz
• Process
• Concept
• All of the above combined
• Any other appropriate.

 (ER 1.1)

Creative idea#1: Allowing consumers to have an experience of the release of new smartphones in the showroom

Creative idea#2: Allowing consumers to have an experience of the release of new electronic appliances, in real time fun setting

4.1 Evaluate and analyze the creative ideas above for their potential to be developed as value creation opportunity.

(ER 1.2)

Inventive knowledge	Advantages	Disadvantages	Expenditure Vs. Profit (Range 1- 10)	Execution ease (Range 1- 10)	Reversibility (Range 1- 10)
Creative Idea 1: Enabling customers to experience the release of new smartphones located in the showroom	Superior value addition in terms of the experience of the customer unmatched by competitors  (Yuksel, 2012) - Foremost mover advantage	- So as to set up an area where many people could literally have an experience of the new products, extensive resource input is required. -Possible environmental damage due to waste as a result of the people’s engagement in the process -Involvement of children in the process may cause certain health and safety issues. -Breakage of the mobile phones.	2	1	1
Creative Idea 2: Allowing consumers to have an experience of the release of the new electronic appliances, in real time fun setting.	-Allows the addition of superior customer value and experience that is unmatched by those of competitors. - Potential that scalable/replicable	-The electronic appliance can be broken	4	4	6

4.2 Based on the evaluation and analysis conducted in Q 4.1, justify and select the idea that you can recommend for adoption in the potential venture scenario.

 (ER 1.3)

From the above evaluation and analysis of potential ideas, it is clear that Samsung is hunting the effective cost-benefit. The first idea involves a great potential in the economic aspect, however, there are high risks involved when dealing with resource inputs. Also, the second idea contains a risk of investment and reversibility while they fill new electronic appliances in the booth.

5.1 under each section, analyze the selected ideas mentioned above for its innovative type.

• Innovation incremental.
• Innovation disruptive,
• Innovation breakthrough
• Innovation sustaining

Innovation type	Fits with the innovation type
Incremental innovation	No
Distruptive innovation	No
Breakthrough innovation	Yes
Sustaining innovation	No

The selected idea, according to the innovation type’s exploration, evidently suits the breakthrough innovation as this is a way of including new products and serving the customer needs to experience new products. Breakthrough Innovations can turnaround the market trend with unique product, which would assist achieve a competitive edge in the market, and create maximum possible value.

5.2 Discuss the scope and degree of innovation term in the life cycle and innovation based on the above.

Life cycle stage	Scope of Innovation
Introduction stage For the company that is introducing a new product in the market, this is considered as the most expensive stage for the company. The product has a smaller market size, and the product sale will increase. However, the cost of expenses such as development and research, consumer testing and marketing, required for product introduction can be competitive (yuksel,2012)	(Innovators about 2.6%)
Growth	Customers: (Early adopters 14.5%, Early Majority 34%)
Maturity	Customers: (Late majority about 35%)
Decline	Customers: (Laggards about 17%)

Market analysis for Samsung

5.3 under each section, explore and evaluate the selected idea for its potential in the market value creation viability and scope.

Impending threat	Analysis	Degree	Favorable?
Bargaining power of customers	Buyer’s cost diverts to the products of the competitor	High	NO
Bargaining power of dealers	It is dissimilar dependent on dealers. There is a few alterative to Android platform provided to Samsung as the bargaining power is represented by Google. (Lee, Kim, & Park, 2015)	High	NO
New entrants threats	Limited number of organization to  Apple,Huawei,LG and Oppo.(Kim, Park, & Kim, 2015).	High	No
substitute products or services threats	Compared to Samsung the Whawey smartphone, a brand of the Chinese market, is cheaper, thus it can substitute Samsung.	High	No
conflict among existing companies	conflict among companies that are existing is extremely competitive	High	NO

The presence of substitute products in the market has threatened the existence of Samsung. For instance, the Whawey smartphone which is a cheaper Chinese smartphone can substitute Samsung for consumers who cannot afford to purchase Samsung.

The home appliance industry is facing a stiff rivalry since the products are saturating the market, and the products feature don not different from one manufacturer to the other.

There a significant disparity in the aspect of bargaining power of the suppliers. Suppliers who provide components are not considered of the bargaining power since they are only affected by the quantity of the order of the Samsung and price negotiation. Due to the few alternatives to the Android platform, Google has represented a bargaining power that is marked.

In the home electronic appliances, for the new entrants, the big brands have been limited, for instance, there is Samsung, Panasonic, and LG.However, in the smartphone market, there is the limitation in the number of firms such as LG, Apple, Huawei, Oppo and Lenovo(Lee..Kim& Park,2015).Samsung has seized this chance and remained at it’s the leader in the market worldwide.

• point-of-difference and consumer value addition

Dimension	Money exchange	Competition1 Apple	Competition2 Whawei	Competition3 LG
Price		1	3	2
Design		1	3	2
Ease-of-use		2	3	1
Interoperability		3	1	2
Security		2	3	1
Price comparison		3	1	2

Features	pros	gains
Advanced simulations	Captivates new customers	Awareness of the brand
affordability	Sales connection	Increase sales

• endorsement of the customer

Timeframe
1st year	CAPTURE 1% - First year penetration is presumed to be 1%while the original adoption by the consumer can be difficulty because they are used of the product of the XYZ….(think innovators)
2nd year	CAPTURE 3% -The projected infiltration this year is an increase of 3% with awareness of the brand increase…… (think – early majority)
3rd year	CAPTURE 4% - the projected infiltration this year is expected to increase up to 4%..... (think early – late majority)
4th year	CAPTURE 9% - - the projected infiltration this year is expected to increase up to 9% (think late majority or laggards
5th year	CAPTURE 13% - - the projected infiltration this year is expected to increase up to 13% (think late majority or laggards)

The results from the market feasibility indicate that there is a need , and the need is big enough. In addition, as the market grows it becomes more attractive, however, it may not offer profit potential for new entrant. To give the organization a strong position there is a need to add superior value and uniqueness.

Asses and evaluate the ideas that have been selected for the potential of the organization, scope and the viability in terms of :

• Weakness and the strengths of the internal organization.
• Threats and opportunities of the external environmental.

Strengths	Weaknesses
- Loyal consumers on the brand. - Rapid service on any products.	- Skimming price-the pricing strategy for the Samsung product. - Employees’ turnover is high
Opportunities	Threats
-Globalised world-the local culture can be well fitted by the flexible company policies. (Lee, Kim & Park, 2015). - Technology is important; Technology has been the foundation of any Samsung product.	Apple has been taking a suit against Samsung for copying the firms smartphone and patent. (Kim, Park & Kim 2015).

According to the above table, Due to Samsung product having an excellent performance rating in the previous years, it has finally won the consumer's trust. The product has a provision of high-speed service for its products. However the price skimming strategy is of significance to Samsung smartphone because the phone is among the products representatives and to gain the competitive market advantage, the firm should continually produce new products each year. The cheap Chinese smartphone brand is growing despite the benefits of the high price of the Samsung firm. The firm should set an effective strategy that pertains to the local culture. Samsung being an original Korean company, it has a policy that is flexible enough to fit any local culture where the company has its operation in. While assessing and planning on the launching of its new devices, it has kept the technological factors up to date.

Competitive gap	Explanation	Procedures to focus on the gap
Increased employees’ turnover	Samsung faces a danger of the organization ideas and information leakage to its competitors, due to the majority of the employees have been hired by the rival companies after filing a lawsuit against Samsung. (Lee, Kim & Park 2015).	There is a need for Samsung to increase the welfare for employees and provide an appropriate wages for employees.
Lawsuit against Apple	Samsung operation has been significantly affected by the lawsuit between Samsung and Apple has not been terminated. (Kim, Park & Kim 2015)	Samsung needs not to be involved in the lawsuit against apple.

Evaluation of two creative ideas

In conclusion, Samsung has lots of strengths which include high technology, and high brand awareness, while its weaknesses include high turnover of employees and the lawsuit against the competitor, Apple. This indicates that Samsung needs to build strategies such as providing welfare to employees and not be involved in the lawsuit.

7.1Present an evaluation that justifies and establishes assumptions of the key input and the parameters revenue stream of the financial model for the spin off venture. The assumptions are not limited to the following:

• Growth rate and market size targeted.

Samsung market target is in NZ for those who want to do dollar stock exchange and purchase smartphones. Currently 55% of the NZ inhabitants have (Samsung, 2017) smartphones are owned by over 2.5 million people all over the world. There is an assumption that over half of the smartphone owners are involved in the buying and selling of foreign exchange in some manner (taking assumption due to lack of data). Hence the population is almost 1.5 million. Using an approach of conservancy there is an assumption of the number being about one million which includes individuals and businesses. The various reasons of such people trading in foreign exchange are either personal, educational, travel and business related. An assumption is made that the market will increase at a rate similar to that of the population of the world of 1% per annum.

• Market infiltration

The initial infiltration is assumed to be 2% and can rise to 30% based on the trend of smartphone usage rising per year. The consumer’s frequency purchase and preferences.

According to the purchase size there is a prediction that on an annual average,

each consumer in the target market would trade $15,000 worth of

foreign currency 5 times a year. Based on preferences not all target markets would purchase online and may make use of the app for the purposes of the price comparison and do a direct management providing the best price place.

• Resource requirements

Expense	Yr1	Yr2	Yr3	Yr 4	Yr5
Start-up cost	$100,000,00
Number of staff required	1	1	2	2	2
Salary per staff	$40000	constant
Platform royalty	$15000	constant
Annual maintenance	$5000	constant
Annual maintenance	$5000	constant
Utility bills	$5000	constant
Accountnant/lawyer	$10,000	constant
other	$10000	constant
Advertising budget	7%	constant

• product;

• price

The cost of each smartphone has been assumed range in between $150-800, and is expected to remain constant due to high competition and low barriers to entry in this type of open market.

• process

The selling of Samsung’s smartphones is associated with the mobile phone companies.

• place

Each smartphone store

• promotion

Based on the 7% of the revenue earned there will be an annual advertising budget. It is also predicted that the promotion would impact on 20 % that would attract new customers.

• other relevant

Innovative type and scope

7.2 Present an analysis that translates above model input assumptions and revenue streams into key financial outputs (a minimum of FIVE) for the venture. These outputs may include but are not limited to:

cost structures

• equity and debt profiles
• number of customers
• sale (units)
• sale (revenue)
• cashflow
• profit profiles

  profit profiles

• breakeven
• investment returns
• NPV
• IRR
• other relevant

Revenue	Yr1	Yr2	Yr3	Yr4	Yr5
Available market	1,000,000	1,020,000	1,030,000	1,040,000	1,050,000
Market captured	10,000	15,000	20,000	25,000	30,000
Additional market captured due to advertising impact	2000	2000	2500	3000	3500
Total market captured	12,000	17,000	22,500	28000	33,500
Revenue	$30,000	$35,000	$36000	$40000	$45000
Commission in	$300,000	$350,000	$400,000	$450,000	$500,000
Revenue-total	$330,000	$385,000	$436,000	$490,000	$545,000
Costs	Yr1	Yr2	Yr3	Yr4	Yr5
Fixed cost
Start-up cost	$100,000	0	0	0	0
Salaries	$20,000	20000	20000	20000	20000
Annual maintenance	$5000	5000	5000	5000	5000
Utility/bills	$5000	5000	5000	5000	5000
Accountant	$5000	5000	5000	5000	5000
other	$5000	5000	5000	5000	5000
Total fixed cost	130,000	130000	150000	150000	150000
Fixed cost	0.15	0.15	0.15	0.2	02
Variable cost
Advertising budget	$15000	20000	20000	20000	20000
Variable cost	0.1	0.1	0.15	0.2	0.2
Total cost	0.2	0.1	0.1	0.1	0.1
Total cost	$150,150	160,180	167.890	168.901	189.901
Cashflow	Yr1	Yr2	Yr3	Yr4	Yr5
Cashflow per annum	$213,800	$255,000	$355,000	$255,000	$255,000
Cashflw cumculative					$1,358,903
Break even	658902

7.3 Analyse the financial sensitivity of the above financial model of the venture in a manner which tests and demonstrates the impact of changes in key input assumptions and revenue stream parameters on the model conduct and output.

Initial infiltration: Each one unit percentage inflates (from 1.5% to

2%) in the initial penetration explains about $2 million of variation in the total 5 year cashflow.

cashflow	Yr1	Yr2	Yr2	Yr2	Yr5
Cashflow per annum	500,500	530,500	550,555	600,000	800.000
Cashflow cumulative					1,450,000
Break even	55,150

Annual growth in penetration: Each one unit percentage inflates

Cashflow	Yr1	Yr2	Yr3	Yr4	Yr5
Cashflow per annum	$150,500	250,000	350,000	400,000	450,000
Cashflow cumulative					1,755000
Break even	150,500
				variation	40,000

(from 20% to 21%) in the annual increase in penetration shows about $40,000 of variation in the total 5 year cashflow.

Average purchase size per user per annum: Each $1000 increase

in the average purchase size per user per annum shows about $250,000 of variation in the total 5 year cashflow.

Cashflow	Yr1	Yr2	Yr3	Yr4	Yr5
Cashflow per annum	250,200	350,000	400,000	450,000	500,000
Cashflow cumulative					2,000,000
Break even	55,000			variation	250,000

Purchase preference (how many will buy): Each 1 unit percentage inflates (from 10% to 11%) in the purchase preference per user per annum explains about $250,000 of variation in the total 5 year cashflow.

Cashflow	Yr1	Yr2	Yr3	Yr4	Yr5
Cashflow per annum	200,000	300,000	400,000	450,000	500,000
Cashflow cumculative					185,000
Break even	55,000
					250,000

Purchase preference (how many will buy): Each 1 unit percentage

inflates (from 11% to 12%) in the purchase preference per user per

annum explains about $250,000 of variation in the total 5 year

cashflow.

Cashflow	Yr1	Yr2	Yr3	Yr4	Yr5
Cashflow per annum	$250,000	300,000	350,000	400,000	450,000
Cashflow cumulative					1,750.000
Break even					250,00

7.4 Performing the above sensitivity analysis, produce three venture scenarios (worst, average, and best) to test the idea’s financial viability.

Excel file

7.5 Present an analysis that communicates the establishment and justification of the most likely scenario.

Samsung will penetrate at a rate of 20 thousands per year and the revenue is expected to be about 100,000 million dollars. This is a clear indication from the cash flow that Samsung is expected to have a good revenue. This means that the venture is worth pursuing.

Present an analysis that identifies venture’s scalability potential in terms of:

• Replicability: by importing innovations from the developed markets and also focusing on local adaptations and innovations, Samsung has gained a lot from the emerging markets. This means that Samsung will maintain strengths in speed in the emerging markets and developed markets.

Customizability: For Samsung’s technology to be customizable into various versions, it needs to be flexible. This is a clear indication that Samsung can penetrate into more markets

Extendibility: Samsung’s new vision is to publicize of its products across the world, and introduce new technologies to all countries.

8.2 Under the following headings, analyze and identify growth strategies you may consider across the venture development stages:

• market penetration: Despite a disappointing first quarter (0% year over year growth), Samsung was able regain control as the global leader in the smartphone market. Through their Substantial discounts on the Galaxy S7 and S7 edge they were able to move last year's flagships as they make way for the new S8 and S8+. Outside of the high end, the product mix continues to shift toward more affordable models (Lee, Kim, & Park, 2015)
• product development:through the introduction of the A7, A5, and A3 earlier this quarter, along with a recently updated J-Series, and new flagship S8/S8+, this should give Samsung a well-balanced portfolio across all regions in the second quarter. The launch of S8 and S8+ looks promising as it may have finally put Samsung's Note 7 fiasco to bed (Samsung, 2017).

• new markets: •Spain, the first market to launch in Europe;
• Singapore, the first within the South East Asian region; and
• Australia, the first market to launch within the Oceania region.

Diversification: Samsung's electronics division is pursuing the corporate-level of related diversification & vertical integration Samsung corporation is pursuing a strategy of unrelated diversification - Corporate-level strategies and unrelated diversification - Kinds of multi-business models (Samsung 2017).

• horizontal integration-Samsung involves the use of Google’s Android operating system in their smartphones (Samsung 2017)
• vertical integration (backward/forward);Samsung significantly implement forward vertical integration in the production and distribution of smartphones and the accompanying apps. (Samsung 2017)
• alliances: Samsung needs to make an alliance with other application companies.
• acquisitions: Samsung needs also to acquire small electronic companies.
• mergers: Samsung may merge with other application companies.
• joint ventures: Samsung can do a joint venture in other businesses showing their products such as movies and entertainment.
• multicountry strategies: Samsung business strategy will use a high level of flexibility in a way that the company is determined in changing its strategy dramatically according to changes in external business environment.
• global strategies:Samsung is a leader in key product categories in both developed and emerging markets. It can remain on top in the fast-moving consumer electronics industry in the face of strong global and local competition with replicability and customization globally. (Samsung 2017)
• Other relevant (if any)

8.4 Determine the venture’s competitive potential by identifying and analysing its key sources of competitive advantage. Your must discuss at least 3 (THREE) sources of competitive advantage, which may include but are not limited to:

• 1.· distribution:Samsung uses diverse channels in the market.

It applies to the channel marketing concept where sales and service dealers, modern retail and distributors are involved.

The sales and service dealers accounts for Samsung to sell its products and these dealers can open their Samsung showrooms.

Samsung’s distribution network is interesting.

This evidenced by the strategy of Samsung setting a single distributor in a state that they distribute throughout to sell all of their products. This distributor markedly invests in Samsung and thus, both the distributor and Samsung go together for the distribution of Samsung products. Therefore, a single distributor will purchase all material of Samsung and sell it to retailers (Samsung 2017).

• 2. marketing and sales: Samsung uses various methods of promotions.

Samsung employs various methods to attract customers to their products such as the use of advertisements and sales promotions.

• customer service:Samsung has a high trust of customers on its products because Samsung has shown  good performance in the last few years. Samsung provides a very fast service for any of its product (Lee, Kim & Park, 2015).

Conclusions/Implications

Provide a brief conclusion of your report, including overall managerial implications of your findings and discussions.

This report has conducted various analyses for Samsung. For Samsung to maintain its global leadership in the market, it is recommended to maintain its technology development, to expand its service domains, and to be watchful of the patent not to spend their energy on legal issues. In addition, as a global leader, it should also pay attention to build its trustful brand images to customers as they are not connected political issues.

References

Kim, S.Y., Park, S.T. and Kim, Y.K., (2015). Samsung-Apple patent war case analysis: focus on the strategy to deal with patent litigation. Journal of digital convergence, 13 (3), 117-125.

Lee, S.J., Kim, J. and Park, B.I., (2015). Culture clashes in cross-border mergers and acquisitions: A case study of Sweden's Volvo and South Korea's Samsung,. International Business Review, 24 (4), 580-593.

Samsung 2017, Values and philosophy, Global Strategy Group, Samsung, viewed 16 Dec 2017, https://sgsg.samsung.com/main/newpage.php?f_id=samsung_value

 Yüksel, ?.(2012), Developing a multi-criteria decision making model for PESTEL analysis’, International Journal of Business and Management, 7 (24), 52.