"What are the strategically relevant factors in the macro-environment that impact your organization’s strategic vision and competitive advantage?"
The chosen company is Samsung which is a multi-national company originated in South Korea in 1938. However, decades later, today Samsung is reputed for ranking 6th in the position of “Best Global Brands 2017” owing to their innovation and growth which have sustained them in the market throughout. Samsung started to expand its business and gained entry in the field of petrochemicals, manufactured refrigerators, washing machines, laptops, tablets, PC, and tape recorders. Samsung partnered with BP in 1989 to form BP Chemicals. Samsung had proved its efficiency and capacity in the field of electronics and innovation when it launched its first internet savvy phone in the year 1999 which let the company to incur huge amount of profits (Nordhaus, 2015). Samsung has shown its keen interest in investing in technology that would produce inventive devices immensely useful to customers like Ring Video Doorbell Pro, gear watches, tablets and more.
Strategic vision is a set of ideas and activities that define and determine business development. It predetermines how a business would be executed so as to deal with the hindering factors like decreased productivity, loss of customer loyalty, declining profit level and economic crisis due to recession. Samsung and other companies must adhere to strategic vision which would be competent enough to improve the corporate management. A well-crafted strategic vision has the ability to envision long-term, help the entrepreneurs adopt a broader view of the organization to assess its competition and current strategies and help the organization progress towards its goals and objectives. Samsung’s strategic vision is to develop innovative products and create for a better globalized society (Coughlin, 2016).
Competitive advantage is when a business firm is able to deliver the same benefits like its rival competitors but at a comparatively low-cut price or if the company is in a position to exceed the profits more than its competing products. In case of competitive advantage, a firm needs to find cheap labor ad sale its products at a high price in the market. For every business organizations, it is necessary to implement competitive advantage to gain more satisfied customers who will receive high value through their products. In order to stay ahead in a competitive market competitive advantage is a pre-requisite to ensure market leadership and domination of the company (McWilliams et al., 2015). Some of the mediums through which competitive advantage can be practiced are technology, human resource and organizational structure. Competitive advantage can be achieved through cost-leadership, product differentiation that would help a company set its image differently from the relevant competitors, forming strategic alliances with other industries and acquire defensive strategies that would be necessary to actively cope up with stiff competition business instability and market saturation. Competitive advantage would also help the company to criticize a rival product in order to add it to Samsung’s own advantage.
Strategic vision and competitive advantage
PESTEL framework is a tool by which market analysts can analyse the macro-environmental factors that can have an impact on the business firm. PESTEL analysis takes into consideration the political, economic, social, technological, environmental and legal factors that can exercise control on a chosen industry. The analyses help a company to determine its strategic management that would help them in gaining a competitive position in the market. PESTEL is one part of the entire scenario which includes strategic planning, assessing internal capabilities to assess that will help an organization’s strategic decision making (Cooke, 2017).
The main political factors that can have an impact on Samsung is South Korea’s foreign policies, frequent government changes and controversial politics that have plagued the nation. Under these circumstances Samsung can be affected by pressure groups and their decisions, frequent military intrusion in the country (Rose-Ackerman & Palifka, 2016). The firm can get involved in controversies and debates like it once did when allegations were that it supported Grand National Party with 2.47 billion pre-election and other scandals like bribery. This lead to the 0consequent of media tainting Lee Myung-bak with corruption charges, breach of trust as he was bribed by Samsung for business profits and gain. The political scandal lead the imprisonment of heir to Samsung Lee to 12 years’ imprisonment and a conflicting scenario within the company (Chen & Ann, 2016). The scandal also caused a strain in the brand image of Samsung worldwide.
Samsung’s sale can also be affected by the damaged international relations with other countries, for instance with United States can have a negative impact on its sales growth. Samsung had acquired the topmost position amongst the other smartphone selling companies in U.S snatching away the position from Apple. According to reports Samsung also has a larger market share in the U.S market than any other company and in 2017 its market share grew from 32.9% to 36.2% (Chen & Ann, 2016). The strained relationship can therefore severely affect the market scenario of Samsung and its future prospects.
The Koran economy faced several obstruction in 2015 a period which witnessed global recession. This could have a severe impact on the business of Samsung and their sales rate as was evident in 2007-2009 when the global mobilephone sales rate slumped by 5 percent (Hartley, 2017). Samsung had already witnessed a sharp shrink of the global mobile phone market during recess. The other factor that can have a negative impact on the growth of Samsung is taxation and rate of interests. This was apparent when Samsung was needed to pay an additional 400 billion that naturally burdened the brand in a tremendous amount. Market researchers have predicted that due to the abnormal increase in tax rate companies can be forced to exit from South Korean market. The percentage of tax that Samsung had to pay in Korea accelerated up to 67 percent in 2018. This is therefore a matter of concern for Samsung Company.
The socio-cultural factors like a huge dependence on smart technology and lifestyle is favourable for Samsung and this has provided the brand more opportunities of investing in technology and innovation (Kotler, 2015). Samsung has tailored its products to adjust to the rapidly changing consumer demands for instance it has introduced gear watches with fitness tracker which are widely used for heart rate data and checking the amount of burnt calories, to check exercise records and more. Other social factors that the increasing amount of reliance on technology for communication, business meetings and social media is also favourable for Samsung market. Samsung has manufactured iPad Pro 9.7 which provides superior quality speakers and a screen size of 9.7 inch for easing out the process of video calls and conferencing (Hartley, 2017). The fact that the new generation has shown a growing demand for large scree smartphones is quite evident in Samsung’s smartphone shipments amounting to 79.8 million units in the second-half of 2017. The penetration of smartphones is also quite deep in the developing or poorly developed rural places. According to a study people may not have proper or adequate access to T.V or washing machine, but they are more inclined towards buying a smartphone in these areas.
Owing to the socio-economical culture around 1.8 billion smartphones are to be shipped world-wide within a span of 2 years (Chen & Ann, 2016). The digitalized technology where everything ranging from education, healthcare check-ups, entertainment and business primarily takes place on the medium of technology, Samsung has been quick to grasp the opportunity to extend its innovation and decided to partner with tech innovators to act as a driving force to enhance business growth and success. The socio-economic era that has elevated the identity of phones far more than its basic functioning has been hugely supportive of the innovations that Samsung has able to bring in. The products have been aligned with the requirements of the generation. A study has shown that Samsung products have been responsible to modify the behavioral pattern of young adults.
Samsung has received constant appreciation for being the world one of the pioneering innovative companies. As the globalized era has made more room for technological advancement Samsung has an advantageous market for harnessing technology and innovation. Samsung has with their product innovation acquired approximately 30.4% market share globally. What has favoured Samsung’s huge growth is its implementation of technological traits of Apple, like product design like charger port of tabs, icons, creation of Samsung wallet imitating Apple Passbook. This has benefitted Samsung by offering a stronger customer loyalty base than Apple in the opinions of Yun & Kim, (2016) as per reports, Samsung has also acquired the top position for mobile phone activation beating Apple in U.S. As per evidence it has been suggested that customers are identifying more with the Samsung brand since it has customized its products to remain at par with customer personalities. These factors have earned Samsung a customer loyalty rate of 70 percent (Coughlin, 2016).
However one threatening factor that can harm the steeping sales growth of Samsung is the lawsuit that has been filed by Apple and the ensuing controversial court session which can cause huge damage to the economic stability and brand reputation of Samsung.Apple has based the charges of copyright infringement against sixteen specific claims which can make Samsung lose its authenticity and product differentiation. As Apple is seeking $2billion for the damages caused it can hamper the productivity and popularity of Samsung (Rose-Ackerman & Palifka, 2016). The technological saturation can affect Samsung’s ability to adjust itself to the changing market pattern and the ability to adapt new markets.
Samsung will have to pay a hefty amount to Apple if found guilty of the charges. This will subsequently lead Samsung to change public perceptions of its brand image, public humiliation and negative media attention. The long-term battle can lead to a loss of market share which can affect the overall sales which will make the climate favourable for other smartphone selling companies (West, Ford & Ibrahim, 2015). The losses will be further aggravated by the through corruption probe launched by South Korea which led to the arrest of Lee. Market analysts have opined that although this cannot be a big restraining factor for the day to day operation of Samsung, it could affect the strategic decision making skills of Samsung. Owing to the fact that the legal scenarios are not in favour of the brand, more distractions can also affect employee engagement and satisfaction from the brand. According to Kim & Shin, D (2015) there are a number of employees waiting for promotions are also being disrupted. The legal scenarios currently apparent can affect Samsung by delaying decisions regarding company structure, strategy implementation and lose favour from the public eyes due to the unfair means by which it executed its business.
Samsung should pay heed to the rise of environmental factors that has become a major concern in the world today. In order to maintain a competitive advantage in the market Samsung should be ready to develop a consistent focus on maintaining a strong emotional attachment with the consumers and brand equity. Samsung should insistently spare adequate attention to the workplace safety measures for the labors who are responsible to create the final product. Samsung can face with penalties and charges on the grounds of failure to include sustainability in the business model.
Sustainability is already a rising global concern and Samsung should be careful enough not to discard this as a mere tend. In order to avoid legal confrontation or lose favor from market Samsung should be able to introduce a number of sustainable approaches for conducting its business (Janeczko, 2017). Samsung has already adopted the pollutant management strategy. Samsung Electronics has also adapted the Green Management plan whose major segments are acquiring globally recognized certifications like ISO, minimize the pollutant discharges as an end result of production by infusing strategies like reusing the wastewater, creating a work environment free of pollution so as to assure the safety of workers’ health. These are some of the ways Samsung has adhered to the plan of sustainable development. As a result of their priorities Samsung has been positioned in a positive light for being the first ever company in South Korea to invest in a safe environment and management system. Samsung has also supervised over the necessity of environment safety training sessions to the employees to be able to remain competent with the various levels of workforce. The environmental factors are in favor of Samsung since it has clearly demonstrated Samsung has never compromised on workers’ and environmental health for business gain (Janeczko, 2017).
Legal and Regulatory Factors
Legal factors like Samsung has to pay for the charges against its imitation of Apple can be restricting and can lead to more public accusations for the reputation to worsen and this could also lower down the consumer approval rate of Samsung. Ethical charges against Samsung can be extremely impeding for Samsung as media has positioned Samsung in negative light due to copyright and pirated issues, at this juncture it can also hamper the reputation that Samsung has built owing to its reputation and creativity. In a recent debate regarding the popularity of some of the oldest smartphone companies in the market critics have already debated the issue of “tweaking innovation” in the Galaxy series (Rose-Ackerman & Palifka, 2016). Critics have been waging debates regarding the lack of spirit of the company’s designers in their lack of lack of enthusiasm towards following a more systematic approach to innovation. What is the most negative about the entire scenario that this copyright matter might get printed in the product description of Samsung by critics (Chen & Ann, 2016). Therefore the users who are rather tech-inclined and fanatics might be propelled to change their decisions regarding the purchase of the product. Due to the over-whelming presence of social media these issues can also get reflected therein.
The accusation charges against Lee Jae-Young could also the partnership of Samsung with other companies since Lee was accused of corruption charges and bribery. The charges can prove extremely contradictory to Samsung’s philosophy of creating a better society with the help of technology and innovation.
From the above PESTEL analysis of Samsung it can be concluded that sound decisions are an important factor that Lee should consider during building the brand image of Samsung. The legal scenarios can have a tremendous impact on business by factors such as employee to employee relationship and their waning away of trust from the organization or delay in implementing major decisions that would be detrimental to the growth of the company. This would simultaneously affect the competitive advantage of the company. Other factors like the lack of authenticity of Samsung products can also result in Samsung losing favour from the wider market. The strategic vision of Samsung that surrounds round their credibility to build technologically innovative products and technology as a mission to expand its community of loyal Samsung users. The other factors, apparent favorable from the above analysis are the socio-cultural factors that massive enormously support the operation of Samsung in the market and can act as a driving force for making Samsung achieve its strategic vision ad goals. Samsung should spare attention to its reputation that can be subjected to degradation because its technological imitation and controversial political and legal charges that can affect the smoothening of its reputation in the long-run.
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