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Question:

Describe the pestel analysis, porter five forces analysis and strategic recommendations of Samsung smart phones?

 

 

Answer:

Introduction:

Samsung Electronics is a world’s largest Smartphone making company. The company was the second company after Apple Corporation that started making Smart Phones. At present the company has taken over Nokia devices and holds world’s largest market share in selling Smart phones. Samsung Electronics is a subsidiary of Samsung Company which is located in South Korea. The country is among the world’s fastest growing economy achieving 10% growth on yearly basis. The purpose of the report is to make PESTEL analysis and apply Porter’s 5 forces models to analyze the external environmental factors that affect the company. The strategic recommendations will also be discussed so that the company can achieve higher growth targets, improve sales and achieve sustenance in business growth.

Company Background:

Samsung electronics is a subsidiary of Samsung Company. Samsung Company was founded in year 1938 by Lee ByungChul as a trading company. The company has its headquarters in Seoul, South Korea. Samsung Electronics is one the world’s largest information Technology Company. The company took over the world market as a leader in 2012, by taking over Nokia Devices which was market leader since 1998. In year 2013 the company started its construction of world’s largest mobile phone factory in Thai Nguyen province of Vietnam. At present the Samsung Electronics Company holds 31% of the market share and has control over the largest world market share(SamsungElectronic, 2015).

 

Country Background:

South Korea is a country in Korean Peninsula in the East of Asia. The country has China on its west and Japan on its East. The capital of South Korea is Seoul which is the world’s  second largest most populated capital city with nearly 25 million residents. South Korea at present is the world’s 11thlargets economy and ranks 8th in the international trade. The country has border issues with its Northern half named North Korea. This way a tension between the countries rises at regular intervals as the country supports liberal ideas and North Korea supports communist ideas.

PESTEL Analysis:

PESTEL initials for Political, Environmental, Social, Technological, Environmental and Legal environment analysis which are external to the company. This way PESTLE analysis helps the companies to look after the various issues and problems that may rise in the external environment. In the present day there exists high competition in the market. Also the political and legal environment has been changing at regular pace Therefore to sustain these conditions the companies needs to analyze its conditions through PESTLE analysis so that the opportunities can be availed and the threats to the business can be dealt with accordingly. The following shows the various factors that forms part of the PESTLE analysis(Malhotra, 2002).

Table 1: PESTLE analysis of Samsung Electronics.

PESTLE analysis of Samsung Electronics.

Political

Environmental

Social

1. Concerns related to use of Smart Phones during federal elections.

2.  Misguiding the voters through fake messages.

3. Political decisions are publicised, which are not required to be displayed to public.

1. Rise in demand of Smart Phones in the United States.

2. American customer’s loyalty towards Apple Smart Phones.

3. Trend of using Smart phones for show-offs.

1. Increasing trend of using Smart Phones for social connections.

2. The ownership of branded Smart Phones has become an essential part of culture.

Technological

Economic

Legal

1. Increasing number of Smart Phones sellers in the United States.

2. Improving technology and regular innovations in the Smart phones has become a regular feature.

3. Increased applications in new Smart phones.

1. Global slowdown not affecting the sale of Smart Phones in the country.

2. The cost of Smart Phones has not become a point of concern for buyers.

3. Availability of cheap and non branded mobile phones in the American markets.

1. Restrictions on downloading medical related applications in the Smart Phones.

2. Issues regarding the download of software that may affect the security concerns of the country.

3. Increasing compliance for the Smart phones to regulate the market applications.

 

 

1. Political Issues

There are a number of political issues that has become a point of concern in United States of America due to the increasing usage of Smart Phones. Actually in year 2012 the number of Smart Phones users reached 92 million and these became the important mode of federal campaigns in the country. Therefore the election campaign related regulations and anti-political information transfers through videos and text messages has resulted in generating concerns for developing security measures and prevention during the election period(Rao & Klein, 2004).

2. Environmental

The United States market has been controlled by Apple Corporation. The company’s Smart Phones are high in demand since its introduction in the market since 2007. Thus after the careful study of the following data about the Smart Phone market penetration by manufacturer and operation system for quarter four in year 2011 for different countries can help in evaluating the real status of Samsung Smart Phone in the market.

 status of Samsung Smart Phone in the market

From the above information it is clear that the United States market is controlled by Apple Smart Phone which has become the priority of American people. According to a survey by ComScore in year 2011, Apple Smart Phones had 29.6% of the market share followed by Nokia Devices and then came Samsung Smart phones(Sharma, 2013).

3. Social Factor

Samsung Smart Phones has been widely accepted as the best methods of remaining in connect with the family and friends in the United States. The use of Smart phone in the recent years has increased manifolds which have resulted in changing the figures of market share that prevailed in year 2011. Until the end of year 2013, the Samsung Smart Phone because of its cost effectiveness and similar features capability like Apple Smart Phone made it a hot stock in the United States. This way the company Smart Phone became the world’s favourite in year 2013. This way the Samsung Smart Phones are used as convenient and time saving devices to remain socially updated(Nagarajan & Sheriff, 2013).

4. Technological Factor

The latest applications of Apple Smart Phones are very much similar to Samsung Smart Phones. For example the Apple’s Iphone 6 introduced recently has a feature of lighter and thinner than its earlier versions. But the similar kind of feature and technology are present in Samsung Galaxy S5 which has an additional feature of 8-core exynos, 5” screen and two day battery backup. This way the features of the top most brand mobile phone are very similar to Samsung Smart Phone which are relatively cost effective(Mintzberg, 1994).

5. Economic Factor

Due to increasing unemployment and economic slowdown since 2008 the demand for goods and services is facing a serious setback. However the demand for latest and high technology mobile phones has never became a hurdle in purchase by Mobile Phone lovers. Thus the economic factor does not affect the sale of Samsung Mobile Phones. Instead its cost effectiveness than Apple iPhone has resulted in increasing its demand and gain more market share than earlier(Jayachandran, 2004).

6. Legal

There are various legal issues that are concerned with the use of Smart phone. The unlimited applications allow the users to make use of even the most complicated and restricted application through their mobile phones. For instance the mobile phone applications offering medical devices like control such as measuring heart beat and other benefits are hindered from being downloaded. Thus Samsung Electronics along with other mobile manufacturing companies has to follow a legal format through which such applications that are not legal are avoided from ing downloaded. The company is also required to follow the product safety through genuine battery and follow other liability laws to track down the mobile phone during steal so that the purchase experience can be made more comfortable and legal for the owners(Malhotra, 2002).

Porter Five Forces Analysis:

Porter’s five force model helps in analysing the external conditions that affect the business. This way the various factors that influence in positive and negative terms to the business is analysed through Porter’s five force analysis. The five forces of Porter’s analysis include the followings.

Porter Five Forces Analysis

The benefit of Porter’s Five Force analysis is that it helps in analysing the external environment conditions that could prove beneficial if the opportunities are avail and fatal if the problems and issues are not dealt on time. The competitive rivalry, threats of substitutes, bargaining power of suppliers, the threat of new entrants and intensity of rivalry are all analysed through the Porter’s five force analysis(Porter, 2008). The Analysis for Smart Phones market as per Porter’s five force analysis is done as followings.

1. Competitive Rivalry

The competitive rivalry has been on the rise ever since the introduction of the Smart Phones in North America. Due to this reason, every month there has been an introduction of new mobile phone technology in year 2014. This includes Apple iPhone 6, Galaxy S5, LG G Flex phone etc. This has resulted in the rise in the need to develop brand image, fixed cost and barrier to exit etc. Thus the varied features of competitive rivalry include the followings.

1. Rising number of companies manufacturing and selling Smart Phones in the United States.

2. The tough competition has divided the market share almost equally among the market leader companies such as Apple, Samsung and others.

3. The similar features and benefits has made it easier for the customers to select the best suitable and most cost effective mobile phone irrespective of the brand name.

(Economou, Rivoire, Kozyrakis, & Ranganathan, 2006)

2. Bargaining Power of Suppliers and Vendors

Smart Phones manufacturing companies mostly select the suppliers from Asian countries so that the cost of production remains low without affecting the quality output. Due to this reason Samsung has initiated its process of developing the world’s biggest manufacturing factory in Thailand so that the cost of making Smart Phones can be controlled to meet the competitive market requirements. Samsung has made its ties with various suppliers such as Hamanatsu Corporation, Mouser Electronics and various others companies. The strategic partnership and support for further investment has helped the company in gaining control over the bargaining power of suppliers and vendors(Economou, Rivoire, Kozyrakis, & Ranganathan, 2006).

3. Bargaining Power of Buyers and Customers

The bargaining power of buyers and customers in the United States has been increasing every since. This is due to the presence of number of Smart phone making company’s presence in the market. Apple, LG, HTC are among the few market leaders that give tough competition to the products of Samsung Smart Phones. Also the customer loyalty towards Apple iPhone has seriously affected the bargaining power of buyers and customers in the United States. However the cost effectiveness and similar product feature has resulted in tempting the customers to the company. The entrance of new Smart Phones with latest technology also attracts many customers towards Samsung Smart phones(Chopra & Meindl, 2001).

4. Threat of new entrants

In the recent year there has been an excessive number of companies entering the American markets. These companies offer the similar kind of Smart Phones at low prices. However the quality assurance and after sales services is missing. This way Samsung Smart Phones has less to consider about the threat of new entrants who are attracting new customers but the output and performance of these cheap products has brought these customers back to Samsung Smart Phones who prefer quality over cost. This way a right blend of quality and cost has resulted in bringing no effect from the threats of new entrants(Caniels & Gelderman, 2007).

5. Threat of Substitutes

There are a number of Smart Phone options available in the United States. Lot many companies has been selling their brand Smart phones. This has resulted in increasing the threat of substitutes in the short run. Although these companies offers warranties similar to other branded Smart Phones but the customers still find it difficult for their products to achieve the output, gains and consistency as the leading brand products. Thus the threat of substitutes is for the short run, as it will affect the sales of branded Smart phones like Samsung forsome time. Therefore even the switch over to other cheap brand will end in bringing back customers to the leading brands which not only guarantee quality performance but also deliver it accordingly(Acharyulu & Shekhar, 2012).

 

Strategic recommendations:

A number of strategic recommendations can be given to the Samsung Electronics company for dealing with the external environment that may prove threat if not dealt wisely.

1. Samsung Electronics must invest more in research and development so that there exist a new technological upgrade in their Smart Phone at every regular interval that could tempt the customers for purchase.

2. New schemes and promotions of latest Smart Phones with varied features needs to be introduced regularly to keep the customers interested in getting more knowledge about company product and services.

3. EMI or Easy monthly installment methods should be promoted so that the customers who cannot spent huge amount at one time can move to purchase through easy monthly installment method. This way they will not have to compromise quality and purchase cheap products due to high cost price of Samsung Smart Phones.

4. All the legal aspects should be administered and followed so that any legal issue may not rise for the company.

5. Offering new applications including software updates, games and other applications should be made available at the Android store so that the customer stays interested in them.

6. The customer complaints should be dealt fairly, wisely and actively to achieve customer satisfaction.

(Aseisdefimedia, 2011)

 

Conclusion:

In conclusion, Samsung Electronics has a lot of things to consider in its external environment. The PESTLE analysis and Porter’s five force model provides an in-depth knowledge of the problems, issues and opportunities available to the company in the external environment. The strategic recommendations can help the company in availing the opportunities and get the most desired results in terms of increasing sales and achieving consistent growth and sustenance in the long run. Efforts should be made to follow all legal requirements so that the issues and problems for the business should be avoided. Finally the company needs to develop new production ideas and bring new innovations in action as the technology in the present day Smart phones get obsolete very soon. Therefore bringing something new in the market is the best way to remain in news for the company and avail opportunities for getting successful business for Smart Phones(Winsource.com, 2012).

 

Bibliography

Acharyulu, G., & Shekhar, B. (2012). Role of Value Chain Strategy in Healthcare Supply Chain Management: An Empirical Study in India. International Journal of Management., 29(1), 93-94.

Aseisdefimedia. (2011). "The difference between market intelligence, business intelligence and strategic intelligence". Retrieved 10 12, 2014, from Youtube: https://youtu.be/tvT1f6H7ADM

Caniels, M., & Gelderman, C. (2007). Power and interdependence in buyer supplier relationships: A purchasing portfolio approach. Industrial marketing management., 36(2), 219-229.

Chopra, S., & Meindl, P. (2001). Supply Chain Management: Strategy, Planning and Operation. (1 ed.). New Jersey: Princeton Hall.

Economou, D., Rivoire, S., Kozyrakis, C., & Ranganathan, P. (2006). Full-system power analysis and modeling for server environments. In Proceedings of Workshop on Modeling, Benchmarking and Simulation. (pp. 70-77).

Gelderman, C., & Van Weele, A. (2003). Handling measurement issues and strategic directions in Kraljic's purchasing portfolio model. Journal of Purchasing and supply management., 9(5), 207-216.

Jayachandran, S. (2004). Marketing Management. Excel Books India.

Malhotra, N. K. (2002). Basic Marketing Research: A Decision-Making Approach. Upper Saddle River, New Jersey.: Prentice Hall,.

Mintzberg, H. (1994). The rise and fall of strategic planning: Reconceiving roles for planning, plans, planners. Toronto: Free Press.

Nagarajan, G., & Sheriff, K. J. (2013). Emerging Challenges and Prospects of FMCG Product Development in India. International Journal of Marketing, Financial Services & Management Research., 2(1), 41-52.

Pearce, F. (2009). Consumption Dwarfs Population as Main Environment Threat. Yale: Yale University.

Pegg, S., Patterson, I., & Matsumoto, Y. (2014). Understanding the motivations of volunteers engaged in an alternative tourism experience in Northern Australia. Journal of Hospitality Marketing Management., 21(7), 800-820.

Porter, M. (2008). The Five Competitive Forces That Shape Strategy. Harvard business Review.

Rao, P., & Klein, J. (2004). Growing importance of marketing strategies for the software industry. Industrial marketing managment, 23(1), 29-37.

Rigdley, S. (2012). Strategic intelligence. Retrieved 10 12, 2014, from Youtube: https://youtu.be/8H4k5WQUekQ

Sharma, N. (2013). Marketing Strategy on Different Stages PLC and its Marketing Implications on FMCG Products. International Journal of Marketing, Financial Services & Management Research., 2(3), 121-136.

Winsource.com. (2012). Apple iPhone 5 vs Nokia Lumia 920 vs Samsung ATIV S. Retrieved 12 25, 2014, from https://winsource.com/2012/09/12/chart-apple-iphone-5-vs-nokia-lumia-920-vs-samsung-ativ-s/

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