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Samsung Business Strategy Assignment
This assignment is aiming to develop a preliminary report on an organization of choice and conduct a critical evaluation on the strategies, external environment and organizational attributes. An organizational audit would be done in this assignment along with a systematic evaluation of the factors which can be influencing the strategy development and management. Alternative strategies of company and their market entry would be assessed as well. Company which has been selected for this assignment is Samsung Inc. Which is a South Korea based Global electronics giant but they have listing in London Stock Exchange as well (Beckhard, 1998).
a) Business activities of Samsung
Samsung group of industries is a multinational company based in Seoul, South Korea and is the largest Korean business conglomerate. There are more than 20 business affiliates and have multiple subsidiaries underneath them; Samsung Electronics, Samsung Heavy Industries, Samsung C & T, Samsung Engineering, Samsung Life insurance and many more. They are developing advanced technology, semiconductors and are also in fashion, medicine, hotels, finance, petrochemical industries, etc. They have around 510 offices around 67 countries and employing nearly 369,000 employees globally.
They are into business for more than70 years (since 1938) and have never looked back since then. Currently Samsung Electronics Corp, their flagship subsidiary have revolutionised global market by offering numerous high technology products and digital media. In2009, Samsung electronics was declared as the largest IT Maker and is leading the global market by selling maximum numbers of TVs, LCDs and mobile phones.
They work with the aim of developing innovative technologies and provide people with efficient processes so that regularly new markets are created and they continue to rule the digital world. Their basic philosophy is to work following five core values. These are as follows:
People: Samsung believe in giving their people all the resources and opportunities they need to give their best.
Excellence: it is made sure in each and every company of Samsung that they provide their customers with excellent products and services.
Change: it is very essential for a company’s success that it believes in innovation and change. Samsung too believes in it and always comes up with new products and innovative services. Thus, needs and demands of customers are regularly recognised and fulfilled.
Integrity: Samsung makes sure that ethics are followed at each and every level and thus stay faithful and give respect to its stakeholders (Grobart, 2012).
Co-prosperity: for a business to prosper, it is very much needed that auxiliaries, employers and others too, must be given opportunities to flourish. Samsung strongly believes in it and move ahead by taking everyone together. They are fulfilling their responsibilities towards society and environment as well by being a responsible corporate citizen (Annual Report, 2013).
These core values have helped them to reach the level they are at today. The new motto of Samsung Electronics says that ‘Inspire the World, Create the Future’. It is the change they aspire to see in next decade, thus they are working with great strategies to fulfil this vision. They believe that by combining new technology, innovative products and creative solutions with promotion of new values: employees, industry and partner, they can achieve higher positions globally. They aspire to come under world’s top five brands by paying $400 billion by year 2020. They also wish to enter new fields as health and biotechnology. It can be said that with such an approach and commitments, Samsung can really become creative leader in new markets as well (Metz, 2004).
b) Factors that have to be considered to formulate strategic plans. How does the Ansoff’s matrix help your chosen firm to manage the strategic decision to consider strategic plan.
Strategic options and implementation is a key factor that influences a company adaptation to the market growth and competition. Samsung being a transnational company should adopt a key strategy of innovation and development and engineering of technologies which provides a cutting edge over its competition. Globalized markets have a requirement of constant business strategy update to meet the changing demands of customers (Bertsch & Williams, 1994).
Ansoff matrix can help the company a lot because the matrix encompasses a company’s present and potential products and markets.
Figure 2- Ansoff's matrix
- Market Development – the company aspires to increase its market share by aiming its existing products to new markets
- Market Penetration - the company aspires to increase its market share by launching existing products in the current market segments
- Product Development – the company develops and introduces new products to the existing market in order to increase its market share
- Diversification – the company creates new businesses in an entirely new market in order to increase its market share.
c) Effectiveness of strategic planning techniques to be used when developing strategic business plan.
An effective planning of marketing refers to an organizational marketing plan developed for forecasting goals and objectives, best possible allocation of resources, identification and monitoring of key marketing variables, planning of disaster recovery for overcoming its problems and exploring the untapped marketing opportunities. It is apparent that organizational strategic needs to incorporate and successfully manage all its resources for its marketing objective attainment. However, on the contrary, according to the general psychology, the entrepreneurs initiate the marketing plans primarily oriented for start-ups or for seeking loans and investors for marketing (Bryson, 2001). Although, it is significant that for an effective establishment of an organization financial resource is vital, however, later it cannot be contradicted that marketing and strategic domain of all businesses do need an excellent marketing plan for the best possible utilization of the resources for growth and development. Samsung group comes under the fastest growing global brand. Although there are multiple subsidiaries, but all are managed fantastically as many are the leading ones in their fields. Samsung heavy Industries is world’s number one ship manufacturing company, Samsung Life insurance is the 13th largest life insurance company of world and Samsung Electronics is the largest electronic firm. This success can be attributed to their reliable and innovative products and services, qualified, talented and faithful employees working with basic philosophy and high standard of values and ethics.
a) Organisational audit
Five force model analysis of a company tend to reveal the external forces which are impacting the company. This analysis helps in understanding which force is of most importance and which one is not that much thus helping in developing strategy which can appropriately deal with the company’s business interests (Metz, 2004).
Samsung’s porter five force analysis
Bargaining Power of Suppliers
Earlier Samsung used to be the manufacturers of parts like chips, semiconductors, flash memory, hard drives etc. So when they diversified to the business-to-consumer market and started to manufacture the mobile phones and smart phones, they did not have to rely on third party suppliers for the different parts as they themselves could procure that from their den (Porter, 2009).
Bargaining Power of Customers
The growing demand of smart phones among the customers is a driving factor for all the Electronics manufacturing companies Samsung successfully kept pace with the growing demand and delivered the consumers with huge range of phones and many attractive features.
Threat of New Entrants
The mobile phone market is already saturated with lot of players manufacturing phones of all ranges and features. For a new entrant to enter the mobile phone market, especially the smart phone market, it will take a toll on their capability to manufacture quality products and patience to survive. So threat of new entrants is very low for this industry.
Threat of Substitute Products
In an industry where there are multiple market players which are separated by very little margin in terms of quality of products, price and features, scope for a customer to switch between products is high.
Competitive Rivalry within the Industry
Competitive rivalry with the Mobile Phone industry is very high. Justification can be given through the facts that Nokia had been ruling the mobile phone market.
b) Significance of stakeholders’ analysis while formulating new strategy
In order to design and develop a new strategy and making it successful, it is extremely important to identify and do stakeholders analysis. It is a process of taking reviews and considering the impact of stakeholders on overall progress of business.
Samsung has identified and divided its stakeholders into six major divisions: shareholders & investors, customers, local communities, employees, business partners and media and government. These stakeholders are having different needs and requirement and therefore Samsung keeps communicating with each group and also takes effort to organize various activities to connect their efforts with stakeholders’ values. Samsung organizes general shareholders meetings, seminars, indulge in community service activities, meetings for employees, blogs have call centres, website, customer care service, etc. to communicate regularly with different groups.
Stakeholder’s analysis has multiple advantages in developing new strategy for business. Staying in touch with stakeholders gives an opportunity to understand their opinions and thinking that may in turn help in developing strategies for sustainability of company. They must be kept updated regularly as their advices are equally important while developing new products that can fulfil their desired expectations. In addition, motivating employees leads to an environment of satisfaction and affects production positively. By understanding and fulfilling their needs, by following fair process of hiring and promotions and by taking their input as well on key decisions, they are kept motivated to give their best which ultimately results in good faith for company. Along with this, being socially active and making charity is essential to make good relations with the community (Collis & Montgomery, 1998)
Properly managed supply chain is a significant component too, as the partners expect the company to work with honesty and integration that can have crucial long term effects on business. Therefore stakeholders’ analysis plays a very crucial role at each and every step of developing new strategy
c) New strategy based on organisational audit and stakeholders analysis
Samsung as a brand is well known among consumers but it has a drawback that it is lying between the premium brand and low cost brand. They are not considered as cheap brands from China but at the same time they are not high end brand like Apple etc. in smart phone industry. In order to ensure that Samsung is able to serve both market segments easily it is important that they should have proper strategy for each market segment. One thing they can do is launch a premium end product range by name of Samsung pro or Samsung supreme. This strategy would have a dual prong approach where on one side customers who are looking for a bargain in products can go for a regular product range which will not have innovative features but it would definitely have the quality and assurance of Samsung brand. On the other hand people who are looking for premium product category with innovative features, latest technological development and luxury product range can opt for the Samsung premium category range. This way a higher market potential can be opened for the company and larger market segment can be brought in the revenue potential of company (Kotler & Keller, 2012).
Second recommendation for the company is to restructure its product range and give a higher emphasis on bringing local preferences and requirements in their product range. For example Samsung’s product name and product features mostly have international standards and general features but they do not factor in local needs. In countries like India there is a need for mobile phones which are sturdier and have higher water resistance ability with increased battery life. Reason being lack of continuous power supply in rural region, changing weather and seasons and relatively rough handling of product by users. Similarly if culturally thought then in Middle Eastern region of world product with local language options and colours like green would be preferred over others. Thus it is recommended for Samsung as a company that they should incorporate some of the features and local preferences of European market and UK market to gain better cultural acceptance. Company should be global in outlook but it should not be felt as an outsider company in local market. Extreme weather of European region and requirement of people to get products which are capable of using the advance technology in wireless network and high transmission media should be considered.
Samsung should more focus on developing an IMC for its brand promotion and brand perception like other brands Sony, Apple, Nokia, LG etc. Samsung has all the required attributes like profits, business revenues, market share, presence in global markets etc. but they are yet to achieve the cult status as a brand like Apple enjoys. This is because of the leadership, vision and focuses on innovation which companies like Apple emphasizes on while Samsung is still lagging behind in those areas.
a) Appropriateness of alternative strategies relating to market entry, substantive growth, limited growth or retrenchment
Alternative strategy for Samsung would include developing alliances with other companies, shifting their manufacturing base to low cost countries like China and India, spending more on promotion of the products etc. These strategies seems to be transitional strategies which can make an impact on the business growth and development for some time but in longer run competition would catch up with it and entire market would be a saturated market with strong players competing for every percent of market share. Secondly profit margins would eventually drop down with increasing competition and it would not be beneficial for the company in general to continue with business growth strategy of conventional approach (Beckhard, 1998).
Secondly these strategies might be appropriate for a few market segments and a few geographies where penetration in market is not sufficient but on the other hand a transitional strategy would not help them in developing differentiation factor which is strongly needed by the Samsung. Over the period of time they used various conventional strategies in market and they became a huge success but not these alternative strategies would only saturate the market in longer run. It is also important for company to include some out of the box thinking. There is one benefit associated with alternative strategies is that they are time tested, their risk levels are low and they are not as expensive as an innovative and out of the box based strategy would be.
b) Appropriate future strategy with justification
Appropriate strategy chosen for the organization is to reach for the newer market segments which are high end technology lovers who can pay premium pricing without making an impact on the current market segment. In this strategy Samsung would launch its new product range which will be premium priced, high end technology products. These products would be produced after a strong research and development and it would be beneficial for the entire company. Strategy would also focus on creating a strong presence in emerging markets of Asia which have a high growth rate and an increasing population with disposable income on electronic gadget (Cardinal, 2001).
a) (i) Roles and responsibilities for strategy implementation
Role and responsibility of entire organization and its stake holders would be well defined and clear in its approach. Role of top management or leadership would be most important and critical in implementation of strategy. They are the primary ball bearer and they should be fully committed towards the strategy implementation. Without backing and full commitment of top leadership of company it would be impossible to implement it. Second role would be of middle managers who would design and define the tactics which is to be used for strategy implementation. They would act as a bridge between upper management and lower level employees and communicate the reason behind changes and its importance for the company. It would be role and responsibility of middle management to facilitate the change and keep all employees focused towards the change objectives and goals (Cavusgil. Et al. 2003).
Role and responsibility of lower level employees would be to implement the change and develop products and services which can back the change. These employees would be responsible to follow the instructions for change as it is and meet the objectives in a satisfactory manner. There are other stakeholders as well like distributors, customers, suppliers etc. which will need some convincing and they would require some motivation from senior management as well. They can be giving additional facilities, profits margins etc. to ensure that they remain attracted towards the new strategy of company.
a) (ii) Resource requirements to implement a new strategy
2. Every business needs to have an aim to achieve and process management comes in the loop of determine the required process to achieve the established target. Process Managers needs to maintain a smooth and efficient way which can remove the bottlenecks of business and run effectively. Resources like trained work force, financial resources, ability of all stake holders to understand the strategy and access to different markets and segments are some important requirements as well. Human resources are most critical requirement specially change specialist because, this type of recruitment is usually done by an organization when they are trying to expand their business on similar lines or they are rolling out a product or brand extensions in services. In such cases they would require employee who are already familiar with the organizational process and its work culture and the new product and services will not be technologically and process wise very different from the existing product and service range. Mostly these companies have a large talent pool and they are not taking a lot of chances because if their new strategy will not work out then they can easily shift their recruitments back to other departments and wings of the company (Bass, 1997).
b) Contribution of SMART targets to the achievement of the strategy implementation
The establishment of all objectives should be created using the S.M.A.R.T. philosophy. S.M.A.R.T. is an acronym that is used to guide the development of measurable goals. Each objective should be:
These criteria don’t say that all objectives must be quantified on all levels of management. In certain situations it is not realistic to attempt quantification, particularly in staff middle-management positions.
Bass, B. M. (1997). From transactional to transformational leadership: Learning to share the vision. London, Sage Publication P.87-98
Beckhard, R. (1998). A model for the executive management of transformational change: Developing Human Resources, International Edition, Prentice Hall. p. 218-276
Bryson, J. M. (2001). Strategic Planning for Public and Non-profit Organizations. San Francisco: Jossey-Bass Inc. Pp.4-14