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Samsung Strategic Analysis Report Prepared by Kevin Jones, Abdullah Maasi, Fra

Samsung Strategic Analysis Report
Prepared by
Kevin Jones, Abdullah Maasi, Frances Mihulec
for
MG 899 A
Emporia State University
Table of Contents
I. Samsung’s Corporate Environment………………………………………………………………………. 3
Company’s Background……………………………………………………………………………………………………………………………… 3
Company Identity…………………………………………………………………………………………………………………………………………. 4
Corporate Governance……………………………………………………………………………………………………………………………….. 4
SWOT Analysis……………………………………………………………………………………………………………………………………………….. 5
Porter’s Five Forces Analysis…………………………………………………………………………………………………………………… 5
Works Cited…………………………………………………………………………………………………………………. 6
Appendices…………………………………………………………………………………………………………………. 7
Appendix 1 -1…………………………………………………………………………………………………………………………………………………. 8
Appendix 1 –2………………………………………………………………………………………………………………………………………………… 9
I.
Samsung’s Corporate Environment
Company’s Background
Byung-Chull
Lee, who started his first business in Taegu, Korea in 1938, founded Samsung. 1951 saw the birth of The Samsung Corporation, a
business mainly focused on trade exports such as vegetables, fruits and fish.
The company soon ventured into the insurance sector for a brief time. In 1969,
the corporation entered into the business of electronics as Samsung-Sanyo Electronics.
The first electronics product manufactured by the company was a black and white
TV that carried the brand name Samsung-Sanyo(Vision).
From humble
beginnings as a small Korean company, Samsung has become a global brand that
deals in myriad of electronic products and has lately ventured into other Asian
markets to introduce its low-cost variants to capture the market especially in
the mid-range segment. This has given a huge impetus to the company in terms of
financial gains and global reach. But at the same time, Samsung has been
accused of imitating some world-class products – primarily Apple offerings like
the iPhone and iPad. Because of this, the company has been associated with
low-cost variants and has lost the leadership in terms of innovation and
differentiation (Vision).
The long-term
vision of the company is “Inspire the World,
Create the Future.” This vision is in line with the company’s mission of
achieving maximum market share in the technology products and thus defines the
future. The company wants to focus on value creation as well as innovation by making
sure that it reaches to every consumer at a best possible price(Vision).
Company Identity
Samsung is known in the media primarily for its
mobile technology such as smartphones, tablets, and smart watches, comparative
to such competitor companies as Apple. Instead, the company is in the business
of providing innovative green technology to personal, business, and health IT
sectors, including B2C as well as B2B sales. Smartphones and other mobile
devices represent only a small component of this venture. Coupled with
technological innovations, green technology for the purpose of a more
sustainable future is Samsung’s overall focus and this is best fulfilled by
being present in otherwise seemingly unrelated sectors (2014).
Corporate Governance
The total ownership structure at Samsung electronics is divided as
follows: Foreign: 55 % ; major Shareholders: 15 % ; treasury stocks : 12% ;
Domestic Institutional 14 % and Domestic Individual: 3 %. The
shareholding structure is divided into major stockholders through common stock
and preferred stocks. Major stockholders of Samsung are Kun-Hee-Lee, Samsung
Corporation, Samsung Welfare Foundation, Samsung Foundation of Culture,
Ra-Hee-Hong, Jae-Yong Lee, Samsung Life Insurance, Samsung Fire and Marine Insurance
and Oh-Hyun Kwon (Overview).
The corporate governance at Samsung work to enhance company’s decision-making
and the supervisory process is based on the highest standards of governance,
transparency and accountability. Currently, the Board of Directors is comprised
of four executive and five independent directors. The independent director
guarantees the board’s independence and transparency and established the
decision-making process by taking inputs from outside experts. Independent
directors meet separately from executive directors. The directors are
prohibited from engaging in business activities within the same industry. This also
prevents the conflict of interest as per Korean Commerce Act and the Company’s
Articles of Incorporation (Overview).
The directors are elected according to
Article 24 or Article of Incorporation in Korea and according to that, the
company should have 3 to 14 directors who are appointed in general shareholders’
meetings. The Independent Director Recommendation Committee recommends
independent directors. The independence of any directors is established by
Korean Stock exchange listing standards (Overview).
SWOT Analysis
See Appendix 1 – 1
Porter’s Five Forces Analysis
See Appendix 1 – 2
Works Cited
2014 Samsung Electronics Annual Report. Web. 21 Sep 2015. http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2015/SECAR2014_Eng_Final.pdf>.
Overview. Samsung. Web. 15 Sep 2015. http://www.samsung.com/us/aboutsamsung/investor_relations/corporate_governance/boardofdirectors/IR_BoardComposition.html>.
Vision & Mission.
Samsung. Web. 15 Sep 2015. http://www.samsung.com/us/aboutsamsung/corporateprofile/visionmission.html>.
Appendices
Appendix 1 -1
Strengths
Weight
Rating
Score
Comments
Vertical Integration
18%
4
0.72
Realized Synergies from different lines
of business
Diversification
10%
2
0.2
Realized Synergies from different
lines of business
Green Technology
11%
3
0.33
They are supposedly focused on
this, but not necessarily great in all respects
Research and Development
25%
4
1
Corporate Social Reliability
9%
3
0.27
Weaknesses
Comments
Diversification
10%
-2
-0.2
Impedes growth and agility
Advertising
8%
-2
-0.16
Not focused on differentiation
innovations
Focus on competitors and their
technology
9%
-4
-0.36
Perception that they copy their
competitors
100%
1.8
Opportunities
Customer Churn
18%
5
0.9
When customers go through upgrade
cycles they can select other manufacturers. This is a way of continuing
growth in a saturated market
Green Technology
6%
2
0.12
Green technology is growing in
many industries
Growing market for Healthcare IT
vendors
10%
5
0.5
4k TV Standard and evolving
Entertainment Technologies
13%
3
0.39
Presents opportunity to increase
market share if capitalized on properly
Threats
Customer Churn
13%
-4
-0.52
When customers go through upgrade
cycles they could select opponents phones instead of ours.
Market oversaturation
15%
-5
-0.75
Core businesses are heavily
saturated in developed markets.
Lawsuit from Apple
16%
-2
-0.32
Due to the perception that they
are copying opponents, Apple has already won over 1.2 billion in damages and
is continuing to sue Samsung for other infringements – Samsung is appealing
to Supreme Court
Other infringement lawsuits
6%
-1
-0.06
TiVo has recently sued Samsung. In
the IT industry, it is easy to infringe on another patent somewhat
unintentionally.
Potential Security Breaches
3%
-1
-0.03
A breach across Samsung’s devices
could cause significant legal liability.
100%
0.23
Appendix 1 – 2
Porter’s Five Forces Analysis for Samsung
Intensity of competitive rivalry
Intensity
Scale is 1-5
Number of competitors
5
industry growth rate
4
Industry growth is slowing in
Developed markets
product differentiation
4
Low Differentiation leads to high
pressure: minimal differentiation that isn’t as effective
Storage Costs
5
Strategy Differentiation
5
Low Strategy Differentiation leads
to high pressure
Exit Barriers
4
4.5
90.00%
(Extremely High)
Threat of New Entrants
Cost Advantages
1
High cost advantages with scale
lead to low pressure of new entrants
Customer Brand Preferences
2
Government Restrictions
5
entrants proprietary knowledge
1
Access to Raw Materials
3
Some countries may favor new
companies with improved access
entrants access to government
subsidies
1
entrants control of distribution
system
5
2.57
51.43%
Moderate
Threat of Substitute Products
Variety of subsitute products
1
substitute products quality
1
cost of switching to a substitute
product
5
Low cost leading to a high force
sales of substitutes
1
2
40.00%
Moderate
bargaining power of suppliers
number of suppliers in the
industry
1
Many suppliers leading low force
differentiation of suppliers
services
2
availability of suppliers’
products
2
Highly available, but some
limitations lead to low force
switching costs
2
threat of forward integration by a
supplier
1
1.6
32.00%
Low
Bargaining power of Buyers
Demand for a product
2
Product differentiation
4
Low differentiation leads to
higher force
Switching costs
4
Low switching costs but
replacements/alternatives are expensive
Buyers’ knowledge of competing
products
5
Buyers’ disposable income
2
Price fraction of all purchases
4
Buyers’ ability to postopone a
purchase
3
3.43
68.57%
Moderate

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