Table also seen a significant increase in earnings as

Table
of Contents

INTRODUCTION…………………………………………………………………………1.0

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PERFORMANCE………………………………………………………………1.1

POLITICAL………………………………………………………………………………..2.0

EFFECTS OF BREXIT………………………………………..………………2.1

ECONOMIC………………………………………………………………………………3.0

SOCIAL…………………………………………………………………………………..
4.0

TECHNOLOGICAL………………………………………………………………………5.0

LEGAL…………………………………………………………………………………….6.0

ENVIROMENTAL………………………………………………………………………..7.0

CONCLUSION…………………………………………………………………………..
8.0

Introduction
(1.0)

Samsung is a Korean technology
company that manufactures and markets a variety of electronic products such as
televisions, computers and mobile devices. Samsung’s current flagship device is
the Galaxy mobile. In the second quarter of 2017, Samsung achieved record
operating profits of 12.7 billion dollars indicating the company is currently
more successful than ever before. (1. Samsung, 2017) Samsung currently spends 6.4%
of revenue on its research and development, compared to 5.7% three years ago
making it the largest spending research company in the tech market. This
indicates that company is concentrating a larger proportion of revenue on
innovation in the future considering total revenue. (2. Business Insider, 2013)

Current
Performance (1.1)

Samsung has surpassed expectations
in 2017.  The components businesses have
driven a large proportion of profits for the company particularly from sales of
OLED screen panels used by premium smartphones currently on the market.
Additionally, the Samsung S8 and S8+ have been leading the company on
smartphone sales this year. The memory business has also seen a significant
increase in earnings as the demand from the server market has increased leading
to larger profits. On the other hand, the company has seen a decline in sales from
both the display panel and mobile businesses due to increased component prices
and lower demand from European and Chinese markets. (1. Samsung, 2017)

Political
(2.0)

Political changes have not had
significant impacts over the company in recent years. Samsung operates in
countries where there is little political unrest, but being a South Korean
company; tensions with North Korea are currently very high.

Effects of Brexit (2.1)

Samsung
has not been dramatically affected by the effects of the 2016 Brexit referendum.
Mobile phone prices in the UK have not been significantly impacted which is
beneficial for the consumer and demand for the company’s products. The pound
has recently stabilised but rival company Apple has already increased prices
for apps on the UK App Store by 25% which reflects the effects of the Brexit
vote. (BBC, 2017) Samsung was considering moving its London HQ to Europe post
Brexit.

Economic
(3.0)

Samsung operates in countries
with high GDP’s, this means that consumers are more likely to spend more money
on their products. This is particularly important currently as component costs
are rising which is reflected in smartphones as prices rise each year. Flagship
device sales can only be achievable through a customer base that will pay the
rising prices consistently, therefore more disposable income is required by
consumers. Samsung realises that high-end devices will not meet every countries
consumer expenditures though, therefore they offer an expansive range of
smartphones to cater for multiple income levels.

In Vietnam, Samsung is having
a positive effect on the economy where the company currently has several large
manufacturing complexes with an overall investment of $9.5 billion. (5. Vir,
2017) This has led to the domino effect in the country as the employment rate
has risen due to the complexes employing so many local workers who then spend
income in other business areas.

Social
(4.0)

Social factors influencing
Samsung are usually localised to the country that they are operating in. As a
family owned business in Korea, Samsung has incorporated various factors of
localised culture into their business and products. As the company has globalised
and demand in emerging markets such as developing countries has risen, Samsung
has had to tailor products to cater for each localised consumer base. Therefore,
the company has had to employ a glocalization strategy to integrate their local
markets into world markets. The glocal strategy aims to make a consumer feel
that a certain brand is relevant to them and is tailored to their needs and
wants. (Kotler, 2009)

Samsung makes every effort to
diversify their products in each country. The J2 smartphone is a good example
of how Samsung has identified the social characteristics, lifestyle and culture
of India and integrated it in a smartphone. The J2 has software such as the
S-Bike mode which reduces data usage, easy app shortcuts and a host of other
features specifically tailored for the large proportion of motorcyclists in the
country. Samsung’s goal with this smartphone is to make it localised to young
people in India, but appealing to the global market as well.

Technological
(5.0)

Currently, Samsung is one of the largest consumer electronics company,
second only to Apple leading to heavy rivalry. The two companies have a
somewhat synergetic relationship, Samsung’s large component business has given
them the ability to sell mobile components to Apple earning profits from each
unit they sell. With the release of the iPhone X, out of the $1,000 retail cost
Samsung stands to generate a profit of $110 per device sold. Research conducted
for WSJ by Counterpoint Technology Market Research found that Samsung is
estimated to make roughly $4 billion in revenue from iPhone X sales. (Wall
Street Journal, 2017)

 

Samsung is the second largest spender in research and development
in industry, second only to Amazon.com which has resulted in a large patent
portfolio. The main advantage to the company’s large patent portfolio is that it
puts them in a good strategic position to defend innovative products from being
copied by rival companies such as Apple. Samsung’s expenditures in this area
show they are extremely invested in the future and making innovative products
for their consumers.

 

The investment in virtual reality has been a strong business move from
Samsung. Samsung Galaxy Gear VR technology is new, innovative and can be
purchased as a bundle with a mobile device. The release of the Galaxy S8/8+ has
significantly driven sales for VR up and the introduction of a controller has helped
increase ASP since release. Apple is yet to embrace VR; giving Samsung a significantly
larger market share currently.

 

 

As the
table shows, Samsung currently has the largest market share and shipment
volumes. The companies apparent success in this area is mainly due to its affordability
compared to other tech giants that charge nearly ten times as much.   

 

Samsung has invested a large
percentage of its revenue on research, making it a very forward-thinking
company. The company already sells virtual reality products that work together
with their smartphones and tablets which is an area Apple currently lacks in.
With the growing virtual reality trend, Samsung has a good advantage especially
with such a large research budget available.

Legal
(6.0)

In the past, Samsung has faced
heavy legal consequences for allegedly emulating the utility and designs of
Apple’s iPad and iPhone products. This has had a detrimental impact on the
company’s reputation, both through consumer perception and public favour. In
2012, Samsung was sued by Apple for infringing on seven of their design patents
for devices. The company was found guilty of infringement on six different
patents, and five of them willingfuly. Samsung was ordered to pay Apple $1.05
billion in damages, this negatively impacted the company but has not severed
the ties between the two as the other is a necessity strategically and
financially.

Environmental
(7.0)

Samsung has permanently
stopped production of the Galaxy Note 7 after reports of battery explosions by
customers. Throughout 2016, Samsung recalled the smartphone from customers
globally. One of the issues facing the company was what would happen to the 157
tonnes of resources, including gold, silver and copper that were recalled. Samsung’s
response was to recycle as many of the phones components as possible whilst
creating as little environmental damage as possible.

Many consumers and
environmental campaigners were not happy with the result since the recall could
have been diverted entirely if the phone had been tested more rigorously during
production. (4. Korean Herald, 2017) In 2017 it was reported that Samsung would
be recycling the components of the Note 7 into a refurbished phone named the
Note FE (Fan Edition). The Note FE sold out of all 400’000 units in just two
months on the Korean market, this is certainly a positive impact from there
earlier recall disaster.

Conclusion
(8.0)

After analysing the key
drivers for Samsung as a company we can clearly see that there are things the
company do well and some mistakes that they have made over the past few years.
The company has a large research budget which is going to be advantageous in
the future and a focus on current technological trends such as virtual reality.
On the other hand, it is important for Samsung to learn from my previous
mistakes; especially the Galaxy Note 7 recall issue which had severe
consequences for the company. Galaxy S8 production has been slowed this year
due to more refined testing of products which can be seen in the Vietnam
complexes resulting in slowed manufacturing rates. Nevertheless, Samsung certainly
has a bright future ahead mainly because of their forward thinking and innovative
research in areas such as virtual reality and patent research for a growing
portfolio.

 

References

 

BBC News. (2017). Apple raises UK App Store prices.
online Available at: http://www.bbc.co.uk/news/technology-38650296 Accessed
29 Oct. 2017.

Herald, T. (2017). Samsung seeks to recycle collected
Galaxy Note 7s. online Koreaherald.com. Available at:
http://www.koreaherald.com/view.php?ud=20170718000566 Accessed 29 Oct. 2017.

News.samsung.com. (2017). Samsung Electronics Announces
Second Quarter 2017 Results. online Available at:
https://news.samsung.com/global/samsung-electronics-announces-second-quarter-2017-results
Accessed 29 Oct. 2017.

Nisen, M. (2017). Samsung Has A Totally Different Strategy
From Apple, And It’s Working Great. online Business Insider. Available
at: http://www.businessinsider.com/samsung-corporate-strategy-2013-3?IR=T
Accessed 29 Oct. 2017.

Vietnam Investment Review. (2017). Samsung’s weighty
contribution to Vietnamese economy. online Available at:
http://www.vir.com.vn/samsungs-weighty-contribution-to-vietnamese-economy.html
Accessed 29 Oct. 2017.

 

 

 

 

 

WSJ https://www.wsj.com/articles/why-apple-rival-samsung-also-wins-if-iphone-x-is-a-hit-1506936602

 

Graph VR https://www.idc.com/getdoc.jsp?containerId=prUS43021317

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