HONG KONG BAPTIST UNIVERSITY

BUSI4006 Strategic Management

Individual Case Test

LEE SUET TUNG

20211481

Topic : Samsung Electronics’ Internal and External Analysis

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 Table of Content
Cover Page 1

Table of Content 2

Introduction 3

Internal Analysis

Strengths of Samsung Electronics 3-4

Weaknesses of Samsung Electronics 4-5

External Analysis

Porter’s Five Force model analysis 6-8

Conclusion 8

References 9-10

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Background of Samsung
Samsung is an electronics firm that specializes in the development and sale of
electronic devices. It was established in South Korea in 1938.1 In the late 1960s,
Samsung entered the electronics business, and in the mid-1970s, it entered the
construction and shipbuilding industries. This company's management saw that there
were numerous potentials in this business, and that technology was becoming more
relevant. According to the Forbes, Samsung has the 8th highest global brand value in
2020.2 In terms of revenue, Samsung Electronics is the largest IT company in the
world (Montgomery, 2012). In addition, Samsung Electronics was named the world's
largest information technology company, consumer electronics manufacturer, and
chipmaker in 2017.3 The aim of this assignment is to illustrate the internal analysis
and external analysis of Samsung Electronics. Besides it will explain it with the VRIO
framework and the five-force model respectively.

Strengths of Samsung electronics

Brand image
Brand image has the potential to become a significant source of long-term
competitive advantage in the smartphone business. Although product quality is the
most important factor influencing consumer opinion of a brand, there are numerous
other aspects that influence brand image. Hence, Samsung has always presented itself
as an innovative technology company. The company's image is primarily based on the
quality of its products and the level of customer service it provides. Furthermore,
brand image is one of the most important selling points for technological firms. Thus,
the brand image is what distinguishes Samsung from Huawei or Apple. Despite being
in the same business, these three companies' brand image are vastly different. It is
impossible to duplicate a brand's image nor can be built or changed in a single day. It
is one of the company's most valuable assets, and it is also rare. As a result, Samsung's
strong brand image is a key source of the company's long-term competitive
advantage.
Customer value and experience
Customer experience is becoming increasingly important in the twenty-first
century. Nowadays, companies are paying more attention to customer experience than
they have in the past because it is one of the most important variables driving sales,
earnings, and customer loyalty.4 Thus, Samsung has always provided exceptional
service to its consumers. The corporation invests in customer service and marketing in

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addition to significant sums of money in research and development each year to
increase the attractiveness and performance of its products. The organization has been
able to significantly improve the customer experience in recent years as a result of
these efforts. For example, Samsung launched a Live Chat platform for customers to
get quick answers in real-time from customer support professionals.5 As a result, it is
now the world's most popular smartphone brand. This important core competency is
valuable, scarce, and well-organized, but it is not unique. Other companies like Apple,
are attempting to create a superior customer experience. In general, Samsung's
transient competitive advantage is the customer experience, which necessitates
ongoing attention and improvement.

Research and Development

In the smartphone industry, there is a lot of competition. Due to the severe
competition among them, everyone employs active marketing and sales methods in
order to obtain market share. According to Gartner, in the first quarter of 2020,
Samsung has maintained the No. 1 spot globally with an 18.5% market share, whereas
Apple is at 13.7% market share.6 Stead of boosting revenue, technological innovation
is the most important factor supporting the smartphone industry's development and
ensuring consumer satisfaction.

Samsung is not only one of the most profitable technological companies, but it is
also one of the most invested in research and development. according to
Samsung's 2020 business report, the company invested about 20 trillion won in
research and development in 2019.7 Every year, Samsung introduces new innovations
across all product categories, resulting in increased demand and sales. Samsung
recently released a vast selection of smartphones and tablets, including Samsung's
own folding smartphones.8 It's also the world's first foldable phone with an
uninterrupted view with less bezel and no notch. Furthermore, in the smartphone
market, Research and Development is the essential source of differentiation. In
summary, it is organized core competitiveness, and hence the source of Samsung's
sustainable competitive advantage, in addition to being valuable, unique, and largely
inimitable.

Weaknesses of Samsung

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Weak position on the China market
China has grown into the world’s largest market for smartphones followed by
India.9 However, while Samsung has managed to retain a strong position in both India
and the US, in the Chinese smartphone market, it is in a considerably weaker position.
China is the largest and the most profitable market for smartphone brands because of
the large customer base it offers.

Source: Quarterly Device Tracker(August 5, 2021)

Huawei holds the greatest market share in China, followed by Vivo, Oppo, and
Xiaomi. Samsung's market share in China is incredibly minimal, nearly non-existent.
Its market share in China has fluctuated between 0% and 1% over the years.
Regarding the Counterpoint Research conducted in 2021, Samsung's market share in
terms of shipments in the first quarter of 2020 was only 1% and decreased to 0% in
the second quarter. If Samsung had been able to increase its market share in China,
the country could have become a profitable market, even a small increase in
percentage points will have a big impact on Samsung based on the demographic in
China.

Drop-in revenue and profit

The smartphone sales have been dropping since 2017, and then company's
profits have fallen during the Covid-19 epidemic then. This loss was additionally
exacerbated by the lack of security in Samsung smartphones. Many Samsung Galaxy
Note 7 devices had overheated batteries, which resulted in an explosion. Its sales and
operating profit fell in 2019 compared to the previous year, owing to lower
performance in its memory and LCD display panel businesses. As a result, the
company's operational profit fell from 58.9 trillion KRW to 27.8 trillion KRW.10
While demand for smartphones is predicted to collapse in 2020 owing to Coronavirus,
it is also expected to fall across other product categories, causing Samsung's profit to
drop even further.

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Dependance on Android
Samsung's reliance on the Android operating system is a problem that inhibits
the company's ability to do business. Google's license to Android, for example, limits
the operating system functions and related licenses of the company's smartphones.11
Furthermore, because both businesses compete directly in the market for smartphones
and other mobile computing devices, Google's influence on Android development has
harmed Samsung's competitive position. This issue is related to the lack of a rival
platform to compete with Apple's hardware, software, and service ecosystem. Because
of this internal strategic aspect, Samsung is relatively poor in terms of boosting
customer switching costs when purchasing consumer electronics from competitors.

External Analysis

Bargaining power of buyers(Moderate)

The buyer's bargaining power may be strong under certain conditions. When
there are fewer buyers than suppliers, the buyer will have more bargaining power. In
the case of Samsung, individual buyers' bargaining power is moderate. This is due to
the fact that, despite the abundance of options, there are only five or six dependable
sellers. Customers can only trust five or six leading companies when it comes to
product quality and users prefer to buy from brands they know. Furthermore,
Samsung's products are extremely diversified. Although the scope of differentiation in
the smartphone sector has narrowed significantly, certain brands, including LG,
Huawei, and Apple, can offer products that match or outperform the competition.
Apart from this, Samsung goods are high-quality in terms of both performance and
design. Hence, Samsung stands apart from its competition in terms of customer
service.

When compared to Apple's, Samsung's smartphones are more affordable and

since most people who use smartphones are from the middle class, affordability can
boost demand for specific brands. Samsung's high-end items, on the other hand, are
quite popular and sell well. Buyers have moderate bargaining power in general.
Buyers in the smartphone market have some bargaining power due to the high level of
competition.

Bargaining power of suppliers (Mild)

In the smartphone industry, suppliers' bargaining power is mild, owing to the fact
that the number of brands acquired from them is less than the number of suppliers.

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Every major smartphone manufacturer obtains raw materials from tens of thousands
of suppliers around the world, the majority of them are based in Asia, including
China, Taiwan, Vietnam, etc. Supplier bargaining power can be great only when the
number of suppliers is small and the threat of forward integration is strong.

In this case, Samsung like many other companies, acquires raw materials for its
many products from around 2500 suppliers (mostly first tier) spread across the globe,
primarily in Asia.12 The industry's quantity of suppliers (smartphones and consumer
electronics) clearly outnumbers the number of purchasers. In comparison to Samsung
or other smartphone and consumer electronics giants, most of these suppliers are
much smaller. While these suppliers also supply competitors, the risk of forward
integration is usually minor or non-existent. This also weakens the supply firms'
bargaining leverage. As a result, the suppliers' bargaining power is limited or non-
existent.

Availability of Substitutes (Moderate)

In the smartphone industry, the availability of substitutes is moderate. This is
because there are just roughly six companies that dominate the smartphone market
from the United States to China. There are several factors that aid Samsung in fending
off the threat of competing products. Samsung's wide variety of smartphones is one of
the primary reasons assisting it in minimizing the danger of alternative devices.
Besides, Samsung's brand equity is another aspect that can make other products and
brands difficult to sell. It is a well-known and dependable smartphone brand. Also,
Samsung has successfully built a huge and loyal client base in many parts of the
world thanks to the ongoing good performance of its devices. Moreover, the company
also marketing to increase its market share in the smartphone market. Its continual
focus on innovation is also a major factor in the company's global success. Given the
fact that its products have high-quality alternatives that can match its performance and
customer experience, Samsung's market position and demand for its products are
quite strong. In general, the threat of alternative products is moderate, as evidenced by
Samsung.

Threat of new entrants

The threat of additional smartphone entrants is merely shallow. Established
businesses have amassed a significant market share in the industry and are continually
spending to maintain their client base and market dominance. A new brand must first
form the basis by investing in production and distribution, supply chain management,

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marketing, and human resources with large amount of financial investment before it
can begin to generate significant profits. Furthermore, acquiring significant
recognition will take some time. The smartphone industry's high level of
competitiveness has posed a significant threat to any new entrants. For instance,
Google released a smartphone currently, it failed to achieve a significant market
share.13

Even if it continues to invest in smartphones, it may find it difficult to compete

with Samsung or Apple for market share. It also demonstrates how tough it is for new
entrants to break into the industry and establish a strong consumer base. Based on
these considerations, the total threat posed by new entrants is minimal.

Intensity of competitive rivalry

In the smartphone industry, there is a high level of competition. Although there a
few brands dominate the whole smartphone market (major brands include Apple,
Samsung, Huawei, LG, Xiaomi, and Oppo), there is tremendous competition among
these companies. Samsung is one of the firms with the highest R&D spending, owing
to the brand's need to focus on innovation in the face of tough competition. Customers
will be more likely to switch to other brands if this does not happen. In addition,
differentiation has been limited to each firm improving its products to provide the best
in class features and user experience in the smartphone industry. As a result, every
modest advancement is significant. In addition to better cameras, Apple has included
quicker A12 bionic CPUs in its iPhones. Marketing is another area where rivalry has
increased. To enhance their influence, sales, and revenue, smartphone marketplaces
are also investing heavily in digital marketing and advertising. In general, the
smartphone business has a high level of competitive rivalry.

Conclusion
The above Samsung’s analysis clearly demonstrates that the corporation has
different strategies when it comes to achieving outcomes in the electronics industry.
Hence, Customer satisfaction should take priority over direct benefits such as
revenue. The trust formed between the company and the buyer is always the source of
the company's profitability. On the other hand, management should consider
optimizing the usage of developing technology to stay competitive. Consequently, the
market has become extremely hostile, and Samsung must ensure that it develops a
competitive strategy on a regular basis to deal with competition challenges.

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 References

1.  "삼성계열사 전자 – 삼성그룹 홈페이지". Retrieved from the original on 20 September 2016.

2.  "The 2020 World's Most Valuable Brands". Forbes. 18 October 2020. Archived from the
original on 18 October 2020.
3. "Samsung topples Intel to become the world's largest chipmaker –
TechCrunch". techcrunch.com. Retrieved from the original on 25 May 2018. Retrieved 25
May 2018.

4. Samsung Electronics becomes top Five in Interbrand's best global brands 2020. – Samsung Global
Newsroom. (n.d.). Retrieved October 16, 2021, from https://news.samsung.com/global/samsung-
electronics-becomes-top-five-in-interbrands-best-global-brands-2020.

5. What factors influence customer satisfaction? Commence. (2020, August 8). Retrieved October
16, 2021, from https://commence.com/blog/2020/08/08/customer-satisfaction-factors/.

6. Samsung Care+. Samsung sg. (2021, September 22). Retrieved October 16, 2021, from
https://www.samsung.com/sg/offer/samsung-care-plus/.

7. Gartner says global smartphone sales declined 20% in first quarter of 2020 due to covid-19
impact. Gartner. (n.d.). Retrieved October 16, 2021, from
https://www.gartner.com/en/newsroom/press-releases/2020-06-01-gartner-says-global-
smartphone-sales-declined-20--in-.

8. "SAMSUNG ELECTRONICS Co., Ltd. 2020 Half-year Business Report"(PDF). Retrieved 8

September 2020.

9. Mobile: TV: Home Electronics: Home Appliances. Samsung us. (2021, October 16). Retrieved
October 16, 2021, from http://www.samsung.com/.
10. By the way, here are top 20 countries with most smartphone users in the world. IndiaTimes. (2021,
July 20). Retrieved October 18, 2021, from https://www.indiatimes.com/technology/news/top-20-
countries-most-smartphone-users-world-545393.html.
11. Gartner says global smartphone sales declined 20% in first quarter of 2020 due to covid-19
impact. Gartner. (n.d.). Retrieved October 16, 2021, from
https://www.gartner.com/en/newsroom/press-releases/2020-06-01-gartner-says-global-
smartphone-sales-declined-20--in-.
12. App licensing : android developers. Android Developers. (n.d.). Retrieved October 18, 2021, from
https://developer.android.com/google/play/licensing.

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13. Samsung Eyes Blockchain technology to cut supply chain costs by 20%: Technology. Supply Chain
Digital. (n.d.). Retrieved October 21, 2021, from https://supplychaindigital.com/technology-
4/samsung-eyes-blockchain-technology-cut-supply-chain-costs-20.
14. TIMESOFINDIA.COM | Oct 22, 2019. (n.d.). Why google has 'failed' to be the Apple of Android -
Times of India. The Times of India. Retrieved October 21, 2021, from
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android/articleshow/71697972.cms.

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