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Samsung Electronics
Industry
Samsung electronics Industry Corporation was created in 1969 as a
division of Samsung group, and the name of corporation was changed to
the current name which Samsung electronics in 1984. Mainly it
manufacture and exported electronics products, which include color TV,
electronic calculator, electronic watch, electronic cash registers, as well as
electronic home appliances such as refrigerators, air conditioners, washing
machines, an also telecommunication devices. Especially, it recorded the
outstanding number of manufacturing black and white TVs which was going
up above 10 million and took top of the world in terms of export of black
and white TVs. It succeeded to develop super mini VTR (8mm) in 1983,
started to export VTR in 1985, and merged Samsung semiconductors and
telecommunication cooperation in 1988.
Since then Samsung electronics has dramatically grown as one of the
worlds leading electronic giant with branches all over the world. Now
millions of Samsung electronic products are being manufactured and sold
every day and its product is seen in almost every house around the world.
Samsung electronics has one of the best inventory management systems,
supply and distribution chain in the world and its products are unique and
durable with dedicated, efficient work force. Also, its research and
development department is second to none in the electronic industry hence
we decided to carry out this in-depth analysis to access the various
strategies they have being applying since their existence and to advise
them on the possible strategic options available to them now and in the
future.
Buyers power
Buyers are the driving force of any industry including the automotive sector.
Buyer behaviour is an essential part of marketing strategy and in-depth
studies and research have been conducted to try to understand buyer
behaviour. Typical question to ask when considering buyer behaviour are,
who are our buyers? How do they buy? When do they buy? Where do they
buy? Why do they buy?
For Samsung electronics the brand strength allows them to make radical
changes as they have a large base of loyal customers (due to an long
history of building quality electronics), this has been evident with the radical
exterior design changes to the Samsung product line up. Thus Samsung
can be considered as a trend setter in their respective markets. This is a
powerful position as it allows for some control of the direction of the future
markets and trends. But strong competition from their rivals ensures that
the changes arent too radical as they may lose customers to their
opposition.
Suppliers power
Suppliers are the foundations of any industry they can supply raw
materials, labour components and other supplies. Therefore it is important
that a business has a good healthy relationship with its suppliers to ensure
that it can operate smoothly and efficiently in cohesion with its suppliers.
The power of suppliers varies depending on certain factors, for example if
the product is standardised then the supplier will be weak, an example of
this in the electronics industry would be silicon manufacturers. There are
many to choose from and product diversity is relatively low thus suppliers
are weak in this market. Suppliers are more powerful when they provide a
more specialised product. Samsung has a technologically advanced
component with existing patents, so in this case the supplier has more
power in the relationship then in the case with silicon.
Threat of Substitute products
A substitute product is a product in another market which poses a threat
because it is potentially a substitute to your product. A substitute (product)
can negatively affect the price elasticity of your product since more
substitutes become available the demand becomes more elastic as
customers have more alternatives a close substitute product constrains the
ability of firms in an industry to raise prices.
In the electronics industry substitute products will include other similar
products from other manufactures. The threat of substitutes in the
Disclaimer
This essay have been submitted to us by a student in order to help you with
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essay writers.
When considering the electronics industrial sector entry into the market is
extremely difficult, since a large initial investment is required, and
competition is fierce. In the current economic climate entry in this sector will
be almost impossible unless an innovative unique selling point is achieved.
Currently the easiest entry into the electronics sector is through excellent
design reliability, durability and cost effectiveness of electronics being the
most obvious.
Electronics Industry Life Cycle Stage
According the theory of industry life cycle, Samsung Electronics already got
the Maturity stage. Because growth is no longer the main focus, market
share and cash flow become the primary goals of the companies left in the
space. Samsungs products like TV, audio, video, mobile phones, camera,
camcorder, PC, peripherals, Printers, home appliances and memory cards
all have good reputation and occupy important place in market.
life cycle.bmp
Picture: Samsung Electronics industry life cycle.
(http://www.masslearning.com/)
PESTEL analysis
Political/Legal Environment
Over the past several years, there has seen a plethora of patent lawsuits within
the smartphone industry. In the highly competitive environment, manufacturers of
handsets have been aggressive in protecting their intellectual properties by suing
competitors by claiming infringements on patents. For example, in March 2010,
Apple sued HTC for allegedly infringing on 20 Apple patents (Weil, 2010). Apple
also sued Nokia in 2010 for similar patent infringements("Patent wars", 2011).
However, in April 2011 the International Trade Commission recommended that
neither HTC or Nokia should be found liable for any infringements. Further
Microsoft reached a licensing agreement in April 2010 with HTC to pay royalties
on Android based handsets ("Patent wars", 2011). More recently, Apple launched
a lawsuit against Samsung in April 2011 claiming Samsung copied design
features of the iPhone in its Galaxy line of Android phones (Quigley, 2011). These
are just a few examples of legal challenges faced by smartphone manufacturers.
Mentioning all lawsuits in the past several years is beyond the scope of this
analysis, but it is important to recognize that manufacturers are using their patent
portfolio's to make it more difficult for their competitors to gain larger market
shares. Even if the majority of cases are found to be 'dubious', the costs
associated with legal battles can hamper or slow down the release of new
handsets and hence making it more difficult for the manufacturer to stay
competitive.
Economic Environment
The North American economy is still recovering from the financial crisis of 2008.
Major factors to consider are the unemployment rates, consumer spending. In
September 2011 the unemployment rate in the US was 9.1% which is well above
the national average of 5.7% between 1948 and 2010 ("United States
Unemployment"). The current high unemployment rate in the US is likely having
an impact on reducing smartphone sales. A 9.1% unemployment rate represents
approximately 28 million Americans out of work. In Canada, the unemployment
rate in September 2011 was 7.1% which represents its lowest point since
December 2008 ("Canada Unemployment"). Since January 2010, Canada has
been experiencing a downward trend in unemployment ("Canada
Unemployment").
The high unemployment rate in the US has been negatively impacting consumer
confidence and has resulted in a decrease in consumer spending. Bloomberg
reports consumer spending dropped 0.2% in June 2011 which provides evidence
the decrease in hiring and wage increases below the inflation rate are affecting
consumer spending (Chandra, 2011). Consumer spending accounts for 70% of
the US economy (Chandra, 2011); any fluctuation in this area will have a
significant impact on the overall economy. In Canada, the opposite is true.
Consumer spending increased by 3.8% from 1st quarter 2010 to the end of 1st
quarter 2011 ("Canadian Consumer Spending"). Consumer confidence is
Canada seems to be higher than the US likely resulting from lower
unemployment rates and Canada's faster paced recovery from the global
financial crisis.
Ref 1: http://www.tradingeconomics.com/united-states/unemployment-rate
Ref 2: http://www.tradingeconomics.com/canada/unemployment-rate
Ref 3: http://www.bloomberg.com/news/2011-08-02/consumer-spending-in-u-sunexpectedly-falls-for-first-time-in-two-years.html
Ref
4: http://www.moneris.com/AboutUs/MediaCentre/NewsAndEvents/2011/Month/J
ul%2014.aspx
Social-cultural Environment
The rise of the information age has made telecommunication more important for
both business and pleasure. It is important to determine how receptive a society
is to new advancements in technology, particularly smartphone adoption in this
case. By measuring smartphone adoption by age demographics, a better
understanding of who the primary target groups can be gained. Insights into how
different groups of smartphone users use their devices can provide insights into
new features or improvements in established features.
At the end of 2010, there were 63.2 million smartphone subscribers in the US
(comScore Inc, 2011). The adoption rate has been increasing annually; in
December 2009, 16.8% of Americans owned a smartphone, while in December
2010 the adoption rate increased to 27% (comScore Inc, 2011). By March 2011,
32.2% of Americans adopted a smartphone (ref 2). The increase of just over
10% over a one year period along with over a 5% increase from Dec. 2010 and
March 2011 shows that the US population is very receptive to new smartphone
technologies resulting in rapid market expansion. Breaking adoption down into
demographic groups, 12.6% over the age of 55, 16.7% aged 18 to 24, and 27.2%
aged 25-34 owned a smartphone in December 2010 (comScore Inc, 2011).
According to comScore, the fastest growing age segments in smartphone
adoption are 13 to 17 year old and those aged 55 and up (comScore Inc, 2011).
Technological Environment
The most important aspect of the technological environment in this case is the
cellular network infrastructure. Both the US and Canada have infrastructure in
place which supports both voice and data transfers. However, rural regions may
have poorer quality of service, and do not always support data transfer. However,
most of the population is concentrated in urban and sub-urban regions of both
countries; these regions have the wireless infrastructure in place to support all
uses of smartphones. The infrastructure in both Canada and the US is privatized,
which means the network carriers maintain and upgrade it since it is in their best
interest to retain and keep cellular subscribers happy.
Natural Environment
Since Samsung does not manufacture its handsets in North America, the natural
environment is insignificant in terms of strategy formulation. Typically, a
manufacturer needs to be aware of extreme weather patterns and availability of
local natural resources within the region they have manufacturing facilities.
However certain regions, particularly along the Gulf Coast are prone to
hurricanes. These massive storms can damage the cellular network
infrastructure which would render smartphones into paper weights.
Political/Legal Environment
Economic Environment
Social-cultural Environment
o
end of 2010
o
2010
o
2010
o
USA
population: 313,232,044
Canada
population: 34,030,589
Technological Environment
Wireless networks which enable high speed data transfers (3G & 4G) are
well established in urban and sub-urban regions in both the US and Canada
Many rural regions in both the US and Canada are lacking wireless data
networks which enable Internet access
Natural Environment
Not very relevant since Samsung does not manufacture its handsets in
North America