SWOT Analysis: Samsung Telecommunications Business Unit

Strengths

Weaknesses

Hardware competencies

Low liquidity and return on assets

Stable financial performance

Litigation problems

Diverse portfolio of products

High brand equity

Opportunities

Threats Googles recent acquisition of Motorola

Rising popularity of 4G Smartphone devices

Launch of iphone 5 in 2012 Launch of new innovative products Nokias recent collaboration with Microsoft

Strengths

Hardware competencies Samsung telecommunications is the world leader in 4G technology and network infrastructures. The company has shipped more than 280 units of mobile handsets and owns nearly 25% of the intellectual rights to the Orthogonal Frequency-Division Multiple

Access (OFDMA) technology, which used in WiMAX technology, a key characteristic of 4G technology used in the upcoming Smartphone devices.1 The popular Smartphone device, iPhone 4, depends heavily on Samsungs technology, with at least 25% of its key components provided by Samsung Electronics. This provides strong testimony for Samsungs current hardware distinct competencies.

Stable Financial Performance The Digital Media and Communications business segment have seen a 34% growth in revenues for three financial years and made more than US$114.5 billion dollars in the financial year of 2010, of which a majority was contributed by the telecommunications division. 2 It is currently the market leader in the Smartphone market in the United States, occupying a quarter of the market share.3

Diverse Portfolio of Products The telecommunications division provides products for three market segments telecommunication networks, businesses and home users. Their product line ranges from telephones to network infrastructures. It aims to become a leader in digital convergence through the integration of its various business units and organizes itself according to the market conditions to remain competitive. 4

High Brand Equity

1 2

http://www.mobiledia.com/news/50638.html

Financial data obtained from www.onesource.com http://www.gsmarena.com/comscore_android_widens_its_lead_on_ios_in_the_us-news-3236.php 4 Information obtained from www.onesource.com
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Samsung is known for its innovative and high quality products. It has been ranked 19 th in the brand-rankings conducted by SyncForce, a marketing and brand communications company. 5 Its popularity in the United States and Europe is evidence of its high global brand equity.

Weaknesses

Low liquidity and return on assets Samsung, as a company, has low liquidity of assets, with a current ratio of 1.54 at the end of the 2010 financial year. This is lower than the communications sector average of 2.67. It is noted that its liabilities are more than half the amount of its assets. A low liquidity position is a concern especially when it has to meet its short term obligations during times of economic crisis. It also has a low return on asset of 1.1% in the financial year of 2010, below the industry average of 4.6%6, indicating a lower than average use of its assets to generate cash. A companys future position depends heavily on its ability to generate cash from its operations. With low liquidity and return on assets, we have doubts about the sustainability of Samsungs operations.

Litigation problems Apple and Samsung are currently engaged in a litigation process about the infringement of Apples intellectual property by Samsungs recent series of Android phones and tablets. As of October 2011, they are carrying out over 19 ongoing lawsuits in 10 countries.
5 6

http://www.rankingthebrands.com/Brand-detail.aspx?brandID=518 http://money.cnn.com/magazines/fortune/global500/2006/performers/industries/return_assets/index.h tml

Apple has successful blocked Samsungs entry into European Union countries, costing Samsung millions of dollars of potential profits and market opportunities. 7

Opportunities

Rising popularity of 4G Smartphone devices A 4G system is an upgrade to the 3G and 2G systems currently used. It will allow for more communication between mobile devices through ultra-broadband internet access, allowing more access to new services for the end user.
8

Since early 2000, telecom

networks across the world have begun upgrading their networks for 4G technology. Samsung is well positioned to take advantage of a growing trend of 4G users, with its strong intellectual position in the 4G technology.

Launch of new innovative products Samsung is well-known for its strong research and development unit, producing some of the most innovative technologies in the world. For example, it released the worlds first solar powered phones, called the Blue Earth Phone in 2009.9 Samsung Galaxy Note, its most recent product, uses a new S-pen technology and its 5.3inch HD touch screen display, is the first phone that will allow for sketching and artwork.

7 8

http://www.theverge.com/2011/04/19/apple-sues-samsung-analysis/ http://dvice.com/archives/2010/06/five-ways-4g-ph.php 9 http://inhabitat.com/samsung-releases-solar-powered-phone/

As Samsung continue to be a leader in producing innovative products that enhances the users experience, it will continue to remain a hardware leader in the Smartphone industry. 10

Threats

Googles recent acquisition of Motorola Google recently acquired Motorola Mobility for $12.5 billion dollars. With the acquisition of Motorola mobility, Google stands to obtain more than 17,000 technological patents and an option to enter the hardware development industry in the long run.11 With the growing popularity of Android, its open-source operating system, GoogleMotorola will be able to launch off phones that provide a better value proposition than Samsungs current phones.12 Another cause of concern is the possibility of a lag in technological support as compared to Motorola, from Google for Samsungs Android based phones, which are currently the best sellers in the United States market. Given the relationship between Google and Samsung, and Googles strength in software, Google-Motorola posses the strongest threat to Samsung.

Launch of iphone 5 in 2012

10 11

http://www.philstar.com/Article.aspx?articleId=744729&publicationSubCategoryId=73 http://www.forbes.com/sites/scottcleland/2011/09/09/why-googles-motorola-patent-play-backfires/ 12 http://www.bloomberg.com/news/2011-08-16/google-buys-motorola-for-superpower-status-in-feudwith-apple.html

Iphone 5 is rumoured to be launched in 2012, providing s threat to Samsungs current leading position in the Smartphone market in the United States. 13 Samsung will also face the challenge of convincing the 10.1% of Smartphone users who uses an iphone in the United States to switch over to a Samsung phone, with more than 90.2% of them indicating that they will continue to use an iphone after iphone 5 is launched. 14 However, this threat might not affect Samsung, especially given its recent remarkable sales of 10 million units of Samsung Galaxy S2 in just 5 months. The phone, however, lags behind iphone 4s impressive sales of more than 20 million units. 15

Nokias recent collaboration with Microsoft Nokia recently confirmed its collaboration with Microsoft on 21st April 2011. Nokia announced that they have begun developing phones specially built for the Microsoft Windows Mobile Platform.16 These event posses the least threat to Samsung, especially given that Nokia is fast losing in the Smartphone market wars, registering a US$523 million dollars loss in its second quarter of 2011 and is no longer the world cell-phone vendor. This assessment is also based on statistics that suggest that Microsoft Windows Mobile 7 occupies less than 1% of the Smartphone OS markets and is still shrinking. 17 There are also considerations of two different companies with different interests working together.

13 14

http://www.maindevice.com/2011/10/31/iphone-5-needs-to-boost-apple-in-the-smartphone-battle/

http://www.comscore.com/Press_Events/Press_Releases/2010/3/comScore_Reports_January_2010_U.S. _Mobile_Subscriber_Market_Share 15 http://global.christianpost.com/news/samsung-galaxy-s2-sells-10m-units-becomes-biggest-threat-toupcoming-iphone-5-56476/ 16 http://www.zdnet.com/blog/microsoft/microsoft-and-nokia-finalize-their-windows-phonecollaboration-agreement/9255 17 http://blog.seattlepi.com/microsoft/2011/07/22/analyst-nokia-microsoft-collaboration-unlikely-to-besuccessful/