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Strategy Analysis Report for Samsung Smartphones Division

Introduction:

Our report on strategy analysis for the subject of Business Policy and Strategy is based on the
Samsung Galaxy line of Smartphones. We visited the head office of Samsung located in the Mall
of Lahore along with a questionnaire which had questions related to different aspects of
Samsungs strategy.
Currently Samsung is the number one brand in terms of market share in the smartphone market.
Their Galaxy line of Smartphones coupled with Googles Android operating system and the
plethora of apps available on the Android Marketplace are the real reasons behind Samsungs
runaway success in the smartphone market. Samsungs main competitor in the smartphone market
is Apple Inc, but with Apple with its focus on premium pricing and a very limited product base
has lost its edge in the ever changing smartphone market. Samsung with its variety of
smartphone variants and innovative features has captured much of the market. Samsungs current
market share of the smartphone market is increasing and this market share is showing no signs of
decreasing any time soon with the launch of the Samsung Galaxy S III smartphone. Samsung has
an immense variety of smartphones available in the market which are suitable for people with
varying budget sizes. Currently their lowest priced smartphone is available for Rs. 13,000 while
the higher priced variants go up to Rs. 60,000. We sat down with Mr. Zuhaib who is Samsung
Pakistans Country Retail Manager to discuss different aspects of Samsungs strategy.
S.W.O.T Analysis:
Samsung is a rapidly developing company and is currently engaged in activities ranging from
ship building to semiconductors chip making. Samsung Electronics strength in general would
have to be its innovativeness and adaptability to change. The market for electronics is rapidly
developing and almost every day we tend to see a new product entering a market which increases
the competition that a company has to face and Samsung is taking the bull of change by the
horns and introducing innovative and sometimes unorthodox products to keep increasing its
already big market share. Mr. Zuhaib said that product development is the biggest core
competency that Samsung possesses. The market for smartphone is ever-changing and
continuously newer brands and handsets are entering the market also the competition between
smartphone manufacturers is increasing day by day so to counter this competition and to
maintain its market leader status Samsung has to bring about products that have the latest
features and technologies so as to assuage the customers demands.

The major weakness that we can comprehend about Samsung is that its products somewhat lack
the finesse and opulence that Apple products have. Everything about an Apple product is
opulent; there is an air of grandiose about them. Talking about the Pakistani market, Mr. Zuhaib
said that Apple has no retail outlet in Pakistan and the current Apple products available in the
Pakistani market are either ones which were brought in via hand carry or were imported by some
retailer to be sold here. So there isnt any direct competition with Apple in Pakistan. Although he
said that the previous market leader in the Pakistani market was Nokia but due to its lag in
bringing newer more innovative smartphones in the market it has lost a considerable part of its
market share and the current percentage of Nokias market share stands at about 24% from a high
of 89% a few years back. While Samsung with its innovative product portfolio and pricing for
smartphones for all pockets has captured a substantial part of the market and its market share has
grown to be about 49.3% from 18% a few years back. Also talking about Apple and the threat it
posed to Samsung he said that it was a very minimum threat at present. He mentioned the
impending launch of the Samsung S III and how it had Apple worried as it had not moved
quickly enough to launch the iPhone 5. He also said that the current flagship phone of Apple the
iPhone 4S has no competition technically with the S III.
Opportunities that Samsung has in the Pakistani market are of further expanding its market share
and introducing some cheaper priced smartphones so that they can fill the gap between the
current demand for lower priced smartphones and their non-availability in the national market.
Samsung currently is targeting multiple areas or facets of the market. It is targeting students,
upper class, middle class and teenagers as well as working women. Samsung shipped about 90
million smartphones last year and speaking in layman terms it is a cash cow and the owners and
management are milking it for all its worth. Also there are over 300,000 apps available on the
Android Marketplace for the Galaxy line of smartphones. Also Mr. Zuhaib told us that Samsung
will be coming up with lower priced smartphones starting at about Rs. 10,000 which will further
open another niche that they can target with the lower end market.
Talking about any edge that Apple might have on Samsung Mr. Zuhaib said that Apple only had
a premium pricing edge with all the hype that they create of their products. He said that Samsung
had the technological edge on Apple and he mentioned an ironic aspect of this whole deal that
most of the electrical and physical components of Apples iPhones are manufactured by
Samsung.
The threat that Samsung has to face is the unchecked flow of Chinese non branded phones
coming into the market. These phones are not only dangerous for the health of the user but also
in financial terms they are a source of loss for companies like Samsung because the non-branded
phones infringe many a patents and copyright designs held by them. And the funny thing is that
these companies work unchecked in China and because of the supposed price advantage that they
have in the eyes of a normal Pakistani consumer they sell quickly.

For the protection of Samsungs patents and copyrights they have a separate legal department that
works alongside the R&D department to check and manage the ongoing legal battles against
Samsung, also Samsung works alongside Google for solving patent feuds.

P.E.S.T.L Analysis:
The political problem that Samsung is facing in Pakistan is the unchecked piracy and copyrights
infringements and the lack of any agency or courts to address these problems. Chinese products
are flooding the market and are selling unchecked even when they have the serious side effects
of increased radiation emissions. In reference to the current market situation of an economic
downturn Samsung is working towards making new lower priced handsets as well, with its
current lowest cost smartphone selling at Rs. 13,000 in the open market. The new lower priced
smartphone will be targeted towards students and new job holders so as to generate more sales
whilst providing a good quality product to the people.
The social aspects that effect Samsung are the supposed class differences that are so very
prominent in the Pakistani culture. Samsung had placed itself wrongly at the time of its
introduction in the Pakistani market. It had placed itself as a second grade brand and now it has
been working to remove this misconception from the minds of the masses. This is where Nokia
had positioned itself beautifully. It had captured a position where the people had thought of it as
the only renowned brand in the country. This is where the people at Samsung have to work
hard to nullify this misconstrued notion of Samsung being second rate. Also due to the ever
changing social structure of the market Samsung has been working on developing new features
with the changes in trends of the market. The current trend in the market is Apps that go along
with the smartphone of the consumers choice. Some years ago the trend was inbuilt cameras.
But this trend has died down now and just to give you an example Nokia has recently made a 41
megapixel camera phone but due to the change in the social structure and wants of the people it
will not fare well in the market. The upcoming trend will be voice controls which will include
navigation and address searches being done by voice commands.
Technologically Samsung is second to none. Samsung is one of the most innovative companies
out in the market. And this can be witnessed at mega events like CES (Consumer Electronics
Show) and MWC (Mobile World Congress) where Samsung brings out a host of innovative and
mind blowing products every year like the recent Samsung Smart Window which is a transparent
touchscreen device which can be used as a display panel and also as a window as the name
mentions. Most recently Samsung has introduced the Samsung Galaxy S III smartphone in a live
internet telecast ceremony. We cant say that Samsung has actually broken new ground with the
launch of the S III as it carries technologies that have already been made available in different

smartphones recently. So this is one avenue which might cause some discomfort to Samsung in
the very near future.
Samsung is also focusing on the environmental side and has numerous CSR projects in the
works. Samsung has developed an environment friendly phone by the name of Samsung Earth in
the past. Samsung follows all the ISO standards and there are no harmful wastes being generated
in the manufacture of their products. The low radiation levels emanating from Samsungs phones
are second only to Sony Ericssons. The current low priced Chinese phones available in the
market are very dangerous to a person health as they have uncontrolled radiation emissions.
Samsung has also worked on creating social villages, schools and nurseries. Also Samsung has
been active in plantations. Samsung Grammar Schools are operating in Kasur and Faisalabad.
There are many legal battle raging on between Samsung and other manufacturers. Samsung and
Apple are currently locked in major legal battles all over the world. The biggest threat legally to
Samsung is if Apple won any of the numerous patents suits pending in courts against them then
they would have to recall all of their products from the market thereby causing much damage to
it both in terms of finances as well as in terms of goodwill. Samsung was sued by Apple for
allegedly copying the shape of the Apple iPad 2 on their Samsung Galaxy Tab 7.0, when Apple
won the case Samsung had to move quickly and in 2 months time they had changed the shape of
the Tab 7.0 and re-launched it as the Tab 7.0 Plus.
PORTERs five forces model:
Competition in the current market for smartphones is cutthroat, with manufacturers pouncing on
any apparent weaknesses of each other and always in the quest of bringing more innovative
products than the competitor. Samsung is a key player of the market and it is imperative for them
to keep innovating and keeping the competition at bay by using the human and technological
resources at their disposal.
In reference to the market situation and prospective new entrants the market for phones is super
saturated and all the telecommunication related products and services are flourishing at a rapid
pace. The Chinese manufacturers have taken a share of the market but with respect to health they
are very detrimental to the health of a person with their excessive radiation emission. Also the
cell phone market is all credit based and the recovery of this credit is not easy so the
manufacturer has to throw money into the market and wait to see if their product gets accepted or
not. Also the retailers work on the manufacturers money.
The bargaining power of buyers is high as the distributors who are the buyers from the
companies want products that will sell well and have many new features. Also the end consumer
is updated and knowledgeable about what is going on in the technological world, they are also
updated about the latest prices and the value that a phone offers to them. The service department
of Samsung takes feedback from the customers and then reports back to the headquarters and
anything and everything related to the design, customer tastes and market situation is sent to

them. Also Samsung develops focus phones which are developed especially for the Pakistani
marketplace.
The bargaining power of suppliers is moderately high as Samsung has its own operating system
which it uses on some of its other smartphones. The operating system is known as BADA.
Samsung has some 100,000 apps available on the Samsung Market which are all exclusively
developed for the Samsung smartphones. These apps are comparatively better developed then
those on the Android Marketplace. Samsung is focusing on using Googles Android operating
system in its smartphones currently and it has been very successful in doing so, but in case
Google withdraws support for Samsungs smartphones for its operating system then Samsung
has its own OS and Samsung has also entered into a deal with Microsoft for the use of Windows
operating system in its phones. So Samsung has its bases covered in case of any eventuality. Also
Samsung has developed dual SIM smartphones with their Galaxy Y smartphone.
Lastly the threat of substitutes for Samsung smartphones is pretty limited as the substitutes which
include laptops and tablet pcs are not as randomly available with everyone. The paucity of the
two products due to higher prices and difficulty in handling them is the biggest hurdle for them
to overcome so as to be able to give the smartphones a run for their money. Also if a product
does not work out with the current placement and positioning, the whole campaign related to the
product is redesigned, the flaws are removed and the market positioning is changed. The product
life cycle of a cell phone is about 3 months. After this time period the phone is outdated and
needs to be replaced with a newer variant. Samsung cannibalizes its own old products as when
they bring a new phone into the market their own old product is booted out of the market.
Performance Landscape Schema:
When talking about the production design and the framework which is being followed by
Samsung in their production, we see that Samsung follows a mass production framework
specifically a series production framework where a whole series of similar products are
manufactured i.e. a particular type of handset.
While designing a performance landscape schema we have kept 3 things in mind. The relation
between the outside environment of the firm with the internal environment, the other two
variables are technological innovation and quality of products. In short in Samsungs case we can
see that the peak between the two internal variables is high and the relationship is strong. Along
with this we can judge by the above strategy analysis that the relationship between the two
internal variables and the external environment is normal and in Samsungs case we can see that
there is a No Change situation existing in the landscape schema. So Samsung will just have to
keep playing the old game as it has been successful while doing so.
HRM dept:

The job openings in Samsung are posted to human resource companies and also in newspapers.
Samsung is open to new ideas so it doesnt only hire people with experience, it mostly hires
inexperienced people and there is no limit on the universities from which they hire employees.

Strategy Diamond:

Speed of expansion is fast


Sequence of initiative
must be in rapid
succession

Economies of
scope
Premium pricing
due to quality
Premium prices
due to
proprietary
product feature

Product category: Smartphones


Geographic: Urban and Rural areas
Technology: Android, Super AMOLED
display and ultrathin and ultra light
smartphones

Alliance with Mobilink

Customization
Quality
Price
Service
Styling
Product reliability

Arena:
Samsung is a global leader in the smartphone industry. What Samsung is looking to do is to
target the customers living both in urban and rural areas all over Pakistan. Samsung is one of the

most innovative companies at present and is providing the customers with eye catching and
infinitely innovative products. Currently it introduced the Samsung Galaxy S III smartphone
which is a marvel of innovation and currently the best smartphone available on the market.
Vehicle:
Mobilink has a very strong relationship with its customer. If Samsung can form an alliance with
Mobilink then Samsung can extend its market and can sell its product faster in the Pakistani
market. So through an alliance Samsung can capture the attention of more customers. The
alliance can be of a nature that Mobilink can start offering Samsung phones on a contract basis
along with its SIMS.

Differentiators:
Samsung offers products which are low priced as compared to its main competitor which is
Apple Inc. the low priced products are in no way made with a compromise in quality. The quality
is as good as it gets. The reliability factor is extremely high, there is no compromise on reliability
and the products made by Samsung are tested to withstand extreme circumstances that might
occur in the normal working environment. The styling of the product is subdued and not overtly
flashy. On the other hand Mobilink has one of the largest cell phone service networks in the
country. Their service is second to none and the voice clarity is stellar.
Economic logic:
Through alliance Samsung can get economic of scale that can help it to reduce its costs. In this
way Samsung can provide its product with high quality at an economical price to its customer.
And having done the alliance with Mobilink the customer will not have to pay the full price of
the cell phone upfront.
Staging:
Through alliance Samsung can take initiatives and can expands its product line by using
Mobilink strategies. Also this strategy will need to be implemented swiftly before some other
service provider starts the same service before Mobilink.

8S Framework:

Samsungs Vision 2020:


As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the
World, Create the Future." This new vision reflects Samsung Electronics commitment to
inspiring its communities by leveraging Samsung's three key strengths: New Technology,
Innovative Products, and Creative Solutions and to promoting new value for Samsung's core
networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to
contribute to a better world and a richer experience for all.

As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in
revenue and becoming one of the worlds top five brands by 2020. To this end, Samsung has also
established three strategic approaches in its management: Creativity, Partnership, and
Talent.
Samsung plans to add to its already burgeoning arsenal of products and as they put it, Samsung
is excited about the future. As we build on our previous accomplishments, we look forward to
exploring new territories, including health, medicine, and biotechnology. Samsung is committed
to being a creative leader in new markets and becoming a truly No. 1 business going forward.
The Samsung Philosophy
At Samsung, they follow a simple business philosophy: to devote their talent and technology to
creating superior products and services that contribute to a better global society. Every day, their
people bring this philosophy to life. Their leaders search for the brightest talent from around the
world, and give them the resources they need to be the best at what they do. The result is that all
of their productsfrom memory chips that help businesses store vital knowledge to mobile
phones that connect people across continents have the power to enrich lives. And thats what
making a better global society is all about.

Structure of Samsung:
The corporate structure of Samsung was overhauled in the year 2009. The changes made include
a major change to the C Suite and introduction of the company system. The term C Suite is a
widely-used slang term used to collectively refer to a corporation's most important senior
executives. C-Suite gets its name because top senior executives' titles tend to start with the letter
C, for chief, as in chief executive officer, chief operating officer and chief information officer.
The new C-suite provides a more unified and efficient management team, consistent with global
business models, and reflecting the executive structures of many leading multinationals.
Samsung's new organizational structure enhances the independence of the company's business
divisions. The new alignment introduces a "company system" in which each business unit is
managed similarly to a stand-alone company, with its own President and CFO. Outside Korea,
subsidiaries responsible for components such as semiconductors and LCD panels will continue to
operate as fully independent entities separate from Samsungs IT and consumer electronics
subsidiaries.
Previously Samsung had 10 operating divisions organized into two principal businesses - Digital
Media &Communications and Device Solutions. The reorganization today replaces the twobusiness structure with seven independent companies under a single corporate entity and unified
C-suite.
While creating greater autonomy at the operating level, the benefits of the new structure also
include reducing the company's decision-making hierarchy from three to two stages, and
supporting stronger focus and speed of execution in business and investment strategy. Customers
will gain from increased independence in decision-making and faster speed to market.
A Visual Representation of Samsungs Organizational Structure:

Systems and Processes:


There are several online centralized DBM having all the information pertaining to the company.
Data suites for strategic planning, information systems, capital budgeting systems, quality
control, and performance measurement are widely used all over the organization. Unfortunately
due to confidentiality issues and corporate espionage issues the management did not provide us
with much information regarding the tools being used to implement these policies. What you see
below is the data that we gathered through poring over the internet and talking to experienced
people.
The Six Sigma approach is widely used at Samsung, the six sigma approach is a business
management strategy, originally developed by Motorola in 1986. Six Sigma became well known
after Jack Welch made it a central focus of his business strategy at General Electric in 1995, and
today it is widely used in many sectors of industry.
At Samsung the Six Sigma seeks to improve the quality of process outputs by identifying and
removing the causes of defects (errors) and minimizing variability in manufacturing and business
processes. It uses a set of quality management methods, including statistical methods, and creates
a special infrastructure of people within the organization who are experts in these methods.
Samsung also uses Supply Chain Management softwares which provide a major advantage for
Samsung. In general, the supply chain of Samsung is much globalized. They have market share
in both the industrialized and the developing worlds, which helps expand their customer base for
all their products. This comes in part from an "improve the world" strategy, which includes a)
reducing costs of low-carbon-emissions power and b) providing medical equipment and drugs to
poor countries and rural areas. They use a "fast follower" strategy, entering new businesses
quickly after these have been launched by the pioneers of the field. They enter new businesses
often via acquisition rather than by inventing the technology; and once in the business, they
invest very heavily in manufacturing capacity, to take advantage of economies of scale. Their
manufacturing costs are therefore lower, as is their cost of capital (The latter is also helped by
guarantees from the Korean government). They also scale up production quickly in new
businesses, to produce high volumes with lower costs. Because of their low manufacturing costs,
they can entice more customers, even competitors, to buy their parts. For example, Samsung is
Apples most important supplier, while also being its biggest competitor.
Many employee performance management systems are in place at Samsung. All the employees
have a clear cut set of responsibilities that they need to follow at Samsung they never make the
responsibility ambiguous. Emphasis on clear responsibility is institutionalized through systems
like the responsibility center system, the individual reward system, and the so-called individual
responsibility-center system.

Style (Leadership/management):
Samsung is a South Korean company and if we study the culture of South Korea we will see that
they follow a strict authoritarian attitude. A manager will enjoy the absolute support of the boss.
But, if a manager fails to perform satisfactorily due to negligence, the support is retrieved and the
manager will have to assume all the responsibilities. Strict control is maintained over the
workers. But now they are loosening some of the hard and fast rules so as to relax the working
environment.
Staff:
Samsung has a total staff of about 160,000 people all over the world. There is no gender
discrimination at Samsung and everyone is free to work there. At Samsung the major
requirement for being able to work there is the ability to innovate and bring about improvements
in the process and products. The organization supports out of the box ideas and creative thinking.
Samsung is THE place to work for people who posses such abilities.
reSources:
The companys headquarter is located in Seoul which is the capital of South Korea. The
company has operations in some 61 countries. Number of employees is adequate enough to
handle the whole operation. In terms of technology Samsung is one of the most innovative
companies in the world. Technology is a major facilitator of the working being done at Samsung.
In Monetary terms Samsung is one of the biggest companies. In the first quarter of the year 2012
it recorded an operating profit of some $5.16 billion out of sales of $39.8 billion which is a 98
percent gain over a year ago. Phones accounted for 73 percent of the profits. The company was
also ranked 11th in the "50 Most Innovative Companies 2010" list put out by BusinessWeek. The
company took the 33rd place in the "World's Most Valuable Brands 2010" list made public by
Forbes magazine. The magazine said that the company's brand value was as much as $12.8
billion with an average sale revenue growth rate of 17 percent for the past three years.
Shared values:
Our Values
We believe that living by strong values is the key to good business. At Samsung, a rigorous code
of conduct and these core values are at the heart of every decision they make.
People
Quite simply, a company is its people. At Samsung, theyre dedicated to giving their people a
wealth of opportunities to reach their full potential.
Excellence

Everything they do at Samsung is driven by an unyielding passion for excellenceand an


unfaltering commitment to develop the best products and services on the market.
Change
In todays fast-paced global economy, change is constant and innovation is critical to a
companys survival. As they have done for 70 years, they set their sights on the future,
anticipating market needs and demands so they can steer their company toward long-term
success.
Integrity
Operating in an ethical way is the foundation of their business. Everything they do is guided by a
moral compass that ensures fairness, respect for all stakeholders and complete transparency.
Co-prosperity
A business cannot be successful unless it creates prosperity and opportunity for others. Samsung
is dedicated to being a socially and environmentally responsible corporate citizen in every
community where it operates around the globe.

Strategic
Performance
reSources

From what we have studied in all this study we can safely say that the 7Ss and Samsungs
strategic performance are perfectly aligned and that if they keep following these same
frameworks they will continue flourishing in the near future.

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