Strategy on Stretch model
The management of Samsung makes effort in order to turn into competitiveness into a growth industry(74)(75). Companies and industries have been analyzed in mind-numbing detail, autopsies performed, and verdicts rendered (3) (6). Yet when it comes to understanding where competitiveness comes from and where it goes, we are like doctors who have diagnosed a problem – and have even found ways to treat some of its symptoms &ndash but who still don’t know how to keep people from getting sick in the first place (71) (72). Th Samsung has considered two aspects(4). The management of business considers first step in under- standing competitiveness is to observe competitive outcomes: some companies gaining market share. In this, he next step is to move from observation to diagnosis (5) (8). In this, manager diagnose competitive problems, we rely on industry structure analysis. A company’s market position – the particular market segments in which the company participates – broadly determines the potential for profitability and growth in different market (1) (2). Within any particular market segment, it is the company’s relative competitive advantage that determines actual profitability and growth (9).
Detailed structure of Samsung based on Cheabol
- This business conglomerate structure was developed in South Korea in the 1960s (11).
- In this, owners create global multinationals business corporation having huge international operations (15).
- The word "chaebol" means "business family" or "monopoly" in Korean (12).
- The chaebol business structure can be considered as a single large company or several groups of companies. It is managed by single family and founder group (Chaebol, 2015). For example Samsung, Hyundai and LG (88).
- In this Ownership of business is managed by single family and group of funders (17).
- In the Chebol business structure, Samsung is divided into several other subsidiaries firm that includes Samsung Electronics, Samsung Heavy Industries, Samsung Engineering and Samsung C&T,Samsung Life Insurance and etc (85) (86).
- This kinds of organizations are Greatly influenced by stock market so management has to develop various strategic plans in order to manage fluctuations of stock market (16)
- Fast decision making process provides several benefits to business entity in the form of profitability and expansion project(14) (86) .
- Formal business structure determines a systematic way to enhance communication among different management level (88).
- High merger and acquisition rate make these kinds of companies big multinational corporation. This thing promotes situation of monopoly in market (81) (83).
- Some times this structure create negative impact interest of consumers (13) (15).
Describe Keirets Japanese term, for Sony and LG (Japanese Company)
- A keiretsu is group of companies which is controlled by interlocking business relationships along with shareholdings (19) . It is an informal business group that plays most important role in economy of Japan.
- The member companies of this group is having some portions of the shares of other firm. This set is centered on a core bank(21).
- With the help of this system, management can easily manage each company from stock market fluctuations along with takeover attempts ((20)).
- This approach is very useful in long term planning in development of new innovations.So, several companies makes effort with combine efforts in order to achieve common objectives.This thing reduce operational cost in Sony and LG (105).
- In this, whole business firm is managed by Group of small companies that creates negative impact on several management decision (25) (26).
- A single group is developed by grouping small firm through relationship and shareholding
- Saves organization form fluctuations of stack market (30).
- Informal business structure creates problems in decision making process and reduces efficiency of management practices.
- It avoids mergers and acquisition (29).
- This business structure promotes social relations among various companies and joint operations reduce production cost (28) .
Both these models or management styles have its own expediency and relativity with the effective management practices. The major difference between these two style of management is that in Chaebol the scope of merger and acquisition remains higher and it allows to make other companies as subsidiaries (25). Through focusing on merger and acquisition it become easier to expand the business at a increasing rate and most importantly the organization can arrange resources in an adequate manner. Through merger it become possible to get access to large market as the network of acquired company also plays an important role in improving the business operations (27). On the contrary Keirts is another technique which is popular in Japan. It is to acknowledge that in this technique the situation of merger and acquisition is generally avoided by the companies. They just focus on expanding their business rather than focusing on acquiring new businesses (35). At the same juncture it is required to mention that by not adopting the crucial technique like merger and acquisition the stage of competition could be increased as small organization can also try to expand their market. For the purpose of minimizing the operational cost and enhancing the functional efficiency the organizations just concentrate on making the social relations. Sometimes they run their operations jointly and the main advantage of Kerits that resources could be managed properly along with the improvement in decision making process. But as compare to Cheboul style of management the decision making pattern of Japanese firms is not so appropriate and effective. It is to acknowledge that in Korean management pattern the one company or any large group handles the different businesses and they have decision making power in their hands (95). It allows in taking the quick as well as uniform decision. On the contrary in the case of Japanese style of management the one group is handled by small companies so it make tough to take decisions appropriately. Further when organizations work under the one umbrella then it directly impacts their efficiency and most importantly allow them to approve the centralize management system (58). Thus it is another area or field of management where Chaeboel is far better than the Keiruts. The system of monopoly is huge within the Korean management pattern so it just allow in developing the business to existing firms or conglomerate companies but in case of origin of new companies some sort of troubles could be faced (77). In Chabeol whole power remain in one hands and it allow to develop the business in well organized and well systematic way. So it might affect the pricing related aspects and fluctuations in the prices could be experienced. It can put negative impact at customers (45). Thus these are certain difference and similarities in both Chabeol and Kirets style of management. Chabeol style is somewhere revolves around the autocracy and Japanese style of management has more impact of ethical management practices. Samsung is growing very rapidly and they have diversified their business into different product range as well (89).
Macro analysis- PESTEL
- In most of the markets where Samsung operates, so business entity has to consider government rules (94).
- Samsung follows government rules related to taxation and other policies of domestic government (99).
- This dimension is especially critical for Samsung because Samsung has to consider both domestic and international economic conditions (95).
- It influences interest rate of lending so as business entity has to manage various expansion plans on the basis of lending rate.
- Samsung is primarily a South Korean Chaebol or a family owned multinational. This means that despite its global footprint it still operates from the core as a Korean company (97) (96).
- Company is considering needs and interest of consumers of particular nation.
- Samsung can be considered as being among the world’s leading innovative companies.
- Business entity also considers new technology in production process that will reduce consumption of resources and improves quality (98). By using new techniques in promotion of products, manager can present unique image of company.
- The management of Samsung all environmental and ethical issues in production of several kind of products and services (25) (26).
- With the help of Eco-friendly technology, business entity can reduce carbon emission and wastage of resources (91) (92).
- Use of Eco-friendly technology enhance of goodwill of firm (100).
- Labor laws, environmental protection laws and service standards that influence business decision (97)
KPI-Key performance indicator present several aspects and evaluates financial performance business. It also shows organizational capabilities. Some KPI's of Samsung are mentioned below:
- Increment in demand of company (32)
- Growth in market share of company (41)
- Positive feedback from consumers(43)
- Growth in sales and profit(33)
- Competitive edge over other companies (37)
- Increase satisfaction level of consumers
- Increment in brand value (36)
Core competencies of Samsung in Technology including international Competencies
Number 1 in Hi-Pass System Implementation
- It is one of the most competitive in transportation solution with the help of extensive experience in nationwide implementation of Hi-Pass systems (40). Business entity has completed more than half of the Korean domestic ETC network implementation.
- The Hi-Pass systems which is implemented by Samsung that can be considered as best products and are number 1 in quality domestically (35) .
- User Quality Standard Index (KS-QEI) by Korean Standards Association indicates Samsung Hi-Pass terminal devices are number 1 on the basis of both stability and service (44).
- Samsung Hi-Pass terminal devices have won 2 of 3 world leading design accolades in iF Design Award (106).
- The devices provide drivers with safe and convenient functions (34).
In order to several business operations, the management of Samsung has acquired resources form various international and domestic suppliers and vendors.
- Financial resources: Company acquires funds through equity, banks borrowing and investor for various business projects of firm (45).
- Human resource: Business entity recruits workers from both internal and external sources. Internal sources includes promotion and transfer of workers (108). Management also arranges proper training and skills development session in order to enhance efficiency of workers.
- Raw material: Organization is collecting several resources from several international vendors and suppliers to meet demand of several products (46).
The management of Samsung has adopted tool of value analysis. In this, production manager of Samsung analyzes several alternatives procedures in order to design new production process, selection of different kinds of material and implement alteration in business system in order to increase operation efficiency of business and reduce expenditures (50).
This approach is also used by management of Samsung in order to achieve business objectives (47). In this, management has made comparison between two or more variables such as products, production process and etc. in order to select best alternative of company (52) (53). It also assists comparison of financial performance Samsung with other companies.
Strengths- It shows current ability of Samsung that plays very important role in several strategic decision of organization (51) (54). On the basis of strength of company, manager can measure market position of company in front of other companies. Some important strength of Samsung are explained below:
- Hardware integration with many open source OS and software
- Innovation and design(48)
- Focus on environment
- Low production costs
Weaknesses- The weaknesses of business entity determines areas where managers needs to implement several improvement in organizational structure (49). This indicates fields where managers have to implement changes.
- Too low profit margin
- Lack its own OS and software(46)
- Focus on too many products
Opportunities- It can be defined as potential chances of business entity in order to improve profit and sales of company (55). It determines areas where management can develop strong position of business entity. Some opportunities of Samsung are described below:
- Growth in demand for quality application processors
- Growth of tablets market(56)
Threats- Threats indicate those factors that can lead negative impact on business operations such as sales, market share and etc (60). In order to improve organizational efficiency, management has to manage proper balance between threats and business structure.
- Rapid technological change(59)
- Declining margins on hardware production(61)
- Breached patents
The Ansoff; Growth matrix marketing planning tool for Samsung
The Ansoff Matrix is a very effective strategic planning tool that provides a framework and roadmap to help executives, senior managers, and marketers for development of various strategies for future growth of Samsung (64). It consists four elements:
- Market penetration: With the help of market penetration strategy, the management of Samsung makes efforts grow using its existing products and services in existing markets (67). In this, managers use current market scenario in order to enhance market share and sales of company (62).
- Market development: The market development strategy assists managers of Samsung in order to expand business into new emerging markets with the help of existing offerings (103). So, company can increase consumer base along with profit (63).
- Product development: In the product development strategy, business entity tries to create new products and services on the basis of needs of consumers to achieve business objectives (68). This thing assists manager in facilitation of best products with in great price (95).
- Diversification: The diversification of an organization determines offerings products services in new markets. In this process, management evaluates several elements like market share of company, interest of consumers and products of other competitors (71) .
Evaluating position of Samsung as a firm
Samsung as a company: On the basis of operational performance, Samsung has recorded goods returns on the basis of value of investment as compared to Sony and LG. Business entity has maintained profit margin as between 5.42 % to 16.78% in last 10 years (104). Organization has maintained sound liquidity position that assists managers in order to manage requirement of working capital. Its current market capitalization of Samsung is 187,045 million USD. Business entity has managed positive net profit ratio in last five years which is higher than LG and Sony (105).
Samsung relation with the customer: Samsung has introduced a range of products and mobile devices within very attractive price and great quality or features (106). These products meet demand of consumer in very effective manner. So, Samsung has managed competitive edge over other competitor like LG and Sony by offering low cost products within great price.
Causes of UP and downs in business position of Samsung as compared to other competitor are mentioned below
- Change in demand of products
- Competition among various organization (8)
- Change in profit of company
- Alteration in revenue (10)
- Alteration in needs of consumers
- Change in satisfaction level of consumers
Comparison of 7c's with LG and Sony
The Samsung can manage competitive edge over other competitors like LG and Sony because Samsung has ability to launch new products twice fast because of shorter product life cycles. This concept plays important role in present business market and commercialization of various business activities (46). By following Chaebol business structure, business entity has fewer levels of organizational bureaucracy that increases effectiveness of business decisions which is not possible in Keirets business structure of Sony. Samsung also makes efforts to facilitate great products to consumer which can meet quality and satisfactions level of consumer similar to Sony and LG (46). In order to meet technological challenges which are developed by Sony and LG, Samsung also increases its spending on on the research and development which is around 5-9% of company's global expenditure. All organizations are facing competition from China because off low cost labor (54).
Comparison of KPI's and Ratio analysis of Samsung with LG and Sony
On the basis of above key performance indicators table it can be stated that, performance of Samsung is better than to other competitors. This provides competitive advantages to Samsung in market. In order to manage competition, business entity should have to develop various plans in order to manage various organizational practices (46) . On the basis of ratio analysis, the comparison of current ratios of all three firm finds that Samsung have managed good liquidity position in order to meet current liabilities. Every business entity makes efforts to increase profit and market share of company (51) (54).. The assessment of profit margin ratio of all three companies Samsung, LGand Sony finds that Samsung has generated high profit margin as compared to other firm. This thing show growth in sales.
On the basis of evaluation of different ratios, it can be stated that Samsung has achieved very feasible position in market of consumer electronics as compared to LG and Sony (107). All the companies are making various strategies and plans in order to achieve management objectives and to improve efficiency of business but the strategies of top level management of Samsung are more effective than other firm (108).
Ecosystem of Samsung
It consists various external and internal factors that influence management decision of Samsung. The major sections of ecosystem of Samsung are explained below:
Consumers: It plays key role in ecosystem of company. The management of Samsung develops various plan like new product development, marketing and promotion, determination of features of products and pricing. All these factors greatly influence profit of firm (55).
Employees: Workers are playing most important role of Eco-system of firm. The quality of products and efficiency of business operations are greatly influenced by skills and qualification of staff members (64). Business entity has developed various training and development operations in order to increase productivity of workers (67).
Suppliers: In order to improve business efficiency, the management has to manage good relations with suppliers so as business entity will get several kinds of raw material with good quality and best price. It will improve quality of final products and reduce cost of production (69).
Government: There are several rules and regulations developed by government which has to followed by Samsung in order improve overall business efficiency (80). So, manager has to maintain proper balance among organizational practices and government rules.
Business Model Canvas
It is one of the most strategic management tool which is used by managers in order to develop an overview of business (81). The main objective of this business model is to present various as aspects of organization on a chart. With the help of this, manager can evaluate every element of organization.
In preparing of Canvas business model, the manager visualize various elements on a chart that include value proposition, infrastructure, target consumers, expenditures as well as business partners. Managers also evaluates different activities of business in development of this model(84).
Benefits of Business Model Canvas
Focus: The BMC is designed to evaluate each key element and foundation of business procedures. With the help of this model, management can easily understand how each element related to functions of organization as well as activities which are interlinked to various business operations (83). This system assists managers in order to manage various aspects of business with an more systematic and formal way that will present a special image of company. The BMC focuses the business on various strategic growth drivers. It enhances overall efficiency of every management practices (85).
Speed & Agility: The key principle of the BMC is to emphasize on quality rather than quantity of various environmental practices. The BMC is constructed in very simple and focused way which provides different kinds of information within few seconds (71). It can be considered as living document because it could be tested in future and re-managed with current business plans and management practices. The BMC is playing important role in order to assess consumer requirements as well as testing of satisfaction level of consumer(35).
Common Language: The main quality of BMC is to develop a common reference and language which can use to present different kinds of business data belong form various department (45). By adopting this model, various internal and external stakeholder can easily interpret different kinds of data. It provides a straight-forward as well as transparent information which can be easily understand by advisers, investors and partners (87). The BMC has a set of characteristics such discovering, building, ratifying etc. It also links the level and nature of competition, roles and responsibilities of employees and managers, core competencies and capacities with various management practices (89).
Disadvantage of Business Model Canvas
- The business model canvas cannot determines the organization’s strategic purpose as well as goals of business entity. In the process of determination of strategic purpose of organizations, this concept done not consider the mission, vision, and strategic objectives (41).
- This model is not evaluating level of competition with other organization. So, business entity faces various problems in order to manage competition by developing various supportive strategies with reference to level of competition in market (103).
- It mixed up a range of management information ()25. It is not easy to an individual in order to understand every aspect of business entity.
The management of Samsung needs to adopt this business model in order to present various aspects and sections as well as business operations in a systematic format (35). With the help of this, business entity can present business condition of an organization in front of investors, suppliers, shareholders etc. in well defined structure so as stakeholders can get proper information about different operations and activities of Samsung (15). So, stakeholders can easily take different kinds of decisions such as investment, increment in operational efficiency and improvement in quality (48). By developing an canvas business model, business entity can easily present brief overview regarding several management practices. It also assists manager in development of various future plans.
There are several benefits would be got by management of Samsung from canvas business model. By adopting canvas business model, managers of Samsung can easily evaluate various aspect of business. This thing helps in order to manage quick business decisions (35). It also assists manager in reduction of various operating expenditures of company. It evaluates effectiveness of various business operation such as efficiency of distribution network so as manager can increase speed of distribution process (22). In this, company can develop partnership contracts with other firms for development of efficient distribution network as well as assessment of a different kinds of raw material from various suppliers within predetermined time period (43). It enhances efficiency of production process and business entity can increase production quantity as well as reduce production cost (91). This system assists manager in order to develop coordination with various business operations that will improve overall business efficiency such as increment in sale, profit and market share along with satisfaction level of consumers (75). This business model also assists managers for development of long term relations with suppliers, partners etc. It also assists Samsung in comparison of business performance of competitors. In this process, management can compare below mentioned element:
- Target consumer
- Cost of products
- Marketing practices
On the basis of above study research concludes that the company has an experience of pursuing both, cost leadership along with differentiation strategies during its lifetime. It finds that With Eric Kim becoming chief marketing officer of the company, there are several changes are implemented in marketing and promotional activities and management practices of business entity. This report concludes the management of Samsung has created a unique ecosystem which assists management successfully in order to spread its product line across both of these dimensions.
In order to get good position in market and management of competition with several competitor, Samsung has adopted different kinds of strategic and long term plans. In this process, business entity is aggressively investing in Silicon Valley with several big campuses to help it start to lead in software as it already does with hardware. Ability to offer customized memory chips that no other manufacturer could offer allowed them to command premium pricing on these products. There are several strategies adopted by Samsung assists mangers in order meet long term goals of company in the form of profit and market share.
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