Samsung Group Analysis( CPM, IFE, EFE, Porter Model, Competitive Forces)

1. Presented By
Mirza Ghalib Ali

2. History
 With only 30,000 won (about $27 USD), Lee Byung-chull started Samsung on
March 1 in 1938, as a trading company based in Taegu, Korea. The small
company of only 40 employees started as a grocery store, trading and exporting
goods produced in and around the city, like dried Korean fish and vegetables, as
well as its own noodles.
 The company grew and soon expanded to Seoul in 1947 but left once the Korean
War broke out. After the war, Lee started a sugar refinery in Busan that was called
Cheil Jedang, before expanding into textiles and building the (then) largest
woolen mill in Korea.

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 Samsung entered the electronics industry in the 1960's with the formation of several
electronics focused divisions.
 Samsung built their initial facilities in Suwon, South Korea, in 1970, where they started
producing black and white television sets.
 Between 1972 and 1979, Samsung began selling washing machines, changed to Samsung
Petrochemical and then Samsung Heavy Industries.
 In 1977, they started exporting color TVs and established Samsung Construction, Samsung
Fine Chemicals, and Samsung Precision Co.
 In 1980, Samsung entered the telecommunications hardware industry.

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 The mobile phone business was grouped together with Samsung Electronics which began
to invest heavily in research and development throughout the 1980's. During this time
Samsung Electronics expanded to Portugal, New York, Tokyo, England, and Austin,
Texas.
 In 1987 with the death of Lee Byung-chull, the Samsung group was separated into four
business groups leaving the Samsung Group with electronics, engineering, construction,
and most high-tech products. Retail, food, chemicals, logistics, entertainment, paper, and
telecom were spun out among the Shinsegae Group, CJ Group, and Hansol Group.
 Samsung grew as an international corporation throughout the 1990's.

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 In 1993, Samsung began to focus on three industries electronics, engineering, and
chemicals.
 Sony partnered with Samsung in 2006 to develop a stable supply of LCD panels for both
companies.
 While the partnership was nearly a 50-50 split, Samsung owned one share more than
Sony, giving them control over the manufacturing. At the end of 2011, Samsung bought
Sony's stake in the partnership and took full control.
 As on 31st Dec 2015, Samsung had 325, 677 employees in 80 countries, with 6 design,
34 R&D (research and development), 38 production and 53 sales & distribution centers
strategically located in various parts of the world.

6. Vision 2020
"Inspire the World, Create the Future"
 The Vision 2020 is at the core of our commitment to create a better world full of richer
digital experiences, through innovative technology and products.
The goal of the vision is to become a beloved brand, an innovative company, and an
admired company. For this, we dedicate our efforts to creativity and innovation, shared
value with our partners, and our great people.
We have delivered world best products and services through passion for innovation and
optimal operation.
 We look forward to exploring new business areas such as healthcare and automotive
electronics, and continue our journey through history of innovation.
Samsung Electronics will welcome new challenges and opportunities with joy.

7. Mission
 Inspire the world with our innovative technologies, products and design that
enrich people’s lives and contribute to social prosperity by creating a new future.

8. PESTEL analysis
 Political
Mallard (2015) has highlighted the role of governments using political influence to attract
foreign direct investment. Thus, political influence will be a major factor for companies like
Samsung when setting up production bases in countries, either to obtain favorable tariffs or
get excise duty exemptions. Reuters (2017a) have reported that Samsung is under pressure
from the US government to set up a production base in USA. The recent arrest of Samsung’s
Vice Chairman, Lee Jae-Young (The Guardian, 2017), in a corruption scandal shows that
politics plays a significant role in how businesses are run.

9. Economic
Consumer electronic products have shorter life-cycles due to the speed of technological
obsolescence (Torresen and Lovland, 2007), and companies have to price new products at a
high price to be able to breakeven quickly. The consumers in developed countries have the
buying power to afford new electronic products.

10. Socio-economic
The changes in the life-style of consumers, due to the fast pace of modern life, has seen
increase in ‘impulse’ buying of products, driven by the sense to achieve instant gratification
(Mittal, Sondhi and Chawla, 2015). In addition, Park, Jun and Lee (2015) have concluded in
their study that mobile phone shoppers are impulse buyers, and have a high consideration for
the product price, since they perceive effort and time spent in buying as a cost.

11. Technological
Wang and Ahmed (2001) mention that a firm’s dynamic capabilities depend upon market
dynamism, and this drives the firm to develop core capabilities over a period of time. The
consumer electronics industry is dynamic, driven by technological innovation, especially in
mobile products (smartphones, tablets, wearables) and televisions (curved, SUHD, OLED),
which means that to achieve core capabilities, companies have to make significant
investments in production technology and R&D.

12. Environmental
Chopra and Wu (2016) mention that the directives like 2003 RoHS (Restriction in use Of
Hazardous Substances) in the EU, and increased emphasis on Climate Change, has seen an
increase in eco-announcements from companies in the computing and electronics, who are
beginning to view the use of eco-friendly materials and systems in their products as a
competitive advantage.

13. Legal
The ‘electronics and computing industry’ is dependent on technological innovation,
which means that protecting IP (intellectual property) is a key issue, and companies
have to ensure that competitors do not take advantage by copying or imitation. In
addition, product safety issues can affect the company’s reputation and impact
product sales (Chen, 2004).
Bloomberg (2016) reported that Samsung China have been ordered to pay CNY80
million (US$ 12 million) to Huawei for a patent infringement.

14. Competitive forces

15. Samsung Electronics’ competitive
advantage
 Technology research and product development capability, with 34 R&D centers in
various parts of the world.
 Human resources talent, with 50,000+ research scientists, engineers and product
designers (Samsung, 2017c), comprising 16% of the employee work-force.
 Brand value of “Samsung” as a super brand, with a valuation of US$ 51.81 million and
ranked 7th in the world in 2016 (Interbrand, 2016).

16. Key success factors
 Low cost of production (for contract manufacturing only)
 Investment in production facilities
 High investment in R&D
 Availability of talent (scientists and designers)

17. External Factor Evaluation matrix
(Opportunities and Threats)

18. Internal Factor Evaluation matrix
(Strengths and Weaknesses)

20. CPM Samsung

21. Conclusion
The depreciation of the KRW (Korea Won) by 8.88% against the US$ in Q4-2016, helped
Samsung post a year-on-year 0.60% increase in revenues in 2016. In addition, the devaluation
of Euro by 10% in 2014 was a major contributing factor for the lower revenues from Euro
area (Euro area = EU27, excluding UK), and there was considerable increase in competition
from local players in China (Xiaowen, 2016).
It can be concluded that Samsung did not change its corporate strategy even when revenues
started decreasing in 2014, and instead made business unit level strategic moves, like
increasing ‘contract manufacturing’ for stabilizing revenues and increasing profitability. For
long-term sustainability, considering that the ‘electronics and computing industry’ is reaching
a maturity stage, it is essential for Samsung to gain a foothold in retailing and derive
maximum product value, especially for high impulse products like mobile smartphones.
Instead of the existing slow ‘organic’ growth route chosen by Samsung, the study
recommends a faster ‘acquisition’ mode, which will also help Samsung in increasing customer
engagement, thereby helping in forecasting lifestyle trends for new product development.

22. Thank you for your precious time!