Samsung Company: Business and Economic’ Analysis

Introduction

Samsung is a mega-company, which has dominated various industries across the world. Although it is a South Korean company, Samsung has grown and ventured into diverse industries in South Korea, Asia, and other parts of the world. History of Samsung shows that it commenced as a trading company in 1938 and has tremendously grown and become a conglomerate comprising a considerable number of affiliates and subsidiaries. A notable feature of Samsung is its diversity because it has expanded into diverse industries and penetrated competitive global markets. According to Samsung (2015), Samsung has evolved from a minor trading company in South Korea to an excellent conglomerate, which has businesses in diverse industries.

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Samsung has ventured in electronics, mobile, computer, construction, and insurance industries, hence, making it a conglomerate. The major subsidiaries and affiliates of Samsung are Samsung Electronics, Samsung Engineering, and Samsung Heavy Industries. Owing to its economic stance, Samsung is a very influential conglomerate in not only South Korea but also across the world. Essentially, Samsung has extensive markets globally because it offers diverse products, which satisfy different needs of customers. To enhance understanding of Samsung, this essay assesses kind of market, price elasticity of demand, income elasticity, competition, profitability, labour force, and SWOT analysis.

Vision and Mission

As a conglomerate, Samsung has set its vision and mission, which give it direction and goals. Exploration of Samsung’s vision and mission shows that they form the foundation of business strategies, which are effectively applied in the competitive markets. Categorically, the vision of Samsung is to be a digital leader by creating innovative products, which enrich the lives of people globally (Samsung, 2015).

This vision has truly made Samsung a digital leader because it currently leads in the electronics industry. As a digital leader, Samsung is setting trends in the electronics industries, and it is giving tough competition to Apple, LG, HP, Dell, and Lenovo. Moreover, Samsung is among the leaders of construction and smartphone industries because it has affiliates and subsidiaries. Thus, the vision of Samsung is the cornerstone of its business strategies of creating quality products, venturing into new markets, and transforming the lives of people globally. In addition to vision, Samsung has a mission to exploit technology and talents in the creation of quality products, which have the capacity to satisfy human needs globally. Samsung devotes its resources in research and development of novel products by coming up with new technology and training its workforce. Hence, the mission is another cornerstone of Samsung because it directs activities that it undertakes on a daily basis.

Perfect Competition Market

Samsung operates in the market where it experiences perfect competition. As a conglomerate, Samsung has diversified into different industries owing to its competitive products, which dominate global markets. Fundamentally, a competitive market is a market where no single competitor dominates or has the power to set the quality of products and determine prices. The market of Samsung exhibits perfect competition because other competitors such as Apple, Nokia, Techno, Motorola, LG, Dell, HP, and Kodak are eying the same markets. These competitors offer fierce competition to Samsung by providing substitute products, such as computers, mobile phones, tablets, televisions, cameras, and other electronics.

Samsung is a tough competitor in the market because it offers quality, innovative, and unique products at affordable prices. Samsung’s products target both low-end and high-end customers in diverse global markets. Analysis of the market share of Samsung indicates that it enjoys extensive market share globally, which gives it a competitive advantage over its competitors. The chief competitor of Samsung in the smartphone and computer industries is Apple. However, Samsung outcompetes Apple in the electronics industry because it offers novel products and enjoys extensive market share globally. Therefore, it suffices to say that Samsung operates in a perfectly competitive market where prices and quality of products determine market share.

Price Elasticity of Demand

Samsung’s products exhibit price-elastic demand because their demand varies, according to the market prices. Prakashan (2008) defines price elasticity of demand as the sensitivity of customers to price changes of products. As Samsung operates in a perfectly competitive market, it uses a pricing strategy in outcompeting its competitors. Owing to stiff competition and availability of substitute products, customers easily change the nature of the products they consume, according to their purchasing power and options. For example, if Samsung increases prices of its electronics products, it will experience a concomitant decline in sales, as customers will shift their choice of products to other substitute products offered by Apple, Nokia, LG, HP, Dell, and Lenovo amongst other companies.

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Samsung has an extensive market share across the world because it offers affordable products, which compete effectively with substitute products in terms of quality, creativeness, and uniqueness. Evidently, pricing is an integrated marketing strategy that Samsung and its competitors employ in penetrating competitive markets. In this view, Samsung’s products have price-elastic demand because their demand is sensitive to change in prices. Hence, Samsung keenly prices its products at affordable prices to make optimum sales and reap maximum profits.

Income Elasticity of Demand

The products of Samsung face positive income elasticity of demand because their consumption increases with an increase in the level of income among its customers. Specifically, the kind of income elasticity is high-income elasticity because they form part of luxuries and comforts. Prakashan (2008) state that high-income elasticity is the positive income elasticity of demand where an increase in income causes a concomitant increase in demand. In this view, given that Samsung offers digital products, their demand is subject to the purchasing power of its customers. Samsung has both low-end and high-end products to suit the needs and purchasing power of customers.

Customers in developing countries have low income, and thus, they can afford to purchase low-end products. In contrast, customers in developed countries have a high income, and therefore, they can afford to purchase high-end products. Moreover, digital products comprise luxuries and comforts, which people can only buy if they have excess money after satisfying their basic needs. Essentially, an increase in income implies that people have extra money to spend on luxurious products such as televisions, tablets, smartphones, fridges, and computers. Thus, Samsung’s products face high-income elasticity because its sales depend on the level of income among its customers.

The Closest Competitors

Samsung has the closest competitors in industries such as electronics, computer, mobile, and construction industries. In the electronics industry, Samsung competes with Sony and LG. These competitors offer products such as televisions, hoofers, speakers, disc video players, fridges, cameras, and other household electronics. In the global markets, the products of these competitors have dominated, and hence, they offer stiff competition for Samsung’s products. In the computer industry, competitors of Samsung are Apple, Dell, HP, Lenovo, Toshiba, and Acer. These competitors manufacture tablets, laptops, and desktops, which are major forms of computers in the global markets.

Moreover, Apple offers a unique software, operating systems, such as MacOS and iOS, for computers and smartphones, respectively, hence, giving Samsung a tough competition. In the mobile industry, Samsung has the fiercest competition because of the emergence of smartphones. Smartphone companies such as Nokia, Apple, Techno, Motorola, and HTC are the closest competitors of Samsung. Apple is the major competitor of Samsung because it offers iPad and iPhone, which are unique smartphones due to its operating system and design. In the construction company, Samsung Heavy Industries competes with Mitsubishi Heavy Industries, China Shipbuilding Corporation, and Hyundai Heavy Industries, which are the closest competitors of Samsung in the shipbuilding industry.

Substitutes and Complements

As Samsung operates in a perfectly competitive market, it has substitutes, which affect its demand in the global markets. Essentially, Samsung has diverse forms of substitutes, which vary according to the industry. In the electronics industry, the substitutes of Samsung’s products such as televisions, fridges, speakers, hoofers, cookers, and other household items exist. Companies such as LG and Philips offer these substitute products in plenty, and thus, customers can easily shift their preferences when supply, prices, and quality changes become unfavourable. In the smartphone industry, companies such as Techno, Apple, Nokia, Motorola, and HTC offer substitute products, which effectively influence the sales of Samsung’s products. Since most smartphone companies rely on Android technology, they generate substitute products, which are similar to Samsung’s products.

Apple uses iOS, which is a unique mobile operating system, hence, creating novel substitute products. In the computer industry, Samsung manufactures complementary products. Fundamentally, Samsung manufactures hardware for smartphones and computers but relies on software from Google and Microsoft. Android software from Google is a complement product of smartphone hardware of Samsung, while Windows is a complementary product of computer hardware. Therefore, Samsung has both substitutes and complements in the electronics, computer, and smartphone industries.

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Increasing Demand for Products

The demand for Samsung across the world is increasing tremendously, owing to their uniqueness, novelty, quality, and affordability. The products of Samsung Electronics, a major subsidiary of Samsung, dominate global markets. Samsung has specialized in the provision of these products because it fetches a significant portion of profits when compared to other subsidiaries. The electronics products include televisions, fridges, cookers, speakers, hoofers, radios, and disc video players, among other products. Given that these products are household products, they are in high demand in every household. Moreover, the affordability of these products has given Samsung a competitive edge in global markets.

Both high-end customers and low-end customers can purchase electronics products because Samsung has differentiated products into diverse market segments, according to the needs and economic level of customers. In addition, smartphones comprise products that are in high demand in the global markets. The emergence of Android technology, coupled with microchip technology of Samsung has boosted the manufacture of smartphones with enhanced capabilities. These smartphones are in high demand because people require them in accessing the Internet and performing a plethora of activities. Social media subscribers, bloggers, and businesspersons heavily rely on the smartphones in accessing the Internet.

Labour Force

Samsung prides itself of talented workforce, which it has trained to create innovative and unique products, which are competitive in the global markets. According to Samsung (2015), talented and well-trained employees are integral asserts, which boost the capacity of Samsung to generate innovative and unique products. Samsung has allocated immense resources in recruiting and training of talented workforce.

The world of technology is very dynamic in that it requires constant training of workforce to keep abreast with technological advancements in diverse industries. According to Sodhi and Lee (2007), Samsung has established training centre, where it trains its employees to gain new knowledge and skills to enhance competitiveness of the company in researching and developing novel products, which can improve the lives of people. In the aspect of marketing, the training centre offers multinational courses, which enable expatriates to gain multicultural competencies so that they can aid in resolution of cultural barriers, which hinder marketing and usage of Samsung’s products. Equipped with multicultural competencies, expatriates can effectively represent Samsung in various cultural backgrounds. In this view, the training of employees increases productivity and consequently reduces the costs of operations.

Profitability of Samsung

Since its inception in 1938, Samsung has continued to grow by expanding its operations and venturing into new markets. The profitability of Samsung is evident because it has risen from being a minor trading company to being a conglomerate. Currently, Samsung is the most profitable company in the electronics, computer, and smartphone industries. According to Danova (2013), Samsung is the leading profitable company with $7.6 billion profit after overtaking Apple with $7.5 billion profit. Although Samsung offers cheaper products than Apple’s products, its profitability emerges from the high sales volume because Samsung enjoys extensive market share. Moreover, Samsung supply chips and semiconductors to electronics companies such as Apple, Kodak, Sony, and LG. Samsung has patented chips and semiconductors for it has exclusive rights of manufacturing and selling them to diverse electronics companies. In this view, Samsung has monopolized microchip industry. Samsung has diverse companies in form of affiliates and subsidiaries, which cumulatively magnify the profitability of Samsung.

Critical analysis of profitability shows that it is sustainable because Samsung has a matchless market share. Its close competitor, Apple, has a limited market share, which is incomparable to that of Samsung. Owing to the fact that Samsung offers cheap products in diverse industries such as electronics, computer, smartphone, and construction industries, it has attracted many customers and maintained them. In this case, the ability of Samsung to attract and maintain customers enhances sustainability of its profits.

According to Danova (2013), it is predictable that Samsung will dominate the digital industry so long as it offers quality and innovative products, which are affordable to customers in diverse market segments. As Samsung values its human resources, it recruits and trains employees to enhance their creativity so that they can come up with competitive products. Hence, well-trained and talented employees contributes to the sustainability of profits that Samsung makes in its diverse affiliates and subsidiaries. In addition, Samsung has not exploited all markets in the developing and developed countries, hence, there is still an immense market to exploit and expand market share. In terms of diversification, Samsung is a notable conglomerate, which easily ventures into new markets and establish robust niches.

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How Samsung Can Increase its Profits

As Samsung enjoys extensive market share, it can increase its profits through value-creation strategy. Analysis of business strategies that Samsung employs in augmenting its profits shows that it mainly exploits product differentiation and diversification of its operations. In product differentiation, Samsung predominantly offers electronics products, but it has diversified into computer, smartphone, and construction industries.

Currently, intense competition is raging in the electronics, smartphone, and computer industries, and thus, threatens to shrink already established markets of Samsung. In this, view, Samsung should take advantage of its extensive market share by employing value-creation strategy in maintaining the established markets and exploiting potential markets globally. Through value-creation, Samsung will be in a position to only to maintain its current market share, but also to venture into new markets. Therefore, to remain competitive and maximize profits, Samsung should undertake value-creation by maintaining its established market share and diversified industries.

Other: Samsung’s SWOT Analysis

Samsung has notable strengths such as extensive market share, affordable products, diversified businesses, and talented employees. The extensive market is the first strength of Samsung because it boosts sales and increases profits considerably. Currently, Samsung is a conglomerate, which dominates diverse markets across the world. The second strength of Samsung is that it offers affordable products, which low-end customers can afford to purchase. The affordable products have enabled Samsung to venture markets that are in the developing countries, where people have low incomes.

Diversified businesses comprise the third strength of Samsung for it has successfully ventured into electronics, computer, smartphone, and construction industries with a view of increasing profits. The existence of talented and well-trained employees comprise the fourth strength of Samsung, which has boosted its innovative spirit and creation of competitive products. Samsung ensures that it recruits talented employees and train them appropriately. However, the weaknesses of Samsung are it violates business ethics and overlooks already established markets. Evidently, Apple has sued Samsung for infringing on its patents, and hence, it has affected the reputation of Samsung globally. Although Samsung is notable for establishing new markets, it does not do much to maintain them.

Brand reputation is an opportunity, which Samsung should exploit in diverse markets. Brand reputation has created loyal customers, who are ready to purchase products from Samsung because they are quality, affordable, and unique. Hence, diversification into new industries or venturing into new markets is easy for Samsung because of brand reputation and customer loyalty. Emerging economies of the developing countries offer immense markets for Samsung’s products because they are relatively unexploited by competitors. However, Samsung experiences massive threats in the computer, electronics, and smartphone industries. Competitors such as Apple, HP, Toshiba, Nokia, Techno, and Dell threatens sustainability of market share and profit margins. Additionally, rapid technological advancement is another threat that Samsung is facing in the current world. The rapid changes in technology outdate innovate technologies of Samsung, and hence, making them obsolete.

Conclusion

Analysis of Samsung shows that it is a company with great vision and mission in the digital industry. Since its inception in 1938, Samsung has managed to grow and expand into diverse industries, making it one of the largest conglomerates globally. As it operates in a perfectly competitive environment, its products exhibit price-elastic demand and high-income elasticity. The closest competitors of Samsung are Apple, Dell, Nokia, Lenovo, Toshiba, Lenovo, and LG.

To increase its profits and reduce costs, Samsung recruits talented employees and train them appropriately. Evidently, the products of Samsung are in a high demand, and thus, generating massive profits. The extensive market share and diversity of industries makes profitability of Samsung sustainable. Ultimately, the strengths of Samsung are extensive market share, affordable products, diversified businesses, and talented employees, while the opportunities are brand reputation and emerging economies.

References

Danova, T. (2013). Samsung is now a more profitable company than AppleBusiness Insider. Web.

Prakashan, N. (2008). Managerial Economics. New York: Cengage Learning. Samsung: Values and Philosophy. Web.

Sodhi, M., & Lee, S. (2007). An analysis of sources of risk in the consumer electronics industry. Journal of the Operational Research Society, 58(1), 1430-1439. Web.

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