Samsung Electronics Company’s Business Model

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Samsung Group is one of the most established companies in the mobile industry and other electronics. The organization is a multinational conglomerate headquartered in Samsung Town, in Seoul, South Korea. Lee Byung-Chul founded it in 1938 as a trading firm (Samsung, 2017). After it was found, Samsung ventured into different businesses, including textiles, insurance, securities, food, construction, shipping, and retail. The organization ventured into the electronics industry in the 1960s and has become a leading producer of most purchased electronic devices in the market (Samsung, 2017). Several factors can be attributed to the firm’s success, especially those that define the business and approach to new markets. This report describes how the company uses the nine elements of the business model to achieve its electronics industry goals. The first section describes each of the elements; the second part is about the core values, objectives, and mission statement; and the third illustrates how the firm successfully employs the building block of the framework.

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Business Model Canvas

This section describes the nine elements of the business model canvas used by Samsung Electronics.

Customer Segments

The customer segment defines an organization’s main target in the market. The element is at the center of the business model, as every for-profit organization wishes to reach and serve as many customers as possible. According to An et al. (2018), a company should consider grouping the target clients into distinct groups based on their common needs, behavior, and other features to enhance its sales. Samsung aims to reach a wide range of retailers and, in some cases, supply large equipment for specific industrial use, for instance, in healthcare and education. The company occupies different niches such as mobile phones, including smartphones and tablets, televisions, kitchenware, audio devices, and other electronic devices. Its mass-market approach is mainly evident in the mobile phone industry, where the company mainly focuses on the youth with some specific financial capability to buy the products. At the same time, Samsung segments its devices; for example, it offers flagships, which are more expensive than other variants, with close similarities with the main device. All these approaches are used to ensure that the firm remains relevant in all the areas it occupies.

Value Proposition

Value proportion is critical as it gives reasons why customers can choose a company over another. It shows that a company listens to the problems faced by its target clients and provides the specific solution required. Thus, the organization’s products result in customer satisfaction, making the market remain loyal to the producers (Hoe & Mansori, 2018). Samsung approaches its value proportion in different ways, depending on the location and the specific target clientele. The organization often focuses on the newness of the products it offers. For instance, over the past decade, Samsung phones have been produced as flagships, which come with new features such as screen variations, touch sensors, and improved user experiences. Moreover, it has majored in customizing its products, making it easier for users to own and operate their purchased items. Furthermore, the company values its products’ performance, so each of the electronic products is fairly expensive compared to those from competitors (Samsung, 2017). By adhering to high-value products, the company’s products have remained most demanded in most of its niches.

Channels

Any business’s main desire is to produce its various products and deliver them to the final consumer using trustworthy means. Channels serve functions, including product campaigns, customer product evaluation, order purchases, device value delivery, and post-purchase client support. According to Genesha and Aithal (2020), an organization with the right channel mix achieves a great market value proposition. A firm can achieve this by using its channel, partner channel, or a mix of the two. Samsung delivers its value proposition to its clients through its channels, including an online portal and retail outlets in different parts of the world. In addition, the company also delivers its devices to the target markets through a partnership with other organizations, though this approach lowers the main company’s margins (Fang et al., 2018). However, the firm also has its sales team that provides technical and sales services, making it easier to associate with the buyers.

Customer Relationships

Customer relations define how a company engages its clients, such as acquiring and retaining the buyers and boosting its sales. Samsung’s product ecosystem provides a means through which the company maintains its retail client relationships by creating brand identity, comprising a multilayered family of products (Cardador & Pratt, 2018). The creation of links between physical devices, digital contents, and client service is created due to enhanced product compatibility, which restrains customers to the specific products and services that the company offers. Samsung Pay enables easy self-service approaches in payment of services and purchased goods from its affiliates. The payment system has enabled the organization to partner with several loyalty programs and financial institutions, enabling Samsung clients to substitute their traditional cards with the firm’s mobile app. Moreover, Samsung is keen on providing personalized assistance through its ever available customer support. Eventually, the firm continues to win customer loyalty by creating a contract with its clients, most of whom find chances to community with the company through different community platforms.

Revenue Structure

Revenue defines if the business can choose to remain in operation or not; thus, it forms a critical factor in the business model canvas. This case implies that the business pays crucial attention to the target customers’ ability to pay for a particular product. The business must understand what the clients are willing to pay for a particular product, which competes with several others in the same market. Samsung Electronics generates its revenues from different streams, each of which has a different pricing strategy. Firstly, the organization’s consumer electronics division comprises visual display, digital appliance, and health and medical equipment business, priced independently. In this case, the company generates its revenue from the sale of its assets. Secondly, the IT and Mobile Communication division comprises mobile communication and network businesses, which are also priced independently. This niche enables the business to get income from selling the products and charging for various subscriptions such as annual maintenance costs and cloud storage services.

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Key Resources

The key resources enable an organization to create and provide the needed value proposition, reach target markets, build and maintain relationships with the customer segments and earn income. The type of model used by a company can result in a firm’s key resource variation. Moreover, the key resources can be valued as human, financial, intellectual, and financial (Onken & Campeau, 2016). Samsung pays critical attention to human, intellectual, and brand value. For instance, one of the main areas that the company has been known is in providing quality products, which are both durable and customized for each target user segment. The company boasts intellectual property in many different design aspects, such as curved screens and enhanced security features. Furthermore, the company has dedicated human resource, which provides it with the best talents, decisions regarding design approach, and marketing. The organization also has physical structures such as factories and officers, including its main headquarter, in Samsung Town. These resources enable the company to continue operating efficiently, reach new markets, and retain the existing ones.

Key Activities

Key activities involve different actions that a company undertakes for it to operate successfully. For instance, in electronics companies in mobile phones, television, computer, and audio systems, these activities can include software design, updates and maintenance, and hardware manufactures. In Samsung Electronics, these activities include continuous innovation, systems design, branding building, product promotion using effective marketing strategies, and work philosophy development (Kanagal, 2017). The organization also focuses on investing its resources in research and development to understand the market and the emerging technologies in various electronics it makes. Moreover, Samsung focuses on understanding consumer preferences and tailoring its design to meet those specific needs, such as creating phones with better cameras for pictures and videos for social media sharing. The company also runs foundations, hence participating in its Corporate Social Responsibility. It is important to note that the firm takes all these actions simultaneously while ensuring that other factors are running as well.

Key Partners

Partnerships enable the organization to advance its line of production and market reach. According to Li (2019), organizations can merge as non-competitors, where the joined organizations enhance the productivity and sales of each other’s products. For instance, Samsung can strategically ally with a company such as Intel, which provides chipsets the former uses to build mobile phones and computers. Moreover, joint ventures can also be considered where an organization wishes to start a new business that differs from its current undertakes. For instance, Samsung used to engage in businesses such as food production, construction, and insurance, among others, before it ventured into the electronics industry. At some point, these alliances are meant to ensure a customer-seller relationship, thus ensuring reliable supplies. Samsung partners with Harvey Norman, David Jones, and JB Hi-Fi, some of the greatest product distributors.

Cost Structure

An organization’s cost structure describes the financial obligations that a company has to meet while operating using a specific business model. According to the annual report provided by Samsung Electronics for fiscal year June 2016 – June 2017, the company’s total operating expenses was KRW 120.85 trillion. The report also revealed that the highest-burden of expenditure was in sales and general and administrative functions, which consumed a total of KRW 23.49 (Morningstar, 2017). These finances enabled the organization to create and deliver value, maintain its customer relationship, and generate the desired revenue.

Core Values: Objectives and Mission Statement

Samsung’s main objective is to provide high-quality products to its clients and maintain superior products and services in the market. This objective is specifically enhanced by the company’s mission statement, which states: “We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” (Samsung, 2017). Based on the company’s application of the business canvas model, it adheres to its values, objectives, and mission statement, in that it pays close attention to the value proposition, channels, customer relationship, key resources, key activities, and partnerships to enhance its efforts to reach the customers.

Execution of Strategy

As part of the Samsung Group, Samsung Electronics has captured the powered devices market because of its strategic application of various building blocks of the business model canvas. As this reported has indicated, the company has employed more than two aspects of each block, resulting in enhanced operation. The company’s history reveals that it adjusted its strategies in several ways in the past and continues to adjust its approaches to marketing and productivity to continue capturing the market. However, even though the company has a moderate market share in its niches, it does not specifically lead in major ones such as mobile and computing because it does not focus on a particular line of productivity. Thus, it would be important if the organization focused more on the production of smartphones and computers, occupying a larger market share in the electronics industry.

Conclusion

The business model canvas provides building blocks that define specific focus areas for a business to succeed. This report analysed Samsung Electronics’ application of the framework. It has been revealed that the company uses various elements of each building block, which enhances its operation in the industry. The objectives of the company align with its values, which are defined within its mission statement. By this specific definition of its approach, the organization has risen to become one of the world’s most notable organizations. However, since it does not focus on any specific niche, it has not managed to be at its competitors’ top. Thus, it would be important for the business to focus on specific niches that it does well, such as smartphones and computers, to enhance its performance. However, it can also continue operating in all the areas it has occupied, but increase competition through improved productivity and lowering its prices.

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References

An, J., Kwak, H., Jung, S. G., Salminen, J., & Jansen, B. J. (2018). Customer segmentation using online platforms: isolating behavioral and demographic segments for persona creation via aggregated user data. Social Network Analysis and Mining, 8(1), 54. Web.

Cardador, M. T., & Pratt, M. G. (2018). Becoming who we serve: A model of multi-layered employee–customer identification. Academy of Management Journal, 61(6), 2053-2080. Web.

Fang, F., Gurnani, H., & Natarajan, H. P. (2018). Leadership, dominance, and preeminence in a channel structure with a common retailer. Decision Sciences, 49(1), 65-120. Web.

Genesha, H. R., & Aithal, P. S. (2020). Rational distribution channel mix for lifestyle brands in India–An empirical study. International Journal of Case Studies in Business, IT, and Education (IJCSBE), 4(1), 136-154. Web.

Hoe, L. C., & Mansori, S. (2018). The effects of product quality on customer satisfaction and loyalty: Evidence from Malaysian engineering industry. International Journal of Industrial Marketing, 3(1), 20-35. Web.

Kanagal, N. B. (2017). Development of market orientation for marketing strategy formulation. International Journal of Marketing Studies, 9(4), 54-66. Web.

Li, L. (2019). Cooperative purchasing and preactive inventory sharing–Channel balancing and performance improvement. European Journal of Operational Research, 278(3), 738-751. Web.

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Onken, M., & Campeau, D. (2016). Lean startups: Using the business model canvas. Journal of Case Studies, 34(1), 95. Web.

Samsung Newsroom. (2017). Samsung Electronics Announces Fourth Quarter and FY 2016 Results. Web.

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