Samsung Current Business Strategy
The linchpin of any successful business organization such as Samsung is the ability of its top management to craft and boldly execute strategies. It is through well crafted and boldly executed business strategies that business organizations are able to achieve their corporate missions (Kim, 2007, p. 68). Before crafting a strategy to execute it is of significant importance for business organizations to carry out an analysis of an organizations resources and competitive position. These considerations are crucial as they aide in crafting executable strategies aimed at giving an organization a competitive advantage against business rivals.
The process of crafting strategy involves thinking in a strategic way about the future of a business organization. It also involves thinking strategically about an organization’s current market performance or rather a position, as well as future prospects. The strategy is a visionary roadmap that business organizations usually follow in developing and strengthening their business prospects. The process of crafting strategy takes into consideration a business organization’s destination and the rationale for reaching that destination (Kim, 2007, p. 141).
The strategy is specific and distinct to a particular business organization hence moulds an organization’s business identity and culture. Key elements of strategy in business organizations are that it provides a strategic path for the business organization’s future and steers the workforce’s energies towards a common direction Samsung current business strategy is that of cost leadership or rather a differentiation.
Samsung’s cost leadership strategy enables the company to translate its vision into strategic business processes and procedures. The cost leadership strategy or differentiation strategy is a collection of initiatives that are undertaken by the organization’s management at various levels in the organizational hierarchy and thus makes it harder to be imitated by competitors, despite operating in standard industry technology. This differentiation strategy is one of Samsung Electronics’ competencies that enable the organization to effectively compete with global rivals such as Sony Electronics and LG Electronics, among others.
Cost leadership is a business strategy that enables companies such as Samsung Electricals to gain competitive advantage and maximize their market place share. Competitors in the market place usually achieve cost leadership by making their business processes and procedures to be the lowest in terms of production costs. Differentiation, on the other hand, is a business strategy that positions a business company in the market place with innovation, quality and speed.
Differentiation strategy enables Samsung to charge premium prices on its electronic products. This strategy has enabled Samsung to dominate the consumer electronics market, especially in Asia. Cost leadership and differentiation strategy
Samsung Electronics’ management is tasked to create an organization that has the capacity to produce electronic goods and services that consumers need but have not imagined. The core competence of an organization such as Samsung Electronics is that organization’s strategic capability and includes a cluster of organizational characteristics which allows the organization to achieve competitive advantage against other organizations (Kim, 2007, p.129).
Samsung Electronics, the manufacturer of consumer electronic products, achieves competitive advantage and core competencies from the way their business strategies and value chains are configured. Samsung Electronics’ value chains and business strategies are crafted in such a way that even the closest rivals can not imitate (Kim, 2007, p. 68).
Samsung’s Strategy to Achieve Global Competitive Advantage
Kim (2007, p.133) posit that a crucial approach for business companies to achieve global competitive advantage is to build layers of advantages. This means a company must continue to expand its competitiveness. Global companies can achieve this by expanding their global brands and making use of low-cost labour force. Initially, Samsung intended to gain competitiveness by enormously investing in its production system, acquiring technological advantage and becoming a world-class manufacturer of consumer electronics.
These were strategies aimed at enabling the company to compete effectively with other industry players’ especially in Japan and in the western countries. Samsung Electronics Company continues to expand its production system in a “systematic reverse order”. Samsung Electronics Company also enters market segments in which its current technological advancements and capabilities enable sit to compete effectively. The company has also widely engaged in making use of cheap and abundant labour force in the production distribution and marketing of its consumer electronic products and services (Kim, 2007, p. 68).
Another strategy that Samsung Electronics Company has implemented to achieve global competitive advantage in the consumer electronics industry is pricing strategies. Samsung Electronics Company positioned its pricing of consumer electronic products as a low end and quality manufacturer. The company supplied substitute consumer electronic products for its major brands of consumer electronic products while raising product prices as the designs and quality of these products improved.
This strategy was geared towards capturing all the market segments ranging from low-income consumers to high-income consumers of electronic products. This pricing strategy was informed by three main factors. The first factor was the prevailing low national income and minimal purchasing power of the local market. The second factor was the unwillingness of joint venture partners to share the costs of the high-end electronic product ranges. Lastly, the pricing strategy was informed by the availability of foreign market for Samsung Electronics Company consumer electronic products, particularly in the US (Kim, 2007, p.133).
In order to continue building layers of competitive advantage, Samsung Electronics Company recognizes the significance of changing the company’s brand and corporate image. This strategy has enabled Samsung Electronics Company to consolidate its global position in the consumer electronics products and services market as a major competitor. This strategy enabled Samsung Electronics Company to transform from a low profile electronics manufacturer to a global market-oriented company in 1999 (Kim, 2007, p.133). Samsung Electronics Company gained market leadership in the memory chip industry sector by laying emphasis on its brand name and corporate image. This enabled it to surpass other competitors in the market, such as Nokia, Philips Electronics, and Sony Electronics.
The second approach to achieving global competitive advantage implemented by Samsung Electronics Company concerns searching for loose blocks in the consumer electronics industry. This is an innovative approach where Samsung Electronics Company ventures into new market segments not exploited by rivals in the industry. Samsung Electronics Company achieved this by acquiring new technological know-how for its unique consumer electronic products.
This strategy also enables Samsung Electronics Company to enter into joint business ventures with other players in the industry. For instance, in 1971 Samsung Electronics Company joined Sony Electronics of Japan to produce its first-ever TV set, in 1982 joined Phillips Electronics to produce colour TV. Samsung Electronics Company has gained substantial knowledge from these joint ventures, among others, and has used this knowledge to produce superior consumer electronic products than those of competitors (Kim, 2007, p.134).
Kim notes that the third approach to achieving competitive advantage in the global consumer electronics industry is by changing the terms of engagement (Kim, 2007, p.134). Samsung Electronics Company has achieved a competitive advantage in the global consumer electronics industry by defining the industry’s attributes and market segments boundaries. Samsung Electronics Company management style is based on the ability to make faster decisions on investments and responsiveness with regard to consumer electronic products sizes and prices. In the mid-1990s Samsung Electronics Company ventured on producing larger LCDs which other competitors such as Phillips and Japan’s Sony were reluctant to venture into.
Samsung Electronics Company has also changed terms of engagement by commanding technology leadership in the consumer electronics industry. Technology leadership enables Samsung Electronics Company to produce differentiated consumer electronic products and set standards for other industry players and competitors. Some of the innovative consumer electronic products that Samsung Electronics Company has produced due to technology leadership include the Mobile WiMAX which is a next-generation technology in wireless communication and the 50-nanometer 16 GB memory flash among others (Kim, 2007, p.135).
Collaboration with other industry players is another approach that Samsung Electronics Company has implemented in order to achieve a competitive advantage in the global consumer electronics market (Kim, 2007, p.135). This approach has enabled Samsung Electronics Company to effectively calibrate both the strengths and the weaknesses of competitors in the market. Collaboration with foreign consumer electronics giants such as Phillips and Toshiba enabled Samsung Electronics Company to learn, internalize and reverse-engineer the technological know-how of these competitors.
Other collaboration strategies that have enabled Samsung Electronics Company to achieve competitive advantage in the global consumer electronics industry include; acquiring companies with high technological know-how in advanced countries and forming strategic alliances or mergers with competitors in order to accelerate the rate at which the company was improving and developing its technological know-how.
Collaboration with foreign competitors as an approach to achieving competitive advantage in the global consumer electronics market has benefited Samsung Electronics Company in various ways. Collaboration has enabled Samsung Electronics Company to bridge the gap between it and other foreign consumer electronics manufacturers at an accelerated rate.
This enabled Samsung Electronics Company to invest heavily in research and development, leverage on technology sources such as strategic alliances, research on foreign electronics market, foreign subsidies, and licensing (Kim, 2007, p.135). It is also as a result of collaboration with foreign companies that Samsung Electronics Company has been able to acquire and implement an effective model of management of knowledge at the company level.
Knowledge-Based Theory in the Samsung Business Strategy
There are various theories that seek to examine the application of information and knowledge by business organizations in order to implement their business strategies and edge out competitors. Knowledge-based theory of an organization or firm is one of the significant information system theories that seek to explain how data, information and knowledge are applicable and useful in the operations of a business organization. According to the knowledge-based theory of an organization, knowledge is a significant and strategic resource that determines an organization’s ability to gain competitive advantage and register superior business performance.
This is because an organization’s knowledge resources are usually embedded in the business culture, policies, operations, identity, systems and human resources of an organization. This complexity makes extremely difficult to imitate an organization’s knowledge based resources (OECD, 2009, p. 88). The current strategy of Samsung Electronics Company is knowledge-based.
An organization’s data generate information and knowledge which are essential knowledge assets in an organization (Muzzucato, 2006, p. 305). It is through technology or rather information systems that Samsung Electronics Company generates information from data that are from an organization’s knowledge-based and intellectual assets. The management component arises when organizations are in the potion of generating value from the knowledge assets.
It focuses on codifying data from employees, business partners, clients and sharing the information within and without an organization with the main aim of devising best practices in an organization. However, not all information is valuable to an organization and thus organizations such as Samsung Electronics Company determine what information qualifies their organizational and business strategy needs.
Knowledge is the fundamental understanding, insight and practical know-how that enable human beings to intelligently function. This knowledge transforms into manifestations such as a business practice, strategy formulation and technology within organizations and firms. These transformations generate expertise when appropriately used and results into employee and business organization effectiveness hence competitive advantage and superior business performance as compared to those of their competitors.
Therefore, knowledge is a valuable asset that Samsung Electronics Company has effectively, managed, nurtured and preserved. Samsung Electronics Company use information systems to synthesize enhance and fasten both intra-organizational and inter-organizational management of knowledge (OECD, 2009, p. 88).
In this regard, three crucial perspectives of knowledge management arise.
First, Samsung Electronics Company’s business perspective and competitive strategy determines the extent to which the company invests in knowledge. This is influential in planning the corporate and business strategy of the company, creating and marketing knowledge-based consumer electronic products and services and creation of joint ventures with other competitors such as Phillips, Sony and Toshiba among others. Second, Samsung Electronics Company management perspective focuses on the use of knowledge to realize the company’s business objectives and low-cost strategies.
This enables Samsung Electronics Company to create, acquire, retain, transfer and use knowledge resources. From this perspective, Samsung Electronics Company is able to monitor knowledge-based processes and functions, create policies and practices that enhance knowledge management and determine company’s activities that require knowledge. Third, Samsung Electronics Company’s operational perspective emphasizes the creation of knowledge inventory systems and the determination of the status of company’s available knowledge. This Samsung Electronics Company to build their human resources, conduct research and development and apply the acquired knowledge effectively (Muzzucato, 2006, p. 305).
The current low cost leadership strategy of Samsung Electronics Company requires the company to have access to vast knowledge on both domestic and foreign consumer electronics market. In knowledge-based theory, business companies such as Samsung Electronics Company must significantly invest in knowledge management to be able to effectively implement their differentiation or low cost leadership business strategies.
Samsung Electronics Company kknowledge management involves managing information tools to assist managers and the general company’s workforce in performing their responsibilities. Knowledge management systems such as management information systems thus help Samsung Electronics Company with the collation of vital data and subsequent production of information in terms of reports. These reports help the management personnel in problem solving and decision making (Muzzucato, 2006, p. 305). Knowledge management systems provide managers with up-to-date information.
An information system is knowledge-based asset and as such an integral part of a business company that plays significant roles in decision making and problem solving in a company. Current trends in the business environment require business companies such as Samsung Electronics Company to establish knowledge management systems which are business strategy-oriented. Knowledge management systems provide business companies; organizations and firms with a competitive advantage to enable them perform better than others especially their competitors. All these require business companies to have access to relevant business operations knowledge.
Knowledge-based assets have enabled Samsung Electronics Company to have access to unique resources and use them more efficiently via superior business strategy knowledge and information assets (Muzzucato, 2006, p. 305). It is this knowledge that has enabled Samsung Electronics Company to achieve competitive advantage in the global consumer electronics market. The current low cost leadership or differentiation strategy is knowledge-based.
The Science & Technology Policy Adopted by Samsung
Samsung’s science and technology policy revolved around the manufacture of semi-conductors. Since Samsung Electronics Company was spun off from the giant Samsung Group, the company aspired to be the world’s largest manufacturer of 20 electronic products. Samsung Electronics Company dominates the world’s semiconductors industry and has also expanded to the manufacture of optical storage electronic devices; flash memory electrical devices, next generation mobile phones, liquid crystal displays, as well as DRAM chips.
Samsung Electronics Company as a global company has worked hard to set standard for competitors in the consumer electrical products industry. The company also adopted and implemented standardized emerging technologies such as WiBro, MPGE-4/7, memory, DVD, as well as DMB among other technologies (OECD, 2009, p. 88).
One of the most important science and technology policy adopted and implemented by Samsung Electronics Company was DRAM (Dynamic Random Access Memory) technology development strategy. This policy can be categorized into three main periods. The first period was the adoption and implementation of 64K DRAM chips. This period majorly depended on Samsung Electronics Company’s resources for the required technologies.
The second period led to the development of up to 256K DRAM chips. This period was characterized by a higher reliance on the externally acquired or borrowed technologies. In the third period, internally acquired technologies played a crucial role in the development of the M DRAM chips (OECD, 2009, p.88).
In the first stage of Samsung Electronics Company’s science and technology policy adoption and implementation, the company focused on purchasing technologies from overseas. Some of the technologies that Samsung Electronics Company imported were design and after-fabrication technologies which were more complicated and difficult. However, with time Samsung Electronics Company accumulated the necessary technologies for the manufacture of the DRAM, home appliances, as well as other consumer electronic products.
In the second stage, Samsung Electronics Company imported the design technology for the 256K DRAM from Micron technology. The electronics company also adopted wafer fabrication and assembly technologies. It is during this stage that Samsung Electronics Company started receiving technology training and advice from experts (OECD, 2009, p. 88).
In the last stage of the adoption and implementation of Samsung Electronics Company science and technology policy, acquisition of design technology was based on technical information from advanced companies, reverse engineering, as well as other relevant DRAM designs. Other developments during this stage included the use of internally accumulated knowledge to develop wafer fabrications assembling technologies, minimizing time for commercialization of new electronic products, mass production lines and joint ventures in product development (OECD, 2009, p. 88).
Kim, R., 2007. Samsung’s competitive innovation and strategic intent for global expansion. Problems and Perspectives in Management, 5 (3), pp. 131- 137.
OECD, 2009. OECD Reviews of Innovation Policy: Korea. Paris: OECD Publication.
Muzzucato, M., 2006. Strategy for business: A reader. London: Sage Publications Ltd.
fsc.yorku.ca., 2010. Knowledge-Based Theory of the Firm. Web.