Samsung Group’s Entry Modes into Global Market

Introduction

This paper underscores the importance of aligning business goals with market dynamics in international trade. The document is divided into two sections. The first one outlines a short list of characteristics of four types of companies that plan to enter foreign markets to expand their businesses. Samsung is selected as a case study for the second part of the paper, which evaluates and recommends three foreign market entry strategies for three types of markets: low, middle and high income markets. The last section of the report summarises the main findings.

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Market Selection

A Niche European or USA Based Prestige Automobile Manufacturing Company – BMW

  • A saturated domestic industry
  • Provide a greater insulation from economic risks of operating in one market
  • It may be cheaper to produce automobiles in an overseas country
  • Take advantage of economies of scale

A Small or Medium-Sized European Prestige Fashion Design House and Retail Company – Burberry

  • Access to new talent pools (leveraging expertise of local designers)
  • Provide insulation from economic risks of operating in one market
  • Manage competitive rivalry because peers are already in overseas markets
  • The opportunity to tap into new revenue sources

A Japanese or South Korean Electrical Appliance and Consumer Electronics Company – Samsung

  • Promoting distribution efficiencies through the establishment of effective global systems
  • Provide a greater insulation from economic risks of operating in one market
  • Create new partnerships with other companies through horizontal or vertical integration
  • International expansion could lead to tax savings

A Large USA-based Toiletries and Personal Care Products Manufacturing Company – Johnson and Johnson

  • Develop synergies in strength and resources, thereby expanding the value of the global expansion
  • Provide a greater insulation from economic risks of operating in one market
  • The creation of a homogenous culture across the globe makes it possible to sell the company’s products across international boundaries

Modes of Entry

Selecting the best modes of entry for different companies depends on how well business processes align with production and distribution strategies (Yu & Lindsay 2017; Ye et al. 2018). This section of the paper describes three strategies that could be used by Samsung to venture into three types of international markets, which assume the characteristics of low-income, middle-income and high-income markets with varying levels of infrastructure development and governance systems.

Emergent Nation with Low per Capita Income

An export strategy is likely to be the best option for Samsung to pursue in a country with a low income per capita and some level of political instability because the market may not have the capacity to support the activities of the mobile phone company if it was to set up a factory in the same location (Castillo & De Vries 2018). Furthermore, political instability may disrupt the operations of the Korean-based firm if it was to build a plant in the selected nation. The export strategy is appropriate because consumer electronics products are relatively easier and cheaper to ship compared to manufacturing them in the destination market (Snihur & Tarzijan 2018). Additionally, the export strategy would better protect the company’s trademark in the international market because electronic products are often prone to counterfeiting and imitation (Shen, Puig & Paul 2017; Castillo & De Vries 2018). Consequently, this market entry strategy would provide Samsung with more control of its foreign market operations in ways that other market entry plans would not (Redding, Xie & Tang 2018).

Lastly, pursuing a direct export strategy in the selected nation would allow Samsung to better tailor its business strategy to the market needs of the host country without requiring any changes to its manufacturing strategy (Miocevic & Morgan 2018). For example, it may simply stop shipping products that do not have a positive market reception and substitute them for others that are positively received or have a higher profit margin in the market (Shen, Puig & Paul 2017; Castillo & De Vries 2018). An export strategy allows for this flexibility because other foreign market entry strategies which require a lot of capital investments may not accommodate the same agility without significant cost implications on the business (Brueller, Carmeli & Markman 2018). Therefore, the best strategy for Samsung to use in an emergent nation with a low income per capita should be an export-oriented plan. However, as the subsequent sections below point out, the same strategy would not be applicable in a middle-income country.

A Market with Medium per Capita Income, Unequal Income and Improving Infrastructure

A large later stage emergent country with rapid (but slowing) rate of growth, large population, medium per capita, unequal levels of income, and less developed (but improving) infrastructure poses different risks that Samsung should consider before making a debut in it. In such an environment, the best market entry strategy to use is a joint venture. This plan is appropriate for the company because it is synonymous with rapid growth and increased productivity (Xia et al. 2018). The joint venture should be pursued with another company that has a similar level of expertise in technical development or growth as recommended by Booltink and Saka-Helmhout (2018). Primarily, the firm should combine its resources and expertise with the host company to exploit market opportunities present in the industry (Shen, Puig & Paul 2017; Castillo & De Vries 2018).

The joint venture strategy is chosen for this market because there is a significant level of risk present in a country that has a developing infrastructure network and unequal levels of income. The plan of action is going to help Samsung share this risk with its partners (Sinha & Sheth 2018). At the same time, the proposed action allows it to invest some resources in the international expansion strategy because it will have some shares in the joint venture plan, unlike the export strategy identified before, which may not require a lot of capital investment from the electronics company (Lemessa, Watabaji & Yismaw 2018). Having some “skin in the game” for a later stage emergent country will secure an opportunity for Samsung to enjoy the profits that could come from a successful implementation of the venture (Park et al. 2018). The positive prospects for success hinge on the fact that the emergent country is still growing and has a medium per capita income with a presumably vibrant middle class that would spur the next phase of growth for the firm.

A significant opportunity that the joint venture strategy would provide Samsung is the access to an established distribution network (Patel, Criaco & Naldi 2018). This operational attribute is essential for the success of the Korean-based company because the targeted country is a large one and having an elaborate or well-established distribution network would make sure that it reaches all parts of the market. Comparatively, establishing a new distribution network for Samsung (exclusively) could be costly for the enterprise and possibly lead to a significant dip in profits for the business. The joint venture shields the firm from such an outcome (Di Comite, Nocco & Orefice 2018). Furthermore, it provides Samsung with the market knowledge needed when formulating a sales plan.

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Information relating to the best pricing strategies, location requirements, legal provisions, and customer preferences would also be availed by the joint venture partner for use by Samsung. This data would be instrumental in making sure that the company formulates an effective marketing strategy that advances significant milestones or gains made in research and development (Heard, Menezes & Rambaldi 2018). Therefore, the joint venture strategy is appropriate for a market that has a medium per capita income and is still benefiting from an expanding infrastructure. However, the same strategy would not be wholly beneficial for Samsung in a more advanced market that has a high-income level and with a well-developed infrastructure with efficient administrative systems. The best market entry strategy to use in such a market is described below.

Mature Markets

A mature, large, high-income, developed country with slowly growing or static GDP per capita with well-developed infrastructure, political stability and efficient administrative systems poses different environmental dynamics for Samsung. A market entry strategy that allows the electronics firm to have maximum control of the business would be the best plan of action to use. In line with this view, an acquisition strategy is the best market entry plan to adopt because it would allow Samsung to exercise the control needed in its foreign market venture (Surdu, Mellahi & Glaister 2018). Although this approach is often complex (may need regulatory approval and is costly), it offers the highest potential for above-average returns (Lemessa, Watabaji & Yismaw 2018).

The presence of high income, a well-developed infrastructure network, and political stability means that the company’s external environment is less vulnerable to operational risks that would affect the business’s performance. The potential for making huge profits is also significantly higher in such a market (assuming the firm could implement the right competitive strategies) (Kim, Lee & Stoel 2017). Therefore, there is no need for partnering or collaborating with another company to reap the benefit of such an enterprise. Indeed, establishing a wholly owned subsidiary through an acquisition is the best approach to use in this context because it gives Samsung the opportunity to control its operations (Buckley 2018). Here, the South Korean company would be solely responsible for its decisions, profits and losses. The presence of efficient and mature administrative structures in the host nation would also make sure that few unforeseen factors affect the company’s operations. A slowing or static GDP would pose the biggest challenge in the adoption of this market entry strategy, but since Samsung would be in a position to make individual decisions, it can effectively modify its business plan to accommodate this variable (Florio, Ferraris & Vandone 2018). Comprehensively, the adoption of an acquisition strategy is specifically chosen for the selected market because it gives Samsung the independence it needs to exploit market opportunities in the new country.

Conclusion

This paper shows that the adoption of foreign market entry strategies requires a careful understanding of the political, economic and social factors affecting the destination markets. The second part of this paper has shown that three independent foreign market entry strategies could be adopted by Samsung as it strives to exploit market opportunities that could exist in three types of countries. The first strategy is an export-oriented one, which is customised to work in a low-income market with political instability and relatively underdeveloped infrastructure. The justification for employing this plan of action hinges on its ability to provide Samsung with the flexibility needed to manoeuvre market dynamics. Comparatively, the joint venture strategy has been selected for a market with medium per capita income, unequal earnings and improving infrastructure. The justification for recommending this type of market entry strategy hinges on its success in promising markets that have almost equal opportunities for growth and failure. In other words, the plan of action provides the opportunity to maximise profits and distribute operation risks.

The last strategy recommended in this paper is hinged on an acquisition model and it is expected to work in a market that has a high income, efficient governance structures and a sophisticated infrastructure. The motivation for selecting this market entry model is its ability to offer absolute control of the business to Samsung. Broadly, although the three strategies mentioned in this review show how the South Korean giant could exploit growth opportunities in different types of markets, the success of their adoption largely depends on the proper understanding of business dynamics highlighted in the first section of the report. Therefore, aligning business goals and market dynamics is instrumental in realising the best outcomes of internationalisation.

Reference List

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Brueller, N, Carmeli, A & Markman, G 2018, ‘Linking merger and acquisition strategies to postmerger integration: a configurational perspective of human resource management’, Journal of Management, vol. 44, no. 5, pp. 1793-1818.

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