Samsung electronics Co., Ltd. (SSNLF), is one of the pioneer companies in the field of mobile and electronics manufacturing and is holding a good share of market as of now in the world and is amongst one of the arch rivals of the renowned company Apple. The company has a number of products and is coming on with the new ones every now and then and is therefore ranked seventh in the world in terms of world’s most renowned brands. It has also filed a number of patents iver a past couple of years (Timothy).
Holding the shares of this company has never been easy for the investors. Though the company has been one of the prospective avenues for the investment particularly for the US investors, but the shares have fluctuated a lot due to heavy competition in the recent past. But looking at the overall performance and strategy of the company, it is recommended to invest in the given shares.
The company chosen is Samsung Electronics. In the year 1938, a store trading in grocery was formed and inaugurated by Lee Byung-Chull. China and its provinces started importing from Korea in which Samsung had started its business of noodles and other goods. The word Samsung in Korean language means ‘three stars’ which was picked by the founder himself when the company was at the stage of incorporation with the motive that one day the company will become powerful and everlasting just like the stars in the skies (Belton).
The leader of home appliances came into existence as Samsung. It diversified its business up to different criteria being infotainment which relates to information as well as telecommunication where life care business was there as taking utmost care of the environment around and the society as a whole involving energy conservation and health care. It wanted to meet the demands of the present consumers as well looking after the future generations for a better tomorrow of the society as a whole. For a better lifetime of the shoppers United Nations agency square measure the top users of any product or service it developed 3 business divisions being shopper physics, IT & Mobile communications and Device Solutions. These 3 divisions established to deliver its merchandise of a wonderful quality.
Now, Samsung physics has been the foremost rising Company within the world (Alexander).
At Samsung there are 3 divisions based on the physical science of the product. The names of these divisions are IM division, DS division and the metal division. The divisions have been constructed in such a fashion to give a competitive edge to the company based on products. The products being manufactured by metal division includes laundry machines, washing machines, the refrigerators, TVs, monitors, etc. On the other hand, the IM division of the company is involved in manufacturing and selling of the smartphones, telecommunication devices, network systems and the final division namely DS division is responsible for manufacturing and selling chips, flash cards, DRAM and completely different elements to be utilized in IT and mobile devices (Choy).
The company has a wide organizational chart and the same can be seen from 2016. At the end of 2016, Samsung had over 220 operational hubs worldwide. Besides that the company also had sales and the manufacturing subsidiaries and vogue and R&D centres all across the world. The company also has 15 regional offices in Korea, Europe, Africa, North America and other different parts of the world (Werner).
Samsung natural philosophy is presently manufacturing banker’s bill of its mobile phones in Vietnam and entirely pool ball in Korean Peninsula. At present, Samsung physics is running six moveable manufacturing facilities at intervals the six countries of Vietnam, China, India, Brazil, Indonesia, and Korean Peninsula (Vieira, O’Dwyer and Schneider).
Samsung really incorporates an unconditional interest within the iPhone X being a large success. According to The Wall Street Journal, the corporate stands to form around $110 from every phone sold , that in all may end in billions over the corporate even created on its own most-recent flagship, the Galaxy S8. To be clear, all that money can attend Samsung cluster, the conglomerate, as hostile specifically the mobile division of the corporate. Why the windfall? Samsung created the OLED show, NAND flash, and DRAM chips within the iPhone. It’s presently the sole company capable of producing these things at the amount that Apple wants, which implies Apple should get the components from Samsung (Knechel and Salterio).If the iPhone X sells the approach analysts assume it’ll, which means Samsung stands to form billions of bucks off its competition. In fact, the Journal reports that one analyst thinks Samsung can probably earn $4 billion additional from marketing components to Apple than it did from sales of its own phone. “These are 2 of the biggest firms on the world deeply tied at the hip and directly competitive,” David Office, a prof at Harvard grad school, UN agency has studied Apple and serves on Intel firm’s board told The Journal. “That makes this stand out compared with nearly any relationship you’ll think about (Raiborn, Butler and Martin).”
How much of an iPhone is formed by Samsung?
The company apple doesn’t produces the APPLE IPhone on its own. The company neither manufactures the wholesome product nor assembles it on its own. The internal elements of the phone are received from the variety of supplier all around the world and the same is being reassembled in one of the Taiwanese firm having its plant in Shenzhen, China. The name of the company is Foxconn. iSuppli, one of the market research firms has found out that a substantial number of parts that go into the making of the iPhone comes from Samsung and therefore it plays a very critical role in the evolution of the Apple as the number one company. Some of the important parts being supplied by Samsung includes memory, operating software, application processor and the DRAM. All this puts Samsung in a slightly uncommon position as it is rival of Apple and the supplier of Apple at the same time. This has been the business model of Samsung for quite a long time now. Apple receives more than half the percentage of the goods from associate and competitor companies and that helps Apple to focus on its strength like ease of service, anti-virus enhancements, software and hardware maintenance, etc.
Even after so much of dependency on Samsung, Apple sued the company in April recently on the looks of Galaxy S phone which was mentioned to be imitated as iPhone, claiming that the hardware and the looks were being copied but Samsung retaliated by means of counter question.
Samsung has listed its company in a pair of overseas stock markets, the London securities market and conjointly the Luxemburg stock exchange. Samsung has been the flagship company in terms of revenue and profitability growth in the past years. It was on the growth spree until 2013 when the revenues achieved the record height of 228.69 trillion KRW except for the small period in 2008 when the global financial crises was going on. However, from 2014, the company started losing its market share to the competitors. Post 2014, the revenues of the company has fell down by 9.83% whereas the profitability declined by 31% in 2014 as compared to the year before. The same business trend continued for the next 2 years as well and had an impact on both the topline as well as the bottomline. One of the major business divisions DS was expected to rise after 3 continuous years of the fall in performance, due to the rise in the demand of semiconductors. Samsung came up with the new strategy with the mission of internationalisation, mergers and acquisitions, new product development and re-examination of the overall strategies for growth and development so that it can gain the lost market share and thereby have an improvement in the share prices as well. Samsung also came up with the new 40 nm semiconductor technology and DRAM (dynamic random access memory) which helped the company in gaining the lost market share and holding the no. 1 position in the market in DRAMexchange. Thus, it can be said that the company had wide strategies and have come up with real good quality products in order to overcome the market spike (Oberoi).
Samsung Asian nation crossed the 50000 crore sales landmark in 2016-17 and becoming one of the biggest MNCs to be filling the company’s financials with the Registrar of Companies (RoC).
The Korean giant’s total gain, at the side of turnover and various gain, grew by 15.5% to Rest fifty 5, 511.9 whole number in FY 2017 from Rest forty eight, 053 whole number among the previous year despite the introduction by many Chinese companies and their smartphones in the world market which usually came at a very lower price.
Samsung Physics is also one of the leaders in the world in terms of production of the semiconductor and the telecommunication devices and the digital media. It has become one of the most valuable brands off late. The company is headquartered in Suwon and employs more than 300000 people all around the world. The company also spends nearly 15 billion US greenbacks on the research, analysis and development. It also has most number of patents filed in US (Gooley).
Samsung is one of the leading brands in the smartphone manufacturing and selling and is occupying the pioneer position in the industry with Apple being the arch rival and having neck to neck competition. It sold nearly 300 million smartphone sets in 2017 and other competitors besides Apple includes Oppo, Vivo, Huawei, etc. It also holds quite a sizeable market cap in terms of Android powered Samsung Galaxy tab and is 2nd largest pill merchant across the planet, accounting for nearly 16% of the worldwide market (Marques).
Besides having giant share in the mobile segment of business, it also holds a considerable and respectable share in the semiconductor and TV business (Goldmann). It has been a consistent player in the market place for almost a decade and has been the largest manufacturer since 2008. At the same time, it is also the largest producer of the liquid show panels and the planet semiconductor market. It left behind Intel in 2017 to become the market leader in the semiconductor segment and having a share of more than 15%.
In case the ratio analysis is being studied, it can be seen that the company has performed invariably good and outstanding in terms of the profitability where each one of the profitability ratios, the return on equity, the return on assets, the gross margin, the net margin, all have increased in the year 2017 as compared to the year 2016 and is way above the industry trend. It just goes on to show the overall dominance of Samsung in the marketplace whereby it is having the leadership position (Linden and Freeman).
In terms of the efficiency ratios again, though it is behind the industry trend but yet again it has improved as compared to the last year in terms of the accounts receivable turnover ratio and the inventory turnover ratio. This goes on to show that the company has good internal control measures and thus is gaining in terms of cash flow and working capital management.
In terms of the liquidity ratios the company is having the liquid ratio of 2.15 times which is way above the normal required ratio of 2 times and hence Samsung will be able to pay off its short term debts in time and not default in the same (Bromwich and Scapens).
Lastly in case the solvency ratios is being analysed, we can see that the overall debt proportion is only to the tune of 7.15% which is above industry trend but still it shows that the company is relying and doing business majorly on equity. The times interest earned ratio has improved considerably in 2017 and is currently at 84.51 times which is very healthy indication.
The EV/EBITDA NTM relation of Samsung natural philosophy Co., Ltd. is significantly not up to the median of its peer group: around seven.00. Per these cash ratios Samsung natural philosophy Co., Ltd.’s valuation has been lagging far behind the market valuation of its competitors (Kewell and Linsley).
The EV/EBITDA NTM relation of Samsung natural philosophy Co., Ltd. is significantly not up to the common of its sector (Consumer Electronics): six.12. per these cash ratios Samsung natural philosophy Co., Ltd.’s valuation is far below the market valuation of its sector.
While Samsung is also a massively well-liked whole, it has never been simple to hold the shares of the company especially for the US investors. This is because of the fact that the company has a huge competition in the marketplace and is holding an ever collapsible smartphone segment. In order to counter the same, the company has come up with one of the hybrid product, known as “smartlet,” which is basically a 5 inch smartphone that unfolds into a 7 inch pill as per one of news agencies in Korea, ETNews.
References
Alexander, F.K. “The Changing Face of Accountability.” The Journal of Higher Education 71.4 (2016): 411-431.
Belton, P. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd, 2017. <https://www.routledge.com/Competitive-Strategy-Creating-and-Sustaining-Superior-Performance/Belton/p/book/9781912128808>.
Bromwich, M and R.W Scapens. “Management Accounting Research: 25 years on.” Management Accounting Research 31.1 (2016): 1-9.
Choy, Y. K. “Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis.” Ecological Economics (2018): 145. <https://doi.org/10.1016/j.ecolecon.2017.08.005>.
Goldmann, K. “Financial Liquidity and Profitability Management in Practice of Polish Business.” Financial Environment and Business Development 4.3 (2016): 103-112.
Gooley, J. Principles of Australian Contract Law. Australia: Lexis Nexis, 2016.
Kewell, B. and P. Linsley. “Risk tools and risk technologies.” The Routledge Companion to Accounting and Risk, 15 (2017).
Knechel, W.B and S.E Salterio. Auditing:Assurance and Risk. fourth. New York: Routledge, 2016.
Linden, B and R.E Freeman. “Profit and Other Values: Thick Evaluation in Decision Making.” Business Ethics Quarterly 27.3 (2017): 353-379.
Marques, R. P. F. “Continuous Assurance and the Use of Technology for Business Compliance.” Encyclopedia of Information Science and Technology (2018): 820-830.
Oberoi, J. “Interest rate risk management and the mix of fixed and floating rate debt.” Journal of Banking and Finance 86 (2018): 70-86.
Raiborn, C, J.B Butler and K Martin. “The internal audit function: A prerequisite for Good Governance.” Journal of Corporate Accounting and Finance 28.2 (2016): 10-21.
Timothy, G. “Managing interest rate risk in a rising rate environment.” RMA Journal, Risk Management Association (RMA) (2004).
Vieira, R, B O’Dwyer and R Schneider. “Aligning Strategy and Performance Management Systems.” SAGE Journals 30.1 (2017).
Werner, M. “Financial process mining – Accounting data structure dependent control flow inference.” International Journal of Accounting Information Systems 25 (2017): 57-80.
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