The primary purpose of this task is to discuss about the porter five forces analysis of Samsung electronics and further the paper also explains some strategies that should be pursued by the company to maximize profitability in the global market.
Samsung electronics was formed in 1969 in South Korea. It is one of the biggest manufacturers of electronic components like semiconductors, chips, flash memory, lithium ion batteries and hard drive devices (Bondarenko, 2017). It has been analyzed from the various studies that Samsung uses innovative tools and methods such as pestle analysis, SWOT analysis and porter five forces analysis to compete with rivals in the global market.
Porter five forces analysis is used or implemented to analyze and evaluate the business strategies of Samsung Company. This method is a tool or technique to assess how each of the market factors impacts the organizations like Samsung activities and operations (Rothaermel, 2015). The porter five forces analysis for Samsung Corporation have been discussed below.
Industry rivalry: This factor is especially vital and important for Samsung to cope up with rivals in the global market. There is high and intense competition among the existing player in the global market. The primary cause behind this competition is that there are enormous major brands such as Apple, LG, Toshiba and Microsoft. The level of competition is immense and high and it is why the new companies find it complex to enter into the market. The biggest leaders are well known brands and there are tremendous elements that have led to immense competition in the international market. These well known brands have to depend on the advanced technology and innovation for growth, expansion and market penetration in the global market. It is stated that the company cannot take it position in the global market for offering products and services due to high and immense competition. Along with this, the company faces the equivalent of the “Cola wars” in the competitive markets such as India where Samsung has to cope up and struggle with various players at global and domestic level as well. This put direct impact on the performance and efficiency of Samsung Company (Managementstudyguide, 2018).
Threats of new entrants: It is noted that threats of new entrants for Samsung brand is weak and low. It is very complex to enter into the new market because a host of elements have to be taken into consideration like supply chain, logistics and distribution network. Along with this, regulatory pressure and strict rules have increased which has further become a challenge for the new entrants. It is portrayed that Samsung has entered various emerging markets through a step by step strategy and has also captured the markets that have been originated to be unprofitable and ineffective. The threat of new entry is quite strong and high because one can enter at a smaller scale but the company cannot compete with stronger and well known brand like Samsung. Thus, it is one of the significant factors that provide innovative benefits to the company to a large extent (Pratap, 2017).
Bargaining power of buyers: It is analyzed that Samsung is a leader in consumer electronic industry. Samsung makes innovative and unique products like mobile products, Home theatres, home appliances, TV and computing related products. It is noted that bargaining power of buyers is low and weak. In the 21st century, there are various elements that have led to increase in the bargaining power of the buyers. The buyers are well informed and educated and they have various options for the mobile products. They can easily select a product of their choice from the various sources and shops. There is no switching cost thus the bargaining power of buyers becomes high and strong. It is elucidated that there is high competition in the consumer electronics products and most of them are struggling for the buyers. The overall bargaining power of the customers is low to moderate because there are enormous elements that moderate the customer’s bargaining power. This factor puts direct impact on the efficiency and effectiveness of Samsung operations and activities. Samsung is a well known brand and it continuous focuses on the advanced and innovative technology to lead high profitability and revenue (Pratap, 2017).
Bargaining power of suppliers: The suppliers play a vital role in Samsung Corporation in order to maximize profitability and returns globally. The bargaining power affects the progress and targets of the company highly. The higher and strong bargaining power of vendors, the lower is the rivalry strength of the company. The bargaining power is very low and weak in the hands of the suppliers (E. Dobbs, 2014). The weak and low bargaining power of the vendor is due to various elements and one of them is their mini size and weak financial strength. Along with this, the company can easily switch from one vendor to a new one. This affects the targets and efficiency of Samsung largely. It is noted that Samsung frame the rules, policies and strategies that the suppliers are needed to pursue and conducts investigations on daily basis to analyze and check whether suppliers are following rules, policies and approaches or not. There are tremendous rules and policies related to child labor, labor welfare, health and safety and sustainability. All these rules and policies are significant and the company can prevent the suppliers or vendors that do not obey the rules and policies (Managementstudyguide, 2018).
Threats of substitutes: The threat of substitute is moderate high for Samsung Company. There are ample of competitors such as Sony, LG and local and international brands that render competing mobile products and services. The switching costs for the consumers are very low. The elements that moderate the threat from the substitutes are a great brand image, advanced technological innovation and similar various elements such as consumer convenience. Low threat of substitute leads higher outcomes and profitability of Samsung (Pratap, 2017).
Now it is observed that porter five forces analysis helps in understanding and analyzing the structure of industry and the way they change. The porter forces determine and assess the intensity of competition and thus, the profitability and effectiveness of the company. This analysis further helps in analyzing and measuring the strategies, policies and approaches of the competitors (Managementstudyguide, 2018).
There are various strategies that can be used by the company to overcome the competitors in the international market. The four strategies that could be used to compete with competitors in the market have been discussed below.
Cost leadership strategy: It is one of the vital strategies that can be used by the company to grab the market and to attain the competitive edge in the global market. In order to attain a sustainable and unique competitive advantage, the company needs to select an innovative and effective strategy. Cost leadership is a strategy to attain competitive benefit and maximize market share by lowering the cost of mobile products in the marketplace. By using this, the company can attract maximum number of customers globally (Porter, 2011). It is investigated that the company needs to reduce the prices as compared to main rival Apple Inc. to beat the competitors internationally. Samsung’s low cost strategy can enable the company to appeal to lower income customers. The firm should manage the cost by pursuing vertical integration in the competitive market (Hill, Jones and Schilling, 2014).
Differentiation strategy: One of the vital strategies that could be pursued by the company is differentiation strategy. By implementing this strategy, the company can able to differentiate its mobile products and services from the competitors who are offering similar products like Samsung. Differentiation strategy is a vital for long term growth and success of the organization. Rendering the highest quality mobile products, the excellent solutions, an exclusive aspects or methods are significant examples of ways to distinguish on specific criteria ( Sim, 2011). By initiating this strategy, Samsung electronics can strive with competitors in the global market by maintaining reasonable prices of the mobile products (Kokemuller, 2018).
Innovation strategy: It is fundamental strategy that could use by the company to create a competitive edge in the international market. An innovation strategy is a plan to grow and increase market share or profitability through product and service innovation (Valipour, Birjandi and Honarbakhsh, 2012). When it comes to generating the solution, an excellent innovation strategy should also shows whether a product improvement or a disruptive approach is best. By using this strategy, Samsung can satisfy the needs, demands and expectations of the customers along with this, innovation strategy also helps in taking innovative opportunities widely. Apart from this diversification can be done by implementing the innovation strategy at the workplace (Valipour, Birjandi and Honarbakhsh, 2012).
Product development strategy: This strategy helps in providing enormous benefits to Samsung by reducing threats and risks of the market. Product development is a process or approach of bringing a new innovation to customers from concept to testing and analyzing through distribution (Cho and Lee, 2013). Various innovations can be done in existing products to cope up with rivals in the international market (Grant, 2016). By implementing this strategy, Samsung electronics can make an attractive and effective image in the minds of the customers. Furthermore, this strategy also helps in attaining long term mission and vision internationally (Grant, 2016).
Conclusion
It is concluded from the above mentioned analysis that porter five forces analysis is needed to stand out against the competitors internationally. Along with this, the company needs to focus on the various corporate level and business level strategies to stay in the international market.
References
Bondarenko.P.2017. Samsung South Korean company [Online]. Available from https://www.britannica.com/topic/Samsung-Electronics [Accessed as on 29th October 2018].
Cho, J. and Lee, J., 2013. Development of a new technology product evaluation model for assessing commercialization opportunities using Delphi method and fuzzy AHP approach. Expert Systems with Applications, 40(13), pp.5314-5330.
Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Kokemuller.N.2018. Differentiated business strategies [Online]. Available from https://smallbusiness.chron.com/differentiated-business-strategies-20638.html [Accessed as on 29th October 2018].
Managementstudyguide.2018. Porter five forces analysis of Samsung [Online], Available from https://www.managementstudyguide.com/porters-five-forces-analysis-of-samsung.htm [Accessed as on 29th October 2018].
Porter, M.E., 2011. Competitive advantage of nations: creating and sustaining superior performance (Vol. 2). Simon and Schuster.
Pratap.A.2017. Samsung five forces analysis [Online]. Available from https://www.cheshnotes.com/2017/10/samsung-five-forces-analysis/ [Accessed as on 29th October 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Sim, J.B., 2011. A Study on Differentiation Strategy for Tablet PC and e-Book Reader by a Comparative Analysis of Acceptance. Diffusion Factors. Korean management science review, 28(1), pp.25-42.
Valipour, H., Birjandi, H. and Honarbakhsh, S., 2012. The effects of cost leadership strategy and product differentiation strategy on the performance of firms. Journal of Asian Business Strategy, 2(1), p.14.
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