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Samsung Electronics: Global Strategies Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> Samsung Electronics: Global Strategies

Question 01: What recommendations would you make to Chairman Lee regarding Samsung’s response to the threat of large-scale Chinese entry?

The recommendation for the Chairman of Samsung Mr. Lee will be to enter new markets and explore new innovative products to remain sustainable in the Chinese market. As for now, the company has been under severing threat from the local Chinese players who offer products are very cheap rates which is quite difficult for Samsung to manage.

Therefore, the recommendation for the company will be to introduce new consumer electronic goods for the market. For instance, the company shall look to offer medical devices, security camera, etc which can be a diverse profile for Samsung, and this will also help the company to eliminate the competition with the local players where Samsung will be playing in an entirely new market.

Question 02: What were the factors that led to Samsung’s dramatic rise over the past 20 years?

The major factors that led to the dramatic rise of Samsung were the fact that it prioritized speed as a major source of competitive advantage. The company looked to introduce new technologies in all the different business sectors at a faster pace than the competitors. Along with this, Samsung also invested a lot on new product development.

Moreover, another major success factor has been the element of vertical integration where most of the manufacturing is done in house. Samsung has also been successful because it has hired talented bunch of engineers which have been working in more than 79 countries to deliver high quality electronic consumer goods to the customers.

Another major success factor for Samsung has been the fact that it produces customized goods for particular segments. For instance, Samsung introduced Rex Series in mobile phones for the Indian market and the developing market where it offered high quality features at reasonable rates.

The company has always been able to penetrate in developing markets and sustain in mature markets. The above factors can be considered as major success attributes for Samsung.

Question 03: What are the sources of Samsung’s cost advantage?

The major source of cost advantage for Samsung has been the fact that the company produces its products in various parts of the world, rather than relying on the home country. For instance, India and China have been two markets where the products that are manufactured by Samsung are reasonable because of the low labour cost and cheap raw material cost.

Along with this, another major source of competitive advantage for Samsung has been the fact that the company has been offering products that are priced for the specific market.

For instance, the Indian market is less developed and people look for cheaper products, therefore, to sustain in Indian market, the company offers low cost products and electronic consumer items. This is generally made possible with the help of vertical integration.

Question 04: What are the sources of Samsung’s price premium?

The major source or Samsung’s price premium has been the fact that the brand name of Samsung has an image and customer loyalty. The company cannot just reduce prices in order to stay competitive and sustainable in the market. For instance, in China the products offered by Samsung in cell phones are ranked number six, which is quite low.

Samsung Electronics Global Strategies Case Solution

The reason for this rank is because, competitors in the market offer similar features cell phones at half the price of Samsung. However, Samsung cannot just reduce the prices because it has invested huge amounts in research and development, product innovation, human resource, marketing etc. This therefore ensures that the company has to charge a premium price for its electronic consumer goods.

Question 05: What will be the most essential steps to implement the Global Strategies for the immediate future?

The major step which Lee has to take to actually implement Global Strategies at Samsung in the competitive markets such as India and China is to further penetrate in these markets. The most essential steps that need to be taken by the company in the near future are to spend on advertising and marketing of its products. Samsung, already spends ample revenues on advertising, however, in the future the company should look to work upon ATL and BTL activities which can increase the chances of implementing global strategies.

Along with this, the company shall also look to introduce new product range such as security cameras, medical electronic devices which are not being manufactured by any of the competing rival firms. BY entering into this segment, Samsung can increase its sales in the market. .................

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Organization Type and Strategies

Samsung Electronics is one of the flagship subsidiaries of the Samsung Group, which is focused on consumer electronics, DRAM and NAND Flash, smartphones, feature phones, microcontrollers and microprocessors, wireless communication chips and foundry (McGrath, 2010). Samsung Electronics is Korea’s largest electronics industry and the largest subsidiary of the Samsung Group. Among the list of the 100 most famous trademarks in the world, Samsung Electronics is the only Korean trademark and a symbol of the Korean national industry. Samsung’s vision for 2020 is to create a commitment to a better world with a richer digital experience through innovative technologies and products (Samsung, 2019). Samsung’s strategy is to create sustainable management of comprehensive value. Samsung not only creates economic value by maximizing profits and shareholder value but as a global citizen, Samsung assumes greater responsibility to create social value (Samsung, 2019).

Competitors, Structure, and Key Players

Samsung is better at learning from its competitors than anyone else (Nisen, 2013). Samsung is a competitor that can stand shoulder to shoulder with Apple. Apple is a technically talented designer, and Samsung is a top-smart businessman. The early Samsung was once seen by the industry as a “cottage” enterprise that produces cheap products. Later, Samsung developed a new brand strategy, which shifted its original business core from large-scale manufacturing to the production of its brands. Moreover, Samsung pays attention to competitors’ new products and strategies and can compete with Apple with a larger screen and more features. Samsung also has many advantages over the design and production capabilities of core components that other electronics manufacturers do not have. Samsung has a completely independent vertical integration kingdom, and many key components can be self-sufficient, which makes Samsung’s vertical integration more economic of scale and efficient. The advantages of the supply chain and the industrial chain make Apple become both a Samsung customer and a Samsung competitor. This table from JPMorgan Chase clearly shows how much Samsung has produced itself. The SEC represents Samsung Electronics, and SDC represents Samsung Display (Nisen, 2013):

According to the contents of Samsung Security (n.d.), Samsung’s management can actively communicate with stakeholders and consider their interests in decision-making. Stakeholders include clients, shareholders, government agencies and business partners, non-governmental organizations (NGOs), employees, and the next generations.

Problem and Issues

Samsung note 7 explosion.

In August 2016, the Samsung Galaxy Note7 smartphone was released for more than a month, and more than 30 explosions and fires caused by battery defects have occurred worldwide. Samsung had to recall the first version of the Note 7 in September (Lopez, 2017). On the morning of October 5, 2016, a flight of US Southwest Airlines flight number 994 was on fire because of a smoking Samsung Note7 smartphone (Golson, 2016). South Korea’s Samsung Electronics decided to suspend the production of the Galaxy Note 7 smartphone and recalled more than 2 million devices, eventually causing a loss of $5.3 billion to Samsung (Lopez, 2017).

Battery-induced explosion

The reason for the Galaxy Note 7 series of explosions is that the official answer is the battery, or rather the battery supplier’s design. Unfortunately, consumers don’t see the battery in their smartphones. Samsung conducted a large-scale charge and discharge test on 200,000 smartphones and 30,000 batteries. As a result, the burn-in phenomenon caused by different reasons was found in both A and B batteries installed in Note7. The battery SDI (battery A) of the first version of Samsung Note7 is due to design reasons, causing the battery negative plate to be squeezed (Lopez, 2017) causing a short circuit between the positive and negative terminals. The second edition of the battery ATL (battery B) melted due to the manufacturing rigor, and the burr penetrated the insulating film during the soldering process (Lopez, 2017), which directly caused short-circuit fire.

SWOT Analysis

First, Samsung’s brand awareness and brand loyalty are high and have a good international brand image (Omer, 2019). According to Choi (2014), Samsung has ranked among the top 10 in 12 major countries in its brand awareness surveys in 15 countries. According to Interbrand (2019), a New York-based global brand consultancy, the company’s brand value jumped from $32.2 billion in 2008 to $61.1 billion in 2019 and thus has maintained the number seven rank in “the world’s most valuable brand” list. Samsung is at the forefront of the IT industry and is increasingly becoming a leader in the industry, with its influence surpassing many traditional giants in the industry.

Second, Samsung’s product development and design capabilities and technology are strong (Omer, 2019). Samsung not only has strong R&D capabilities but also vertically integrated industrial integration capabilities built by its factories and are rare among global information industry giants. In 2018, Samsung Electronics won 49 IDEA design awards in the Industrial Design Excellence Awards (IDEA), including one gold, six silver, and two copper (Samsung Newsroom, 2019). These prove Samsung’s Design capabilities have reached world-class levels.

First, Samsung’s market positioning is not accurate because the price of the product is far from high to high. Positioning covers high, medium, and low-end markets, and there is no focus on a single market. Although the products are rich and the customer population is broad, it also makes customers suspect the quality of the products. Secondly, although Samsung Electronics has achieved rapid development in recent years, the pressure from old-fashioned electronic operators such as Sony is still very huge. Besides, Apple is also an industry giant, and its advantages over competitors are still in short supply. Third, the lack of innovation is another shortcoming of Samsung’s smartphones. The lack of a master system and relying on an external Android system is not conducive to the long-term development of the company.

Opportunities

With the rise of the youth market, college students and white-collar markets have become Samsung’s new high-end smartphone competition. For students, smartphones have become a must-have and a luxury. And Samsung’s price positioning is suitable for students and office workers to buy without pressure. Compared to competitors Apple and other mid-range phones, Samsung’s system, and configuration are very good, so consumer satisfaction has also increased. According to Martin (2019), Samsung’s strategic partnership with software developers and online service companies is an opportunity to increase its competitive advantage.

Market changes are changing rapidly, and smartphone updates are getting faster and faster. The market has a large number of new products entering every day, which will lead to an overall decline in the price of electronic products. And the biggest threat Samsung faces is a strong competitor. High-end market competitors such as Apple, HTC, Sony Ericsson, and other smartphone manufacturers are constantly developing new products in the market, and Samsung is easily killed by strong competitors. Legal restrictions and unsupportive policies may also make Samsung’s development slow, especially in major mobile technology markets such as the US and the European Union (Martin, 2019).

Assessment and Implementation Plan

On October 11, 2016, after experiencing a battery explosion, Samsung Electronics decided to permanently stop production and sales of the Galaxy Note7 smartphone, hoping to end this most shameful event in the company’s history as soon as possible. Moreover, in order to seriously investigate the recent burning of the Note7, Samsung strengthened its quality management and decided to interrupt the production and sales of the Note7 with user safety. The findings ultimately determined that the root cause of the problem was battery design and manufacturing defects. Samsung allowed consumers who had purchased the Galaxy Note 7 smartphone to replace the new phone two weeks later and recalled a total of 2.5 million Note7 phones from 10 countries and regions including the US, South Korea, and Australia (Jeong, Wells, & Kim, 2016). However, because Note7 sold in mainland China uses a different battery supplier than other countries, Samsung feels that the battery does not pose a safety hazard. Unfortunately, China’s Samsung Note7 smartphones exploded one after another, and it was not until the seventh explosion that they took back all the Note7 smartphones sold in mainland China. After the incident, representatives of Samsung Electronics apologized to all consumers. Samsung also announced the ‘8-point battery safety test system’ to ensure the safety of mobile phone batteries in the future. It includes the Durability Test, Visual Inspection, X-Ray Test, Disassembling Test, TVOC Test, ΔOCV Test, Charge and Discharge Test and Accelerated Usage Test (Lopez, 2017). At the same time, Samsung will also adopt a multi-layered security measures agreement during the product planning phase. The agreement will enforce strict security standards for each part of the equipment, including the overall design and materials used, hardware strength and size, and new software algorithms. At the same time, it will enhance safety in terms of battery charging temperature, charging current, and charging duration.

Galaxy Note7 first bombed on August 24th in South Korea, followed by a global recall of 2.5 million units, and finally stopped production and sales and announced a full recall. In these tough 47 days, Note7 continued to explode. In the face of consumer doubts and pressure from public opinion, Samsung’s response was rather regrettable, because Samsung did not admit the mistakes at the beginning, making the whole event process full of drama. In the beginning, Korean netizens posted a picture of the explosion of the Korean version of the Samsung Note7 during charging. Samsung Electronics officially responded to the Galaxy Note7 postponing shipments because of further testing for product quality. When Samsung Electronics decided to fully recall Note7 in the Korean market, Note7 will be available for sale in the Chinese market, because the Note7 China version does not use the battery provided by the problem provider. Finally, Samsung Electronics President publicly apologized for the incident and announced that it would recall the affected 2.5 million Notes7 worldwide, and said that it will stop selling in the ten markets where Note7 has been released.

Technology upgrades have driven the advent of the mobile Internet era, and the frequent replacement of smartphone hardware and the reduction in production costs have brought huge market growth. However, after the rapid growth in the past few years, the pace of upgrading has gradually slowed down, and market saturation has gradually increased. This has brought a certain degree of anxiety to mobile phone manufacturers. In order to save the increasingly weak growth and seize market share, the speed of launching new models has accelerated and the promotion has become even greater. As the world’s largest mobile phone maker, Samsung has a strong sense of anxiety in the face of Apple’s strong competitor. Therefore, the listing of the Note7 is considered to be the response to iphone7, grab the time to release. In order to pursue speed and market share, Samsung has led to a decline in quality control. Moreover, consumers spend more and more time on their mobile phones, and as a result, the battery is not enough. The mobile phone body is getting lighter and thinner, and the fast charging and large battery have become the industry trend. It is also under such circumstances that the safety of the battery has become a big problem, which may not be unique to Samsung in the industry. Also, Samsung’s attitude towards consumers after the accident is worthy of deep reflection, especially in China. When the quality problem first appeared, the ‘individual phenomenon’ was used as a deduction, which further aggravated the situation. However, in another product accident in China, Samsung believed that it was caused by man. Samsung not only shirks responsibility but also questions Chinese consumers. The ethical awareness of business managers is weak, neglecting the role of morality in enterprise management, and all the energy is used to capture production and economic benefits. Without the establishment of corporate values and moral values, ethical violations will occur. Enterprises cannot establish a good self-image in the face of emergency events but also become a factor restricting the development of enterprises.

Recommendations

Corporate ethics and social responsibility are important parts of the healthy development of enterprises and the core content of corporate culture. Enterprises must adopt practical methods and steps to strengthen the awareness of corporate ethics and social responsibility and enable a balanced development between enterprises, society, and the economy. Regarding ethics and social responsibility as a core resource of enterprise competitiveness, enterprises should get rid of the misunderstanding of economic benefits and social responsibility conflicts as soon as possible, take the initiative to meet the challenges in the world economic integration, and quickly connect with the world to play an important role.

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Case Study of Samsung Electronics by Mahmudur Rahman

Samsung Group is one of the biggest group of companies in the world. This is beyond intriguing to inspect the strategies and business models it used in order to become one of the largest conglomerates. More specifically, however, this is an in depth analysis about Samsung Electronics, the principal subsidiary of Samsung Group which is also the largest smartphone manufacturer in the world.

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samsung company case study

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