Sample Business Studies Paper on Samsung Group Case Analysis

Porter’s Five Forces Model

The Power of Suppliers. Suppliers facilitate business activities by providing labor and raw materials. Therefore, companies have to maintain quality and healthy relationships with suppliers to continue operating efficiently and smoothly. The bargaining power of suppliers in each industry differs and can impact on competition and profit ratios. If suppliers’ energy is low, the level of competition is high, and vice versa. In Samsung, suppliers have less bargaining power because the company operates globally, and raw materials are scattered worldwide. Hence, if a supplier offers goods or services at a higher price, Samsung can easily contract another supplier. The company also sets rules and regulations that are reviewed regularly to ensure that contractors are adherent. The provisions check on product quality and labor welfare.

The Power of Customers. Buyers are critical drivers of business operations, primarily in the electronics industry. Customers’ behavior varies depending on tastes and preferences; hence they have to be involved in decision-making processes. Samsung, as a brand, is dominant due to loyalty from buyers and the continued delivery of quality products. The company has been in existence for decades. It has remained true to its mission of creating better products and services for the global society using the available technologies and resources. The brand strength has created room for radical changes, especially on exterior product designs, and also allows the entity to maintain control on future trends and markets. Despite the complex research and development projects performed by Samsung, they have to conform to customers’ needs or lose them to competitors.

New Entrants. Newmarket entrants have negative implications on existing businesses because they increase competition on market share.  However, market entry depends on the complexity of government regulations and the legal requirement necessary for operations. For instance, companies seeking to join the manufacturing business sector must get trading licenses and prove that their commodities are safe and of quality standards. According to Shin, entry into the electronics industry is not as easy as the initial capital, and competition from industry giants are very high (406). Furthermore, extensive marketing activities and highly skilled personnel are needed. With the current global economic status, entry into the electronics industry may be impossible unless the product is unique and highly innovative. The commodities must also be reliable, durable, excellently designed, and cost-effective. Companies seeking to grow their brands to reach Samsung’s level must, therefore, start locally and use the step by step approach to join global conglomerates. This calls for market research, due diligence and consultation with intended subsidiary countries.

The Threat of Substitute Products. Substitutes are items or services that can be used to perform similar tasks. Substitutes impacts on price elasticity by lowering demand and increasing alternatives.  In modernity, substitutes constitute a significant threat in the electronics sector, given that the digital era has embraced social responsibilities and adhere to legislation. Environmental conservation is part of social obligations, and due to the rise of global warming, people are going green and adopting energy conservation measures. The legislations present in different countries impact buyer behavior in terms of spending. Economic trends are currently hard to predict hence the need to cut costs in all corners. In the United Kingdom, for instance, charges on energy bills are too high; thus, customers mostly choose electronics with low power consumption. This, in turn, raises the need for substitutes as the switching costs are low. Samsung has high competition from Apple Inc., LG, and Sony; hence customers have a variety of choices.

Competitive Rivalry. Competition drives market changes, and firms have to be aggressive innovators to gain a competitive edge. The intensity of competition varies across industries, depending on the saturation. Highly saturated industries have a fierce rivalry as companies compete to capture attention from the customers. Growing markets are, however, less competitive as the customer base is also small and increasing. Companies like Dell, Toshiba, Apple, Sony, LG, and Motorola, major Samsung competitors, have been in the industry for long, and their client base has already been established. Therefore, the entities are likely to have adopted a code of conduct that governs direct competition and ensures coexistence. Besides, Samsung faces rivalry in emerging markets as it has to contend with global and local players.

A Comparison of Samsung’s Value Chain with That of Apple And LG

Inbound Logistics. It controls primary operations like the reception of raw materials and storage in warehouses. Asia is the largest consumer of Samsung products, and it accounts for about 79.4% of the company’s supply expenses (Ezell et al. 13). America is next at 14.8%, followed by Europe at 4.4%. (Ezell et al. 13).  The logistics are further boosted by the fact that Samsung has multiple subsidiaries that offer comprehensive logistics services. Similarly, Apple has a stable global suppliers’ network that continually meets the demand for raw materials. To manage expenses, the management regularly implements strategies meant to minimize the number of suppliers while still maintaining quality.  The company orders raw materials in advance as it does not participate just in time operations. LG has adopted technology in inbound logistics such that inventory is controlled using the Global Digital Logistics System (GDLS), which keeps records and completes product lifecycles.

Operations: Samsung has approximately 213 global operation centers, including research and design hubs, sales offices, and subsidiaries (Keegan 22). The entity operates through – product manufacturing, system manufacturing, and device assembly. Components and semiconductors comprise the product segment, while applications and software form the systems department. Among the packaged and assembled devices are batteries, chargers, and mouse. Apple has approximately 132,000 employees and customers from America (42%), Europe (24%), China (20%), Japan (8%), and Asia (7%) (Walcott and Fan 70). The company operates through the outsourcing of products and locations in low-cost areas. LG’s operations seek to increase efficiency in production and minimize wastage. Besides, the entity regularly upgrades processes, especially in India, where the central hub is located, to add value to products and meet clients’ demands.

Outbound logistics: Samsung is famous for the production of modern smartphones and the quick launch of items. These facilitate competition and aids in monitoring of distribution processes. The company’s outbound logistics is segmented into three parts – notification, method, and charges. Samsung Logitech, an inhouse logistics subsidiary, provides international and domestic logistics while enabling B2B cooperation. Apple distributes ready iPad, iPhone, Mac computers, and other items. The goods are shipped to Apple outlets situated in urban centers, quality shopping malls, and high-traffic regions. The company also acknowledges e-commerce because it is cheaper than sales via the Apple store. LG has an excellent global supply chain technologically controlled network customized by a JDA software that estimates demand, schedule transportation, and distribution. The company also cuts outbound logistic expenses through elaborate packaging of shipping products.

Sales and Marketing. Samsung’s regional sales headquarters are in Singapore, India, Latin America, Russia, North America, United Arab Emirates, United Kingdom, and China. Production centers are based in North and South America, Asia, and Europe, while sales offices are present in North and Latin America, Africa, Asia, Europe, and the Middle East. Complaints from clients are addressed via the website through product warranty registration, twitter conversations, live chats, and tracking. Apple has seven sales channels – wholesalers, retailers, direct sales, Apple retail stores, third-party network carriers, Apple online stores, and value-added distributors. In 2018, the company’s domestic sales accounted for 37% of the net sales, while international sales summed up 63% (Apple Inc). Direct sales accounted for 29%, and indirect sales were 71%, thus showing the need for quality distribution channels.

Service. Samsung service centers are in North, South, and Latin America, Asia, and the Middle East. The company offers after-sales services and guarantees product replacement if it does not meet the requirements or provisions. Apple Inc. provides advanced services via the Apple software installed in all Apple gadgets. Although this strategy is a monopoly, it increases brand loyalty and market base. Apple also offers quality pre-purchase, immediate, and post-purchase experiences. Besides, it maintains global experience centers where first time buyers can familiarize themselves with the brand. Sales personnel at LG are technically savvy and willing to facilitate post-purchase services like trade-ins.

Business-Level and Corporate-Level Strategies for Samsung, Apple, and LG

Business Level Strategies. They are comprised of differentiation and cost leadership. Samsung uses the cost leadership strategy aimed at selling items at prices lower than those of competitors. The concept is more appealing to low-income earners who are the vast majority. Differentiation is also evident given the frequent product launches and extensive investment in Research and Development (R&D). For long, Apple has dominated the technology industry through the introduction of superior commodities. It also outsources hardware and operating systems from other companies, giving it time to concentrate on designs. Apple also positions itself in high-end markets, thus building a reputation for creating valuable items. LG thrives on product differentiation and encourages interdepartmental coordination in the design and promotion processes.

Corporate Level Strategies. They include vertical integrations, mergers and acquisitions, product diversification, and restructuring. Samsung can remain competitive by standardizing products globally. This is aided by the fact that manufacturing and engineering designs are centralized. On the other hand, Apple Inc moderates levels of its diversified products, including mobile phones, music stores, home, and personal computers. The company also internationalizes production by setting base in low-cost areas such as China, where resources like labor and raw materials are very cheap. Like Apple, LG forms strategic alliances with global entities to benefit from information and economies of scale.

Conclusion

In modernity, technology is continually changing, and companies ought to be aggressive in R&D. Apple Inc. and LG are Samsung’s main competitors and also have been operational for long. This means that the industry giants have already established markets that are cultivated through brand loyalty. As more entrants join the electronics industry, Samsung has an advantage as it is stable. However, it is noteworthy that markets vary depending on legislation and economics; hence adequate research is needed before making investments in new geographical locations. The bargaining power of buyers and suppliers cannot be sidelined as they influence supply and demand. Therefore, companies have to develop strategies that maximize their dominance in the market.

 

Works Cited

Apple Inc. Apple Reports First Quarter Results. www.apple.com/ke/newsroom/2019/01/apple-reports-first-quarter-results/. Accessed 17 February 2020.

Ezell, Stephen J., et al. “Manufacturing Digitalization: Extent of Adoption and Recommendations for Increasing Penetration in Korea and the US.” Available at SSRN 3264125 (2018).

Keegan, Warren J. Global marketing management. Pearson India, 2017.

Shin, Jang-Sup. “Dynamic catch-up strategy, capability expansion, and changing windows of opportunity in the memory industry.” Research Policy 46.2 (2017): 404-416.

Walcott, Susan M., and Zhang Fan. “Comparison of major air freight network hubs in the US and China.” Journal of Air Transport Management 61 (2017): 64-72.