Qualification - BTEC Higher National Diploma in Business (RQF)
Unit Name - Business Strategy
Unit Level - Level 5
Unit Number - Unit 32
Assignment Title - Environmental and Competitive Analysis for Business
Learning Outcome 1: Analyse the impact and influence which the macro environment has on an organisation and its business strategies.
Learning Outcome 2: Assess an organisation's internal environment and capabilities.
Learning Outcome 3: Evaluate and apply the outcomes of an analysis using Porter's Five Forces model to a given market sector.
Learning Outcome 4: Apply models, theories and concepts to assist with the understanding and interpretation of strategic directions available to an organisation.
Case Scenario:
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Introduction
The development of technology and the rising demand for advanced gadgets have contributed heavily to the growth of several industries. Especially the electronic industry has been greatly flourished by the requirements of the global population. Samsung is a multinational brand which is operating in the market since 1938. Samsung is a South Korean company based in Samsung Town, Seoul(Chang, 2011). The company has a wide range of products and is operating in the global market with giant competitors. The brand has market dominance in the USA, UK and China where it has respectively 29.5%, 35% and 2.2% market share. The present report will evaluate the various factors to determine the probable strategic direction for the company.
1. By applying appropriate frameworks, categorize and explain the macro environmental factors of Samsung. For each factor, explain how it may impact the company and its business strategies.
For this purpose, you will be using an appropriate framework to list (or categorize) the political, economic, social, technological, legal, and environmental factors affecting the business.
1.1 PESTEL Analysis of Samsung
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Political
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Samsung is a global tech giant operating in almost every market across the globe with proper market share. The company has been governed and run by the founder family for three generations (Michell, 2010). Though the company has been running with huge market reputation yet some major political issues have tarnished the reputation of the company significantly. For instance, the acting chairman Lee Jae-yong was accused of various charges by the special crime investigation in 2016. The South Korean court held various trials on the tech giant and found him guilty. This factor has affected the image of the brand insignificantly.
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Economical
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Samsung is one such brand that has been consistently innovating new and high featured devices and introducing those in the global market for a significant market identity(Lee, 2019). But the company has been also accused of delivering faulty products which severely affected not only the market reputation but also the revenue generation of the company. After the complaints of blasts in a few of the products, especially after Samsung galaxy fold became a disaster for the company the economic standard fell visibly low.
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Social
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Samsung has been a culturally aware brand. The brand is operated through the Yong family and still quiet South Korea oriented, but this factor has not affected or restricted the brand to operate in other parts of the globe with various cultures(Jang etal., 2019). The brand is efficient to analyse and quick to adapt to new cultural requirements. They design and manufacture according to the demand of a specific region to cater to the needs of the customers. Therefore, the products in India will are not similar to other regions. This is a distinct fact that differentiates the brand from others.
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Technological
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Samsung is one of the biggest tech giants in the global market. The company has a rich reputation for its investment and development of innovative products(Chang, Zhang and Xiong, 2019). But the brand had to face extreme backlash after it was accused of duplicating the existing patent products of its rival brand Apple. Apple dragged the brand to the court which led to severe reputational damage of the company. Samsung was also instructed to pay compensation and was ordered to follow instructions from thereafter.
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Environmental
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The growth of industrialisation and globalisation has put a strain on the natural resources of the planet. Rising pollution and excessive greenhouse gases have contributed to the alarming state for the environment. Industrial waste and other pollutants have led to the critical atmospheric change which has become a concern for everybody around the world(Haizaretal., 2020). Samsung as a brand is well aware of these aspects and is highly engaged in the activities to reduce greenhouse gasses. Samsung has introduced initiatives such as the Kyoto Protocol to reduce greenhouse gas emission. The brand has also been involved in ecologically friendly practices to decrease the greenhouse effect on the world.
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Legal
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Samsung has been facing many legal issues, which has impacted the brand identity and operational productive\it by reducing economic standards. The brand is alleged for different allegations(Raza, 2019). It was dragged into many controversies which led to serious reputational damage for the company. From facing a set of penalties by the federal law to getting charged for literally imitating the patent products of the rival company Apple, facing charges for corruption, the brand had to face a huge challenge to keep up the customer base and maintain the consistent market share across the world. But still, the company has been going strong with its potential strategic plans and the support of its consumers.
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1.2 Evaluation of the Macro Environment based on PESTEL
The above-discussed segment provides a concise understanding of the political, economical, social, technological, environmental and legal factors associated with the company and how these are impacting the strategic moves of the company significantly. The analysis represents a structured comprehension of the factors which regulate the market dynamics of the company(Gil, 2016). This has also brought out a set of necessary components affecting the competitive edge of Samsung which will further assist to develop a significant strategic choice for the company to sustain in the global market while catering to the customer requirements.
2. By looking at the internal environment of the organization, you need to evaluate the strengths and weaknesses of the organization's internal capabilities, structure, and skills set by using related tools and frameworks.
For this purpose, conducting a relevant analysis of these factors will be the second step for this project as it will allow you to explain the strengths and weaknesses of the organization to seize existing market opportunities and to counter back threats in the external environment or market. Specifically, you will describe how these strengths can allow the company the seize such market opportunities and what are the weaknesses that it needs to address in order to protect itself from the external potential threats. Such strengths may be based on certain resources that the company has, of which some should be evaluated using the VRIO framework.
2. Evaluation of Samsung's Internal Environment and Capabilities
2.1 SWOT Analysis
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Strength
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Weakness
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For years, Samsung has held the largest market share for smartphones(Cusumano, 2013). According to Gartner, with 18.5 per cent market share, Samsung held the No. 1 spot globally in Q1 of2020, where as Apple is at 13.7 per cent market share. The company has always prioritised research and development which has led to the innovative product range of the company. Samsung has 34 research and development centres across the globe. Samsung has a strong footprint in the Asian markets, especially in Chinese and Indian market. These two nations have a prosperous market dimension which has provided a huger opportunity to the brand for further investment and expansion.
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Both Apple and Samsung are reported to have sold a minimum of 70.8% in the US market. Although Samsung has modernized its investments and expanded its Asian operations, it still largely relies on the U.S. market. The Nation's economy is extremely volatile, and yet another recession could jeopardize Samsung's profitability and destroy its operating capital(Jie and Hasan, 2017). Each item that compromises the lives of customers weakens confidence and trust in the corporation. From exploding Samsung Galaxy A20e to a defective foldable device, Samsung has released many defective products to the market. As of 2017, Samsung has seen a decrease in smartphone revenues. A similar trendis seen in China because of the Chinese market's cost sensitivity. Many of those items are introducedin the Indian market at an inexpensive price, distressing the sales of Samsung.
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Opportunity
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Threat
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Samsung is planning to introduce its revolutionary "Triple Protection Proposition"AC model that combines leading-edge technology and immaculate design(Bayu, Noor and Diah, 2019). The item is directed towards a targeted customer that would guarantee full retention of customers. It can be a huge opportunity for the company to attract new customers.
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The competitive environment has clutched a record height among competitors, particularly from some within the semiconductor technology, smartphones, and computer industries(Valipour, Birjandi and Honarbakhsh, 2012). Latest occurrences have catalysed international market instability and led to a 20.2 per cent fall in smartphone sales in Q1 of 2020. Economic constraints have driven many customers to look for reused or repaired phones, that has raised by 24%. Samsung has already undergone a revenue decline, and if volatility continues, it could drop further.
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2.2 VRIO Analysis
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Value
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Samsung is among the leading cell phone firms with a market share of 21.4 per cent. It has outstanding innovation and engineering capability from which it consistently delivers featured and revolutionary quality products and services(Raza, 2019). The organization has been equipped with numerous resources and expertise that have allowed the organization to penetrate and exploit different fields of consumer electronics. It has emphasised on the R&D to dominate the market with utmost superiority. This provides the company a strong competitive advantage.
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Rarity
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Samsung has produced a set of a special, highly functional and innovative product that is highly advanced in a competitive industry(Valipour, Birjandi and Honarbakhsh, 2012). No other company holds rare resources as Samsung does. It has both resources and expertise. Therefore, it can be said that Samsung's tools, abilities, and competency are very unique, unusual, and important compared to other rivals in the industry. It is another factor that facilitate the company to have competitive edge.
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Imitability
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Samsung has produced special, highly functional and innovative product that is extremely advanced(Gil, 2016). Samsung offers high-quality premium services and goods that cannot be conveniently imitated by anyone. In yearly US patents filed in the last 6 or 7 years, Samsung is 2nd to IBM. This produces multiple patents and has a strategic advantage in designing the same provisional patent. Which differentiate the company strength from its rivals providing it a significant market advantage.
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Organisation
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Samsung Company, on the basis of profitability, has embraced an efficient corporate culture, tactics, initiatives and infrastructure by which it has become the world's largest electronic organization(Cusumano, 2013). It had revenue of up to $179 billion in 2012, and sales have progressed since 1987. Samsung has improved revenue figures that have enabled the business to meet its maximum potential. The organisation has adapted different business approaches from various markets which has heled the brand to establish a strong culture which helps to exploit the expertise and resources properly.
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3. Now, you take a closer look at your competitors in the market. You will consider the competitive forces of the organization sector by applying a model that allows you to analyze the competition of a business.
In this model, you will derive the five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. For each of these forces, you will briefly explain (with an example) how it may increase or decrease the rivalry and competition in the sector, i.e., the electronic sector.
Accordingly, you will propose appropriate strategies (in brief) to enhance the competitive edge of Samsung and market position based on these outcomes. For example, how the company should position itself in the market to face the bargaining power of suppliers & buyers and how it can fend off the threat of possible substitutes and new entrants to the market.
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3. Analysis of the Market's Competitive Forces through the Porter's Five Model
3.1 Porter's Five Forces Analysis
I. Threat of New Entrants: The threat of new entrants is relatively low for Samsung as the company has been operating with the largest rivals in the global market with a huge customer loyalty for several consecutive years (Cusumano, 2013). The brand is highly equipped with capital power and resources. This has enhanced innovation and enabled the company to operate consistently.
II. The Threat of Substitutes Products: The threat of substitute products is moderate as the new market rivals are introducing more technologically innovative electronic devises (Jie and Hasan, 2017). The advancement in technology has increased the competition in the electronic market in past few years.
III. Bargaining Power of Suppliers: Negotiating power of the contractor is very low. In Samsung's situation, the negotiating strength of its vendors is meagre because of the many substantialissues. The most important facet is their small size, which indicates that their negotiating power is low (Michell, 2010). All around the globe, these vendors are spread. In addition, from an existing one, Samsung may easily be turned to a different supplier.
IV. Bargaining Power of The Customers: Elevated access to quality data has contributed to a huge rise in consumers' bargaining power in the modern era. In the instance of Samsung, the total negotiating control of customers is comparatively high (Gil, 2016). The clarification is that because the switching price is minimal for customers and they can turn instantly to any of competing brands, clients can simply evaluate brands and their offerings and receive other customerappraisals.
V. Level of Competitors: Because of the huge number of rival brands and their scale and monetary resources, the electronics trade experiences strong rivalry (Jie and Hasan, 2017). There are many companies that are striving for market share, including LG, Apple, SONY, Toshiba etc. That is also, why it is becoming hard to enter for new brands. These major players have an existing brand identity and are very well companies.
3.2 Strategies to Improve Competitive Edge and Market Position
In order to sustain the existing market position Samsung should make definite changes in its operational and promotional procedure as it will help the company to increase and upgrade its relevance in the competitive market(Cusumano, 2013). The key to competitive advantage is to keep improviser the existing products. Samsung needs to focus on the manufacturing quality and improvise its previous production strategies to minimise and eliminate the challenge of faulty products to be surer about product quality. It will help to rebuild customer base and retain the existing customers. The company should focus on the human resource management to assure the integration of right professional skills and intellectual assets are possessed within the organisation which will help to sustain and increase competitive edge.
4. As the last step, you will produce a strategic management plan that has tangible and tactical current and future strategic priorities and objectives.
Here, you may be choosing a focus, differentiation, or a hybrid (mix) strategy. You may also have different options for market growth in the existing market (e.g. increasing market share, diversification, partnerships and acquisition). Choose one strategy and explain what are the needed steps to implement to reach the desired strategic goal in that market.
4. Interpretation of the Strategic Direction for Future Strategic Priorities and Objectives
4.1 Strategic Option for the Company
Samsung's marketing mission is to inspire the community and build a vision for the future of electronics(Chang, Zhang and Xiong, 2019). The company's goal is to lead technical solution and product advances that empower communities around the globe to improve the world. The business is committed to delivering new industry and individual principles and expectations, as well as upholding the principles of its staff, partners and customers. Samsung Electronics aims to build a bright future and tiepublic from diverse countries through technology. In addition, the 2020 Samsung goal is to achieve USD 400 billion in annual revenue and grow Samsung Electronics' brand image among the world's top five. The key goal of the business was to offer the highest quality goods and services in the world through creative processes and operational excellence. The organization will strive to continuously develop its ability, sustainability and creativity.
4.2 Implementation of Ansoff Matrix for understanding the desired strategic goal for Samsung
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Market
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Product
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Existing
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New
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Existing
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Market Penetration
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Product Development
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The development of Samsung's sales depends on on market penetration as the predominant concentrated approach. The calculated purpose of market expansion is to spread the technology sector by increasing its sales revenue of existing products in existing markets, such as the European Union consumer electronics marketplace where the corporation already operates (Chang, 2011). The effectiveness will reflect when the brand will be able to cater to the technological need of the customer through enough product differentiation
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Product development is an important aggressive expansion strategy of the corporation, given the emphasis of product dominance in the company mission and vision declarations of Samsung. In this state, a strategic aim of product development is to enlarge the company via advanced technologies, including new electronic devices. The introduction of product innovation as an aggressive expansion strategy is based on Samsung's competitive differentiation strategy, which containsprecise product development that separates the business from competitors.
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New
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Market Development
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Diversification
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The global scope of Samsung's activities makes the growth of the market a minor, intensive business expansion approach (Michell, 2010). The effectiveness of business expansion as an intensive growth strategy depends on the product quality and competitive edge, and in this case, comes from Samsung's generic differentiation strategy through technical advancement. Efficient development for cutting-edge technical design, for instance, makes products of the company more successful when carried out in market segments. The introduction of products to new markets can result in changes in the organisational structure of Samsung with this intensive growth strategy.
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The diversified business practices of the Samsung Group maintain numerous sources of revenue and accelerate growth across sectors and markets (Jang etal., 2019).Implementation of this intense growth plan is unusual in the technology conglomerate, given regulatory challenges and other obstacles.Differentiation plays an important role in creating the organization's competitive advantage, although the technology sector and its success are still supported by other conventional marketing advantages, such as cost leadership and focus strategies.
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Overall, it is obvious to state that Samsung can reconsider its cost structure and focus on the innovation of new features in their product to make diversification and differentiate their products from other rival companies in the market (Cusumano, 2013). In the UK, the market share of Samsung is near about 35%, which is significant, but to expand more and penetrate deep into the UK market it needs to strengthen its pricing and product strategy to deliver services that are more advanced and technological features to drive more customer base despite the heavy competition. It also needs to promote the brand to get the absolute market advantage and brand recognition in the global market.
Conclusion
The rising demand for advanced technologies has provided a wide range of opportunities to the companies to initiate development and innovation to stay relevant in the competitive market. Customers are highly technology-driven and their demands are rising significantly with each day. This has created a state of constant revolution for the electronic industry, which is striving to match the standard of customer requirements and market validation. Samsung is a well-reputed company, which is also competing with giant tech companies such as Apple, Google etc. Considering the growing demand and market rivalry, it has become extremely important to build a proactive strategic approach to keep up the market existence and brand image for the company. In a nutshell, the above-discussed segment has evaluated some of the major factors which affect the strategic movements of the company and also rationalized the strategic option for the company to maintain its market share effectively.