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Samsung Electronics CO Economics
Various corporations from all over the world have a set of activities that are performed regularly in the process of designing, production, marketing, and distributing products. These can be presented using a value chain model that contains primary activities mainly concerned with the creation and delivery of a product as well as secondary operations factors that enhance the efficiency of primary commodities. In this regard, the model establishes a performance-based management system that is strategically designed to improve the overall companys performance. The essay discusses Samsung Electronics CO. Ltd as the case study in order to portray the importance of a value chain model.
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What is the Object of the Research?
Porter articulates a companys value chain as the procedures followed by an organization in order to manufacture and deliver products. They may range from product designing, marketing, distribution networks, and customer services just to mention but a few. In this relation, the primary objective of this research is to identify the significance of a value chain model in the organization. More precisely, the study is formulated to demonstrate how a corporates value chain affects the competitive advantage of the organization. Besides, the research will also outline the linkages and interrelationships that exist in a value chain in regard to formulating competitive strategies for an organization.
Why the Chosen Company is Appealing?
The research has used Samsung Electronics CO. Ltd as an example with the purpose to demonstrate how a value chain model can be beneficial towards a companys competitive advantage (D’heur, 2015). The enterprise was chosen for conducting the research as it incorporates the worlds largest technology firms, and their dominance in the market can be principally owed to their generic value chain model. More precisely, the model transformed the company from being an ordinary electronics manufacturer focusing on low-cost advantages to exceptional manufacturers of premium products with a strong brand. Hence, the company is very appealing to as it has used the value chain model in order to generate corporate visions, marketing strategies, cost control procedures, and technology development among other activities.
Significance of the Study
Following the dynamic changes in the worlds economy, competition among various organizations has intensified. As a result, different organizations need innovative strategies so as to compete globally. In this line, human resources, marketing, product design and technological advancements have become the primary focus of competitive resources. Therefore, this research will be quite significant to corporate managers since the value chain model will enable their organizations to build a strong relative competitive advantage that is unrelenting to competitors attacks and changes in the general market (D’heur, 2015). The value chain model will integrate various activities within and around the organization into the systems that drive the competitive strength of the organization.
Methodology for Conducting the Research
The research has been conducted by a formulation of research questions used as the main guidelines for the survey. The primary focus of the research is Samsung Electronics CO. Ltd.; the organization has been used as the reference point to answer the research questions. As a result, Samsung Electronics CO. Ltd has been critically examined in order to reveal how the company has remained competitive following the integration of generic value chain model. Data has been obtained from previous industry analysis conducted by various scholars on the strategic management of the company. Thus, the type of products and services offered by the corporation and their significance of market share, have been critically analyzed.
Organization of the Report
The rest of the report is organized in sections and subheadings where the main parts are as follows: (1) a review of Samsung Electronics CO. Ltd., where research questions have been formulated, products offered by the company analyzed, and a brief introduction of the business provided; (2) an industry analysis that includes the type of competition faced by the company, the companys products in the market, and the companies competitors; (3) the long-term prospects of the company, where the companys financial performance as well as expected performance on the stock market have been criticized; (4) conclusion which contains a summary of the research, recommendations, limitations encountered during the research. ,
Critical Review of the Company
The Research Questions
The central research questions are:
- How do companies apply value chain model for strategic management of the enterprise?
- How does a firm accomplish a competitive benefit using a value chain model?
- How does a value chain model enable a company to link all its activities so as to realize a profit margin from the product sales?
- How does a value chain model help an organization to attract more consumers to their products?
Overview of Samsung Electronics CO. Ltd.
Samsung Electronics CO. Ltd. was founded in Suwon, South Korea as a part of the Samsung Group in 1969. It is a multinational electronics company with assembly plants and sales networks in over 80 countries all around the globe. Samsung Electronics CO. Ltd. is categorized among the largest electronics company in the world following their change in management tactics in 1993. The company used the value chain model to monitor their resources ranging from their personnel management systems to their human resource patterns. Specifically, the company achieved success by applying the value chain model to their staff management systems, marketing and design strategies, quality-based management for their products, Hybrid management system, and Human Resource paradigms.
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Goods and Services Offered by Samsung Electronics CO. Ltd.
Samsung Electronics CO. Ltd is a global market leader in a variety of products that focuses on four main categories. The first one is digital media that comprises computing devices such as pocket PCs, tablet computers, and laptops; entertainment devices such as DVD players, digital camcorders and mp3 players, etc.; and home appliances that include washing machines, air filter systems, microwaves, vacuum cleaners, refrigerators, and washers among others. The second category is semiconductors that contain flash memory cards, DRAM chips, smart cards, processors, CMOS sensors, MP3 Integrated Circuits, and storage devices such as hard drives. Next, telecommunication consumer electronics includes fax machines and satellite receivers. The company also recently diversified in cellular devices such as mobile phones, smartphones, Mobile Intelligent Terminals (MITs), and Personal Digital Assistant phones. To the last category belongs LCD panel that produces TFT-LCD and OLED panels for Desktop monitors, laptops, and TV.
Is the Company Known for One or Two Products while Creating Dozens of Products?
Despite the company produces various items, it is commonly acknowledged through a handful of products such as the LCD and OLED display panels, mobile phones, semiconductors, and TV sets. Samsung Electronics CO. Ltd is the worlds largest producer of OLED and LCD panels with a market share of 40%. Besides, the company owns 98% market share of the OMELED display panel for smartphones. In regards to mobile phones, Samsung Electronics CO. Ltd. is the largest cell phone manufacturers in the world with a business share of 22% worldwide. On the hand, the company has been a giant in the memory chip production since 1993 (Michell, 2010). Particularly, the company controls 35% market share after their recent breakthrough in the mass production of 30 nm-class DRAMs and 20nm-class NAND flashes. Finally, the company is also a leading manufacturer of HD 3D LED televisions, Internet TV, and Smart LED TV. The reason for the companys success in the above products is mainly pertained to their unique implementation the value chain model in marketing and design of their products. More precisely, the company has used the model for understanding the customer’s needs and desires so as to create unique products that surpass their competitors’ products.
Samsung Electronics CO. Ltd. as Multi-National
Samsung Electronics CO. Ltd. is classified among the big multi-national companies in the world. This is based on the fact that a high ratio of Research and Development facilities, manufacturing industries for their products, and sales of their products occur in various countries distributed all over the world. For instance, Samsung Electronics CO. Ltd. has 30 subsidiaries in China. Additionally, the company has 18 Research and Development office representatives in the world; 5 offices in the Commonwealth of Independent States; 13 offices in the African and Middle East countries; 16 offices in European countries; and 6 offices in North America just to mention but a few. The company also comprises 144 consolidated subsidiaries that have been acquired (Michell, 2010).
What is So Special about Samsung Electronics CO. Ltd.?
Samsung Electronics CO. Ltd. has numerous achievements through the implementation of the value chain model. More precisely, the company has experienced tremendous growth over the last years. The 2011 statistics showed that it achieved sales worth $140 billion while excluding tax was 14.92 billion. The companys leaders have also learned the aspect of open management through the value chain model which implies respecting the autonomy and creativity of the employees. As a result, these aspects have increased staff performance, which positively impacts on the companys overall performance. Thus, the company has won various awards such as IDEA Design Awards, Best Company in Korea Awards. Besides, the company has been listed on multiple stock exchanges including the London Stock market and Luxemburg Stock Exchange.
Prominence of Samsung Electronics CO. Ltd. in the UAE?
With that said, the companys profile in the United Arabs Emirates (UAE) is mainly observed through the Samsung Gulf Electronics. The company is located at Hamad International Airport, and its main aim is offering transformative technology to passengers passing through the Qatars Airport. The company had a notable impact on the Samsungs mobile market as it helped to increase mobile sales by 30%.
The Type of Market for Samsung Electronics CO. Ltd.
Samsung Electronics CO. Ltd. belongs to a monopolistic competition type of market. This is mainly accredited to the fact that there are numerous firms that produce similar products, and many consumers are present in the market. In this relation, the companies are viewed as the price-takers while the consumers are the price makers. Besides, the company is classified under this category since various manufacturers in the market sell their products that are differentiated from each other either on the basis of quality or branding. Generally, no business has total control over the global market share, and there are no entry and exit costs. The company is also independent in the sense of decision-making about production or marketing of the products, which means that there is no interference from the competitors. The company does not produce varying products among which one product has a monopoly position.
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Analysis of the Market/Industry
The market industry for Samsung Electronics CO. Ltd. was analyzed by equating the companys marginal revenue with the minimal cost. In this relation, the companys competitors were identified, and their value in the products market share analyzed. Similarly, the level of demand for the companys products was also considered in conducting the market analysis intended to determine the companys elasticity. Moreover, the companys economic profit was used to perform the market analysis.
Competition in the Market
In harmony with Michell (2010), Samsung Electronics CO. Ltd.s products in the market are highly competitive. The company faces competition on various fronts including Digital Media, Semiconductors, Telecommunication, LCD panel. However, the main competitors are Apple Inc. and LG industry. Apple Inc. is the primary competitor in telecommunication products such as mobile phones and smartphones. The company is classified as the worlds leading innovator in the mobile industry. More accurately, the company had a global market share of 20.5% in 2013 as compared to Samsung Electronics CO. Ltd. that had a market share of 28%. As for the digital media products such as TVs, LG is regarded as the companys toughest competitor. Specifically, the company owns a global demand share of around 14% while the Samsungs market share is 24 %.
Samsung Electronics CO. Ltd.s Elasticity
As a result of being in a monopolistic competition type of market, the company faces elasticity in various ways. First, the price elasticity of supply implies that the price of goods the company wishes to supply is influenced by the changes in the product price. Second, in the price elasticity of demand, the consumers rate of demand for a particular product is affected by the products price for the company and that of its competitors. As a result, Samsung Electronics CO. Ltd. can be categorized as very elastic since the companys performance is bound to change with alterations in other variables.
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Samsung Electronics CO. Ltd. SWOT Analysis
Samsung Electronics CO. Ltd.s strength can be mainly attributed to their generic value chain that allows a vertical integration of the companys processes. As a result, the company is the world largest memory manufacturer, largest LCD manufacturer, distributor of bundled components even comparing to Apple Inc., its primary competitor. Besides, the company has a well-built reputation in the production of high-quality products massively produced to meet the consumers demand. Besides, the companys strength is evident in their low pricing strategy on the products that eventually attracts more sales from the customers, hence increasing profit margins for their shareholders. Finally, the company has also invested heavily in branding and advertising, thus creating awareness for their products among various market segments (Peng, 2009).
Samsung Electronics CO. Ltd. Competitors
Nonetheless, the company is also faced with a variety of weaknesses; for example, it dependent on Apple for product sales because Apple is a direct competitor, and selling them the companys product may lead to a huge economic gap in the future once the company starts manufacturing its components. Similarly, the majority of the companys products are not compatible with most devices.
However, the companys opportunities include improving their products compatibility with other devices, partnering with companies such as Google Inc. so as to always obtain the latest Android operating systems while manufacturing their products. The company should also seize the opportunity of emerging markets in Africa in order to improve the sales. However, the common threats the company may face are branding of their competitors products as well as new firms emerging and venturing in the electronic business.
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Samsung Electronics CO. Ltd., Long-Term Prospects
Since the founding of Samsung Electronics CO. Ltd, the company has navigated through various challenges in the business environment following a continuous economic recession in the markets. These hardships include competitive pricing and unstable currency exchange rate. Nevertheless, the company has proved to be a global leader in the IT industry in mainly fostered by the mobile communications business as well as in component businesses producing memory semiconductors. The company generated a consolidated revenue of KRW 200.65 trillion for the year 2015 with an operating profit of KRW 26.41 trillion. Thus, based on financial ratios of the companys stock performance in the market which consist of marginal sales, profitability sustainability, and operational efficiency, the companys performance has been deteriorating. Despite the company experiencing a profit of 26.41 trillion, a decline in the sales growth is 2.69%. This follows a decrease of 9.83% sales growth that was experienced in 2014. However, this is assumed to change over the next five years owing to the various opportunities presented in the smartphone and mobile phone business. In this regard, the shipment of smartphones and other mobile devices are expected to increase from 1 billion to 8 billion.
The company has a vision of manufacturing new products that will greatly attract the attention of the consumers in the general market. This includes products such as smartphones that can be directly connected to vehicles. The device will be integrated with advanced automotive technologies such as the GPS, broadcasting media, Bluetooth connectivity, and safety interconnection between the car and the mobile device (Betz, 2011). Besides, the company plans to increase human resource capacity and monitor investment in research and development so as to encourage innovation in product manufacturing.
Moreover, the company plans to continue using the value chain model as a strategic management in order to remain profitable in the market. This will enable it to eradicate discrimination and restriction in the companys personnel so as to enhance efficiency and competitiveness. The chain model will also help the company remain profitable based on the fact that it will foster the development of effective marketing strategies that in turn, would be beneficial to the enterprise. The model will also ensure that the firms products are of high quality and according to the consumers needs.
However, the company faces various threats in the market which include intense competition from other companies offering their products. Falling demands for the PCs, TVs, and mobile phones is another key challenge the company may face. Similarly, unstable fluctuation of the foreign currency is a hardship that might increase the companys expenses.
To summarize, the importance of implementing the value chain model in an organization has been clearly portrayed on the example of Samsung Electronics CO. Ltd. as the case study. The company has experienced steady growth over the years and is now among the leading multinational organizations in the world. In this relation, the company has been critically evaluated regarding the products and services it offers, the companys subsidiaries worldwide, the type of market the company is involved with, a SWOT analysis on the enterprise, and its long-term perspective described. Various companies are therefore recommended to implement the value chain model since it is a tool for strategic planning and resource allocation. Conducting analysis costs via the value chain model is also imperative. Given more time to improve the study I would use various data gathering methods in order to analyze qualitatively the performance of the different companies that have implemented the value chain model against the performance of their business without the model. The limitation faced while conducting the above research was insufficient time to perform an analysis adequately.
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