Business Administration Capstone
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Question 1: Determine the impact of the company’s mission, vision, and primary stakeholders on its overall success.
The mobile industry has changed in the recent years. Nokia and Motorola led the mobile industry for years until Apple introduced the smartphone in 2007 creating a market for average consumers. With the introduction of the iPhone by Apple, Samsung began establishing itself as a major competitor in the smartphone industry by mirroring Apple’s game plan by creating a high-end touch screen flagship line in its Samsung Galaxy S Android phones accomplishing its product-line positioning strategy. Today, Samsung owes much of its success to its Value Innovation Program Center, where the company’s mission and vision statements drive the focus. “A key purpose of vision and mission statements is to inform stakeholders of what the firm is, what it seeks to accomplish, and who it seeks to server” (Hitt, Ireland, & Hoskisson, 2013, p. 17). Samsung’s vision for the new decade is, “Inspire the World, Create the Future” (Samsung (1), 2014).
This vision is the core to its commitment for leading innovations in technology, as well as inspiring fellow technology firms to join in a world full of richer digital experiences. Samsung has dubbed its vision statement “Vision 2020” because it has set specific objectives to “achieve annual sales of USD 400 billion” while placing its “overall brand value among the global top 5” by the year 2020 (Samsung (1), 2014). Samsung has invested heavily into this vision by adopting an approach that better controls its quality control of manufacturing, and its R&D operations by increasing its volume of research centers located overseas.
Samsung’s mission statement is “To inspire the world with innovative technologies, products and designs that enrich People’s lives and contribute to a socially responsible, sustainable future” (Samsung (1), 2014). By dividing its mission goal into quantitative and qualitative ones, Samsung strives to be at “USD 400 billion in sales, and predominantly No. 1 in the global IT industry & Global top 5”, which is its quantitative goal, and be an “Innovative company; Respected company; Top 10 world’s best workplaces; Creative leader building new markets; Global enterprise that attracts the world’s best talents”, its qualitative goal (Samsung (1), 2014). Samsung aspires to place its company as one of the electronics leaders globally via its creative business strategy by further inspiring innovation.
Furthermore, Samsung understands that it will not be able to accomplish its vision and mission without the support of its stakeholders. The company’s philosophy is “People First”. In order to target each of its stakeholders, it publicizes its annual reports, as well as a sustainability report yearly so that each of its actions and intentions are transparent to the stakeholders. It also establishes periodic meetings with its shareholders if and when important issues are addressed and decisions are made. One method of doing so is by improving its company via customer satisfaction surveys keeping direct contact with the company’s customers and employees. Also, in an effort to attain an Environmental Health and Safety (EHS) certification in all of its global operation sites by 2015, it checks its suppliers’ energy management systems certification status prior to purchasing from them to ensure all health and safety checks are being met.
As of 2013, Samsung received an ISO 50001 certification for six domestic and four overseas operation sites while reducing its overall energy consumption (Samsung (2), 2013). Question 2: Analyze the five (5) forces of competition to determine how they impact the company. Technology is ever changing, and because of this, the companies that are in the technology industry must understand how fast paced it is. In order to stay ahead of the competition, Samsung must understand the underlying causes of the industry’s competitive forces. “Firms must search more broadly to recognize current and potential competitors by identifying potential customers as well as firms serving them” (Hitt et al., 2013, p. 51). The use of the five forces model, which includes the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competing firms, allows for a thorough competitive analysis of the industry. For Samsung, the threat of new entrants is low.
One of Nokia’s downfalls was the inability to see the need to create smartphones early on. Nokia partnered with Microsoft in 2010 in order to create a substantial smartphone, which was 3 years behind the power curve (Cheng, 2014). Creating a new brand in a mobile technology successfully, and rapidly enough to become a worthwhile competitor is very difficult. The brand would already have to be in the industry, and create a high-end product at a low cost in order to compete with Samsung’s popular phones that are currently growing its market share. Samsung, like Apple, is its own supplier for the most necessary market products such as semiconductors, touch screen panels, visual displays, and even mobile operating systems, giving it a competitive edge when it comes to bargaining power of suppliers. There is no need to compete with what is proprietarily owned already. In regards to the bargaining power of buyers, Samsung has a diverse arrangement of mobile products in varying price ranges giving the buyer the choice of what price point and quality of product is purchased. Samsung recently entered into uncharted territories regarding the smart watch industry furthering its competitive advantage.
It is because of the multitude of offerings that Samsung reports that the majority of its income revenue comes from hand held devices (Samsung (2), 2014). Samsung was one of the first to create a smart watch, and recently it catered its device to the consumers with health in mind. Its Samsung Gear line offers the ability to have a heart rate monitor available without the need of a chest strap. Because of this product being relatively new, this is an area that Samsung must monitor the threat of substitute products carefully. Regarding its mobile hand held devices, Samsung is one of the leaders in product and design, but complacency in this area could hinder its ability to achieve its goals.
Samsung and Apple are the two largest manufactures of cellular devices creating an intensity of rivalry among competitors to an unprecedented level. For the past two years, Apple and Samsung have found itself in the judicial system pending lawsuits for various patent infringements. While the legal hearings are in trial, the competition finds ways of mocking the two companies via various marketing tactics in order to help its own sales. Samsung must ensure that it continuously creates innovative products while catering to its customer. Question 3: Create a SWOT analysis for the company to determine its major strengths, weaknesses, opportunities, and threats.
As mentioned previously, one of Samsung’s key strengths is its ability to continuously create innovative products, maintain a low carbon footprint, and having low impacts on the environment’s health and hazards. Because of this, Samsung has empowered the ecofriendly and innovative image in its stakeholder’s mind. Also, being one of its own products suppliers, Samsung has maintained low manufacturing costs creating a unique price strategy for its company.
The mobile operating system that Samsung has created, Tizen, is fairly new. Because of this, it relies heavily on using Android or Windows as its operating system becoming one of its main weaknesses. Apple, on the other hand, manufactures a product to operate in unison with its own operating system, taking full advantage of it software and hardware capabilities. Meanwhile, Samsung has to rely on one of its major brand competitors, Google, for its operating system used on the hardware it manufactures. This unique relationship gives Google an opportunity to capitalize on Samsung. In order to combat this, Samsung operates on a low profit margin because it creates a high-end mobile device at such low costs. This is only offset due to the sheer numbers of sales that Samsung generates. This is a major weakness for Samsung. It attempts to combat this by increasing it market shares in an aggressive manner.
An opportunity that Samsung has over its competition is that it has the ability to reach a wide range of consumers with various smartphones in different markets. This enables carriers around the globe to advertise Samsung’s products and generate sales for Samsung. Samsung’s ability to innovate and incorporate high definition technology for its television department allows the company to incorporate that technology into its mobile screens. It did this in 2012 with the Galaxy Note, the first popular phablet, or phone/tablet, device. Its wide array of patents also helps Samsung stay competitive. Enhancing or increasing its patent portfolio can give Samsung the ability to grow its operating profits, as well as acquiring new firms, or charging competitors for the use of its patents. As Samsung attempts to create a wide variety of products to suit the needs of customers in various markets, it poses a major threat for the company as well. Apple is able to charge premium prices for its products because it creates a handful of products and it invests heavily in those products. Samsung on the other hand, creates different variants of the same product allowing the customer to switch to lower end devices.
Samsung stays competitive due to its low prices for premium devices. The sales of its devices are over saturated taking away its ability to raise profits. Having very low gross margin in most of their products, and already selling some of the products with significant price cuts, Samsung’s competitor can follow price-cutting approach to and induce price wars. The constant change in the industry also poses a threat to Samsung. Samsung invests heavily in R&D in order to continuously innovate new products. As seen in the smart watch line up created by Samsung, a year doesn’t pass before a newer product is revealed leading customers asking themselves if they should buy the current model or simply wait a couple of months for a newer device to be marketed. Question 4: Based on the SWOT analysis, outline a strategy for the company to capitalize on its strengths and opportunities, and minimize its weaknesses and threats.
Samsung can remove its need for the Android operating system and invest in implementing its own operating system to seamlessly operate on its devices. This will allow the company to raise its operating costs. Samsung’s patent portfolio contains of 100,000 patents as well as operating over 40 research centers worldwide and employing over 50,000 engineers dedicated to research and development. Currently, the research and development portion of Samsung is divided in to three separate layers: The Samsung Advanced Institute of Technology (SAIT) that captures highly capable engineers, the R&D Centers that focus on technology in each department, and the Division Product Development Teams that is responsible for commercializing when they get to the market (Samsung, 2014). Samsung has the capability of developing, implementing, and marketing an operating system tailored to its devices. Samsung needs to focus on this major aspect in order to separate itself from Google.
Also, Samsung should focus on the marketing of its products in a more spaced out manner. Google partners with hardware companies and releases a new phone yearly, as does Apple. This creates a life expectancy of a device for the consumer as well as gives them the choice of upgrading on a timely fashion. Samsung should continue to implement various devices at various price points for different markets, but should not release 2-4 variants of the same device in the same market, all within the year span. This will allow them to more accurately utilize its R&D department to creating the operating system desperately needed. Question 5: Discuss the various levels and types of strategies the firm may use to maximize its competitiveness and profitability. Companies gain a competitive advantage by implementing business and corporate level strategies. The business-level strategy implemented by Samsung is that of differentiation in order to create distinctiveness from the competitors. This differentiation method is used in most of the products created by Samsung and can be noticed in the physical and non-physical attributes of the products.
The design of the phone, its ergonomics, and the ability to distinguish it from others via different color options are physical aspects. Non-physical aspects are the software capabilities such as swiping from pages to page without the use of hands differentiates the products from others in the market. Other software enhancements are available in its products such as being able to use both the front and rear facing cameras at the same time. Samsung also uses the segmentation strategy by creating multiple variants of a product, but all having different internal hardware, or capabilities such as the Samsung Galaxy S5 and the S5 Active variants, where one is more water-resistant than the other. At the corporate-level, the diversification of new product lines and the cohesiveness of the products with one another allow the company to market products to its customer base more effectively.
Question 6: Outline a communications plan the company could use to make the strategies you recommend above known to all stakeholders. “ Customers, as stakeholders, demand reliable products at the lowest possible prices” (Hitt et al., 2013, p. 21). It has already been discussed that Samsung operates at a low profit margin. Nonetheless, in order to keep its stakeholders pleased, Samsung must first create a communications plan that will involve advertisements and marketing strategies to gain the stakeholders support. It doesn’t solely rest on a reliable product at a low price; the company must be able to maintain its market share in the future. The communication plan will allow the company to gain and retain its stakeholders in order to achieve the goals already set as well as improve the company-stakeholder relationship, which work hand in hand to improve the company’s operational effectiveness. Samsung’s plan is to increase its market share as well as its operating profit. Samsung must create a pattern to its device structure in more established markets.
The ability to create innovative products is something that Samsung is known for. Being transparent if and when Samsung decides to invest more heavily into its R&D department to increase the stakeholder’s awareness of a new operating system can gain their confidence in the product that will operate the new system. Detailing in quarterly reports the progress of the company, to include each department and its responsibilities and keep the stakeholder informed as to the performance of the company. Question 7: Select two (2) corporate governance mechanisms used by this corporation and evaluate how effective they are at controlling managerial actions. Chapter 10 and the corporate governance tools are listed on page 295. By managing the stakeholders’ relationship with the company, Samsung can determine the strategic direction it should take. Samsung is a large company, and because of this, it has implemented fail-safes as to what the management committee can perform, as long as it is in accordance with the Board of Directors.
The Board of Directors supervises the conducts of the business and the liabilities of the Directors shall not be reduced of the duties delegated to the management committee (Samsung, 2014). Samsung has implemented these rules and placed these controls into place so that the company, as a whole, cannot make a bad decision without the prior approval of the Board of Directors. Question 8: Evaluate the effectiveness of leadership within this corporation and make at least one (1) recommendation for improvement. There is little doubt that Samsung is an innovative company and that its products have helped revolutionize the technology industry. Its ability to be on par with the speed of new arriving technology is second to none. It is because of this that Samsung is considered to be an innovative and manufacturing powerhouse. This was evident with its debut of the Samsung Galaxy Gear smart watch that allowed the consumer to take photos, videos, view and reply to emails, text messages, and even phone calls.
Although the product did not sell as intended, it placed Samsung in the forefront of the technology and has allowed the company to improve on the “Next Big Thing” as its slogan states. As the company ventures into new territory with the smart watch, Samsung must be very careful to learn from previous mistakes, assess their downfalls as well as great innovations, and capitalize on its strengths. The recommended method to do this is by not rushing into a product market. The first one on the scene is not necessarily the best one. This was evident with Dell’s phablet phone that was introduced in 2010. It flopped in terms of sales, and Samsung learned from it. The next year, a great device was made and has been fine-tuned ever since then. In order to do this, the CEO must restructure its R&D department to focus on one project at a time. Question 9: Assess efforts by this corporation to be a responsible (ethical) corporate citizen and determine the impact these efforts (or lack thereof) have on the company’s bottom line. Provide specific examples to support your response.
In order to ensure ethical behavior is paramount to the company’s well being, there are several governance mechanisms in place for protection. In 2010, Samsung established three directions to help preserve the environment so that future generations can partake in the innovations created by Samsung. Remember, the company’s philosophy is “People First” and its mission is to inspire the world through the technologies innovated by the company so that people are socially responsible while making the future sustainable. The three directions are Technology innovation to drive positive change, Planet first, and Link with products (Samsung (1), 2014). By implementing these three staples, Samsung is striving to make these strategies global by developing programs used to monitor and assess the consumer service relationship via chat lines, surveys, and social media outlets. This program is in place to help ensure the company is transparent to the stakeholder.
Cheng, R., (2014, April 25), Farewell Nokia: The rise and fall of a mobile pioneer, CNET, retrieve from: http://www.cnet.com/news/farewell-nokia-the-rise-and-fall-of-a-mobile-pioneer
/ Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic Management: Competiveness and globalization (10th ed.). Mason, OH: South- Western Cengage Learning. Samsung.com (1), 2014, Vision 2020, Retrieve from: http://www.samsung.com/us/aboutsamsung/corporateprofile/visionmission.html Samsung.com (2), 2013, Sustainability Report 2013, Retrieve from: http://www.samsung.com/common/aboutsamsung/download/companyreports/2013_Sustainability_Report.pdf