Samsung – SWOT analysis

A financially crippled giant 6 yrs ago, associated with cheap me to tv’s and microwaves. From 1997 debt has shrink from $10.8bn to $1.4bn (source Tech Biz research). Overall cut 24000 employees and sold $2bn non core biz.

Thrives in low margin consumer electronics

Favors hardware over software

Makes everything itself

High definition phones

Feature jammed gadgets

Global Market Share (Data – Gartner June 03)- Cell phones

Nokia 36%

Motorola 15%

Samsung 10%

Siemens 8%

Global sales 10.4bn operating profit 2.5bn.

First quarter 2003 announced biggest market share gain of any company in handset sales (9.3-10.5), however at lower prices- fall in 1st Qtr profits of 41% to $942million on sales of $8bn. Investors globally set to loose if earnings soften as with $41bn (foreign investors hold more than half) in market Cap Samsung is the most widely held emerging stock in the world. Shares have risen tenfold over 5 yrs to $273.

CNN,USA Today- Samsungs ads first to pop up

Matrix Tie in’s

Strengths

I ask for a report on what Samsung is doing every week (Sony Pres) Kunitake Ando. Sony noted Samsungs aggressive restructuring and said Sony must follow.

2nd biggest maker of CDMA (code division muliple access) (Motorola #1)

It is used to huge swings. Cells kept avg price at $191 versus $154 Nokia $147 Motorola.

Cash rich (With nearly 7bn in cash Samsung has plenty to spend on R&D.)

Vertical integration at work (semiconductors,tellecom,digital appliances and digital media- all fit into the latest cell phone)

Driving success is CEO Yun Jong Yong (since 1997). (ferocious drive).

Less bureaucracy in product approval, marketing- gives them flexibility to sieze opportunities.

Speed- Average of 5 months concept to rollout of new product. Compared to 14 months 6 years ago. After Samsung persuaded T-Mobile (US-German) to market new camera phone last April, in 4 months they had a prototype for the V205, flew 30 engineers to Seatle to field test on T-Mobile servers and by Novemeber the phones were rolling out, since then sold 300,000 a month at $350 each. (This is estimated as half what the Japanese wou3d take.

Innovation- Plans to introduce 20 new phones compared to 12 from Motorola. Similarly Nokia another whiz at snapping out new models are based on 2-3 platforms of basic design. Samsung will introduce 130 models on 78 platforms.

Motorola changes product line every 12-18 mths , Samsung does it every nine months.

Uses Korea as a test market (70% homes have broadband) 20% of population buys a new cell phone every 7 months. In Korea already selling video-on demand phines at $538, planed by Verizon to introduce to the US by this fall.

In 2002 won 5 design excellence awards for its digital appliances- total matched only by Apple computer. Chief of User research is An Yong II 34 years old!

Customized memory chips(60% of its chips are custom-made) , Samsungs gets 17% higher than industry avg prices for products like Dell servers. MS Xbox and Nokia cell phones!

Hring the right people in the right market AT&T and Viewsonic guys , tie ups T-Mobile , media Matrix. Sprint PCS started selling Samsung in 1997, Sprint was CDMA.

Pulled off products from Wal-Mart and target and put them in Best Buy and circuit city.(Image re-.engineering)

Weaknesses

Lack of software content?

Refuses to enter the software business. Challenging the assumption that proprietary software and content gives you higher margins and a longer lead time over rivals.

ontinues to sink millions in building big factories, not outsourcing manufacturing. (Apple Motorola, Ericsson have learnt the perils of the hardware way)

Over the long run this model does not work, must keep investing heavily in R&D to keep the upward trend. $19billion over last 5 yrs into new chip facilities. Rivals buy from small companies rather than tying up capital.

Opportunities

To unseat Sony as the most valuable electronics brand and most important shaper of trends. To dominate the digital home competeing with Sony and Philips.

Capitalize on reputation, image

Threats

Cheaper production of rivals

Ability of others to mimic and copy design (LG)

Trades at a discount to its global rivals due to Koreas history of Corporate scandals (Even though its considered one of the most transparent emerging companies)- foreigners will always suspect numbers.

SWOT Table

Strengths·Cash rich·Vertical integration (manufacture everything self)·Low bureaucracy·Speed of delivery·Tapping into youth·Feature jammed gadgets·Design of products·Constant R&D·Leadership vision·Image reingeneering (me-too 2 high end)·Marketing (pop up ads)·Key tie collaborations (T-Mobile, Jewewelry and matrix)·Chip customistaion·ConsistencyWeaknesses·Low software back up ·Heavy capital investment in hard assets·Image (me-too)·Low quality reputation·Not know as a total solution provider Life style(Nokia or Sony)·To internal in their structure no outsourcing! family

Opportunities·To unseat Sony as a digital home solution provider·Growth markets CDMA China India·Building smart marketing·Image uplift Europe and Latin America·PEST changes·Packaging·Target age for products (teens)Threats·Corporate governance- Korean corporate scandal reputation·Japanese quality reputation·Software changes, trends and user friendliness·Cheaper production by rivals·Mimicing stratergy Lg and others·Asian Economic downturn·Potential of being bought out.·Impact of SARS and its revival