Put forward by Albert Humphrey, SWOT analysis has been widely used in evaluating the business development of a company in the future. By assessing the individual and environmental factors, SWOT analysis comprehensively identifies both the internal and the external factors, namely strengths, weaknesses, opportunities and treats. Strengths are used to characterize the internal advantages the company has over its competitors. Opposite to strengths, weaknesses are used to describe the internal disadvantages that might put the company into the unfavorable situation. Opportunities suggest the potential beneficial elements that might be utilized by the company in the future. Opposite to opportunities, threats refer to the elements that might lead the company into trouble in the future. SWOT analysis is critical to the decision makers because the decision makers can base on the information provided in the SWOT analysis to make the final decision regarding to the business strategies. (Humphrey, 2005)
Samsung, as one of the Fortune 500, a leading company in the electronic industries, have three different business units, IT and Mobile Communications (IM), Consumer Electronics (CE), and Device Solutions (DS). Each business unit is crucial for the future development of Samsung. It is necessary to conduct SWOT analysis for each business unit, based on which Samsung can achieve its business expectation in the future.
IT and Mobile Communications (IM)
Samsung is the world’s No. 1 marketer of the mobile phones with over 20% market share in the global market. The high market share assures its leading position in the IT and mobile communication. The consumers have group psychology to make the purchase decision for their mobile devices. With the increasing popular of K-pop star all over the world, Korean products with celebrity branding can quickly gain the hearts of the young generation aged from 10 to 30. (SAMSUNG, 2015)
Another strength lies in Samsung’s impressive research and design ability. Samsung is able to apply the innovations in its products. According to the incomplete data from business analysis, Samsung spent most in the research and development among all its competitors and have established a mature system to convert innovations into application. For example, Samsung is able to launch Samsung Pay, the Korean version of Apple Pay, within one year. (Baker, 2016)
Compatibility is another advantage of Samsung devices. Android platform is open to the public, which makes it available to accept the improvements made by the global intelligence. The high renewable frequency greatly improves the user’s comfortableness. (Anthony, 2014)
In the smartphone market, Samsung cannot catch up with its major competitors such as Apple in the United States and Huawei in China. Considering China and the United States are the two biggest smartphone consumers in the market, it is urgent for Samsung to promote its smartphone with more attractive advantages over other competitors. Between 2014 and 2015, Samsung’s share in the market fell by 2.3% in the United States while at the same time, Apple’s share price grew by 35%. The same thing happened in China. Between 2014 and 2015, Huawei’s market share in China grew by 48% and Xiaomi’s market share grew by 29%. Though there is no available data about the decreasing market share of Samsung during the same period. The decreasing revenues suggests its shrinking market share in China. (Bhasin, 2016)
The Android open source operating system is another weakness. Though some consumers view the Android is superior in the user’s comfortableness, some consumers regard Android as an inferior product to Apple’s iOS. The personal preference might negatively affect the purchasing decision. (Bhasin, 2016)
There is a growing market for smartphones, especially in developing regions such as Africa and India. The small online population suggests the great developing potentials the regions have. The expanding market in the India and African countries is expecting to take over the current growing quota from China and the United States.
With the popularity of the online shopping and online payment, the online service has already become an indispensable part of the people, especially the young people in the developed countries. On the one hand, the online service requires the higher level of the interactive networks and database, on the other hand, the increasing online service makes people rely on the smartphones. The reliance on the smartphone gives Samsung opportunism to make more revenues in the artificial intelligence of the smart phones.
The young people are quickly becoming the largest consumer group of the Samsung. Combing with the Korean culture and celebrity branding, Samsung has the natural advantages over its competitors in the promotion. Samsung should take full use of its potential connection with the Korean pop culture and expand its influence in the young consumers. (Dudovskiy)
The major threat comes from its competitors such as Apple, Huawei, Xiaomi and so on. All of them have targeted consumer groups in the market. Apple launches its new generation of electronic products periodically with a strong focus on the young generation. Huawei is the Chinese brand and its biggest selling point is the long standby time, which meets the demand of the middle age group. Xiaomi plays the price game and wins its consumers by selling its products at a lower price with some hunger marketing.
Another threat comes from the consumers. Due to the battery explosion of Samsung Galaxy Note 7, Samsung does not have a good reputation among its potential consumers. The reputation is crucial for the potential consumers. For most consumers, there are many equivalent products in the market. Many products can meet their demand and the reputation of the product swings their purchasing decision. Therefore, Samsung is urgent to improve its reputation in the quality among its customers. (Bhasin, 2016)
Consumer Electronics (CE)
The consumer electronics include visual display business, digital appliances business, printing solutions business and health & medical equipment business. Though Samsung has already fully developed all the branches of the consumer electronics in its home country, South Korea, it has not developed this business unit in many other developed and developing countries.
The success of the IT and Mobile Communications successfully promotes the develop of Consumers electronics. Under the world-wide famous brand, Samsung Electronics, the potential consumers naturally develop a preference for the Samsung Electronics. Similar to the IT and Mobile Communications, the customer electronic is home to many patents. Thanks to the high expenditure in the Research and Development Department, Samsung has developed the largest patent portfolio among its key rivals. Between 2014 and 2015, Samsung’s investment in R&D reached 14.1 billion dollars, which is the largest in the industry. But Samsung is the most efficient player in the innovation. According to the incomplete statistics, the patents account for around 7% of its yearly revenue. (Tripathi, 2016)
At present, Samsung is the world’s largest manufacture of liquid crystal display (LCD) panel. Samsung has the strong manufacturing and marketing capabilities. In order to reduce the cost, many competitors choose to outsource their manufacture, which makes it difficult to control quality. The strong manufacturing capability grants Samsung with an advantage in the quality control.
In addition to the weaknesses of the IT and Mobile Communications, the major weakness of the consumer electronics is the current sales. Samsung is heavily dependent upon consumer electronics sales in markets with limited potential for growth such as the United States and Europe. Though the sales stay stable in these countries these years, the aging society poses the likely declining sales in the coming years. So it is necessary for the Samsung to develop new markets in other developing countries such as China, India and African countries. The potential customers in these developing countries have the increasing purchasing power and emerge as the potential customers for many products such as electronic devices, high-tech devices, health products and so on. (Jurevicius, 2017)
Another weakness lies in the Samsung’s recall of its products. In 2013, U.S product safety officials say Samsung in the United States was going to recall its washing machines due to the potential detachment in usage. Significant product recalls like this negatively affects the consumer confidence in the group’s products.
The global consumer electronics industry has witnessed a significant growth in the recent time. Based on the business analysis report on “Global Consumer Electronics”, September 2009, the global consumer electronics market had achieved the total revenues of $267.2 billion in 2008, representing a rapid growth rate of 7.1% for the period spanning 2004-08. The performance of the forecast to improve further and is expected to drive the market to a value of $306.1 billion by 2013. Though the performance in 2016 is not as expected as before due to the negative influence from the recall of Samsung Galaxy Note 7, the customer electronics have maintained the leading position among its major customers. Samsung Electronics is one of leading players in the consumer electronics industry. The company produces and markets a wide range of consumer electronics products including digital TVs, monitors, audio-visual devices, and printers. Compared to its major competitors such as Apple, the customer electronics produced by Samsung are of good compatibility and have less requirement of user capability. Besides, its price is very competitive. It also provides digital home appliances like refrigerators, air conditioners, washers, ovens, vacuum cleaners, and other appliances. Hence, the company is well positioned to capture the growing global consumer electronics industry. (Jurevicius, 2017)
Since Samsung relies heavily on its research and development, the failure of the research and development might exert an unprecedented hit on the company. The group faces the inherent risk of R&D failure and the copy issue about the patents has always been an annoying legal problem for the company for a long time. On the one hand, the group also needs to enhance its protection system of its patents and intellectual property rights. On the other hand, the group should make more efforts in maintain its intelligence group by providing more attractive salary and comfortable working environment.
There has been a rising concern in various countries for cutting carbon dioxide (CO2) emissions to prevent global warming and reducing the use of environmentally hazardous substances, are becoming widespread. Due to the increasing environment awareness, restrictions have been imposed on various key ingredients of the electronics devices such as lead, cadmium, mercury, hexavalent chromium, and PBDE flame retardants. Strict regulations in various countries requires Samsung to develop different strategies and apply different manufacturing processes to produce products. Respond to the calls of reducing the use of raw materials, energy consumption, and emissions, Samsung needs to make proactive movements to change its current manufacturing process. (Anthony, 2014)
Device Solutions (DS)
Since R&D has always been a major advantage over its major competitors, Samsung is regarded as an innovative company in both mobile communication and customer devices. The company received 80 awards in 2015, including the CES ‘Best of Innovation’ award, and has received more than 300 awards since 2004. The innovation made by the company also takes place in its Device Solutions as well. The powerful researching ability and innovating spirits grants the device solutions with many technical advantages over its major competitors such as Apple and Huawei. (Baker, 2016)
In addition to its technical advantage, Samsung has also been known for its captive appearance design. According to the company, since 2009, Samsung has won the most awards among all nominated companies. What’s more, the company’s environment protection awareness is gaining the customer preference in its ecologically friendly products. Samsung’s engagement to decrease its greenhouse gas emissions has also been widely acknowledged by its customers and the society, for which Samsung has been named as one of the world’s top-ten companies in the Carbon Disclosure Leadership Index. (Dudovskiy, 2015)
Although Apple has spent a lot of money and time in its social responsibility, Apple has never received as many awards for innovation and eco-friendly product design as Samsung. This enhances the company’s reputation, increasing brand awareness and sales.
The decline in the profit margin has been a problem bothering Samsung in the last three years. Since 2006, both the operating margin and the net margin have been showing a declining trend. The operating margin decreases from 10.6% in 2006 to 5.0% in 2008, which suggests that Samsung has not conducted a good cost control and risk analysis. The decline also takes place in the net margin. The new margin came down to 4.6% from 9.2% during 2006 to 2008. Declining profit margins is not a good sign to restore the consumer confidence from the product recall and might evolve into the customer crisis if not controlled the declining margin well. (Baker, 2016)
Due to rapid development of the network technologies and artificial intelligence, the market is changing from stand-alone content and services to multimedia applications and multimodal services. The shift in the market marks the coming of the new era in the electronics industry. Media centers in the home are also playing a key role in delivering the new digital media. In the near future, there will be a great demand in the digital TVs, home media centers combine applications such as music players, recorders and virtual reality games. Samsung can capitalize on this growing demand for digital media by creating converging products, thus increasing its revenues and profitability. (Humphrey, 2005)
Due to the economic depression in 2008, the middle-class incomes in North America and other European counties have been declining these years. Though there are signs of minor recovery. But there is no strong power to restore the income level of the middle-class back to the previous level. As the main purchasing power of the Samsung products, the potential decline in the sales deserve enough attention and preparation.
For the three business units of Samsung, there are many same points in the SWOT analysis. Research and development is a powerful advantage over its major competitors in all business unit. Thus, innovation and user friendliness of the Samsung product is a key selling point. Another advantage is the world famous brand name. Under the name of Samsung, its product can impress the customer with good quality and reliable performance. Though the company also faces the recall problems and the fierce competition among its major competitors, the company still holds the leading position in the industry. In the future, Samsung needs to figure how to deal with the public relations and the declining profits to achieve its annual fiscal goal.
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