Samsung Business Strategy Analysis

The report analyzes Samsung's business strategy by identifying various types of multi-business models, such as horizontal integration, vertical integration (backward/forward), alliances, acquisitions, mergers, joint ventures, multicountry strategies, and global strategies. It also discusses Samsung's use of diverse channels in the market, including sales and service dealers, modern retail, and distributors. The report concludes by recommending that Samsung maintain its technology development, expand its service domains, and build trustful brand images to customers.

Assessment Cover Page
Course qualification DIPLOMA IN BUSINESS AND ENTERPRISE
MANAGEMENT
US/Prescription title: CREATIVITY, INNOVATION AND NEW VENTURE
CREATION
Course/Paper number: ABD703
Student name: JINHO SONG
Student ID: 174482A
Teacher: ZIA, AMRINDER AND TIM
Assessment type: 1ST ASSESSMENT
Due date: 19/FEB/2018
Student(s) to complete: Assignment/Report Plagiarism Declaration
For Individual Assignment / Report ONLY
I / we certify that this is my / our own work and I / we have read
and understood the Plagiarism and Dishonest Policy (7.7) of
Abacus Institute of Studies.
I/we understand that the submission of this form electronically
is the equivalent of me / us signing my / our name, in pen, on a
paper assignment cover sheet.
For Group assignments/reports ONLY:
Student name(s) & IDs:
1.
2.
3.

TABLE OF CONTENTS
1.0 Business introduction/background...............................................................................2
2.0 Market need/opportunity.............................................................................................. 2
3.0Generation of Idea........................................................................................................ 4
4.0 Evaluation and selection of idea..................................................................................5
5.0 Feasibility of the market............................................................................................... 7
6.0 Feasibility of the organization....................................................................................13
7.0 Monetary feasibility.................................................................................................... 15
8.0 Growth and sustainability potential............................................................................22
9.0 Conclusions/Implications............................................................................................25
References....................................................................................................................... 26
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1.0 Business introduction/background
Write a brief introduction for the existing business/or the business idea/ or concept
you have chosen to investigate in your report.
Samsung is the world well-known company for its products which are technologically
based such as laptops, computers, mobile phones and home electronic appliances.
The organization mission is to have a full dedication of its technology and talent to
develop products and services that are based on innovation (Samsung 2017). The
firm faces stiff competition from its rivals in business such as apple. Apple Company
is in battle with Samsung firm due to the patent infringement. Samsung has a
marketing strategy that focuses on the promotion of the brand image and sales
increment with the aim of achieving its strategic and financial goals. The customer
rang can be expanded and the sales revenue increased if the company adopt and
effective marketing strategies. This report focuses on providing the financial
feasibility and the organizational and market of the suggested
investment(Samsung,2017)
2.0 Market need/opportunity
Identify a market need or opportunity by analysing the current market situation based
on the following dimensions:
 Consumer taste along with preference
 The potential for profitability and growth in the market
 Competition from competitors
 Other needs
Dimension Analysis/Discussion
customer wants, needs and preferences The recent growth in the technological
development has brought a significant
shift in the smartphone industry. The
industry is the most significant industry
in business and has produced a
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dynamic environment.
The consumer has over the years
preferred a phone that has improved life
battery would prefer a battery life that
can go past a day without being
charged. The smartphone comes with
various features such as WI-FI,
Bluetooth, EDGE, GSM and a different
color display all depending on the
battery life of the phone. With all these
features, consumers are more addicted
to their phones and would prefer a
phone that has longer battery life.
Competition The Chinese brand market has
continually increased while Apple and
Samsung market share decline over the
years based on the most recent Gartner
data below.
There was a marginal yearly growth n
the iPhone sales. However, there was a
9% market growth during the same
period which resulted in market share
decrease. The global share of apple
decreased from 14.8% to 13.7%.
However, the Samsung having the more
significant market share saw a decline
from 23.3% to 20.7%(Kim,
Park,&Kim,2015).
On the contrary, oppo saw the most
significant growth in the market share of
4.6% to 8.1%.Huawei and vivo saw an
increase in the market share too.
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market growth and profitability potential The smartphone market is expanding at
a rapid speed globally, justifying for the
14% of the cell phones in the world. The
rapid growth in the technological
development has backed up the high
increase. Some of the technological
development comprises of the
professional data management, fast
internet browsing, advanced personal
data management and the 4g and 3 G
network evolution technologies.
Smartphone hotspot has been linked to
the Asian region mainly in China and
India. The region has seen a continuous
development in the cellular market and
an increment in the 3G expenditure and
penetration on customer electronics
across the region. In the markets that
there is saturation, the growth of
smartphone in the region has been
fueled by the subsidies of the operator
and the carrier wars. In the year 2014
the smartphone market is been
estimated to reach $150.3 billion
compared to the year 2009 where it
attained $55.4 billion (Lee, Kim,&Park
2015)
other relevant (if any)
3.0Generation of Idea
 Provide more than two creative ideas that rae capable of handling the
need identified based on the analysis above.the creative ideas can
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take any of the form below.
 Service
 Productz
 Process
 Concept
 All of the above combined
 Any other appropriate.
(ER 1.1)
Creative idea#1: Allowing consumers to have an experience of the release of new
smartphones in the showroom
Creative idea#2: Allowing consumers to have an experience of the release of new
electronic appliances, in real time fun setting
4.0 Evaluation and selection of idea
4.1 Evaluate and analyze the creative ideas above for their potential to be developed
as value creation opportunity.
(ER 1.2)
Inventive
knowledge
Advantages Disadvantage
s
Expenditur
e
Vs. Profit
(Range
1- 10)
Executio
n ease
(Range
1-
10)
Reversibilit
y
(Range 1-
10)
Creative
Idea 1:
Enabling
customers
to
experience
the release
Superior
value addition
in terms of the
experience of
the customer
unmatched by
competitors
- So as to set
up an area
where many
people could
literally have
an
experience of
2 1 1
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of new
smartphone
s located in
the
showroom
(Yuksel,
2012)
- Foremost
mover
advantage
the new
products,
extensive
resource
input is
required.
-Possible
environmenta
l damage due
to waste as a
result of the
people’s
engagement
in the
process
-Involvement
of children in
the process
may cause
certain health
and safety
issues.
-Breakage of
the mobile
phones.
Creative
Idea 2:
Allowing
consumers
to have an
experience
of the
release of
-Allows the
addition of
superior
customer
value and
experience
that is
unmatched by
-The
electronic
appliance can
be broken
4 4 6
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the new
electronic
appliances,
in real time
fun setting.
those of
competitors.
- Potential that
scalable/replicabl
e
4.2 Based on the evaluation and analysis conducted in Q 4.1, justify and select the
idea that you can recommend for adoption in the potential venture scenario.
(ER 1.3)
From the above evaluation and analysis of potential ideas, it is clear that Samsung is
hunting the effective cost-benefit. The first idea involves a great potential in the
economic aspect, however, there are high risks involved when dealing with resource
inputs. Also, the second idea contains a risk of investment and reversibility while they
fill new electronic appliances in the booth.
5.0 Feasibility of the market.
5.1 under each section, analyze the selected ideas mentioned above for its
innovative type.
 Innovation incremental.
 Innovation disruptive,
 Innovation breakthrough
 Innovation sustaining
 Other
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Innovation type Fits with the innovation type
Incremental innovation No
Distruptive innovation No
Breakthrough innovation Yes
Sustaining innovation No
The selected idea, according to the innovation type’s exploration, evidently suits the
breakthrough innovation as this is a way of including new products and serving the
customer needs to experience new products. Breakthrough Innovations can
turnaround the market trend with unique product, which would assist achieve a
competitive edge in the market, and create maximum possible value.
5.2 Discuss the scope and degree of innovation term in the life cycle and innovation
based on the above.
(ER 2.1)
Life cycle stage Scope of Innovation
Introduction stage
For the company that is introducing a
new product in the market, this is
considered as the most expensive stage
for the company. The product has a
smaller market size, and the product
sale will increase.
However, the cost of expenses such as
development and research, consumer
testing and marketing, required for
product introduction can be competitive
(yuksel,2012)
(Innovators about 2.6%)
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Growth Customers: (Early
adopters 14.5%, Early Majority
34%)
Maturity Customers: (Late
majority about 35%)
Decline Customers:
(Laggards about 17%)
5.3 under each section, explore and evaluate the selected idea for its potential in the
market value creation viability and scope.
 potential in profits and attractiveness of the target market.
Impending threat Analysis Degree Favorable?
Bargaining power
of customers
Buyer’s cost
diverts to the
products of the
competitor
High NO
Bargaining power
of dealers
It is dissimilar
dependent on
dealers.
High NO
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There is a few
alterative to
Android platform
provided to
Samsung as the
bargaining power
is represented by
Google. (Lee, Kim,
& Park, 2015)
New entrants
threats
Limited number of
organization to
Apple,Huawei,LG
and Oppo.(Kim,
Park, & Kim,
2015).
High No
substitute products
or services threats
Compared to
Samsung the
Whawey
smartphone, a
brand of the
Chinese market, is
cheaper, thus it
can substitute
Samsung.
High No
conflict among
existing
companies
conflict among
companies that are
existing is
extremely
competitive
High NO
The presence of substitute products in the market has threatened the existence of
Samsung. For instance, the Whawey smartphone which is a cheaper Chinese
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smartphone can substitute Samsung for consumers who cannot afford to purchase
Samsung.
The home appliance industry is facing a stiff rivalry since the products are saturating
the market, and the products feature don not different from one manufacturer to the
other.
There a significant disparity in the aspect of bargaining power of the suppliers.
Suppliers who provide components are not considered of the bargaining power since
they are only affected by the quantity of the order of the Samsung and price
negotiation. Due to the few alternatives to the Android platform, Google has
represented a bargaining power that is marked.
In the home electronic appliances, for the new entrants, the big brands have been
limited, for instance, there is Samsung, Panasonic, and LG.However, in the
smartphone market, there is the limitation in the number of firms such as LG, Apple,
Huawei, Oppo and Lenovo(Lee..Kim& Park,2015).Samsung has seized this chance
and remained at it’s the leader in the market worldwide.
 point-of-difference and consumer value addition
Dimension Money
exchange
Competition1
Apple
Competition2
Whawei
Competition3
LG
Price 1 3 2
Design 1 3 2
Ease-of-use 2 3 1
Interoperabilit
y
3 1 2
Security 2 3 1
Price
comparison
3 1 2
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Consumer value addition
Features pros gains
Advanced
simulations
Captivates new
customers
Awareness of the brand
affordability Sales connection Increase sales
 endorsement of the customer
Timeframe
1st year CAPTURE 1% - First year penetration is presumed to be 1%while
the original adoption by the consumer can be difficulty because
they are used of the product of the XYZ….(think innovators)
2nd year CAPTURE 3% -The projected infiltration this year is an increase of
3% with awareness of the brand increase……
(think – early majority)
3rd year CAPTURE 4% - the projected infiltration this year is expected to
increase up to 4%.....
(think early – late majority)
4th year CAPTURE 9% - - the projected infiltration this year is expected to
increase up to 9% (think late majority or laggards
5th year CAPTURE 13% - - the projected infiltration this year is expected to
increase up to 13% (think late majority or laggards)
other
(ER 2.2)
The results from the market feasibility indicate that there is a need , and the need is
big enough. In addition, as the market grows it becomes more attractive, however, it
may not offer profit potential for new entrant. To give the organization a strong
position there is a need to add superior value and uniqueness.
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6.0 Feasibility of the organization.
Asses and evaluate the ideas that have been selected for the potential of the
organization, scope and the viability in terms of :
 Weakness and the strengths of the internal organization.
 Threats and opportunities of the external environmental.
(ER 2.3)
Strengths Weaknesses
- Loyal consumers on the brand.
- Rapid service on any products.
- Skimming price-the pricing strategy for
the Samsung product.
- Employees’ turnover is high
Opportunities Threats
-Globalised world-the local culture can
be well fitted by the flexible company
policies. (Lee, Kim & Park, 2015).
- Technology is important; Technology
has been the foundation of any
Samsung product.
Apple has been taking a suit against
Samsung for copying the firms
smartphone and patent. (Kim, Park &
Kim 2015).
According to the above table, Due to Samsung product having an excellent
performance rating in the previous years, it has finally won the consumer's trust. The
product has a provision of high-speed service for its products. However the price
skimming strategy is of significance to Samsung smartphone because the phone is
among the products representatives and to gain the competitive market advantage,
the firm should continually produce new products each year. The cheap Chinese
smartphone brand is growing despite the benefits of the high price of the Samsung
firm. The firm should set an effective strategy that pertains to the local culture.
Samsung being an original Korean company, it has a policy that is flexible enough to
fit any local culture where the company has its operation in. While assessing and
planning on the launching of its new devices, it has kept the technological factors up
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to date.
Competitive gap Explanation Procedures to focus on
the gap
Increased employees’
turnover
Samsung faces a danger
of the organization ideas
and information leakage
to its competitors, due to
the majority of the
employees have been
hired by the rival
companies after filing a
lawsuit against Samsung.
(Lee, Kim & Park 2015).
There is a need for
Samsung to increase the
welfare for employees
and provide an
appropriate wages for
employees.
Lawsuit against Apple Samsung operation has
been significantly affected
by the lawsuit between
Samsung and Apple has
not been terminated.
(Kim, Park & Kim 2015)
Samsung needs not to be
involved in the lawsuit
against apple.
In conclusion, Samsung has lots of strengths which include high technology, and
high brand awareness, while its weaknesses include high turnover of employees and
the lawsuit against the competitor, Apple. This indicates that Samsung needs to build
strategies such as providing welfare to employees and not be involved in the lawsuit.
7.0 Monetary feasibility
7.1Present an evaluation that justifies and establishes assumptions of the key input
and the parameters revenue stream of the financial model for the spin off venture.
The assumptions are not limited to the following:
 Growth rate and market size targeted.
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Samsung market target is in NZ for those who want to do dollar stock exchange and
purchase smartphones. Currently 55% of the NZ inhabitants have (Samsung, 2017)
smartphones are owned by over 2.5 million people all over the world. There is an
assumption that over half of the smartphone owners are involved in the buying and
selling of foreign exchange in some manner (taking assumption due to lack of data).
Hence the population is almost 1.5 million. Using an approach of conservancy there
is an assumption of the number being about one million which includes individuals
and businesses. The various reasons of such people trading in foreign exchange are
either personal, educational, travel and business related. An assumption is made
that the market will increase at a rate similar to that of the population of the world of
1% per annum.
 Market infiltration
The initial infiltration is assumed to be 2% and can rise to 30% based on the trend of
smartphone usage rising per year. The consumer’s frequency purchase and
preferences.
According to the purchase size there is a prediction that on an annual average,
each consumer in the target market would trade $15,000 worth of
foreign currency 5 times a year. Based on preferences not all target markets would
purchase online and may make use of the app for the purposes of the price
comparison and do a direct management providing the best price place.
 Resource requirements
Expense Yr1 Yr2 Yr3 Yr 4 Yr5
Start-up cost $100,000,00
Number of staff
required
1 1 2 2 2
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Salary per staff $40000 constant
Platform royalty $15000 constant
Annual
maintenance
$5000 constant
Annual
maintenance
$5000 constant
Utility bills $5000 constant
Accountnant/lawyer $10,000 constant
other $10000 constant
Advertising budget 7% constant
 product;
Smart phones
 price
The cost of each smartphone has been assumed range in between $150-800, and is
expected to remain constant due to high competition and low barriers to entry in this
type
of open market.
 process
The selling of Samsung’s smartphones is associated with the mobile phone
companies.
 place
Each smartphone store
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 promotion
Based on the 7% of the revenue earned there will be an annual advertising budget. It
is also predicted that the promotion would impact on 20 % that would attract new
customers.
 other relevant
(ER 3.1)
7.2 Present an analysis that translates above model input assumptions and revenue
streams into key financial outputs (a minimum of FIVE) for the venture. These
outputs may include but are not limited to:
cost structures
 equity and debt profiles
 number of customers
 sale (units)
 sale (revenue)
 cashflow
 profit profiles
profit profiles
 breakeven
 investment returns
 NPV
 IRR
 other relevant
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(ER 3.2)
Revenue Yr1 Yr2 Yr3 Yr4 Yr5
Available
market
1,000,000 1,020,000 1,030,000 1,040,000 1,050,000
Market
captured
10,000 15,000 20,000 25,000 30,000
Additional
market
captured
due to
advertising
impact
2000 2000 2500 3000 3500
Total market
captured
12,000 17,000 22,500 28000 33,500
Revenue $30,000 $35,000 $36000 $40000 $45000
Commission
in
$300,000 $350,000 $400,000 $450,000 $500,000
Revenue-
total
$330,000 $385,000 $436,000 $490,000 $545,000
Costs Yr1 Yr2 Yr3 Yr4 Yr5
Fixed cost
Start-up cost $100,000 0 0 0 0
Salaries $20,000 20000 20000 20000 20000
Annual
maintenance
$5000 5000 5000 5000 5000
Utility/bills $5000 5000 5000 5000 5000
Accountant $5000 5000 5000 5000 5000
other $5000 5000 5000 5000 5000
Total fixed
cost
130,000 130000 150000 150000 150000
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Fixed cost 0.15 0.15 0.15 0.2 02
Variable cost
Advertising
budget
$15000 20000 20000 20000 20000
Variable cost 0.1 0.1 0.15 0.2 0.2
Total cost 0.2 0.1 0.1 0.1 0.1
Total cost $150,150 160,180 167.890 168.901 189.901
Cashflow Yr1 Yr2 Yr3 Yr4 Yr5
Cashflow
per annum
$213,800 $255,000 $355,000 $255,000 $255,000
Cashflw
cumculative
$1,358,903
Break even 658902
7.3 Analyse the financial sensitivity of the above financial model of the venture in a
manner which tests and demonstrates the impact of changes in key input
assumptions and revenue stream parameters on the model conduct and output.
Initial infiltration: Each one unit percentage inflates (from 1.5% to
2%) in the initial penetration explains about $2 million of variation in the total 5 year
cashflow.
cashflow Yr1 Yr2 Yr2 Yr2 Yr5
Cashflow per
annum
500,500 530,500 550,555 600,000 800.000
Cashflow
cumulative
1,450,000
Break even 55,150
Annual growth in penetration: Each one unit percentage inflates
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Cashflow Yr1 Yr2 Yr3 Yr4 Yr5
Cashflow
per annum
$150,500 250,000 350,000 400,000 450,000
Cashflow
cumulative
1,755000
Break even 150,500
variation 40,000
(from 20% to 21%) in the annual increase in penetration shows about $40,000 of
variation in the total 5 year cashflow.
Average purchase size per user per annum: Each $1000 increase
in the average purchase size per user per annum shows about $250,000 of variation
in the total 5 year cashflow.
Cashflow Yr1 Yr2 Yr3 Yr4 Yr5
Cashflow
per annum
250,200 350,000 400,000 450,000 500,000
Cashflow
cumulative
2,000,000
Break even 55,000 variation 250,000
Purchase preference (how many will buy): Each 1 unit percentage inflates (from 10%
to 11%) in the purchase preference per user per annum explains about $250,000 of
variation in the total 5 year cashflow.
Cashflow Yr1 Yr2 Yr3 Yr4 Yr5
Cashflow
per annum
200,000 300,000 400,000 450,000 500,000
Cashflow
cumculative
185,000
Break even 55,000
250,000
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Purchase preference (how many will buy): Each 1 unit percentage
inflates (from 11% to 12%) in the purchase preference per user per
annum explains about $250,000 of variation in the total 5 year
cashflow.
Cashflow Yr1 Yr2 Yr3 Yr4 Yr5
Cashflow
per annum
$250,000 300,000 350,000 400,000 450,000
Cashflow
cumulative
1,750.000
Break even 250,00
7.4 Performing the above sensitivity analysis, produce three venture scenarios
(worst, average, and best) to test the idea’s financial viability.
(ER 4.1)
Excel file
7.5 Present an analysis that communicates the establishment and justification of the
most likely scenario.
(ER 4.2)
Samsung will penetrate at a rate of 20 thousands per year and the revenue is
expected to be about 100,000 million dollars. This is a clear indication from the cash
flow that Samsung is expected to have a good revenue. This means that the venture
is worth pursuing.
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8.0 Growth and sustainability potential
Present an analysis that identifies venture’s scalability potential in terms of:
 Replicability: by importing innovations from the developed markets and also
focusing on local adaptations and innovations, Samsung has gained a lot from the
emerging markets. This means that Samsung will maintain strengths in speed in the
emerging markets and developed markets.
Customizability: For Samsung’s technology to be customizable into various versions,
it needs to be flexible. This is a clear indication that Samsung can penetrate into
more markets
Extendibility: Samsung’s new vision is to publicize of its products across the world,
and introduce new technologies to all countries.
8.2 Under the following headings, analyze and identify growth strategies you may
consider across the venture development stages:
 market penetration: Despite a disappointing first quarter (0% year over year
growth), Samsung was able regain control as the global leader in the smartphone
market. Through their Substantial discounts on the Galaxy S7 and S7 edge they
were able to move last year's flagships as they make way for the new S8 and S8+.
Outside of the high end, the product mix continues to shift toward more affordable
models (Lee, Kim, & Park, 2015)
 product development: through the introduction of the A7, A5, and A3 earlier this
quarter, along with a recently updated J-Series, and new flagship S8/S8+, this
should give Samsung a well-balanced portfolio across all regions in the second
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quarter. The launch of S8 and S8+ looks promising as it may have finally put
Samsung's Note 7 fiasco to bed (Samsung, 2017).
 new markets: •Spain, the first market to launch in Europe;
•Singapore, the first within the South East Asian region; and
•Australia, the first market to launch within the Oceania region.
Diversification: Samsung's electronics division is pursuing the corporate-level of
related diversification & vertical integration Samsung corporation is pursuing a
strategy of unrelated diversification - Corporate-level strategies and unrelated
diversification - Kinds of multi-business models (Samsung 2017).
 horizontal integration- Samsung involves the use of Google’s Android operating
system in their smartphones (Samsung 2017)
 vertical integration (backward/forward); Samsung significantly implement forward
vertical integration in the production and distribution of smartphones and the
accompanying apps. (Samsung 2017)
 alliances: Samsung needs to make an alliance with other application companies.
 acquisitions: Samsung needs also to acquire small electronic companies.
 mergers: Samsung may merge with other application companies.
 joint ventures: Samsung can do a joint venture in other businesses showing their
products such as movies and entertainment.
 multicountry strategies: Samsung business strategy will use a high level of
flexibility in a way that the company is determined in changing its strategy
dramatically according to changes in external business environment.
 global strategies: Samsung is a leader in key product categories in both developed
and emerging markets. It can remain on top in the fast-moving consumer electronics
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industry in the face of strong global and local competition with replicability and
customization globally. (Samsung 2017)
 Other relevant (if any)
8.4 Determine the venture’s competitive potential by identifying and analysing its key
sources of competitive advantage. Your must discuss at least 3 (THREE) sources of
competitive advantage, which may include but are not limited to:
 1. distribution: Samsung uses
diverse channels in the market.
It applies to the channel marketing concept where sales and service dealers, modern
retail and distributors are involved.
The sales and service dealers accounts for Samsung to sell its products and these
dealers can open their Samsung showrooms.
Samsung’s distribution network is interesting.
This evidenced by the strategy of Samsung setting a single distributor in a state that
they distribute throughout to sell all of their products. This distributor markedly
invests in Samsung and thus, both the distributor and Samsung go together for the
distribution of Samsung products. Therefore, a single distributor will purchase all
material of Samsung and sell it to retailers (Samsung 2017).
.
 2. marketing and sales: Samsung uses various methods of promotions.
Samsung employs various methods to attract customers to their products such as
the use of advertisements and sales promotions.
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 customer service: Samsung has a high trust of customers on its products because
Samsung has shown good performance in the last few years. Samsung provides a
very fast service for any of its product (Lee, Kim & Park, 2015).
(ER 5.3)
9.0 Conclusions/Implications
Provide a brief conclusion of your report, including overall managerial implications of
your findings and discussions.
This report has conducted various analyses for Samsung. For Samsung to maintain
its global leadership in the market, it is recommended to maintain its technology
development, to expand its service domains, and to be watchful of the patent not to
spend their energy on legal issues. In addition, as a global leader, it should also pay
attention to build its trustful brand images to customers as they are not connected
political issues.
References
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