Marketing within the Global Economy: Analysis of Samsung's Operations in India and UK

This report analyzes the macroeconomic environment in India and UK and how it affects Samsung's operations. It includes a comparative analysis of macroeconomic indicators, market structure, monetary and fiscal policy, and foreign trade policy instruments.

RUNNING HEAD: Marketing within the Global Economy 0
Samsung
Marketing within the Global Economy

Marketing within the Global Economy 1
Contents
Business overview..............................................................................................................................4
Purpose of the report..........................................................................................................................4
Analysis of the market structure- India and UK..............................................................................4
Comparative analysis of macro-economic indicators -India and UK...........................................6
Analysis of monetary and fiscal policy...........................................................................................12
Analysis of foreign trade policy instruments..................................................................................13
References........................................................................................................................................15

Marketing within the Global Economy 2
List of figures
Figure 1: GDP growth comparison...............................................................................6
Figure 2: Annual inflation rates (CPI) of UK................................................................7
Figure 3: Annual inflation rates of India........................................................................8
Figure 4: Unemployment rate of total labour force India..............................................9
Figure 5: Unemployment rate of UK............................................................................9
Figure 6: General government structural balances UK..............................................10
Figure 7: General government structural balances India...........................................11
Figure 8: Balance of Payments -Current Account Balance (% of GDP) UK..............11
Figure 9: Balance of Payments -Current Account Balance (% of GDP) India...........12

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List of tables
Table 1.1: GDP growth comparison
Table 1.2: Annual inflation rates (CPI)
Table 2: Unemployment growth comparison
Table 2.1: General Government Structural Balance (% of GDP)
Table 2.2 Balance of Payments (% of GDP)
Table 3: Official Interest Rates UK
Table 3.1: Official Interest Rates India
Table 4: Currency Exchange Rates - USD vs. lb
Table 4 .1: Currency Exchange Rates - USO vs. Rs

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Business overview
Samsung electronics is a South Korean electronics company. The company has
become global leader in telecommunications and digital media and started working
in 1969 and having it’s headquarter in Suwon, South Korea (Park, 2015). The
company offers a variety of electronic components such as semiconductors, chips,
flash memory, lithium-ion batteries and hard drive devices. It supplies electronic
components to Apple, Nokia, HTC and Sony.
Purpose of the report
This report is going to focus on the operations of Samsung in India and UK and is
going to investigate how macroeconomic environment within these two situations
can affect the economic activity of Samsung.
Analysis of the market structure- India and UK
India
In 2014-15 the electronics hardware production was estimated at US$32.46 billion. It
represented about 1.5% share of the world’s electronic hardware production. The
purchasing power of consumers in India is still very low. Indian economy is one of
the world’s leading and fastest growing smartphone markets. The electronic industry
is growing industry in the world. Out of the electronic industry, mobile industry is
growing fast and India is adding more mobile connections every month. The telecom
industry is dominated by the mobile phones in India (Forsgren, 2017). Samsung is
one of the leading brands in India. The company focuses on high and mid-range
markets. The mobile industry is attractive destination for the mobile phone
manufacturers because of the broad range of customers (Baker & Saren, 2016).
The electronic market in India can be classified by oligopoly competition. Samsung is
one of the brands which dominate the market. The firms are price makers which
mean firms can fix prices without losing profits. There are only few sellers of
differentiated products. There are more electronic businesses in India when
compared to US. Samsung account for 40% share in the market. The electronic
industry in India has observed strong presence from multinational corporations and

Marketing within the Global Economy 5
small and medium size enterprises (Dinnie, 2015). The electronic item stores are
major purchasing points for mobiles.
The competitors offer slightly different products, for instance Samsung has launched
Google Android and has taken advantage of Google Android operating system and
has launched attractive handsets. The company sells wide series of smart phones.
There are no barriers to newcomers which are seeking to enter in market (Auer &
Schoenle, 2016). Such players make huge investment in advertising and promotions
to increase their market share.
UK
The sales of Samsung in UK are comparatively low as the respondents focus more
on the Apple iPhones. According to a report of 2017, Apple have 48% share market
and Samsung has comparatively less that is 34%. UK is a developed market and
over the years it has seen that the domestic electronics items have grown by an
estimation of 10-15% annually in comparison to the global average of 2%. The sales
of smart phones remained flat in the third quarter of 2017. Due to lack of product
software it has to depend on other companies. Samsung along with Huawei provides
strong volume platform in the country (Park, 2015). Samsung also identifies the
contribution that that BBC makes to UK. The mission of British Broadcasting
Corporation (BBC) is to make public service available to customers.
In 2018 the company is likely to lose ground in the smartphone segment. It is due to
the growth of other smartphone companies and dominance of Apple. The share of
Apple in market stands for 48% whereas Samsung’s share kept decreasing to 34%
(Wu & Vasquez-Parraga, 2016). According to the market research, the UK electronic
market is mainly composed of Apple and other smart phone companies such as
Huawei, Sony Xperia, HTC, Nokia, LG, Xiaomi and Microsoft. The electronic sector
in UK is made up of 16.6% which contributes to the country’s economic growth. The
electronic companies in UK has doubled from 2007 to 2012 and showing increasing
trend towards the mobile segment. The country is the most exclusive smartphone
market in the world. The focus in the industry remains with the top players Apple,
Samsung, Huawei, HTC, and LG (Chen & Ann, 2016). These five companies
accounts for 91% of overall market. Huawei and LG have captured the rural part of
country where as Samsung and Apple has focused on urban UK. Xiaomi enjoys it’s

Marketing within the Global Economy 6
online strategy. Samsung leads among the top five brands in the country (Rumokoy,
Pangemanan & Manorek, 2015). The arrival of new companies in the electronic
industries has headed to the Samsung’s operations in UK being categorised as one
of the characteristics of oligopoly competition. The oligopoly market includes only
few large firms and there are high barriers to entry. It shows understanding of
cultural environment country. The competitor companies produce either
homogenous or differentiated products to understand culture of UK and high tariffs
are assigned to import of smartphones (Elshandidy & Neri, 2015).
Comparative analysis of macro-economic indicators -India and UK
Figure 1: GDP growth comparison
Source: Haver analytics, 2017
The graph represents rapid growth rate of India from 2005-2010 preceding an upturn
in the economy in 2010-2015. GDP growth showed signs of further improvement
over the period. It can be seen in the period of 2015-2016. In UK, GDP growth from
2005-2015 is 1.5 times higher than the India’s peak period in 2010 (Word Bank,
2016). The slow growth rate in 2005 accredited to drop in exports from
manufacturing sector.

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In 2011 Samsung released first series of ads in UK that defined company for the
next three years. It included the features which were missing in the competitor’s
product. At the end of 2012, the profits of the company increased up to 76% and it
was made possible by the growth of mobile division (Bank for International
Settlements, 2018). To see growth of GDP the company decided to increase number
of stores which positively enabled consumer to spend (Hampshire, 2017). The GDP
growth rate in 2010 created more jobs and it resulted in increasing spending to
higher levels of output. The company recorded higher growth in sales and increased
revenue (Hughes, McMunn, Bartley & Kumari, 2015). In India the growth over the
period was not up to the buying capacity of consumers. The increase in revenue
attributed to the performance in India. It represented fewer chances for the company
in India due to growing metropolitan and middle class customers.
Figure 2: Annual inflation rates (CPI) of UK
Source: Trading economics, 2018
The inflation rate of UK in 2010 was 3%. In 2011 the inflation rate increased to 5.1%,
in this situation the company is forced to increase prices. In 2012 it reduced to 2.2 %
which represents supply of products is higher than demand (Campbell, Goldfarb &
Tucker, 2015). It increases employment which is a positive sign for Samsung.

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Figure 3: Annual inflation rates of India
Source: Trading economics, 2016
In India the inflation rate in 2011 was 9.6% and it increased to 10.1% in 2012.
Comparatively the inflation rate in UK was more stable. The inflation rate in India
was less predictable. It revealed number of fluctuations. It could constrain the
company’s expansion in India and could obstacle in generating revenue for company
due to price variations. The stability of inflation rates in UK can contribute to well-
functioning of market. It could enable Samsung to increase incentive to control costs
and enhance productivity.

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Figure 4: Unemployment rate of total labour force India
Source: Trading economics, 2018
Figure 5: Unemployment rate of UK
Source: Trading economics, 2018
The explanation of unemployment rate in India and UK has been given in the
appendice 1.

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Figure 6: General government structural balances UK
Source: by author
The government structural balance in 2008 was -8.2%. However it fluctuated in
recent years and tends to decrease in the period of 1996-2017. It ended at -2.8% in
2017.

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Figure 7: General government structural balances India
Source: Reserve bank of India, 2018
The general government structural balance in 2013 was 33%. In 2015 it reduced to
31% and finally reduced to 26% which is a positive remark.
Figure 8: Balance of Payments -Current Account Balance (% of GDP) UK

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Source: economicshelp.org, 2018
The current account of UK shows it has a determined current account deficit in the
past years. In 2012 it had a current account deficit of 3% of GDP.
Figure 9: Balance of Payments -Current Account Balance (% of GDP) India
Source: Reserve bank of India, 2018
The current account balance of India shows it had current account deficit of 12% in
2011. It has improved over time. It reached to 10% in 2013 and further brings
positive changes and resulted in 27% in 2014.
Analysis of monetary and fiscal policy
The effects of credit crisis have been intensified by the overflowing of UK’s decade-
old house price bubble. It has implied severe taxes on the economy. The GDP
anticipated growing by 4 per cent in 2009, the country’s first downturn in 17 years.
The retail price index is estimated to fall by 1.7 per cent in 2009. It is increasing
concerns over devaluation and the number of unemployment is likely to extent 3
million people before the economy recovers.

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The government follows two key fiscal rules in UK. According to the golden rule, the
government can borrow to invest over the economic cycle. It cannot fund on current
expenditure. The other rule is sustainable investment rule. The public sector debt is
a part of GDP and will be detained over economic cycle at a practical level
(Laokulrach, 2018).
The unemployment in 2014 continued to fall more rapidly than expected. The CPI
also falls below the target of government. The re-emergence of inflationary pressure
can be seen if the economy recovers appropriately. Despite falling unemployment
the UK government can keep a strong case for loose monetary policies. It can be
helped by stagnant wage growth and companies can expand and keep up with the
demand. It can allow company to hire more employees (Anand & Khera, 2016).
Samsung sells electronic items and the sales rely on disposable income. It promotes
growth. Consumer spending and inflation reduction can be profitable for the
company. The efforts of company can be contributed to industrialisation and it brings
wealth and investors and exposure of UK to captivate modern technology culture.
The sales of the company increased with the improving GDP of country. It creates
wealth and growth for country (Cevik, Dibooglu & Kutan, 2014).
Analysis of foreign trade policy instruments
The trade policies of UK are constructed in such a way that it benefits all. The
European Union manages trade policy on behalf of UK. The government supports
and develops new trade policies. It monitors the treatment and invents the policies
for UK exports (International Monetary Fund, 2015).It trains teams, government and
interested parties. It also involves stakeholders to develop country’s international
trading environment. The trade policy of UK has surpassed India due to liberalisation
of trade policies. It also involves number of decisions such as tax, subsidies and
price control to foster growth and investment of country. Being member of WTO the
country derives benefit being part of incorporated global trading system. UK is
involved in various bilateral and multidimensional trade agreements. It enables entre
to new marketplaces for the products of country (Buckley, Pass & Prescott, 2016).
The incorporation of Indian economy through trade and capital flows has enhanced
which led to the growth of $2.3 trillion in 2016 from $ 475.37 billion in 2004. The per

Marketing within the Global Economy
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capita income also increased in these years. It can also be evidenced by the
participation of country in WTO (Hopewell, 2015).
The currency is valued between two countries for the exchange of goods and
services. For instance, the value of Indian currency is weak when it’s compared to
UK pound. It is done to encourage exports to sustain economic growth. It can create
exchange rate for Samsung. The revenue from India depreciates against the
Samsung’s trading currency the UK pound. It could impact the future investment
decisions concerning growth in the economy (Criscuolo, Laursen, Reichstein &
Salter, 2018).
Samsung could be affected by the exchange rates if there is devaluation in currency
in the country company supplies. It can happen only if the company is involved in
international trade. It provides good value in lower amount. It can benefit to company
in the form of higher revenues (Chuang & Lee, 2015). For instance, increase in the
exchange rate of UK from 2010-2015 enabled company to trade in UK pounds to
experience great purchasing power for electronic equipment in UK.

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References
Anand, R., & Khera, P. (2016). Macroeconomic impact of product and labor market
reforms on informality and unemployment in India. International Monetary
Fund.
Auer, R. A., & Schoenle, R. S. (2016). Market structure and exchange rate pass-
through. Journal of International Economics, 98, 60-77.
Baker, M. J., & Saren, M. (Eds.). (2016). Marketing theory: a student text. Sage.
Bank For International Settlements (2018). Cross-border retail payments. Retrieved
February 26, 2018 from https://www.bis.org/cpmi/publ/d173.htm
Buckley, P. J., Pass, C. L., & Prescott, K. (2016). Canada-UK bilateral trade and
investment relations. Springer.
Campbell, J., Goldfarb, A., & Tucker, C. (2015). Privacy regulation and market
structure. Journal of Economics & Management Strategy, 24(1), 47-73.
Cevik, E. I., Dibooglu, S., & Kutan, A. M. (2014). Monetary and fiscal policy
interactions: Evidence from emerging European economies. Journal of
Comparative Economics, 42(4), 1079-1091.
Chen, C. M., & Ann, B. Y. (2016). Efficiencies vs. importance-performance analysis
for the leading smartphone brands of Apple, Samsung and HTC. Total
Quality Management & Business Excellence, 27(3-4), 227-249.
Chuang, Y. T., & Lee, Y. T. (2015). The Impact of Glocalisation on Website
Translation. Translation and Cross-Cultural Communication Studies in the
Asia Pacific, 239.
Criscuolo, P., Laursen, K., Reichstein, T., & Salter, A. (2018). Winning combinations:
search strategies and innovativeness in the UK. Industry and
Innovation, 25(2), 115-143.
Dinnie, K. (2015). Nation branding: Concepts, issues, practice. Routledge..

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Elshandidy, T., & Neri, L. (2015). Corporate governance, risk disclosure practices,
and market liquidity: comparative evidence from the UK and Italy. Corporate
Governance: An International Review, 23(4), 331-356.
Forsgren, M. (2017). Theories of the multinational firm: A multidimensional creature
in the global economy. Edward Elgar Publishing.
Hampshire, C. (2017). A mixed methods empirical exploration of UK consumer
perceptions of trust, risk and usefulness of mobile payments. International
Journal of Bank Marketing, 35(3), 354-369.
Hopewell, K. (2015). Different paths to power: The rise of Brazil, India and China at
the World Trade Organization. Review of International Political
Economy, 22(2), 311-338.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=GB
Hughes, A., McMunn, A., Bartley, M., & Kumari, M. (2015). Elevated inflammatory
biomarkers during unemployment: modification by age and country in the
UK. J Epidemiol Community Health, 69(7), 673-679.
International Monetary Fund. (2015). Balance of Payments and International
Investment Position Statistics. Retrieved February 26, 2018 from
http://www.imf.org/external/np/sta/bop/bop.htm
Laokulrach, M. (2018). Impacts pf fiscal and monetary policies on employment. AU
Journal of Management, 9(1), 33-42.
Park, S. O. (2015). 23. Samsung: restructuring, innovation, and global
networks. Handbook of Manufacturing Industries in the World Economy, 362.
Park, S. O. (2015). 23. Samsung: restructuring, innovation, and global
networks. Handbook of Manufacturing Industries in the World Economy, 362.
Rumokoy, F., Pangemanan, S. S., & Manorek, S. L. (2015). The Influence of Brand
Image, Advertising, perceived Price Toward Consumer Purchase Intention at
Samsung Smartphone. Jurnal Riset Ekonomi, Manajemen, Bisnis dan
Akuntansi, 3

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Word Bank (2016). GDP (current US$).
Wu, Y. C., & Vasquez-Parraga, A. Z. (2016). Fitting Consumer Needs to Perceived
Product Value: The Example of Apple versus Samsung Products. Atlantic
Marketing Journal, 5(2), 13

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Appendice 1
In the period of 2005-2015 the unemployment rate in UK was 6% where as
compared to India it was on an average 3.49%. According to the report of last 10
years unemployment rate in both countries were lowest in 2008 and 2015
respectively. The positive growth level of countries could derive benefit to company
in the form of increased consumer consumption and personal consumption. In 2011
the unemployment rate was higher and Samsung reported negative sales growth. It
slow down economy due to reduction in household income.

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LIST OF TABLES
Table 1.1: GDP Growth Comparison
Table 1.1.GDP Growth Comparison by Country (%)
Country 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
UK 2500 2900 3100 3200 3500 2500 2500 2600 2600 2650
India 600 800 900 1000 1200 1300 1400 1450 1400 1300
Source: Haver analytics, 2017
Note: Estimates start after 2009
Table 1.2: Inflation rate (CPI)
Country 2010 2011 2012 2013 2014 2015
UK 3 4 3 2.4 1.7 0
India 9.5 9.5 10 9.8 8 7.7
Source: Trading economics, 2018
Note: Estimates start after 2010
Table 2: Unemployment Rate % of Total Labour Force Table
Country 2008 2009 2010 2011 2012 2013 2014 2015
UK 5.7 7.7 7.8 8.1 7.9 7.6 6.2 5.6
India 4.15 3.91 3.55 3.54 3.62 3.57 3.53 3.49
Source: Trading economics, 2018
Note: Estimates start after 2009
Table 2.1: General Government Structural Balance (% of GDP)

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Country 2013 2014 2015 2016 2017
UK 5.8 4.9 5.8 4 3
India 33 32 30.5 29 26
Source: Reserve bank of India, 2018
Note: Estimates start after 2014
Table 2.2 Balance of Payments (% of GDP)
Country 2005 2006 2007 2008 2009 2010 2011 2012
UK -2.5 -2.8 4.7 -.2 -3 -2.7 -2.5 -3
India -5 5 25 -17 8 4 -13 3
Source: economicshelp.org, 2018
Note: Estimates start after 2008
Table 3: Official Interest Rates UK
Date Interest rate
2015 2.7
2014 2.9
2013 3.7
2012 3.1
2011 3.5
2010 4
2009 3.9
2008 6.4
2007 5.3
2006 5.2
Source: https://www.quandl.com/data/BOE/IUMBV24-Monthly-interest-rate-of-UK-
monetary-financial-institutions-excl-Central-Bank-sterling-Lifetime-Tracker-mortgage-
to-households-in-percent-not-seasonally-adjusted

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Table 3.1: Official Interest Rates India
Date Interest rate
2015 8
2014 7.7
2013 8
2012 8.5
2011 6.2
2010 4.7
2009 5.5
2008 7.7
2007 7.2
2006 6.3
Source: https://www.quandl.com/data/BCB/17901-Official-interest-rate-India
Table 4: Currency Exchange Rates - USD vs. lb
British pound to US dollar effective exchange rates
Date Exchange rate
2015 1.4819
2014 1.5608
2013 1.6528
2012 1.6168
2011 1.5461
2010 1.5655
2009 1.6148
2008 1.4376
2007 1.9909
2006 1.957
Source: https://www.poundsterlinglive.com/bank-of-england-spot/historical-spot-
exchange-rates/gbp/GBP-to-USD-2015

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Table 4 .1: Currency Exchange Rates - USO vs. Rs
US Dollar to Indian Rupee Exchange rates
Date Exchange rate
2015 66.1653
2014 63.035
2013 61.795
2012 54.955
2011 53.015
2010 44.7125
2009 46.4
2008 48.425
2007 39.3
2006 44.12
Source: https://www.poundsterlinglive.com/bank-of-england-spot/historical-spot-
exchange-rates/usd/USD-to-INR-2006