Management Economics Assessment 2: Samsung Business Analysis

This report provides a comprehensive analysis of Samsung, a multinational South Korean corporation, from a management economics perspective. It begins with an overview of the company, its products (focusing on smartphones), and services, and then analyzes the market structure in which Samsung has operated since its inception. The report examines Samsung's transition from an oligopoly market structure to monopolistic competition, evaluating the characteristics of each. It critically evaluates different market structures and discusses the role of government intervention in the economy. The analysis covers key aspects like market share, competitive landscape, and the impact of market dynamics on Samsung's business strategies, including the factors that influence pricing and production decisions. The report provides insights into the competitive forces that shape the mobile phone industry and Samsung's position within it, making it a valuable resource for understanding business development and market economics.

MANAGEMENT ECONOMICS:
Assessment 2

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Describe the business and its products & services..................................................................1
2. Analyse the market structure in which company operated since its inception........................2
3. Evaluate the characteristics of pervious market structure of Samsung Company...................4
4(a). Critically evaluate the different market structure................................................................6
4(b). Suggest that greater or lesser government intervention is good for the society or not.......6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Economics is a branch of science which is related with production, distribution and
consumption of products and services in an economy (Callan and Thomas, 2013). In present
report the knowledge of management economics is used to develop an understanding regarding
economic concepts and the impact of economic government policy effecting managerial
decisions of a business organisation. For the fulfilment of this purpose, the organisation which
has been selected to focus upon is Samsung. It is South Korean based multinational company
which is established in 1938.
This assessment covers the several topics such as description of the selected business
organization and range of products and services which they offer. In addition, also evaluate the
current or historic market structure of selected entity and characterises. Along with this, critically
evaluate the market structure in which business operated and suggest that government
intervention is good or not for the society.
MAIN BODY
1. Describe the business and its products & services
Overview of the business:
Samsung is a multinational South Korean corporation with headquarters in Samsung
City, Seoul. It is also the largest South Korean conglomerate business and includes various
affiliated businesses, most of them united under the Samsung brand. Company was founded in
1938 as a trading firm by Lee Byung-chul (Armstrong And et.al., 2019). The group diversified
within the next 3 decades into fields that included food manufacturing, textiles, banking, shares,
and distribution. Samsung has a strong impact on South Korea's economic growth, government,
news & culture and has been a significant driving force behind the "Han River Miracle". The
companies generate about one-fifth of South Korea’s overall exports. Samsung's turnover was 17
per cent of South Korea's $1.082 billion GDP.
Products & services:
There are several Smartphone ranges offered by the Samsung Company which help the
customers to satisfy their demand as per the requirement. Samsung Galaxy Note, Samsung S
series, J series, Samsung Galaxy J5, Samsung Z4, and Samsung Galaxy Core Mini etc. is the
series of smart phones offer by the Samsung Company. Consumers can pick any mobile phone
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according to their requirements or budget, which will help them fulfil their needs. For this
report, Samsung is chosen as it is one of the major cell phone companies and it has large market
shares. Below mention graph provide better understanding that how market share of Samsung
Company changes over the time.
Samsung's primary mobile model range is the Galaxy series that was first launched in
April 2009. The company's mobile sales steadily rose from 2.4 million in the beginning of 2010
to 74.1 million in the 4th quarter of 2017. Over the years Apple has steadily been its nearest rival
while other brands like Lenovo and Huawei have also expanded their market share for
Smartphone. Apple is the world's only largest mobile maker, with the firm shipping more than
215.8 million iPhones globally in 2017. Huawei is the 3rd largest mobile maker with 10.2 % of
market share as of the fourth quarter of 2017. In 2020, market share reduces due to corona virus
spread and government take action and announce lockdown in the country.
2. Analyse the market structure in which company operated since its inception
In context of Samsung organization, from its inception company deals in Oligopoly market
structure because that time there was very few competitors in mobile phone industry such as
Apple and LG. But now, company has lot of competitors along with previous one such as,
Xiaomi, Realme, Oppo, Vivo, Huawei, Motorola etc.
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Current market structure of Samsung Company is Monopolistic Competition because of
some reason (Bridge and Dodds, 2018). Monopolistic market structure shows both pure
competition and monopoly characteristics. The companies manufacture a somewhat different
commodity that can be near alternatives but not ideal replacements and both companies fight for
the similar customers in fact. Hence the companies are not focusing on demand as much as they
are seeking to promote their product to represent the value-added features or key characteristic
that differentiate their product offering. The companies in monopolistic business are also "Price
Maker" since each corporation produces a unique commodity; they will fix their own market
price so they don't have to 'take' it from the entire industry. The value and manufacturing results
produced by individual businesses are dependent on the judgment of the customer and their "cost
creation." The firms could also use the industry price as a benchmark for selecting the methods
and materials of manufacturing. Key characteristics of Monopolistic Competition, which are as
follow:
 There are a lot of suppliers and a lot of buyers in this industry, and no company has
absolute market price power.
 Customers recognize non-price distinctions among products made by competitors (Callan
and Thomas, 2013).
 Entrance and exit barriers are small which encourage new people to enter in this market
structure.
 Production companies have a full degree of market power because they offer unique
products.
 The company's primary goal is to increase its earnings through setting their product price
of their own.
 A business is expected to behave as if it were confident that it understood the demand and
price elasticity, it will further helps in making strategic decision or understand customer
demand regarding products.
 Any company's price and production decision does not influence the actions of all
companies in a sector, i.e., the effect of a particular company's decision is fairly
uniformly distributed around the whole market. So among all the firms there's really no
rational rivalry.
 Throughout the long run, every other company achieved only normal profit.
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 Single company invests large sums on ads. The advertising and advertising costs are
referred to as cost of selling.
Samsung Company is under monopolistic competition where its rivalry firms such as Apple
Inc, Xiaomi, Realme, Oppo etc. offer almost similar products with some uniqueness which
allows them to set their product price accordingly. That’s why, they are the price maker not price
taker. Market structures have a crucial role to play in the direction a company may conduct
business (Dinçer and Yüksel, 2018). In knowing what kind of market environment a company
positions in, the company would be able to see whether it's worth having to struggle over the cost
of profit. The variables distinguishing the various forms of market systems may be the
distinction between whether or not such a start-up competitor would be able to survive or be
driven out of business by the big companies who already operate in that specific market
environment. It is by knowing and playing into the dynamics of the industry that some
businesses like Samsung Electronics have indeed been willing to be so popular. Various business
dynamics prioritize different variables, but one reality holds. Any business, in the end, is
essentially attempting to bring their goods or services to their customer base.
3. Evaluate the characteristics of pervious market structure of Samsung Company
Samsung Electronics was exists in a distinctly oligopoly industry. Another of this firm's
main components is found in the selling of mobile phones. Samsung serves as a leading force in
this industry alongside firms such as LG, Apple and Motorola. The rivalry is far more restricted
away from these big players. It is exceedingly difficult for foreign firms to obtain a presence in
this industry, as the market leaders already have very significant percentage influence over the
customer base. Business structure's usefulness is immensely advantageous to Samsung, but they
have taken ownership of it to being one of the key large corporations on their individual market.
For Samsung, it is primarily from the business system that the sources of labour and production
are formed.
In Samsung history, company was operated in oligopoly market because that time in the
Smartphone Industry, there was very few competitors available in the market (Kamien and
Schwartz, 2012). The demand which Samsung generates is cantered almost exclusively as a
function of an oligopoly's market structure. Since Samsung has developed a corporate model
capable of leading the industry and putting a heavy focus on exploring and producing new ,
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innovative technologies, the corporation is able to deliver its customer base technically superior
goods that enable the demand for its technologies to grow.
A good example of this would be the Galaxy S III. That specific product is so creative
and very well-designed which were helped Samsung to be one of the world's biggest Smartphone
sellers. In a regular basis, it has frequently beaten out the iPhone 5 that is Apple which is biggest
competitor of Samsung. The same basic idea stands true as for labour as well as production. This
is because of the strong market share that Samsung dominates by effectively controlling its
business position, which enables the business to manufacture too many goods and keep its
production stable enough to satisfy its demand, and to manufacture such a stable volume of new,
creative products that Samsung can hire a huge workforce for anything from manufacturing of a
product to assembling of a device. Some of the key characteristics of oligopoly market are as
follow:
Few firms: This attribute is a defining feature of the Oligopoly system which indicates
that in this market structure there are only a very few large firms who influence the market most.
There are lots of small companies in oligopoly industry system but there are less
large corporations who have almost 50 percent of market share.
Interdependency: In this market structure, there are very few large corporations which
means if one of such entities increases the price of products, the whole sector will have to suffer
substantially (Keller, 2015). It may be assumed that all big corporations in the framework of
oligopoly market are interdependent with each other because one company's pricing shift or
marketing campaign affects the other organizations in the sector.
Barriers to entry: Maximum of the market share captured by the large
organizations which makes it impossible for new entities to reach such a market position. Due to
numerous factors organizations able to achieve success or survive in this market such as
huge capital demand, current business separation, customer loyalty for products, economies of
scale, the number of barriers to joining such a market system is significant.
Advertisement: That seems to be a significant feature of oligopoly market structure is
that owing to market environment is distinct from many. There are only a few major
organizations with adequate leverage in this system which allows them to promote their brand on
larger scales.
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Above discussed characteristics affect the organization or become reason to not operate
in this market structure. Samsung Company was previously operated in oligopoly market
structure but because of availability of near substitutes no longer allow them to operate in it.
Now, they currently operated in monopolistic competition where they offer different products or
set their product price accordingly.
4(a). Critically evaluate the different market structure
Market structure can be defined by the organisation and main features of the area of
products under which a corporation is doing business. Perfect competition, monopoly, oligopoly
and monopolistic competition, these are four main groups of market structure which is based on
profitability and degree of demand. The oligopoly market structure has been characterized as an
atmosphere that only a few companies play a role as individual’s gain, while only one
organization has the ability to become the same within monopoly marketplaces. On the other
side, perfect competitive market indicates that there are several companies which are price-
takers, while monopolistic companies showed the ability of price maker.
A number of companies within the Smartphone sector compete with each other to satisfy
the exact same customer demand, i.e. get something unique and creative together with quick
delivery (Kotorri and Krasniqi, 2018). In the mobile phone sector, customers have different
demand and preferences regarding products such as battery backup, camera quality, good
external body, colour of mobile phone, processor etc. Mobile manufacturing should ensure that,
they implement such demands in their product development strategy to attract more customers
through showcasing these features and generate more demand.
Additionally, as major firms offer controversial and special features within the electronics
industry, then, in the subjective opinion of economic analysts, it has seen firms merely
differentiate their product range from all the others. A variety of customers within the
Smartphone sector is claim with each other to satisfy customer requirements, i.e. want something
unique and modern alongside better delivery with effective branding and marketing.
Nevertheless, each corporation used it to produce similar products with unique features and
recognizable products to satisfy less or more specifications.
4(b). Suggest that greater or lesser government intervention is good for the society or not
Low or high government intervention is beneficial for the organization because it helps
equality, force organizations to follow public goods regarding lows and regulations, change in
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consumer behaviour etc. Governments should intervene to offer social protection for people who
are sick and injured, unemployment insurance, minimum wage etc. It increases overall economic
prosperity and helps people to move away the extreme poverty. Such political interference will
also protect the widespread injustice from social disorder. Governments should have budget
for national security, law and order out of general taxation. Monitoring after the atmosphere is
also a public interest, there are a growing number of places where a policy is required to tackle
problems such as wild fires, sea level rise and water quality demand. State intervention is good
for the society because it helps in providing free education which will lead to an increase in the
quality of life for qualified citizens. The remainder of civilization too, has many good
environmental impacts.
A well-educated population can increase the efficiency of labour and economic
development. Once the government recognizes unhealthy products, they can gradually alter
customer habits such as through increased prices, promotional strategies, and behavioural
psychology, such as finding it harder to purchase tobacco in unattractive packaging (Vanek,
2017). Long-term efforts from the government to discourage smoking in the United Kingdom
and the US have proven successful in lowering smoking levels and something that has works to
boost life expectancy. Firms can obtain monopoly power in a free economy to charge customers
high prices and monopolistic control to pay lower wage to workers. It increases inequality and
the lack of support for the millstone. Intervention by the government to curb mergers and
monopoly control will contribute to greater economic wellbeing.
Higher government intervention is good for the society because it restrict the companies to
exploit workers and consumers through setting high price of their products and give low wage to
their workers. Because of this, government establish a law of minimum wage payment for
employees and every organization should have to follow it strictly otherwise government take
appropriate action on that particulate entity.
CONCLUSION
From the above report, it has been analysed that management economics is more of a
process than a concept in which market structure and business environment of a business
organisation is analysed. The above report is summarisation of market analysis of Samsung
Company and this summarisation has helped in reaching to the conclusion that Samsung
previously operated in oligopoly market structure and further they shift into monopolistic
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competition because of increase in availability of nearest substitute. It has been also concluded
that Samsung works in monopolistic market structure as there are large number of firms in this
market along with which all these firms offer distinct products.
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REFERENCES
Books & Journals
Armstrong, C. S. And et.al., 2019. The economics of managerial taxes and corporate risk-
taking. The Accounting Review. 94(1). pp.1-24.
Bridge, J. and Dodds, J. C., 2018. Managerial decision making. Routledge
Callan, S.J. and Thomas, J.M., 2013. Environmental economics and management: Theory,
policy, and applications. Cengage Learning.
Dinçer, H. and Yüksel, S. eds., 2018. Handbook of research on managerial thinking in global
business economics. IGI Global.
Kamien, M.I. and Schwartz, N.L., 2012. Dynamic optimization: the calculus of variations and
optimal control in economics and management. Courier Corporation.
Keller, G., 2015. Statistics for Management and Economics, Abbreviated. Cengage Learning.
Kotorri, M. and Krasniqi, B. A., 2018. Managerial characteristics and export performance–
empirical evidence from Kosovo. South East European Journal of Economics and
Business. 13(2). pp.32-48.
Vanek, J., 2017. The economics of workers' management: a Yugoslav case study (Vol. 15).
Routledge.
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