Essay Example on Samsung Electronics: Success by Design

Samsung is the third largest South Korean firm which was founded in 1969. Samsung Electronics has invested in the television market, mobile phones, tablets, home appliances and many more. Samsung Electronics competitive strategy is critical to its success in the overseas market. Samsung is prominent for its service delivery, innovative and reliable products, as well as excellent employees. The paper evaluates how the five forces that shape the industry competition have impacted Samsung Electronics. The paper also discusses the strategies that Samsung could adopt to create a sustainable competitive advantage in the global markets.

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Influence of the Five forces that shape industry competition on Samsung Electronics

Bargaining power of suppliers

Suppliers are the sources from which firms acquire raw materials for generating products. They are a crucial group and their bargaining power is a significant force influencing the status of the firm. In case suppliers possess a high bargaining influence, the competitive influence of the firm will remain low and vice versa. Samsung Electronics has ensured that the bargaining power of the suppliers is low due to several crucial factors. Samsung has ensured that the supplier's size is small to limit their influence. Secondly, Samsung has ensured that its suppliers are spread all over the world meaning that the company can easily switch to another supplier. Nevertheless, Samsung Electronics, being a key source of income for the suppliers, cannot just switch to another supplier (Govind 2006, p. 160).

For a long time, Samsung has been making rules that the suppliers are expected to comply with. The company also conducts regular surveys to check whether the suppliers are adhering to the rules and regulations. Samsung Electronics focuses on labor welfare, product quality, and sustainability as yardsticks to ensure that suppliers adhere to the guidelines. These elements have ensured that the general bargaining power of suppliers is reduced.

Bargaining power of customers

Increased access to valuable information results in a constant rise in the bargaining influence of the clients in the 21st century. The general bargaining power of clients has been moderately high in the case of Samsung Electronics. Samsung Electronics ensures that there are low switching costs for the customers; thus ensuring that they can switch to any competing brands while getting feedback from other customers. Over the last two decades, there has been greater competition and extensive use of technology by customers which increases influence. This has made Samsung Electronics invest more in marketing and advertising to attract new customers. Over the past few years, every competing brand has become so aggressive in marketing to gain a market share in its competitor's customer's base. All these elements have increased the bargaining power of the clients. Samsung has also increased the bargaining power of its customers by designing unique products for its customers and also putting financial consideration of the customers first (Lee and Carter 2012, p. 270).

Threat of new entrants

The threat of new entrants has been low for Samsung Electronics. Building the Samsung brand has not been easy. There was a lot of monetary investment and marketing and a requirement for highly skilled human resources. This has made entry to this market segment difficult for new firms.

Threat of new substitutes

Samsung Electronics experiences the threat of substitutes which poses a relatively huge threat to its brand. For many years, the brand has had many rivals. The most prominent Samsung's competitors are LG, Apple, and Sony. Apart from these, there are also other local and multinational brands that have been posing a competitive threat. Therefore, Samsung's client bases have multiple substitute brands and products they can choose from. Samsung Electronics boasts of long-standing low switching costs which lessen substitution chances.

Samsung ensures that its marketing strategy is appropriate considering that its products are durables. Since its inception, Samsung has been adopting a different pricing strategy to attract consumers from different income levels. The strategy is to shift the customers away from cheaper substitutes. Most customer segments have not yet developed a dependence on electronic goods and instead prefer products with high quality. To deal with the threat of substitutes, Samsung ensures that its products are high-quality with moderate pricing (Jung 2014, p. 198).

Competitive rivalry between the existing players

The electronics industry experiences extreme competition because of the huge number of rival brands, size, and financial muscle. Throughout its development, Samsung has been experiencing competition from established brands like Toshiba, Sony, Apple, and LG. Approaching market saturation for numerous product categories in consumer electronics industry increases the rivalry among existing companies. There is little differentiation offered by the electronics companies. Additionally, the huge number and diversity of rivals operating in the electronics market increase the extent of competition in the industry. Samsung understands this and ensures that product differentiation is the key to outshining its competitors. Samsung develops products with the latest technology at low costs. Samsung products are relatively low in price as compared to Sony. In terms of quality, Samsung develops quality products making it the market leader for the last six years.

Strategies that Samsung Electronics could adopt to create sustainable competitive advantage in global markets

In today's fast-paced competitive environment, Samsung Electronics experience the need to be increasingly competitive and adaptive.

Low-Cost Strategy

The low-cost strategy will allow the company to be very competitive in the international market. Samsung Electronics has the capability to negotiate with suppliers and give them the advantage of low-cost raw material. Most Samsung products are generally expensive, therefore, only people with financial influence can afford to purchase them. Implementing low-cost strategy will increase sales and market share. However, the low-cost strategy should be accompanied by quality. The company has the capacity to make quality products in places where there are cheap labor and raw materials (Govind 2012, p. 280).

Centralized Research and Development facilities

Samsung should set up a centralized research and development facility. It is notable that most of the company's competitors have their R&D facilities and production centers geographically scattered across the world. Centralization will give them an opportunity to continuously explore and exploit more superior products and also enable them to invest in the latest technology. Samsung should ensure that the research and development facility is located in an area where there are low costs in terms of labor and raw materials. Having a research facility will enable its research team to brainstorm and come up with the best design for its electronic products.

Invest in Cutting-edge Technology

Most of the inventions for the Samsung Electronic products share the same core design. It is important for the company to invest more in different designs for its products. Samsung should also focus on launching new high-tech products which rival the existing products. The company should also replace universal products like the video recorder. They should ensure that they make products tailored to a specific market segment. For instance, they should code recording devices such that they work in a specific market segment but not in others. This way, they will maximize sales in one market base rather than making products for the entire electronics industry.

Quality

Samsung Electronics should strive to improve its product quality in all markets. Additionally, the company should implement numerous quality control checks. The firm has ensured that there is a halt in production whenever a fault is detected. Investing in flexibility will enable the company to find the best sources of raw materials across the world. Samsung Electronics boasts of 26 production facilities all over the world, this means that it has the capacity to acquire the raw materials needed to produce quality products (Jung 2014, p.134).

Conclusion

The five forces model has greatly influenced Samsung's competitive environment. The five forces model influencing Samsung's competitive environment are bargaining power of clients, negotiating power of suppliers, threats of new entrants, the threat of new substitutes and competitive rivalry between existing players. There are various strategies that Samsung can adopt to create a sustainable competitive advantage in global markets. They include; low-cost strategy, centralized research and development facilities, invest in cutting-edge technology and quality improvement. Quality improvement will enable the company to increase its market share. Investment in technology will enable Samsung to produce different designs for its products. Adoption of centralized research and development facilities strategy will enable the company to make more superior products. Additionally, the low-cost strategy will increase sales and market share.

References

Govind, S. (2006). Samsung Electronics:" Success by Design. IBS Center for Management Research.

Jung, S.C., 2014. The analysis of strategic management of Samsung electronics company through the generic value chain model. International Journal of Software Engineering and Its Applications, 8(12), pp.133-142.

Lee, K. and Carter, S. (2012). Global Marketing Management. OUP Oxford. 269-280.