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Strategic Analysis: the case of Sumsung Electronics

Updated on August 10, 2014

Current Situation

Samsung electronics is currently experiencing more favorable profit margin than the previous years. This company, which is currently undergoing a transformation as a game changing technology firm, derives its revenues substantially from the manufacture and sale of computer monitors, semiconductors and other electronics. The companies’ CEO is certain that, the development of the internet and ICT in general presents many opportunities to the company and the entity should therefore, come up with creativity endeavors in order to make it more sustainable in the market. This is depicted in its latest products such as the 7-inch computer tablet, which runs on Android operating systems, Galaxy Tab and Galaxy S marketed as Sprint’s epic 4G, Verizon’s wireless Fascinate and AT and T’s Captivate. The company’s Galaxy lines are effectively competing with Apple’s iPad and iPhone. The company’s Galaxy products have superior features, which distinguishes them from those of their competitors. Most of the company’s products are introduced after years of extensive research. Over the recent years, company has gone on to outdo its main rivals such as Motorola, Sony and Nokia owing to its revolutionary products (Shamsie and Eisner, 2011).

Problem Identification

One of the problems that engulfed Sumsung especially in 1990s was the financial problems, which emanated from its strategy of low cost. However, this strategy could only work if the company had the ability of scouting for locations that could enable it maintain the low cost of production. In addition, the entity also had to go on generating adequate orders to maintain a consisted and high volume production. Despite the increasing competition from other low cost makers of similar products as well as the high cost of production, the company still maintained its low cost strategy, thus resulting into financial problems.

Monroe (2009) explains that, the marketing mix factors such as price, placement, promotion, and the product are the determinants of the marketing elements that are related to the sale of an item. Among these, the price is the most adjustable factor of the marketing mix; hence, it has a higher number of related strategies. The price of a particular product depicts the intended value of the product by the company. Therefore, maintaining too high or too low prices may elicit unintended consequences to the company. The author observes that, although pricing in relation to the mix, in the production cost and industry standard may be easy, it may not present a competitive strategy. The price should, therefore, be used in combination with the other marketing mix elements. Moreover, high-end products should be priced accordingly in order to make the item and quality sustainable. It is a mistake for managers to leave the price the same at all levels or circumstances. The price strategists should, therefore, set different prices in different contexts, introduction of the product, development, maturity or decline.

Alternative Solutions

As a way of improving employee productivity in this company, Sumsung’s management decided to make the fewer employees feel motivated and equip with the appropriate abilities. It did this by adequately training them on the job requirement and rewarding them accordingly. The merit based advancement strategy also encouraged more workers to work hard in order to be eligible for promotion. This way, the company’s performances, improved considerably.

Strategic Analysis

One of the key strategies that helped Sumsung to rise from its financial pit was to slash the number of its employees by almost a third. It is apparent that maintaining fewer workers will significantly contribute to reduced cost of production and, therefore, the company can be able to effective competes with other rivals in terms of price. The company also kept overhead prices at a minimum through providing low wages to its existing workers and getting rid of its large and unnecessary inventory. In addition, the company’s management board kept an emphasis of providing unique and quality products that were quite appealing to customers with advanced technology and attractive designs (Shamsie and Eisner, 2011).

Recommendations

If Sumsung wants to go to the next level, then it has to lean on the economies of scale (Arthur and Sheffrin, 2008), which will make its average production costs go down and the output to subsequently increase. It may opt to do this by purchasing raw materials in large quantities and by establishing long-term contracts with their suppliers. Another factor is that while borrowing money from the lenders, it should choose those with low rate of interests to avoid having to return high sums of money from the accrued interests. If it still want to retain a competitive edge in terms of price, then the company has to establish an effective supply chain management.

Industry Information

The electronics industry is one sector, which is significantly altering the nature of the present world faster than any other industries. From the internet gadgets and mobile phones, satellite TVs and telecommunications, electronics have become ubiquitous, developing by bounds and leaps, with more influence and power into less space on a regular basis. This industry has spawned a range of other specialist industries such as the IT, and the mobile phone market. It also includes consoles, specialists controlled systems, also not forgetting the auto, aviation and medical devices market (Spillman, 2013).


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