The Case of Samsung Performance
Samsung is one of the biggest technological companies in the world producing some of the best electronics in the world. However, being the best in the market does not mean that the company does not face its share of challenges. One of the biggest challenges affecting the company’s stability regarding the share market, profitability, and the brand name is the issue of Galaxy Note 7 batteries bursting into flames (Shin, & Kim 2015, 316). Repair of the damages caused by the explosion of the Galaxy Note 7 batteries was an uphill for the company. The recall and halting production of the devices cost the company about US$ 5 billion, but the biggest blow was the brand image and reputation of the company in the international market (Burgess 2017)
Quality test and assurance of the company’s gadgets was put into perspective, which had a significant impact on the company’s overall brand. Failure to handle the problem effectively would affect Samsung’s ability to compete effectively with its archrivals (Burgess 2017). The ability of the company to accomplish big tasks within the shortest time possible predisposes the company to quality assurance flaws. In the third quarter of 2016, the company recorded a 30% slump in profits citing the recall of the Galaxy Note 7 as one of the factors behind the slump. The profit fell by KRW 2.19 trillion to KRW 5.20 trillion one of the biggest declines since the company’s rise as a revered smartphone producer in 2010 (Burgess 2017).
However, the external and internal environmental factors have enabled the company to remain on an upward trajectory despite the Note 7 debacle. In 2016, Samsung recorded annual revenue of KRW 201.87 trillion and operated profits of KRW 29.24 trillion in the face of recall of the Galaxy Note 7 (Trusted Reviews 2017). The positive gains are due to the strategies laid down by the company in its operations to ensure profitability and to deal with future uncertainties.
The Microenvironment Analysis
The internal environment of Samsung has been one of the major factors behind its success. Most of the internal factors have acted as a strength for the company in the light of competitiveness.
Innovation. Innovativeness has been one of the major reasons that have given Samsung a competitive advantage over its competitors. The company has diversified its production to fit in different markets with different mobile devices (Shin, & Kim 2015, 315). The innovativeness of the company enabled it to replace the discontinuation of the Galaxy Note 7 with the flagship of other devices such as the Galaxy S 7 and the Galaxy edge (Bhushan 2016, p. 144). The Note 7 debacle would have provided Samsung’s competitors with a good opportunity to pin it down; however, its innovativeness ensured that the company remains abreast in the smartphone market. Moreover, innovativeness gave the company the confidence to withdraw production of the Galaxy Note 7 with the view that it will produce other devices with the capacity of winning consumers’ confidence (Choe 2012). Moreover, the company creates excitement among its customer’s by producing new quality devices in a quick succession thus winning the trust and the confidence of its competitors (Shin, & Kim 2015, p. 317).
Superior brand name. Innovativeness has enabled Samsung to acquire a strong brand that smartphone enthusiasts like to associate with. The strong brand name has created customer loyalty. Customer loyalty has enabled the company to continue performing exceptionally in times of hardship in times of success (Shin, & Kim 2015, p. 316) The Note & debacle did not affect consumer’s attitude towards Samsung’s devices since they have confidence in the products.
Strong strategy. The innovativeness strategy has enabled the company to deal with the shortcomings in its operation effectively. The better, fast, cheaper strategy has helped Samsung to produce some of the best devices that have the capacity to compete effectively with products from other competitors (Choe 2012). The strategy has enabled to maintain a significant market share in the light of fierce competition. Samsung controls 21.4% of the global market share (Bhushan 2016, p. 144). Samsung has also maintained a close and healthy relationship with its supply. Moreover, the company has a strong marketing strategy that endears its products to the consumers. Good relationships with the retailers also give Samsung an upper hand in access markets in different parts of the country.
Production of new devices in quick succession makes the customers forget the devices quickly. That makes some of the devices to lose value quickly. The marketing strategy used by the company is not as strong as the one used by Apple. Moreover, the Asian competitors such as Huawei and Xiomi are fast catching up with Samsung smartphone devices not only in the Asian market but also in the global market. Huawei has gained a 48% while Xiomi has gained 29.4% of the Asian market (Zhang 2017). The dominant market for Samsung devices, which is the U.S. and Europe, has been on a downward trajectory for Samsung devices while on an upward trajectory for Apple at 34.9%.
One of the opportunities that pose a bright future for the company is opening up new markets in the developing countries. Additionally, the online market allows for the sale of products globally, expanding the company’s market reach. New technology offers Samsung with an opportunity to increase its market share through the production of devices that have the capacity. Moreover, the world is experiencing a growth in the middle class, which forms an important part of the Samsung’s market.
The Note 7 debacle is one of the threats that company faces in the global market since it hurt its reputation. Apple dominance in the production of smartphones is one of the challenges that Samsung has been experiencing globally. Moreover, new companies such as Samsung and Xiaomi have become a challenge to the success of Samsung by depriving the company part of its Asian share market. Penetration into markets already dominated by Apple has become a challenge for Samsung since customers view Apple products being superior in comparison to the Samsung’s devices.
External- Environment Analysis
The political environment has been stable for efficient operation of the Samsung across the globe. However, some market policies have been trying to affect its operations in certain markets, such as Germany (Shin, Kim 2015, p. 316). On the other hand, the economic environment has been conducive for the company. The company has gained global access to the market. Moreover, the company has been socially responsive in the economies it operates in by creating chances of employment and providing social assistance to the needy. Additionally, Samsung has found itself on a legal tussle for copying Apple’s patent rights. Imitation of the patent rights affected the company’s brand name.
Product differentiation remains a threat to the success of Samsung. The use of the Android operating system poses a threat since new software can change the taste and preferences of the public. The threat of substitutes does not pose a major threat to the success of Samsung since it is renowned for its innovations. The bargaining power of customers is high given the high number of electronic devices in the market.
Strategies to Use
The Note 7 debacle is one of the biggest challenges that Samsung has ever faced despite having a strong brand name. The debacle accentuates the need for the company to increase its quality assurance to produce flawless products. Moreover, the company needs to limit production of devices in quick succession to enable enough time to evaluate the gadgets’ success in the market. Moreover, Samsung should produce user-friendly devices that are simple, reliable, and effective to use.
Bhushan, A 2016, A comparative analysis of consumer behavior of Nokia and Samsung mobile users, The Journal of Internet Banking and Commerce, vol. 7, no. 6, pp. 140-144.
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Choe, S. 2012. The Samsung strategy, better, faster, and cheaper. Available at http://www.business-standard.com/articles/ the-Samsung-strategy-Better-faster-cheaper. [Accessed 9 Apr. 2017].
Rodrigo, 2012, Analysis of Samsung marketing and brand strategies. The WritePass Journal. Available at https://writepass.com/journal/2012/12/analysis-of-marketing-and-brand-strategies-used-by-samsung/. [Accessed 9 Apr. 2017].
Shin, WS, and Kim, C 2015, Samsung’s journey to excellence in quality, International Journal of Quality and Service Sciences, vol. 7, no2/3, pp.312-320.
Trusted Reviews 2017, Galaxy Note 7 fail: Samsung reveals true impact of exploding phones. Available at: http://www.trustedreviews.com/news/galaxy-note-7-fail-samsung-reveals-true-impact-of-exploding-phones. [Accessed 9 Apr. 2017].
Zhang, Y 2017, “Xiaomi Races to gain larger slice of global smartphone cake – Global Times.” Available at: http://www.globaltimes.cn/content/1034391.shtml. [Accessed 9 Apr. 2017].