Analysis and Strategic Recommendations for Samsung Smartphones in the United StatesBUS 8500 – Business Policies and Strategies
Professor Doula ZaharopoulosFall 2018
Team Members:
Niyati Mirani, Dawood Khan, Wei Chen
Table of Contents:
Key Issues……………………………………………………………………………………………………………………….4
External Analysis……………………………………………………………………………………………………………..5
Internal Analysis…………………………………………………………………………………………………………….11
Samsung Group is a multinational conglomerate group comprised with numerous subsidiaries and affiliated companies. Headquartered in South Korea, and first founded in 1938, Samsung’s business operations span across multiple industries, including electronics, machinery and chemicals, financial services, and trade and services. Its products and offerings range from consumer electronics, digital appliances, media, heavy industry, semiconductors, system integration, civil defense, theme parks, hotels, insurance, and many others. As a global company, Samsung has offices all over the world and its products are sold worldwide.
For the purposes of this project, we will focus on Samsung’s portable consumer electronic products, namely smartphones and tablets, which fall under the operations of Samsung Electronics Co. Ltd., a subsidiary of Samsung Group. Samsung Electronics produces a range of electronic equipment, consisting of both consumer and industrial products; for example, personal computers, home appliances, semiconductors, monitors, internet access network systems and telecommunications equipment.
More specifically, we will concentrate on the company’s smartphone and tablet performance in the American market. In 2012, Samsung emerged as Apple’s primary rival in smartphones in the United States as Samsung achieved a 171% volume growth over the year. In fact, Samsung captured 28% of the entire volume share and led the smartphone market, followed by Apple, who only had a 21% volume share in the market (Euromonitor 2013).
Currently, however, Apple regained its dominant position in the market, holding at 48% of the market share, while Samsung has 31%. However, over the years Samsung’s share in the tablets market has increased rapidly. Apple has seen its share of the tablet market drop from 51.6% in December 2011 quarter to 38.1% in 2012 to 33.8% in the just ended December 2013 quarter. During the same two-year timeframe Samsung’s share has increased from 7.3% in 2012 to 18.9% in December 2013 1 .In this more-than-ever competitive environment, Samsung faces many challenges. Of the major issues, three are particularly threatening in the present market:
Issue 1: Heavy competition within the industry across all product lines.
Technology is a fiercely competitive field, and although Samsung is currently one of the leaders in the smartphone market, it must continue to perform well to capture new consumers and retain old ones. Apart from Apple being its primary rival, Samsung must watch out for lower-end smartphone companies who are pricing their products at a discounted cost. For example, there are currently a few Chinese smartphone companies that are now offering competitive products at a much lower price.
Issue 2: Brand positioning in the United States.

Samsung is the dominant smartphone and tablet provider all over the world except in the United States. For example, iPhone recently came out with the iPhone 5C and Samsung does not have a strong contender product to compete with Apple in that area. While Samsung has the primary market share and domination of the phablet (ie. Note 3) market, there are still possible revenue streams to be sought after in the sub-flagship product line area. Samsung must make sure they have all available market segments covered.

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Issue 3: The next big thing (innovation).

Now with Steve Jobs gone, no one knows who is the next innovator in the market. Tablets and wearable gadgets are becoming increasingly popular, but no one has yet made the next must-have like the iPhone or iPad. Samsung is locked in a fierce R&D battle with companies like Apple and Microsoft. To ensure they take the lead in the consumer electronics field, they must continue to make use of their competences and innovate new products that meet consumers’ unfounded needs.
By conducting an in-depth analysis of the firm, its chosen industries, and its current strategy, we aim to come up with strategic recommendations that will enable Samsung to position itself as an industry leader and ensure sustained innovation. In terms of innovation, our goal is to produce a guide on which market segment to focus on R;D that will allow the company to profit most and potentially maximize its ROI, both in monetary value and market position. This is not limited only to products within the portable telecommunications product segment, but also in segments that in the future can create a synergic effect. In other words, products that will strengthen Samsung’s overall products mix, competitive advantage and sustainability when integrated with its portable consumer electronics segment (for instance, OLED and in-house Exynos chip-set series that leverages the risk of processor chips war). Our strategic recommendations will mainly target the U.S. portable consumable electronics market, using Samsung products’ uniqueness to increase market share and profitability.

External Analysis
Macro analysis of the Mobile Phone industry
As of 2013, almost half of the world’s population now uses some sort of mobile communication. With the billions of mobile subscribers added within the last four years alone, the grand total now stands at 3.2 billion by the end of 2013. With that said, there are still a huge market of adults and young people that are looking to reap the economic benefits of mobile technology but are unable to obtain it due to either geographic or economic reasons. This delineates that there is still huge amount of untapped market opportunity in the mobile phone industry for years to come.

Since 2011, Google’s Android operating system has dominated the mobile operating systems in the market of the mobile industry. In 2012, 57.9% of all devices worldwide were running on the Android operating system and it is projected to continue this dominance at least through 2016 2. This means that mobile phone companies that are running on the Android operating systems will have an advantage in the market share of the mobile phone industry based on its choice of operating system alone.
Between the year 2011 and 2012, we see an upset of industry leadership in the segment of smartphones for the mobile phone industry. Samsung increased its market share of 23% in Q4 of 2011 to 29% in Q4 of 2012. Meanwhile, during the same period Apple dropped its market share from 23% to 22%3. While the surface leader may clearly be Samsung by the end of 2012, it must be taken into consideration that Apple does not compete in the lower priced smartphone segment, meaning that the previous industry segment leader is still closely following Samsung’s newfound lead. Also notable in the same period is the replacement of HTC as the top 5-market shareholder in the smartphone segment. Huawei, a Chinese company has replaced the Taiwanese based HTC despite being a late entry into the smartphone competition. However, while Huawei has made a name for itself in the Asian Pacific markets, it still lacks the foundation HTC has in the North American and European markets, which is more relevant to the topic of this analysis.

Porter’s Five Competitive Forces Analysis
Threat of New Entrants: Moderate
There is a high price of admission to enter the business, high entry barriers. Large capital investments are required. Supply-side economies of scale: entrant should come into the industry on a large scale. Incumbents have advantages that new entrants cant access: well established brands exist. Companies that already deal in the production of electronics will have access to suppliers for the parts needed in creating smart phones.

However, the threat of experienced companies is considerably higher than from inexperienced companies as they have experience in related fields such as tablet, television or computer industry.
Power of Suppliers: Low
Mobile phone producers often use suppliers for parts such as chips, batteries, SIM cards and other hardware. The suppliers are needed much more for hardware than for the software. These suppliers have relatively little power as there are is a large number of potential suppliers and there is only a low amount of mobile phone producers. Consequently, mobile phone producers can easily switch if issues on quality or price occur. In addition, several companies strive to produce 80% of the parts in-house to reduce the costs of dealing with the suppliers.

Power of Buyers: High
With so many options available on the market buyers have all the information and options to choose from when buying a new cell phone. There is a certain level of brand loyalty but is not to an extent that will severely play in the manufacturers’ favor. If some other company comes out with a better product customer would not have a lot of switching cost. Some may argue that compliment products such as someone who has an iPad or/and a Macbook would have a high switching cost to switch from an iPhone to another manufacturers phone – this is not accurate anymore as with new technology all phones are very similar and easily integrate-able with all devices.
Threat of Substitutes: Low
The threat of substitute products in the mobile phone industry is very low, it is even arguable if there are any real substitutes to a mobile phone. The biggest threats to mobile phones are tablets and new products developed in between a tablet and a mobile phone (phablet) such as an iPad Mini, especially when those devices can be used for phone calls as well. Even in this case the threat for the companies is not big as the market leaders in those industries are similar to those of the mobile phone industry. The development of the mobile phone itself and especially the introduction have protected the mobile phone from substitutes and even developed the mobile phone as a substitute for many other products. An example is the threat of software such as Skype and even e-mail, which counted as communication replacements for making phone calls. However, because of its fast development the mobile phone can now be used for the use of all these features.

Competitive Rivalry: High
Rivalry among the current competitors is more intense, profitability is lower. Rivalry has many forms: price competition, advertising, new products introduction, or increased services (unique applications or services: iTunes from iPhone). The major competitors continuously present innovative products with new looks and features in order to be ahead of the competition or at least not to stay behind.

Key Success Factors
Innovation – The most important factor in the mobile phone industry, particularly the smartphone, is the ability to constantly innovate and keep up with target customers’ demands. In the past it has been who can make the smallest phones and compactness determined the industry success. However, with the introduction of the iPhone from Apple, innovation in terms of hardware, operation, and application availability became the industry standard and the company that hit the most marks in those aspects would be determined successful. Most recently, as those characteristics became a standard, screens also became an important innovation factor.

Speed of Innovation – In this highly innovative market, target customers are always looking for the newest products. With product life cycles on the market being typically 2 years at the max, mobile phone companies are expected by the market to produce a new product every year. While it has become the industry standard to provide incremental improvements every year, companies are expected to produce a groundbreaking design every 2 or 3 generations. Therefore, a major key success factor looking into the future would be a company that can offer more than just incremental improvements to existing models in a shorter amount of time.

Carrier Availability – It goes without saying that having an excellent product without complimentary service provider options would be quite a dilemma for mobile phone companies. While this may be obvious to consumers, there are still opportunities to come out on top in this factor as many international countries are using different bandwidth that are not available on many smartphones offered today.

Segmentation Analysis
There are four main segments for the market, which can be reached by dividing by two sets of factors. The first is between Developing and Advanced Nations. The second is between Basic Phones and Smartphones. The table looks like this:
Market Segmentation Basic Phones Smartphones
Developing Nations Nokia, etc. Samsung
Advanced Nations Nokia, etc. Samsung, except US
Samsung currently is the leading player in Smartphones for most Advanced Nations, except for the United States. They are also strong in the Smartphone market in Developing Nations as well. However, they have not expended as much effort attempting to capture the lower end of the market (i.e. Basic Phones) in either region, preferring to specialize in Smartphones and leaving it to other brands such as Nokia to capture those markets. Samsung can benefit from increasing their hold on the market in both Developing and Advanced Nations by increasing their innovation and marketing relative to competitors.

Competitor Analysis
Apple – In the U.S. Mobile Smartphone Market, Apple is really Samsung’s only competitor in this segment while the rest of the companies are merely picking up the scraps left by these two industry giants. While Apple is no longer leading Samsung in the international market, it still has quite the leg up on its home turf, the U.S.A. As of Q2 of 2013, Apple still leads Samsung by over 15% holding onto approximately 40% of the smartphone market. However, with the loss of its visionary leadership, many questions the sustainability of innovation that Apple is so well known for.

HTC – While a direct competitor of Samsung, HTC is barely on the radar in comparison to Samsung as it struggles to cling on to 9.4% of the market share by the end of Q2 of 20134 CITATION Ste13 l 1033 (Kovach, 2013). Motorola closely follows this number, which during the same time held onto only 9% of the market. While HTC is considered a straggler in this industry at the moment, the company has high potentials of catching up as it has demonstrated with its latest model the HTC One.
Key Opportunities:
Growing smartphone markets worldwide in emerging countries such as India and Africa.

Growing demand for quality application processors
Growth of the phablet (phone+tablet) market
Key Threats:
Saturated market in already developed countries.

Rapid technological changes
Patent wars
Price wars
Internal Analysis
Historical Background
Samsung was formed in 1938 by Lee Byung-Chull as a trading company based in Su-dong. The small company started as a grocery, trading goods produced in and around the city as well as its own noodles. The company grew and soon expanded to Seoul in 1947 4 but left once the Korean War broke out. After the war, Lee expanded in to textiles and built the largest woollen mill in Korea.

The successful diversification became a growth strategy for Samsung, which rapidly expanded in to the insurance, securities, and retail business. Samsung was focused on the redevelopment of Korea after the war with a central focus on industrialization. Samsung entered the electronics industry in the 1960’s with the formation of several electronics focused divisions. The initial electronics divisions included Samsung Electronics Devices, Samsung Electro-Mechanics, Samsung Corning, and Samsung Semiconductor ; Telecommunications. Samsung built their initial facilities in Suwon, South Korea, where they started producing black and white television sets. In 1980, Samsung entered the telecommunications hardware industry with the purchase of Hanguk Jenja Tongsin. Initially building telephone switchboards, Samsung expanded in to telephone and fax systems which eventually shifted to mobile phone manufacturing. The mobile phone business was grouped together with Samsung Electronics which began to invest heavily in research and development throughout the 1980’s.

During this time Samsung Electronics expanded in to Portugal, New York, Tokyo, England and Austin, Texas. In 1987 with the death of Lee Byung-chull, the Samsung group was separated in to four business groups leaving the Samsung Group with electronics, engineering, construction, and most high-tech products. Retail, food, chemicals, logistics, entertainment, paper, and telecom were spun out among the Shinsegae Group, CJ Group, and Hansol Group. Samsung grew as an international corporation throughout the 1990’s. The construction division of Samsung secured several high profile construction projects, including one of the Petronas Towers in Malaysia, Taipei 101 in Taiwan and the half mile tall Burj Khalifa Tower in the UAE. Samsung ‘s engineering division also includes Samsung Techwin, an aerospace manufacturer that manufacturers aircraft engines and gas turbines as well as supplying parts used in jet engines on Boeing and Airbus aircraft.

In 1993, Samsung reorganized to focus on three industries, electronics, engineering, and chemicals. The reorganization included selling off ten subsidiaries and downsizing. With renewed focus in electronics, Samsung invested in LCD technology, becoming the largest manufacturer of LCD panels in the world by 2005. Sony partnered with Samsung in 2006 to develop a stable supply of LCD panels for both companies, which had been an increasing problem for Sony which had not invested in large LCD panels. While the partnership was nearly a 50-50 split, Samsung owned one share more than Sony, giving them control over the manufacturing. At the end of 2011, Samsung bought Sony’s stake in the partnership and took full control. Samsung’s focus in the future is centered on five core businesses including mobile, electronics and biopharmaceuticals. As part of it bio-pharma investment, Samsung formed a joint venture with Biogen, investing $255 million to provide technical development and biopharmaceutical manufacturing capacity in South Korea. Samsung has budgeted nearly $2 billion in additional investment to pursue their bio-pharma growth strategy and leverage the advantages of their joint venture.

Samsung has also continued to expand in the mobile phone market, becoming the largest manufacturer of mobile phones in 2012. To remain a dominate manufacturer, Samsung has earmarked $3-4 billion to upgrade their Austin Texas semiconductor manufacturing facility.

Vision, Mission & Goal Objectives
Samsung’s current Management Philosophy is “We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.”
Since its founding in 1938, SAMSUNG has maintained a mission statement that responds both to its own change, and to new developments in the world: “Economic contribution to the nation”, “Priority to human resources”, “Pursuit of rationalism”. Each slogan represents significant moments in SAMSUNG’s history, reflecting different stages of the company’s growth from a domestic industrial leader into a global consumer electronics powerhouse. In the 1990’s, we transformed our mission statement to keep pace with our growing global operations, rapid changes in the world economy, and escalating competition from well-established rivals.

First of all, The Samsung Philosophy. Samsung follows a simple business philosophy: to devote their talent and technology to creating superior products and services that contribute to a better global society. Every day, people of Samsung bring this philosophy to life. Our leaders search for the brightest talent from around the world and give them the resources they need to be the best at what they do. And that’s what making a better global society is all about. Samsung group has five values: People, excellence, change, integrity, and co-prosperity.

Second, Vision 2020. Samsung group vision for the new decade is to “Inspire the World, Create the Future.” Samsung is committed to inspiring communities around the world by developing new technologies, innovative products and creative solutions. Samsung is also committed to creating a brighter future by developing new value for our core networks: industry, partners and employees. As part of their new vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the world’s top five brands by 2020. To this end, Samsung has also established three strategic approaches in their management: creativity, partnership and talent. Samsung is excited about the future. As Samsung build on their previous accomplishments, Samsung look forward to exploring new territories, including health, medicine and biotechnology. Samsung is committed to being a creative leader in new markets and becoming a truly No. 1 business going forward.

Resources & Capabilities
Samsung has some of the best resources in semi-conductor products, highly skilled engineers and designers, a much broader access to market around the world with lot more touch points to end customers.

Financial Analysis
Samsung has a healthy financial status. Dividend has grown 45% compare to last year. Earning per share has been meeting with analysts’ forecast, and is 25% above same quarter of last year. Average yearly growth rate is at 48%. Revenue of 4th quarter 2013 is 59bn, 0.33% above same quarter of last year. Annual revenue growth is at 28% 6. With all these positive growth in key financial performance, Samsung is a strong and stable company, and analysts continue to project strong growth from this company.

Strategic Issues
Samsung’s latest launch, the S4 and consequently the S5, has been fairly disappointing to the market. The lack of huge innovation seen in other competitors are the main reasons of the disappointing performance. Samsung’s incorporation of modest existing features such as fingerprint did not make it unique from the packs who have introduced such features before Samsung. In the meanwhile, Nokia’s Lumia and Google’s Moto X have enjoyed great hype for introducing unique features such as strong camera or high customization.

Their strategy relies on generating market hype to push sales of their next product. This strategy only works when the product lives up to expectation. This strategy has seen its blow back, after their 2013 sales failing both top executives’ expectations, and Wall Street’s expectations.

1 BIBLIOGRAPHY Ahonen, T. T. (2013, 03 06). The Annual Mobile Industry Numbers and Stats. Retrieved from communities-dominate: annual-mobile-industry-numbers-and-stats-blog-yep-this-year-we-will-hit-the-mobile-moment.html
2 Columbus, L. (2013, 01 17). 2013 Roundup of Mobility, Smartphone and Tablet Forecasts ; Market Estimates. Retrieved from softwarestrategiesblog:
3 Jones, C. (2014, 02 03). Apple’s iPad Losing Share To Samsung And Lenovo. Retrieved from forbes:
4 Kovach, S. (2013, 11 14). Samsung Is Still Crushing Apple In Smartphone Market Share. Retrieved from Business Insider:
5 Samsung. (2018, 10 02). Retrieved from Wikipedia:
6 Samsung. (2018). Shareholder Return. Retrieved from samsung:


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