The Mobile Handset Industry in Transition - Case Study Example

Global Business Situation and Opportunity Analysis: Samsung Electronics Executive Summary This report depicts a global business situation and opportunity analysis for Samsung Electronics in relation to the sale of its mobile phones. The findings of this report illustrate that, the global mobile phone industry increasingly becomes competitive with the emergence of new technology. The emergence of new technology has caused consumers needs and preferences in relation to mobile phones to significantly change. Currently, consumers especially those in developed markets such as Europe and the United States not only buy mobile phones for the purpose of communication but also as a status symbol. Due to these changes the European and US markets are good examples of developed markets that have become viable markets for Samsung mobile phones. This report recommends that in order for Samsung to enhance its competitive edge and profitability in the market, there is need for the company to implement design driven strategy by constantly reinventing and upgrading its mobile phone models so as to keep up with the pace in this industry. Introduction Samsung Electronics Co. Ltd is a multinational company based in Suwon, South Korea. The company is a subsidiary of the Samsung Group. Samsung Electronics speacilises in the manufacture of electronics and information technology devices such as televisions, computers DVD players, mobile phones, refrigerators, washing machines, microwaves and digital cameras among many other products. Based on its revenues, it is one of the world’s largest IT companies (Yahoo Finance 2012; Lee, 2006). This report seeks to present a global business situation and opportunity analysis of Samsung Electronics in relation of its mobile phones. Firstly, this report will examine Samsung’s current internal situation particularly in relation to the company’s structure, current mobile products, overall resources, distribution, supply and capabilities. Moreover, this report will analyse Samsung’s external situation in relation to the sale of its mobile phone in the global markets particularly in the United States and the European markets. In this case, this report will analyse the strengths of Samsung mobile and nature of competition in the United States and the European markets. Furthermore, this report will explore some economic, technological, political, socio-cultural and natural variables that could affect the sale of Samsung mobile phone in particular global markets. In addition, this report will explore possible market opportunities that Samsung mobile can capitalize on, it will subsequently recommend a market opportunity that the company should pursue. Internal Situation Analysis Company structure Samsung Electronics is a subsidiary of Samsung group. Initially, Samsung Electronics had a single CEO management system. However, in 2010 the company changed its management system to incorporate a two person management team made up of Kwon Oh-hyun who acts as the CEO and the vice President and Lee Jae-Yong who is the President and the Chief Operating Operator. The company has a board of directors comprising of seven members whose main role is to make key decisions and oversee the overall functioning of the company. Sumsung Electronics has operation bases in Europe, South America, North America, Asia, Australia and Africa. As a company operating in the global market, Samsung has sales networks and operation bases in over 61 countries and over 200, 000 employees around the world. In 2010, Samsung electronics embarked on an organisational restructuring with the aim of synergizing its global operations. Currently the company has a total of eight divisions namely; the Visual Display Division, Digital Appliance Division, IT Solution Division, Network Division, LCD Division, Digital Imaging Division, Semi-conductor Division and the Mobile Communication Divisions (Samsung, 2009; India Times 2012; Samsung,2012). By 2009, the company’s total net sales totaled to 139.0 trillion Korean Won. Samsung mobile phone products have been faced with greater demand as consumers are increasingly resorting to new cell phone technologies so as to store data, access video and audio clips, browse the internet and use a wide range of applications (Mitchell 2011; Samsung, 2012). Product Samsung Electronics is considered as one of the world’s large mobile phone manufacturers. The company is constantly reinventing and upgrading its mobile brands and launching new products in the market so as to meet the changing needs of its consumers (Mitchell 2011). Some of the company’s well known mobile phone models include; Galaxy Ace Plus, Star 3 Duos, Galaxy Y Pro Duos, Omnia W , Samsung Galaxy Note, Samsung Galaxy Tab, Samsung Galaxy S and Samsung Galaxy S2 among many others (Esato 2012). Samsung Galaxy S is one of the most successful mobile phone model that has propelled the company to greater height in the mobile technology industry. Following the launch of the SamSung Galaxy S mobile phone in the market, in 2011 the company was ranked first based on its global sales figures. Currently, SamSung Galaxy S is considered a major rival of the Apple iPhone (Weintraub, 2010). In 2009, Samsung sold over 200 million mobile handsets. By 2010, the company surpassed the 70 million sale unit causing the company to gain a 22% global market share. In 2012 Samsung was ranked as the world’s largest mobile phone manufacturer with a sale of 45million Smart phones in its first quarter (Livbit 2010; India Times, 2012b; Samsung 2012). External situation Analysis Competitive Environment and Industry Situation Following the global financial crisis in 2007- 2010, the global mobile phone market experienced a significant downturn. During this period, the sale of mobile phone units was lower than expected in developed markets such as Europe and the United States. For instance, The United States market succumbed to a decline in economic growth. Nevertheless, the mobile device market witnessed a double-digit growth due to factors such as strong consumer interest, trends in unlimited calling and data offers. Conversely, in the European market, the mobile phone market was hit hard by the recession. Consequently, Samsung realised lower sales and its operating margin suffered. Nonetheless, despite of these results, the company invested its resources in developing touch screen-enabled phones and camera phones. As a result, the company witnessed a strong demand for its products (IDG, 2009). Globally, the mobile phone industry is very competitive. The nature of competition in the mobile phone industry increasingly evolves with the emergence of new technology every now and then. Due to the emergence of new technologies, mobile phones are increasingly becoming more advanced and sophisticated by incorporating operating systems, microprocessors LCD screens, touchpad, keypads, android software and applications among many other features. Consequently, it has become difficult for a single mobile phone manufacturer to dominate the market due to the increasingly evolving spectrum of software and hardware technologies (Anderson & Jonsson, 2005). According to the International Data Group (IDG) (2009), the top five mobile phone companies as of 2008 are Nokia, Samsung, LG, Motorola and Sony Ericsson respectively. Some of the key competitors of Samsung mobile phones include; Nokia, Apple and Sony Ericsson Competition in these markets is often characterised by price wars and the upgrade of new application and features (IDG 2009). Synthesis of Strengths Relative to Potential Opportunity The emergence of new technology has caused consumers needs and preferences in relation to mobile phones to significantly change. Consumers today especially in developed markets such as Europe and the United States not only buy mobile phones for the purpose of communication but also as a status symbol. The needs and preferences of consumers in these markets are somewhat sophisticated. A considerable number of consumers in these markets buy mobile phones to express their personalities and meet their entertainment and functionality needs. Consumers in these European and North America markets often opt to purchase advanced mobile phones models incorporating internet browsing features, games, GPS navigation and media player among other features. When making purchase decision most consumers appreciate added features and services provided by the manufacturer (Singh & Goyal, 2009; Baumgartner & Steenkamp, 1996). One of the key strengths of Samsung lies in its design driven strategy that focuses on designing products that suit the style, lifestyle and preferences of consumers (Mitchell 2011). Mitchell (2011) notes that, Samsung is constantly reinventing and upgrading its mobile phone models and launching new products in the market so as to enhance its competitive edge in the competitive market. Over the years, Samsung has introduced a number of unique mobile design features that have propelled the company to greater height in the mobile technology industry. For instance, the introduction of the Samsung Galaxy S in the US market realised a sale 1 million Galaxy S smartphones in just 45 days (Weintraub 2010). Therefore, it is plausible to argue that due to technological evolution and changes in consumer preferences, the European and US markets are viable markets for Samsung mobile phones. Additionally, studies show that despite of the global financial crisis, consumers in both the European and the US markets have a relatively high purchasing power. For instance in European countries such as Switzerland and Norway, the nominal GDP ranges between $70,000 to 80,000 (World Bank, 2009). In the United States, the nominal GDP of residents in states such as Mississippi and Columbia ranges between $10, 000 to $51, 000 (US Department of Commerce, 2010). The consumer purchasing power in these markets presents an opportunity for Samsung to realise optimum sale of its various mobile phone products. Viardot (2004) observes that in order to for Samsung to maintain its competitive edge in the market, the company switched its target segment to mid and upper market segments rather than focusing on the low-end consumer market segments. This shift brought about an increase in the price of mobile phone units. For instance, the average price of Samsung mobile phones is usually higher than that of Nokia mobile phones. It is thus evident that both the consumer markets in the United States and Europe provide a suitable base that Samsung can capitalise on in order to enhance its competitive edge and profitability in the market. Strategic Fit Evaluation and Opportunity Identified and Justified In order to for Samsung to enhance its competitive edge and profitability in the market, there is need for the company to implement a design driven strategy. Foremost, the company should identify and analyse the needs of its consumers in various markets segments and subsequently come up with mobile phone designs that are suitable for the specific preferences, needs and lifestyles of consumers in different market segments. In practice, the company should focus on reinventing and upgrading its mobile phone models and launching new products in the market. The global mobile phone industry is increasingly becoming competitive due to the entry of new players who employ advanced technologies so as to meet the needs of consumers. There is therefore a need for Samsung to focus on reinventing and upgrading its mobile phone models so as to keep up with the pace in this industry (Anderson & Jonsson, 2005; Mitchell (2011). Conclusion Globally, the mobile phone industry is very competitive. The nature of competition in the mobile phone industry increasingly evolves with the emergence of new technology. Following the global financial crisis in 2007- 2010, the global mobile phone market experienced a significant downturn. In the course of this period, the sale of mobile phone units was lower than expected in developed markets such as Europe and the United States. Nevertheless, Samsung has managed to maintain its competitive edge in the market by constantly reinventing and upgrading its mobile phone models and launching new products in the market. In addition to this, the company switched its target segment to mid and upper market segments rather than focusing on the low-end consumer market segments so as to capitalise on the high purchasing power in developed markets. References Anderson, J. & Jonsson, M. (2005). The Mobile Handset Industry in Transition. Viewed on October 7, 2012 from Baumgartner, H. & Steenkamp, J.B. (1996), “Exploratory consumer buying behavior: Conceptualization and measurement”. International Journal of Research in Marketing, pp. 121-137. Esato (2012). 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