3. Introduction Samsung is foundedin 1969 in South Korea and is theleading and most innovative electronic products and services providers (Ong, T, 2017). The businessunit of Samsung Mobile Phones is one of three business units within SamsungElectronics.
Samsung Mobile is based in Korea but over 90% of the sales isoutside Korea, (Samsung ElectronicsBusiness Report, 2016). Samsung Mobile Phones is the global number onemobile phone and smartphones manufacturer (Figure 7), second position in Tablets and secondposition in Smart watches, (SamsungElectronics Sustainability Report, 2017).Its main global competitor is Apple, (Figure 7). 4. Whatis a PESTEL analyze? The PESTEL analysis is an analysis ofthe external macro environment in which an organization operates.
These factorsare impacting the industry as well as the different players in the industry andare in many cases outside the control or influence of the business. Thecompanies need to understand the factors and manage accordingly to become competitiveand create value to its stakeholders, (Rapid, Bi, 2013). PESTEL will be used asa tool to analyse Samsung Mobile and will analyse the environmental keydrivers:· Political· Economic· Social· Technological· Environmental· LegalThemobile devices industry is global and therefore the PESTLE model is relevant touse as a tool to understand how external environmental factors impacting the mobiledevice industry as well as Samsung Mobile.
The purpose of the model is toidentify factors impacting the organization rather than to be 100% correct on howto define different factors like, if it is legal or political driver. ThePESTLE tool is a useful tool for analysing the environment but it is just onepart of a comprehensive strategic analysis process,(Free-management-ebooks.com, 2017). 5. PESTELanalyse of Samsung Mobile (Samsung Electronics) 5.1Political Thepolitical factors impacts global technology companies for instance by tax-law,trade, labor-law, environmental-law. The global mobile phone industry is huge andinvest significantly in R&D and manufacturing which makes them sensible forpolitical decisions. Therefore, a stable political situation with a well functioningtax and legal system is important in the countries where a company manufactureand invest in R&D, (Hagel et al.
, 2015). Apolitical risk event is Brexit and will impact all businesses in UK. It expectsto impact currency exchange rates and trade terms for companies importing andexporting from UK, (Ghosh, A, 2016). Corporatetaxes impacts businesses profitability. In December 2017 the US Senate approvedthe new tax proposal, which includes reduced corporate tax rate to 21%, from 35%,(Gambino, Siddiqui and Jacobs, 2017).
SamsungMobiles do not have any production facilities in the UK and sales in Europehave been steadily declining over the past three years. Brexit is expected tofurther contribute to the decline. When UK is leaving the EU expectations arethat import tax and sales tax on products manufactured in the EU might increaseprices for electronics, (Ghosh, A, 2016). Thelower US tax will positively impact Samsung Mobiles main competitor Apple. InSouth Korea corporate tax is 22% which means corporate tax is still lower forSamsung relatively Apple, (KPMG, 2017). SamsungMobile has manufacturing facilities in 6 countries; Vietnam, China, India,Brazil, Indonesia and South Korea. (Samsung.com, 2017).
meaning they arefocusing on low cost countries for manufacturing and mainly in Asia. Itindicates they are focusing investment in low cost. In regards of R&DSamsung mobile has its major R&D centres in countries with highly educatedpopulation and stable Political environment, (Samsung.com, 2017).
5.1.1Recommendation Iwould recommend Samsung Mobile to investigate if they would lower its politicalrisk by diversifying investments in manufacturing and R&D in to morecountries in different parts of the world. Iwould recommend Samsung to invest more in R&D centres in the developing andemerging markets with rationale they are becoming more important for Samsungand it is easier to find well educated people in these countries to lower cost. 5.2Economic Inthe Economic factor, we include inflation rate, interest rates, foreignexchange rates, economic growth patterns etc. The growth in developing marketsduring the past 20 years and the financial crisis 2008, which reduced thepurchasing power in many markets, changed the market dynamics for the industryas well for Samsung. Thesmartphone sales has slowed down in the mature markets and emergingmarkets sales are still growing, (Konrad, A.
2013). Samsunghas expanded more in to developing and emerging markets to adapt to the lowerconsumer disposable incomes in developed countries. Samsung’s ambition is to offsetfor the lost business in the developed world, (Konrad, A. 2013). Today Samsunghas more models than any other mobile device company (Figure 7). Samsungmobile operates in the global macroeconomic environment, (News.samsung.
com,2017), and it has expanded its business globally, (News.samsung.com, 2016). Samsung has put more focus on Indiaand China and other emerging markets. They have managed to keep the leadingposition by launching products fitting the needs in these markets. Samsung’smajor competitor Apple has continued to focus on on itshigher-end iPhone line. (France-Presse, A.
2015).2017Samsung showed lower annual profit for the first time in three years, 30%lower. Reason for the lower profit is increased competition from low costChinese companies and Apple launched high-end iPhones with larger screens(Marlow, I, 2017). Samsunghas responded to the change in market by releasing 39 new models since 2015 andat the same time Apple has released 2 new models (Figure 7). 5.2.1Recommendation Samsunghas to continue innovate differentiated products which fit well for thedifferent markets with a specific focus on emerging and developing markets.
Samsungalso has to find the right balance between differentiated products and economyof scale in manufacturing to be able to offer products at the right price andat the right manufacturing costs. 5.3 Social Smartphone is today used by manypeople around the world, people using it to communicate, find information, socialmedia, online shopping, gaming or watching video content, (Mintel, 2016). Thetrend of sharing information online and the increased penetration of social mediahave been a driver for sales of smartphones (Forbes.
com. 2016). Accordingto Mintel (2016), there is a behavioural change in the way consumers are usingsmartphones resulting in tablets to loosing their Unique Selling Point (USP). Onedriver for the change is the development of phablets (smartphones bigger than 5inches) resulting in consumers using their smartphones for more time consumingand complicated tasks.
This is one reason why sales of tablets have declinedfor all major mobile device companies in the market, including Samsung andApple (Titcomb, J, 2017), (Idc.com, 2017). Today consumers frequently change anddevelop their needs, behaviours and requirements, and these changes forces theindustry to adapt and change as well. Companies have to innovate at the samepace or faster than the consumers’ requirements and demand changes, (Cavallini, L.
, Baker, P. and Team, T, 2017). The ultrahigh-end segment of the smartphone market is an example of a new fast growingconsumer segment (Scarsella, A. 2017).
The prices in the segment are now above$850 level. In markets which are more price sensitive, consumers might not beable to afford the high end products and therefore mobile device companiesoffers device financing combined with trade in and marketing activities to makethe products more affordable, (Idc.com, 2017). In US Smartphone penetration isup 10% per year and sales continues to be strong.
The best percentage growth iscoming from consumer segments, in the 45-54 and 55+ age, which has had lowerpenetration than younger consumers (Deloitte United States,2017). Samsung has over time succeeded wellin innovating products to different consumer demand and they have launched morenew models than any of its competitors, (Figure 5, Figure 6).Samsung Mobiles position is consideringto be the only brand offering value for money and high quality (Figure 5). They have beenable to innovate and produce different products which match different markets, (Figure 12). 5.3.2Recommendations Samsung needto understand consumers better and create consumer insights per differentconsumer segments and innovate relevant products and solutions to the specificsegments and market conditions.
They have todefine the consumer’s segments based on their different behaviours andrequirements and need to understand how to sell the smartphones to the differentconsumer segments in different markets. 5.4 Technological The telecomnetworks are important for mobile device companies enablingdevices delivering new solutions and services to its users.
The testing of 5Gnetworks will start in 2017 and 5G will be essential for supporting connectedthings in the future, (Deloitte United States, 2017). Content and the Internet of things, are two technology areas to understand when innovating newproducts and solutions for consumers. With new technology it is possible todeliver content to any screen, any where.
The consumer-oriented “internet ofthings” will drive incremental revenue and create new revenue streams in theecosystem, (Deloitte United States, 2017). Innovationslike advanced wearable’s will probably take some time to emerge but in manycategories there is already an increase penetration and use across theecosystem, smartwatches penetration in US tripled in 2016 to 12% share of theUS mobile consumer market, (Deloitte United States, 2017). The primary driver for phablets have been OS Android and Chinese OEMmanufactures which have been gaining market shares by pushing the phablet categoryto middle price and low price segment. The biggest market is China with 50% ofthe market 2016 and the phablets market in China will continue to be thebiggest and it is forecasted to grow approximately 12% 2017, (Idc.com, 2017).Samsung has losttheir dominant position because of the OEM manufacturers, (Idc.
com, 2017). Samsung is investing in R 3rdmost of all companies in the world (Dollars), R, 2017). SamsungElectronics where Samsung Mobile is part of spent US$13.2 billion on R2016, equal to 7.3 percent of its revenue. 2016 they reduced its Rinvestment and communicated they would acquire part of key technologies throughM, (Theinvestor.co.kr,2017).
Samsung hasgot positive results on their increased R investments the past yearsreflected in share price development and new product launches (figure 1, figure 6). At thesame time, they have reduced their advertising spend significantly, (Heisler, Y, 2017). In 2016 Samsung had a serioustechnological issue with the new release of Galaxy Note 7. The issue was that thedevices of Galaxy Note 7 were causing fire and Samsung had to officially recall2.
5 million devices. This issue created damage to the Samsung brand and madethey lost the trust of the consumers, (Liberatore, S. 2017).
5.4.1 Recommendations I would recommend the Samsung tocontinue to invest in R with ambition to differentiate themselves towardsthe OEM manufactures.
I would recommend Samsung to workmore with open innovations, inviting external individuals and smaller companiesto help Samsung develop specific technologies. It is difficult to developmenteverything within the company because of the high speed of consumers changesand emerging technologies. I would also recommend Samsung toput extra attention to secure quality in their products so they can avoid anynew quality issues.
5.5 Environmental UN has developed 17 SustainableDevelopment Goals with the purpose to transform the world. In Paris 2016 an agreementon climate change was signed. UN together with countries, cooperations andcivil society are committed take actions to reach to goals by 2030, (Nino, F. 2017).
One aspect of globalization isthat individuals have become increasingly aware of environmental challenges andthe importance of ethics. Today consumers expect companies to be sociallyresponsible and to become positive contributors to the improvement of the overallsociety. The working conditions within a company has to be good enough toattract and keep the best individuals, (Silbershatz, S.
2018). Samsung has defined SustainableDevelopment Goals and they have a Sustainability Strategy and framework to beexecuted across the businesses, (Samsung, Sustainable report, 2017). Samsung works with differentinitiatives and in Korea they are operating a voluntary take-back system acrossKorea. They collect old mobile phones, with a customer reward or free ofcharge, to be recycled.
Samsung have a vision to establish the Voluntarytake-back system in every major city, (Samsung, Sustainable report, 2017). Samsung has been fast growingoutside Korea and have over time adapt its preferences and the related policiesso the company show flexibility on how to implement these in alignment to thelocal culture and the social factors in a country, (Sgsg.samsung.com.
2017). Samsung are accused paying lowersalaries compared to its competitors and Samsung has a higher people attritionrate than other companies in some countries and employees are starting to workfor Samsung competitors. When people are leaving Samsung this increased therisk of leakage of business information and it can negatively impact theSamsung brand in the eyes of the consumer.
(China Labour Bulletin.(2016). 5.
5.1Recommendation Samsung should develop a detailedstrategy per area on how to contribute to the achievement of UN 2017Sustainable Development Goals. Samsung need to strengthen itsambition to become a contributor in the society as a whole and the company haveto put extra efforts in to become an attractive and trusted employer. I would recommend Samsung tospeed up it mobile device recycling initiative. 5.6 Legal For global technology companies legalrisks are significant in many areas like; antitrust, tax, patents and labor. Legalrisks are close linked to political risks and breaching a law can jeopardizethe whole company because the fines can be enormous, (Samsung.com/legal, 2017).
Technology innovations can be protected by patents and at the same timecompanies have to protect themselves for infringing other companies’ patents, (McLaughlin,A, 2016). Apple has many times accusedSamsung for copying Apples products. This had lead to a patent war between the twocompanies, (McLaughlin, A. 2016). One case in this patent war went up to theU.
S. Supreme court in 2016, (Peterson, A. 2016).
The war about the patents negatively impacts booth companies but the consumersare loosing most. The ongoing war cost both companies a lot of money and at theend consumers needs to pay higher prices for smartphones, (Kastrenakes, J, 2017). Lee Jae-yong, vice chairman ofSamsung Electronics got in 2017 verdict of 5 years in prison. He and four moreemployees bribed former South Korean president Park Geun-hye and a confidanteof hers, (Ricker, T, 2017). 5.6.1Recommendations I would recommend Samsung tostrengthen their understanding on how to protect their innovations with patentprotection and at the same time make sure they are not infringing othercompanies’ patents.
I would also recommend Samsung torun a program to educate all employees in code of conduct and implement a solidcode of conduct control system to protect for future failures but I would alsorecommend the company to conduct a meticulous internal investigation to findout if they have any more issue that need to be disclosed.