3. Introduction

 

Samsung is founded
in 1969 in South Korea and is the
leading and most innovative electronic products and services providers (Ong, T, 2017). The business
unit of Samsung Mobile Phones is one of three business units within Samsung
Electronics. Samsung Mobile is based in Korea but over 90% of the sales is
outside Korea, (Samsung Electronics
Business Report, 2016). Samsung Mobile Phones is the global number one
mobile phone and smartphones manufacturer (Figure 7), second position in Tablets and second
position in Smart watches, (Samsung
Electronics Sustainability Report, 2017).
Its main global competitor is Apple, (Figure 7).

 

4. What
is a PESTEL analyze?

 

The PESTEL analysis is an analysis of
the external macro environment in which an organization operates. These factors
are impacting the industry as well as the different players in the industry and
are in many cases outside the control or influence of the business. The
companies need to understand the factors and manage accordingly to become competitive
and create value to its stakeholders, (Rapid, Bi, 2013). PESTEL will be used as
a tool to analyse Samsung Mobile and will analyse the environmental key
drivers:

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·            
Political

·            
Economic

·            
Social

·            
Technological

·            
Environmental

·            
Legal

The
mobile devices industry is global and therefore the PESTLE model is relevant to
use as a tool to understand how external environmental factors impacting the mobile
device industry as well as Samsung Mobile. The purpose of the model is to
identify factors impacting the organization rather than to be 100% correct on how
to define different factors like, if it is legal or political driver. The
PESTLE tool is a useful tool for analysing the environment but it is just one
part of a comprehensive strategic analysis process,
(Free-management-ebooks.com, 2017).

 

5. PESTEL
analyse of Samsung Mobile (Samsung Electronics)

 

5.1
Political

 

The
political factors impacts global technology companies for instance by tax-law,
trade, labor-law, environmental-law. The global mobile phone industry is huge and
invest significantly in R&D and manufacturing which makes them sensible for
political decisions. Therefore, a stable political situation with a well functioning
tax and legal system is important in the countries where a company manufacture
and invest in R&D, (Hagel et al., 2015).

 

A
political risk event is Brexit and will impact all businesses in UK. It expects
to impact currency exchange rates and trade terms for companies importing and
exporting from UK, (Ghosh, A, 2016).

 

Corporate
taxes impacts businesses profitability. In December 2017 the US Senate approved
the new tax proposal, which includes reduced corporate tax rate to 21%, from 35%,
(Gambino, Siddiqui and Jacobs, 2017).

 

Samsung
Mobiles do not have any production facilities in the UK and sales in Europe
have been steadily declining over the past three years. Brexit is expected to
further contribute to the decline. When UK is leaving the EU expectations are
that import tax and sales tax on products manufactured in the EU might increase
prices for electronics, (Ghosh, A, 2016).

 

The
lower US tax will positively impact Samsung Mobiles main competitor Apple. In
South Korea corporate tax is 22% which means corporate tax is still lower for
Samsung relatively Apple, (KPMG, 2017).

 

Samsung
Mobile has manufacturing facilities in 6 countries; Vietnam, China, India,
Brazil, Indonesia and South Korea. (Samsung.com, 2017). meaning they are
focusing on low cost countries for manufacturing and mainly in Asia. It
indicates they are focusing investment in low cost. In regards of R&D
Samsung mobile has its major R&D centres in countries with highly educated
population and stable Political environment, (Samsung.com, 2017).

 

5.1.1
Recommendation

 

I
would recommend Samsung Mobile to investigate if they would lower its political
risk by diversifying investments in manufacturing and R&D in to more
countries in different parts of the world.

 

I
would recommend Samsung to invest more in R&D centres in the developing and
emerging markets with rationale they are becoming more important for Samsung
and it is easier to find well educated people in these countries to lower cost.

 

5.2
Economic

 

In
the Economic factor, we include inflation rate, interest rates, foreign
exchange rates, economic growth patterns etc. The growth in developing markets
during the past 20 years and the financial crisis 2008, which reduced the
purchasing power in many markets, changed the market dynamics for the industry
as well for Samsung. The
smartphone sales has slowed down in the mature markets and emerging
markets sales are still growing, (Konrad, A. 2013). 

 

Samsung
has expanded more in to developing and emerging markets to adapt to the lower
consumer disposable incomes in developed countries. Samsung’s ambition is to offset
for the lost business in the developed world, (Konrad, A. 2013). Today Samsung
has more models than any other mobile device company (Figure 7).

 

Samsung
mobile 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 India
and China and other emerging markets. They have managed to keep the leading
position by launching products fitting the needs in these markets. Samsung’s
major competitor Apple has continued to focus on on its
higher-end iPhone line. (France-Presse, A. 2015).

2017
Samsung showed lower annual profit for the first time in three years, 30%
lower. Reason for the lower profit is increased competition from low cost
Chinese companies and Apple launched high-end iPhones with larger screens
(Marlow, I, 2017).

Samsung
has responded to the change in market by releasing 39 new models since 2015 and
at the same time Apple has released 2 new models (Figure 7).

 

5.2.1
Recommendation

 

Samsung
has to continue innovate differentiated products which fit well for the
different markets with a specific focus on emerging and developing markets.

 

Samsung
also has to find the right balance between differentiated products and economy
of scale in manufacturing to be able to offer products at the right price and
at the right manufacturing costs.

 

 

5.3 Social

 

Smartphone is today used by many
people around the world, people using it to communicate, find information, social
media, online shopping, gaming or watching video content, (Mintel, 2016). The
trend of sharing information online and the increased penetration of social media
have been a driver for sales of smartphones (Forbes.com. 2016). According
to Mintel (2016), there is a behavioural change in the way consumers are using
smartphones resulting in tablets to loosing their Unique Selling Point (USP). One
driver for the change is the development of phablets (smartphones bigger than 5
inches) resulting in consumers using their smartphones for more time consuming
and complicated tasks. This is one reason why sales of tablets have declined
for all major mobile device companies in the market, including Samsung and
Apple (Titcomb, J, 2017), (Idc.com, 2017).

 

Today consumers frequently change and
develop their needs, behaviours and requirements, and these changes forces the
industry to adapt and change as well. Companies have to innovate at the same
pace or faster than the consumers’ requirements and demand changes, (Cavallini, L., Baker, P. and Team, T, 2017). The ultra
high-end segment of the smartphone market is an example of a new fast growing
consumer segment (Scarsella, A. 2017). The prices in the segment are now above
$850 level. In markets which are more price sensitive, consumers might not be
able to afford the high end products and therefore mobile device companies
offers device financing combined with trade in and marketing activities to make
the products more affordable, (Idc.com, 2017).

In US Smartphone penetration is
up 10% per year and sales continues to be strong. The best percentage growth is
coming from consumer segments, in the 45-54 and 55+ age, which has had lower
penetration than younger consumers (Deloitte United States,
2017).

Samsung has over time succeeded well
in innovating products to different consumer demand and they have launched more
new models than any of its competitors, (Figure 5, Figure 6).

Samsung Mobiles position is considering
to be the only brand offering value for money and high quality (Figure 5). They have been
able to innovate and produce different products which match different markets, (Figure 12).

5.3.2
Recommendations

 

Samsung need
to understand consumers better and create consumer insights per different
consumer segments and innovate relevant products and solutions to the specific
segments and market conditions.

 

They have to
define the consumer’s segments based on their different behaviours and
requirements and need to understand how to sell the smartphones to the different
consumer segments in different markets.

 

5.4 Technological

 

The telecomnetworks are important for mobile device companies enabling
devices delivering new solutions and services to its users. The testing of 5G
networks will start in 2017 and 5G will be essential for supporting connected
things in the future, (Deloitte United States, 2017).

 

Content and the Internet of things, are two technology areas to understand when innovating new
products and solutions for consumers. With new technology it is possible to
deliver content to any screen, any where. The consumer-oriented “internet of
things” will drive incremental revenue and create new revenue streams in the
ecosystem, (Deloitte United States, 2017). Innovations
like advanced wearable’s will probably take some time to emerge but in many
categories there is already an increase penetration and use across the
ecosystem, smartwatches penetration in US tripled in 2016 to 12% share of the
US mobile consumer market, (Deloitte United States, 2017).

The primary driver for phablets have been OS Android and Chinese OEM
manufactures which have been gaining market shares by pushing the phablet category
to middle price and low price segment. The biggest market is China with 50% of
the market 2016 and the phablets market in China will continue to be the
biggest and it is forecasted to grow approximately 12% 2017, (Idc.com, 2017).

Samsung has lost
their dominant position because of the OEM manufacturers, (Idc.com, 2017).

 

Samsung is investing in R 3rd
most of all companies in the world (Dollars), R, 2017). Samsung
Electronics where Samsung Mobile is part of spent US$13.2 billion on R
2016, equal to 7.3 percent of its revenue. 2016 they reduced its R
investment and communicated they would acquire part of key technologies through
M, (Theinvestor.co.kr,
2017).

 

Samsung has
got positive results on their increased R investments the past years
reflected in share price development and new product launches (figure 1, figure 6). At the
same time, they have reduced their advertising spend significantly, (Heisler, Y, 2017).

 

In 2016 Samsung had a serious
technological issue with the new release of Galaxy Note 7. The issue was that the
devices of Galaxy Note 7 were causing fire and Samsung had to officially recall
2.5 million devices. This issue created damage to the Samsung brand and made
they lost the trust of the consumers, (Liberatore, S. 2017).

 

5.4.1 Recommendations

 

I would recommend the Samsung to
continue to invest in R with ambition to differentiate themselves towards
the OEM manufactures.

I would recommend Samsung to work
more with open innovations, inviting external individuals and smaller companies
to help Samsung develop specific technologies. It is difficult to development
everything within the company because of the high speed of consumers changes
and emerging technologies.

I would also recommend Samsung to
put extra attention to secure quality in their products so they can avoid any
new quality issues.

 

5.5 Environmental

 

UN has developed 17 Sustainable
Development Goals with the purpose to transform the world. In Paris 2016 an agreement
on climate change was signed. UN together with countries, cooperations and
civil society are committed take actions to reach to goals by 2030, (Nino, F. 2017).

 

One aspect of globalization is
that individuals have become increasingly aware of environmental challenges and
the importance of ethics. Today consumers expect companies to be socially
responsible and to become positive contributors to the improvement of the overall
society. The working conditions within a company has to be good enough to
attract and keep the best individuals, (Silbershatz, S. 2018).

 

Samsung has defined Sustainable
Development Goals and they have a Sustainability Strategy and framework to be
executed across the businesses, (Samsung, Sustainable report, 2017).

 

Samsung works with different
initiatives and in Korea they are operating a voluntary take-back system across
Korea. They collect old mobile phones, with a customer reward or free of
charge, to be recycled. Samsung have a vision to establish the Voluntary
take-back system in every major city, (Samsung, Sustainable report, 2017).  

 

Samsung has been fast growing
outside Korea and have over time adapt its preferences and the related policies
so the company show flexibility on how to implement these in alignment to the
local culture and the social factors in a country, (Sgsg.samsung.com. 2017).

 

Samsung are accused paying lower
salaries compared to its competitors and Samsung has a higher people attrition
rate than other companies in some countries and employees are starting to work
for Samsung competitors. When people are leaving Samsung this increased the
risk of leakage of business information and it can negatively impact the
Samsung brand in the eyes of the consumer. (China Labour Bulletin.
(2016). 

 

5.5.1
Recommendation

 

Samsung should develop a detailed
strategy per area on how to contribute to the achievement of UN 2017
Sustainable Development Goals.  

Samsung need to strengthen its
ambition to become a contributor in the society as a whole and the company have
to put extra efforts in to become an attractive and trusted employer.

I would recommend Samsung to
speed up it mobile device recycling initiative.

 

5.6 Legal

 

For global technology companies legal
risks are significant in many areas like; antitrust, tax, patents and labor. Legal
risks are close linked to political risks and breaching a law can jeopardize
the whole company because the fines can be enormous, (Samsung.com/legal, 2017).
Technology innovations can be protected by patents and at the same time
companies have to protect themselves for infringing other companies’ patents, (McLaughlin,
A, 2016).

 

Apple has many times accused
Samsung for copying Apples products. This had lead to a patent war between the two
companies, (McLaughlin, A. 2016). One case in this patent war went up to the
U.S. Supreme court in 2016, (Peterson, A. 2016).
The war about the patents negatively impacts booth companies but the consumers
are loosing most. The ongoing war cost both companies a lot of money and at the
end consumers needs to pay higher prices for smartphones, (Kastrenakes, J, 2017).

 

Lee Jae-yong, vice chairman of
Samsung Electronics got in 2017 verdict of 5 years in prison. He and four more
employees bribed former South Korean president Park Geun-hye and a confidante
of hers, (Ricker, T, 2017).

 

 

 

 

5.6.1
Recommendations

 

I would recommend Samsung to
strengthen their understanding on how to protect their innovations with patent
protection and at the same time make sure they are not infringing other
companies’ patents.

I would also recommend Samsung to
run a program to educate all employees in code of conduct and implement a solid
code of conduct control system to protect for future failures but I would also
recommend the company to conduct a meticulous internal investigation to find
out if they have any more issue that need to be disclosed.

 

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