|Smartphones, Consumer Electronics, Displays, and Semiconductors.
|Seoul, South Korea.
|230.4 Trillion Korean Won.
|Number of Employees Dec. 2018
|Kim, Ki Nam.
Kim, Hyun Suk.
Koh, Dong Jin.
|Huawei, Xiaomi, Oppo, Apple, Vivo, Intel, LG, Panasonic, SONY and others.
Weighing the strengths and weaknesses of Samsung:
Samsung Electronics is a leading brand of smartphones. However, the company has a diversified product portfolio which also includes displays, semiconductors, and other products apart from smartphones. The Galaxy range of smartphones made by Samsung has been highly popular around the world. However, the company is also expected to bring more innovations in the near future. The company has divided its business into five leading segments based on product categories and generates a large part of its revenue from the smartphone segment and mainly the US market.
Apart from investing a large sum each year in research and development to improve its existing products and make them more efficient and productive, it is also focusing on making its products more environment-friendly. It is also because of Samsung’s focus on the design and quality of its products that the company and its smartphones have acquired global popularity. However, the smartphone industry is marked by intense competition and it is expected to grow in the future. There are other challenges too before Samsung which is now an established brand enjoying strong customer loyalty and growth momentum.
Read this swot analysis to know more about Samsung and how the brand is poised for faster growth in the future against all odds and challenges.
Strengths of Samsung:
Samsung is one of the leading consumer electronics and smartphone brands in the world. Its products sell all over the world and apart from industry-leading technology, the brand prides itself on the quality and unique design of its products. In the smartphone industry especially, Samsung has been able to build an industry-leading position for itself. Its fame worldwide grew manifold with its galaxy smartphones. Strong branding and marketing have also helped the brand acquire a distinct position in a highly competitive industry. It is a South Korean multinational company with its headquarters in Seoul. It was founded in 1938 and since then it has diversified into several business areas. Some of the leading factors that have driven the global success of Samsung include technological innovation and excellent product quality. There are several competitors of Samsung in the market, but the Korean brand has built a distinct position for itself and its global success has turned it into a world-famous brand name.
Diversified Product Portfolio:
Founded in 1938, Samsung has diversified into several business segments and brought a large number of innovative products to the global market. Its extensive product portfolio is also an important factor that has driven its global success. The products made by Samsung include mobile phones and smartphones, television and audio, home appliances, camera, and computing as well as semiconductors and other products. Based on the product category, the company has divided its business into four major segments including consumer electronics, IT & Mobile communications, device solutions, and Harman. The device solutions category includes display panels and semiconductors. The largest product segment of Samsung based upon revenue is IT and mobile communications followed by device solutions.
Heavy Investment in research and development:
Samsung is one of the leading spenders on research and development in the global business industry. As the smartphone and semiconductor industries are experiencing higher competition, the company is making huge investments in research and development each year to maintain the demand for its products worldwide and to accelerate growth. In 2018, the company invested around 18.7 Trillion Korean Won in research and development or more than $15 billion. Apart from smartphones and their features, the areas where Samsung invests in research and development include Ai, IoT, and 5G.
Strong Position in the US:
Samsung is already in a strong position in the US where Apple is the industry leader. However, while Samsung’s market share is at around 25 and 20% during the last two quarters of 2019 in the US, it is poised to grow faster in the future according to sources. The arrival of 5G is going to benefit Samsung the most compared to its competitors. Smartphone users around the world are eagerly waiting for the 5G network to arrive. Moreover, 5G is expected to grow the demand of smartphones globally since a large number of consumers have postponed their smartphone purchases until the arrival of 5G. Apart from 5G smartphones, Samsung also makes the chip and tower infrastructure for 5G. So, overall the situation is turning highly profitable for Samsung.
The largest share in the smartphone industry:
For around eight years, Samsung has retained the largest market share in the smartphone industry. Mobile phones account for a large part of the company’s net revenue. In 2017, the IT and mobile communications segment accounted for more than 40% of the company’s net revenue. Samsung is the leading player in the smartphone industry. During the fourth quarter of 2019, it held an 18.8% market share in the smartphone industry. In its press release announcing the fourth quarter results of the company Samsung noted,
“For the Networks Business, performance improved in sequential terms in the fourth quarter on the back of LTE network expansions by Samsung’s major overseas customers and as Samsung began to supply 5G network equipment to the United States and South Korea. This year, Samsung will expand its equipment supply for the first markets for 5G in South Korea and the United States, laying the foundation for global growth.”Samsung Q4 2020 earnings release.
So, Samsung is going to benefit both ways from the growth of the 5G network. Apart from its network business, its smartphone sales will also grow on the back of the 5G wave.
Samsung is a global brand and has expanded its business worldwide to serve consumers around the world. The company has established 216 global bases across 74 countries. It has 52 sales offices around the world as well as 15 regional offices. Samsung has also established 37 production sites as well as 37 research and development centers and 7 design centers. In this way, it has established a large global business network. Apart from its physical distribution network that is spread worldwide, the company also uses online channels for sales and support. Samsung also has a global supply chain network that includes around 2500 suppliers.
Focus on environment-friendly products:
Samsung had started investing in making eco-friendly products long back in 2004. It focuses on minimizing the environmental impact of products starting from the product planning process to its final disposal. In 2004, the company adopted the ecodesign process for a thorough analysis of the environmental impact of its products. Since then the company has focused on making its products just as environment-friendly as they are efficient.
Weaknesses of Samsung:
Declining semiconductor sales:
In 2019, the company is experiencing a decline in its semiconductor sales. Samsung’s revenue from the sales of semiconductors declined by 19% in 2019 compared to the previous year. However, it is not just Samsung but the entire semiconductor industry has experienced a decline in revenue. According to a report by Gartner semiconductor revenue worldwide declined by 11.9% in 2019 coming down to $418.3 billion. However, Samsung had maintained a leadership position in 2017 and 2018 and again lost it in 2019 to Intel. In 2019, the main reason behind the decline in the net revenue of Samsung was the decline in revenue across the semiconductor business segment.
Dependent on the US economy:
The United States is the leading market for Samsung products. Apart from smartphones, it is a leading market for other Samsung products as well. However, that also leaves Samsung dependent on the US economy to a very large extent and any kind of economic instability or uncertainty in the US will have a severe impact on the overall market position of Samsung and its revenue.
Shrinking Market Share in China:
While Samsung is the global uncontested leader in terms of smartphone sales, its position in the Chinese market is relatively weaker. Actually, the brand is not even close to the top in the China smartphone market where it held a share of less than 1% in 2018. There was a slight growth in its market share during the first quarter of 2019 but it was still around 1% only. The local brands are performing relatively a lot better in the Chinese smartphone market. Huawei is the market leader in China with the highest market share of around 37% as of the second quarter of 2019. Huawei, Oppo, Vivo, and Xiaomi together hold an 85% market share in the Chinese smartphone market. China is strategically a very important market and apart from the supply chain, it is also important from the sales point of view where growth in market share could also help Samsung reduce its dependence on the US market. Over the years, Samsung has continued to lose market share in China. Its share in the Chinese smartphone market has come down from around 5% in 2016 to around 1% in 2019.
Opportunities for Samsung:
Samsung is a globally well-recognized brand. However, to grow market share in key markets, it must focus on the marketing of the brand. The company can drive higher customer engagement globally through the use of digital marketing and social media marketing. While the smartphone market has grown highly competitive, to retain and grow its leading position in the industry, Samsung should focus on digital marketing apart from research and development.
Strategic HR management is also a key area where the company should place a higher focus to strengthen its competitive advantage overall. More than anything, Samsung is a technology company that invests a lot in research and development every year. However, strengthening and maintaining its competitive lead in the market will also require a strategic focus on HR management which will help it generate superior results in the longer term.
Acquisitions and diversification:
Samsung has a diversified product portfolio and it is also a reason that its competitive position in the market is strong. The company can grow its position stronger through acquisitions and by diversifying into related areas. Focusing on backward integration could also help the brand reduce its operating expenses.
China is strategically a very important market for smartphone and consumer electronics brands. It has risen fast to become the second-largest economy in the world. Currently, the economy may be under pressure due to coronavirus but once the situation is back under control, the market will start flourishing again. However, Samsung’s market share in the China smartphone market has continued to shrink over the last several years. Samsung should grow its focus on China and how it markets its products there.
Threats for Samsung:
Competition in the smartphone and consumer electronics, as well as the semiconductor industry, is higher now. Apart from Huawei and other Chinese brands, Apple is a leading competitor of Samsung in the global smartphone market. After having retained a top position in the semiconductor industry, Samsung lost its leadership position to Intel in 2019. Growing competitive pressure also adds to the operating costs since the company has to spend more on R&D as well as marketing to retain its market position.
Regulatory and compliance-related threats:
Regulations and regulatory barriers are also a major threat to the growth of large and international businesses like Samsung. The technology industry and smartphone industry are also highly regulated and apart from user privacy-related laws and regulations, there is a complex web of laws that also affect Samsung including labor laws. Moreover, laws vary from market to market and region to region. It is important for businesses like Samsung to consider the regulatory threats and the compliance issues since non-compliance will result in hefty fines as well as a loss of reputation.
Impact on sales due to Corona:
Corona’s impact on the global economy was sudden and immense which is going to affect businesses like Samsung on both the ends from production to sales. Apart from having disrupted the supply chain in various regions of the world, Corona might also affect the sales of products worldwide. It is going to affect employment and earnings in several industries and mainly travel and tourism. Apple, one of the leading competitors of Samsung has already announced that its performance in the second quarter of 2020 is going to be affected by the spread of Coronavirus. Corona has disrupted Apple’s supply chain and sales network in China. Even if China is not the largest market for Samsung like the United States, the impact of Coronavirus on the US economy could hurt Samsung sales and revenue in the second quarter of 2020.
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|CITE THIS ARTICLE.
|Pratap, A. (2020, March 17). SWOT Analysis of Samsung – 2020. Retrieved from https://notesmatic.com/swot-analysis-of-samsung-2020/
|Pratap, Abhijeet. SWOT Analysis of Samsung – 2020. 17 Mar. 2020, notesmatic.com/2020/03/swot-analysis-of-samsung-2020/.