1.0 INTRODUCTION 

Samsung Inc. is a Korean electronics company currently engaged in the design, manufacture and marketing of mobile communication and media devices, electronics, computers and portable digital music players, as well as related software, accessories and third-party applications. The company reported revenue of US$182,595 million during the fiscal year 2015 (Samsung 2016).

2.0 Samsung’s current performance 2016-2017

The company’s global turnover totalled US$182,595 million for the fiscal year ending in 2015 (Samsung 2016). According to Mintel (2016), Samsung is still the world’s number one smartphone vendor and together with Apple dominate the smartphone market, accounting for over 62% of this market. Despite record dominance of this market, there are signs Samsung (and Apple included) are beginning to be squeezed by emerging mobile phone brands especially from China that are gaining ground (Campbell 2016).

Further, Samsung’s dominance has been especially weakened by the high profile recall of the Galaxy Note 7 in 2016, at least in the short-term. This occurred after some units of the phones had batteries with a defect that caused them to produce excessive heat, leading to fires and explosions. On 2 August 2016, Samsung replaced the recalled units of the phones with a new version the Galaxy Note7 smartphone, which went on sale on 19 August 2016. However, in early September 2016, Samsung suspended sales of this phone too and announced another informal recall on 10 October 2016. Not only was the initial recall a stumble for Samsung, the second recall further led to their discontinuation after discovering that the new version of the Galaxy Note 7 also had the battery defect (Campbell 2016).

As expected, the Galaxy Note 7 debacle not only obliterated 98% of Samsung's Mobile division operating profits in 2016, but it also halted the company’s momentum in the highly hit-driven smartphone business especially when one considers the Note series led Samsung’s high-end phone business, which is also the most profitable part of its mobile division (Fried 2016).

Using PESTLE, SWOT, Samsung’s BCG matrix and Porters Five Forces framework, the report will examine how Samsung can take advantage of its core strengths in innovation, and seize on opportunities in the current global market created by a competitive mobile phone and tablet environment as well as faltering rivals like Apple to benefit.

3.0 Samsung's PESTLE analysis 2016-2017

PESTLE is used in strategy to analyse the macro environment and identify how future trends in the political, economic, social, technological, environmental and legal environments might impact individual organisations within an industry. Firms then study the key drivers of change behind the PESTEL factors. This is only a starting point as often, other frameworks such as Porters Five Forces and SWOT will also be used in conjunction to help Samsung utilise internal core competencies so as to take advantage of opportunities while neutralising threats.

3.1 Political factors

3.1.1 The Brexit effect

In the UK, Samsung seemed not to have been impacted much by the brexit effect, atleast for its mobile phone division whose prices have stayed the same. Talk of moving its London-based European headquarters following Brexit also seemed to have been unfounded at least in the short-term (Ghosh 2016). Nevertheless, the implications to leave the EU are many, not least the fact that it is already creating Brexit inflation as general prices continue to escalate, in part due to a weakening pound which has fallen by 18.5% against the US dollar, a situation that will only get worse if Britain does leave the EU before 2020 (Davies 2017). In terms of Brexit effects, Rival Apple has already raised prices on its UK App Store by almost 25%. In October 2016, Apple also marked the launch of all new Macs with a 20% price rise to reflect the sharp depreciation of the pound following June’s vote Brexit vote (Hern 2016; 2017).

3.1.2 The South Korea bribery scandal

In South Korea, Samsung has also been caught up in a bribery political scandal involving president Park Geun-Hye which led to her resignation as well as the arrest and trial of Samsung’s heir-apparent and co-chairman, Lee Jae-yong (Mozur 2017; BBC 2016). This is unfortunately coming immediately after the Note 7 debacle and at a time when the company is facing serious competition across many of its core businesses.

3.2 Economic factors

The growing volatility in some economies, notably China, as well as in the tuemoil in currency and financial markets in key counties meant sales fell in some quarters in 2016 (Samsung 2016).

3.3 Social factors

According to Mintel (2016), there is a behavioural shift in the way customers are using smartphones that is progressively causing tablets to lose their Unique Selling Point (USP). The rise of phablets (smartphones bigger than 5 inches) has meant that phablet owners were more inclined to use their phones to perform more complex or time-consuming tasks, such as online shopping, gaming or watching video content. This has led to cannibalisation where phablets are quickly taking over tablet activity, and explains why tablet sales (for both Samsung and Apple) have been declining in the last 2 years for all the major phone companies.

3.4 Technological factors

The decelerating development and slowdown of smartphone penetration is continuing to open up more competition forcing traditional players in the smartphone market to come up with new innovations and upgrades that can increase or sustain revenues as evidenced by the emergence of virtual reality and 360-degree videos. Smartphone-based virtual reality headsets, and wireless charging technology may prove to be the next battleground of innovation as rivals hit the market with their own solutions and features hoping to differentiate themselves (Mintel 2016).

The good thing is that Samsung is ahead of its rivals in many of the new developments in smartphone technology as evidenced by the fact it was the first smartphone maker to eliminate power cords in favour of wireless charging capabilities in its devices hence beating rivals such as Apple in terms of more features, versatility and adaptability (Mintel 2016).

3.5 Environmental factors

Following the Galaxy Note debacle, Greenpeace has been blasting Samsung for failing to detail how it will dispose of the millions of Note 7 smartphones it's recalled around the world. If the South Korean tech company chooses to dump them, it would create the equivalent of about 28 shipping containers of toxic waste, according to the environmental advocacy group (Pham 2016). With more than 4.3 million Galaxy Note 7 phones produced, that amount of phones would contain 20 metric tons of cobalt, one metric ton of tungsten, about 100 kilos of gold and more than 1,000 kilos of silver (Pham 2016).

Greenpeace has urged Samsung to recycle as much of the doomed smartphone parts as possible. Its report highlights the heavy human and environmental costs associated with mining and producing the precious metals and other materials contained in the phones (Pham 2016).

3.6 Legal factors

Samsung and Apple are still embroiled in a “smartphone patent war” that has been on-going since the spring of 2011, when Apple first began litigating against Samsung in patent infringement suits. By July 2012, Apple and Samsung were litigating 50 on-going lawsuits in more than ten countries with billions of dollars in damages claimed between them. While Apple has won many rulings in its favour in countries like the U.S, Germany and Austalia, Samsung has also won rulings in South Korea, Japan, and the UK with the latest one in December 2016 where Samsung finally won its appeal in the US Supreme court to reverse a decision to award nearly $400million to Apple (Albanesius 2016).

4.0 Samsung's Five Forces Analysis 2017

Samsungs Porters Five Forces analysis available upon request

5.0 SAMSUNG's SWOT ANALYSIS 2016-2017

A SWOT provides a reality check on Samsung’s internal and external situations and its past performance (see figure 1 below)

6.0 Samsung's BCG matrix 2017

Samsungs BCG Matric 2017 available upon request

Conclusion

After an analysis of the key drivers of change in Samsung’s industry using PESTLE, we were able to see that the current macro environment has flashpoints that may define the competitive landscape in 2017. One of them was the political scandal in South Korea that has dragged the company’s share price and reputation down the drain at a time when the company is facing serious competition across many of its core businesses.

This South Korea political scandal as already stated together with Brexit and other factors such as new technological, social and legal developments means Samsung may well face more competitive pressures and battles for dominance regarding the smartphone market. How Samsung handles the Galaxy Note 7 debacle and emerging rivals like Huawei and Xiaomi, will be determined by how it takes advantage of current opportunities (see SWOT) while neutralising threats which were looked at using SWOT. Of critical importance is diversifying away from an over reliance on the Galaxy series as the ultimate cash cow because sooner or later, as Samsung’s BCG matrix shows, cash cows do eventually turn into dogs.

References

Albanesius, Chloe (2011) “Every Place Samsung and Apple Are Suing Each Other” PC Magazine [Online] at http://www.pcmag.com/article2/0,2817,2392920,00.asp[Accessed 3 Mar 2017]

BBC (2016) “Samsung raided in political corruption probe” [Online] at http://www.bbc.com/news/business-37904802 [Accessed 3 Mar 2017]

Campbell, M (2016) “Samsung still No. 1 smartphone vendor, but Note 7 knocked marketshare back to 2014” Apple Insider, [online] at http://appleinsider.com/articles/16/10/27/samsung-still-no-1-smartphone-vendor-but-note-7-knocked-marketshare-back-to-2014 [Accessed 3 Mar 2017]

Davies, Rob (2017) “Beer prices rise amid sobering threat of Brexit-related inflation” The Guardian [Online] at https://www.theguardian.com/business/2017/jan/24/beer-prices-rise-brexit-inflation-heineken-carlsberg-carling-budweiser [Accessed 25 January 2017]

Fried, Ina (2016) “Samsung’s Galaxy Note 7 recall could hardly come at a worse time” Record, [Online] at http://www.recode.net/2016/9/2/12771798/samsung-galaxy-note-recall-impact [Accessed 3 Mar 2017]

Ghosh, A. (2016) “Brexit impact: Samsung may move EU headquarters from London” International Business Times, [Online] at http://www.ibtimes.co.uk/brexit-impact-samsung-may-move-eu-headquarters-london-1567262 [Accessed 3 Mar 2017]

Hern, Alex (2017) “Apple increases App Store prices by 25% following Brexit vote” The Guardian, [Online] at https://www.theguardian.com/technology/2017/jan/17/Apple-ios-mac-app-store-prices-rise-25-per-cent-following-brexit [Accessed 27 January 2017]

Hern, Alex (2016) “Brexit hits Apple Mac customers hard as prices rise by up to £500” The Guardian, [Online] at https://www.theguardian.com/technology/2016/oct/28/brexit-Apple-mac-customers-prices-rise-us-dollar-pound-sterling [Accessed 27 January 2017]

Mintel (2016) “Mobile phones – UK – 2016” Mintel market intelligence: London

Mintel (2016) “Digital trends winter– UK – 2016” Mintel market intelligence: London

Mozur, Paul (2017) “Political Crisis Engulfs Samsung, a Firm Tied to South Korea’s Success” New York Times [Online] at https://www.nytimes.com/2017/01/16/business/lee-jae-yong-samsung.html?_r=1[Accessed 3 Mar 2017]

Pham, Sherisse (2016) “The next victim of Samsung's Note 7 fiasco could be the environment” [Online] at http://money.cnn.com/2016/11/01/technology/samsung-galaxy-note-7-environmental-disaster/ [Accessed 9 Mar 2017]

Samsung (2016) “Annual reports” [Online] at http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/annual_reports.html [Accessed 22 Mar 2017]

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