Samsung Electronics: Strategic Planning and Management

Executive Summary 

Strategic planning is very crucial for the success of any organization. It is used to set priorities, focus the firm’s capital, reinforce operations, make confident that workforce and other shareholders are working toward organization’s objectives, create unison around desired outcomes, and evaluate and regulate the organization’s course of action in response to a varying environment. Effective strategic planning depicts the direction to be taken by an organization, the activities desired to make advancement, and track the progress of the company in achieving its success. The essay depicts the role of strategic planning to Samsung Electronics over the past three decades. It illustrates the significance of laying out an effective strategic plan and adhering to it despite exposure to persistent market challenges. The research describes the roles played by strategic planning in the attainment of the organization’s short term and long term goals. 

Introduction 

The success of a company is determined by several management factors that include the strategic plan laid out by the firm’s management. The strategies put in place by the institutions executive have a significant influence on the path taken by a company. It determines how the company plans on achieving its set out goals. It designs principles that dictate the company’s technique to overcome competition, gain and retain more customers, better and efficient management of the available resources and ensure the overall expansion of the enterprise (Bryson, 2011). It is, therefore, important for the company’s governing team to have a well thought vision for the firm before coming up with the strategies that will ensure its achievement. The business strategy is paramount as it helps the management track its performance, its capabilities and their potential in leading the company towards growth. Lee Kun-Hee, the chairman of Samsung Electronics, understood this principle hence adopted a new strategic plan immediately after he took control of the company in 1987. The firm not only grew two and half times in the first five years of his leadership, but it also moved from a second tier Korean authentic equipment producer to a world class company dealing in electronics over the preceding twenty years (Magnusson, Westjohn, and Zdravkovic, 2011, p.457). It grew from earning just below ten billion dollars annually to making a generous figure of one hundred and eighty-eight billion dollars (Yu, 1998, p.60) Samsung Electronics became the globe’s leading manufacturer of mobile phones and televisions. By 2013, the corporation was able to provide employment to over two hundred and thirty thousand people in seventy-nine countries. Samsung was able to attain the greatest market share in both developed and developing nations. It was an achievement that majority of her competitors were unable to achieve at the time. Lee Kun-Hee’s vision of making Samsung a world class organization was made due to its effective strategic plan and the cooperation shown by all her employees in working towards the laid out goals. 

Fundamental changes in the company’s strategic position 

Samsung Electronics’ success was based on some factors that affected both its internal and external environment. Samsung’s change in management was the genesis of her journey towards the achievement of global prestige. In 1987, Lee Kun-Hee took over as the company’s CEO after his father’s demise. He had grand ambitions for the company where he dreamed of moving the company from a second frontier organization to a world-class electronics manufacturer. In 1993, Lee Kun-Hee beckoned senior executive from all over the world and delivered his vision to the company. He defined the strategies that the company had to adopt to achieve the dream of becoming the leading electronics manufacturer on the planet (Abell, 1980, p.5). He acknowledged that the firm needed to make overall changes in its administrative procedures to realize the corporation's dream. Under his new leadership, Lee Kun-Hee directed the management towards three strategic pillars which focused on quality, internalization and synergies. He advised his management team to make adjustments on all sectors to realize the organization’s goal. The initiative centred on moving the firm’s priorities from quantity to quality. He also aimed at promoting differentiation rather than focusing on low costs of production. In addition to that, Lee Kun-Hee realized that the management ought to focus on technology and brand creation instead of wage advantage. Although the company faced numerous challenges in the execution of the strategic plan it remained adamant in its efforts to achieve this dream. The dream was the firm’s driving force to the realization of its dream while its persistence and endurance were the reason behind its success. The change in leadership was, therefore, the birth of a new Samsung corporation. 

The corporation had to ensure that it beat its competition and acquired the largest market share globally to become a world class organization. As a result, the firm prioritized factors such as the speed at which it delivered its products to the market. The electronics manufacture industry had some competitors such as Apple in the mobile phone industry (Nisen, 2013, p.15). Samsung was determined to beat this competition hence came with a plan to ensure that her products were prioritized over other brands. It is common knowledge that whoever hits the market first gains a competitive advantage over the other brands. The management had to ensure that the products are released first to control the market. For instance, when the company came up with new technology in 2000, it became the world largest memory chip producer owing to the development of the 256M Dynamic Random Access Memory. The primary challenge faced by operators in this industry is the fast rate at which a product loses its value as new technologies are developed. It reduces the benefits that the company reaps from the technology creating the need for any organization operating in this industry to keep up with these changes. Samsung would ensure that they produced new technologies of high quality now and then and ensured that the products beat other competitor’s products. The firm, therefore, must ensure that the Research and Development Department was proactive and efficient enough to make sure that the company introduced new technologies in the market at a reasonable time. The management provided that it achieved speed to the market by conditioning the Research and Development Team to develop multiple new technologies simultaneously. The administration encouraged internal competition among different R&D teams where the product that demonstrated superior performance was assertively financed for faster production. It was then released into the market. Samsung combined an excellent design skill set with a short design cycle of approximately three to six months. It ensured that the company instigate up to ten new products quarterly. 

The decision-making team realized that its coordination and cooperation with suppliers was of crucial importance. It was also aware that the quality of goods and cost of production was dependent on the overall manufacture process. The firm minimized the outsourcing of its products where it manufactured ninety percent of its products. It gave the company a competitive advantage as costs were minimized while still high product quality and speed delivery. The key suppliers also engaged in their personal Research and Development that complemented Samsung’s Research and Development ensuring high-quality production. In addition to its research and Development, Samsung also made changes that incorporated its marketing department. Recognizing that an appropriate marketing structure was key to creating brand awareness globally, Samsung started investing on marketing her products globally especially in regions that had a high purchase power. She ensured that her prices were competitive internationally. Samsung’s planned marketing program gave the company a chance to concentrate on products with the highest Return on Investment. 

The resources at the company’s disposal determine the quality of goods and services produced by the firm. The administration, therefore, made changes in its human resource by hiring highly skilled personnel. Most of the employees had a degree while about twelve percent held master’s degree or a PhD. It focused on retaining the country’s greatest talent. The team were encouraged to adopt an achiever’s attitude and worked hard to achieve Lee Kun-Hee’s vision for the company. The employees’ effectiveness was evident when they carried out a project anticipated to last two years in just six months. The workers worked as a team and smartly to achieve the organization’s goals. 

Samsung went ahead to make huge adjustments in its production process to accommodate its internalization goal. The firm worked towards penetrating emerging markets such as India, China and Africa. The company’s desire to dominate all markets globally led it to appreciate the fact that different markets had different needs and demands. The developing nations, for instance, could mainly afford features phones while developed regions such as Europe required smartphones and technologically advanced products. The company, therefore, invested in gaining knowledge of the requirements of each part to satisfy those needs. They put up manufacturing firms in various areas internationally such as Mexico, India, Russia and Egypt. They also set up and Research and Development teams in areas such as India and China that enabled the company to be well informed about the India or Chinese specific solutions. It positively affected the company as they were able to acquire a huge market share on both developed and developing nations. Samsung was, for instance, able to produce feature phones at a low cost of ten dollars. It seemed impossible at first. However, the engineers were able to make the necessary adjustments to their coding to present the same phone with lower memory and at lower costs. The technique enabled them to provide quality products at affordable rate. 

Critical evaluation of the challenges faced and the firm’s response to these responses 

Every market is confronted by numerous threats in the course of its operation. An active management team should be well prepared for these challenges. It should be proactive rather than reactive. Samsung Electronics has been faced by numerous threats to its strategic plan. However, the firm’s top management has been able to actually reduce the effects of these problems by finding proper solutions over the years (Mintzberg, 1994, p110). Lee Kun-Hee advised his management team to avoid getting too comfortable. The company should always be on the lookout for new investment activities especially because her global dominance was not guaranteed. In the recent years, this giant in the mobile phone industry has faced its greatest challenge so far. The mobile phones sector has seen a decrease in its growth and profits over the past few years. The smart phone market is currently flooded as Chinese companies are taking the lead in the market. Samsung and Apple recorded a growth rate of 14 percent and 0.4 percent respectively. Chinese companies such as Huawei and Lenovo, on the other hand, showed a significant growth rate of 37 % and 44 % in the same quarter of 2015. Furthermore, Samsung made huge losses in 2016 when its flagship model, The Note 7, had battery issues soon after it was launched. Despite the products great features the company had to recall all the units and compensate the customers for inconveniences caused. The company lost millions of dollars invested in the manufacturing process and mitigation measure against the scandal. Most potential Samsung customers moved to competitor products such as Apple Inc and Huawei. Such companies are posing a significant threat to the giant forcing the company to take new measures that help it cope with this competition. The administrative team realized that much of the growth by these Chinese key players was attributed to the production of the middle level to low-end smart phones. These corporations also offered the market similar technology at lower prices. The company has resulted to striking a balance between its high end and low-end phone production. Emerging markets in the developing nations have the greatest purchasing power of middle and low-end phones. The launch of the J series mobile phones was aimed at countering this problem. Low end and middle-class consumers are now able to get quality products at affordable prices. The Z series, for instance, is a Samsung smart phone who price range is approximately sixty dollars. In addition to that, the corporation improves on its competitive advantage by presenting her consumers with quality software and hardware, service and wearable products with her Smartphone. The manufacture of the S7 edge also places the company at a competitive advantage as it provides the market with an unprecedented design and technology. The strategy will ensure that the organization stays on top even with the heightened competition. 

Although Samsung Electronics prides itself in the manufacture of new technology now and then, her competitors have caught up. The technology cycle in the production of smartphone and semiconductors is shortening very fast. New technologies are produced every few months or years. The competitors are battling to stay ahead by providing new products frequently. New rivals are also emerging every year. As the firm’s CEO Lee Kun-Hee has to ensure that Samsung thrives amidst all the competition. He ensures that he is constantly aware of participants in the industry that collapsed such as Blackberry and Nokia thus is careful not to follow suit (Choi, Poon, and Davis, 2008, p. 240). The competition has led to a significant drop in the company’s revenue from the Smartphone industry hence the administration has to invest in the next big thing. The Research and Development department is always racing to introduce new technological advanced products in the market. The organization has ploughed large sums of money into a variety of outputs such as virtual reality, flexible displays, next-generation memory, electric-vehicle batteries and healthcare/ medical services. Samsung SDI is currently the world’s third-largest battery supplier after LG Chem and Panasonic. The firm is currently worth eight billion dollars. In addition to that, the company plans on launching Samsung Biologics aimed at becoming the leading contract maker of biopharmaceuticals globally. The company’s effort to engage in product diversification is its only chance at gaining a competitive advantage against its competitors and maintaining a steady growth rate (Lee, and Lee, 2007, p.500). 

Samsung has also been faced with governance issues over the past few years. In 2008, the Samsung Conglomerate faced allegations of corruption and bribery. Lee Kun-Hee was indicted on charges of tax evasion and breach of trust. The genesis of the scandal was Lee Kun-Hee attempts to pass on the management of the corporation to his son, Lee Jae-Yong. The firm’s chief advisor accused the CEO of using bribery and illegal trade bonds to secure the control of the management under the Lee Family. In 2015, shareholders were angered by the Lee family’s decision to merge the company with Cheil Industries hence increasing the family’s share and control over the group of enterprises. The company’s shareholders were also disgruntled by the rate of return on their investments. The firm, therefore, resulted in returning thirty to fifty percent of liberated cash flow to financiers over the next three years. The move worked to appease the disgruntled shareholders (Michell, 2010). 

The basis and sustainability of the competitive advantage of Samsung 

Samsung has been proficient to attain the position of being a marketplace leader in numerous of its products owing to its innovation, technology and products (Moon, and Lee, 2004, p15). The firm has been able to attain sustainable competitive advantage due to its strong commitment to remain on top. The branding strategy of the company has built a robust branding equity which has been able to achieve a sustainable competitive advantage. The firm has been able to create a relationship with its clientele through this strategy. In addition to the branding strategy, Samsung attains a competitive advantage through its product, positioning, and manufacturing strategies. Samsung is focused on product quality, and this strategy has considerably paid off. It has invested highly in the research and development team which ensures that Samsung offers produces the next design now. The firm must position itself strategically in the market. As a result marketing and sales operations must be carefully thought out. New market research ensures that Samsung identifies new ways of pitching products to attract new business men and women who deal with sensitive data to use Samsung products. Correct marketing strategies aid Samsung in maximizing its value as perceived by the general public (Belch, and Belch, 2003). The company greatly respects customer choices and the people they deal with. As a result, the company has partnered with dealers all over the globe to accomplish a tight-knit national coverage. It enables the clientele to get access to Samsung’s services anywhere at any time. The firm ensures that the dealers’ expertise is improved and up to date through frequent certification courses. It gives the customers confidence in the quality of solutions and services offered by these dealers. The firm also strives to comprehend its customers need before the competitors. As a result, the management has invested in an active Research and Development department that ensures that the company meets the clients’ demand through innovation. The company consistently responds to the voice of the customer by designing and testing of new products. The company’s competitive advantage has been sustained through the production of cutting off technology that is reasonably priced (Montgomery, 1991). Samsung has proved itself time and time again through the manufacture of quality products. A Samsung products user is satisfied that the platform they are using is secure and reliable. As a result, the firm has managed to retain and attract new customers and attain the client loyalty. 

Strategic Options available for Samsung to ensure its success and sustainability in future 

Samsung’s management must acknowledge that the market is fast changing. As new rivals emerge, the firm’s market share is at stake affecting its overall profit margin (Day, 1984). The organization, therefore, must strategize on how to ensure a sustainable competitive advantage. Samsung must first take care of it people; consumers and employees. The company’s success depends heavily on its customers and the employees working to promote and achieve its set out goals. Employees are the most important to the firm as they ensure that the business operations run smoothly and that the organizational goals are realized (Barney, 1991, p.111). The management must, therefore, hire the best global talents to work in the production of groundbreaking new technology. It is also important to retain these employees by offering the best remuneration package that keeps them motivated (Enright, 2000, p.315). The employees should be given a chance to own stock in the company to reap its benefits. It is important for the management to realize that “when you take care of your employees they caring for your customers”. Products are perishable, but a team that consistently manufactures products that grab your customers’ attention is the greatest competitive advantage that any company may have. The business culture is also imperative for the achievement of a competitive edge in the organization (Barney, 1986, p.559). The firm should ensure that the employees work as a team towards achievement of the organization goals. 

Samsung depends on its loyal customers to make profits and for its growth. The company should guarantee that their needs and desires are fully satisfied to ensure their loyalty. It is, therefore, important for the company to keep aggressively investing in its Research and Development Department. It will ascertain that the firm is always informed of customer needs and strive towards productions of products that satisfy these requirements. Samsung should work on meeting the demands of time. It is crucial to ensure that the goods released not only meet but surpass customer expectations. Consumers are always willing to pay for an excellent product (Beheshti, 2004, p. 380). Furthermore, sturdy processes such as excellent customer service to the clients ensure customer loyalty. Samsung should ensure that customer concerns are always addressed raising their satisfaction level (Porter, and Advantage, 1985, p.167). One of Samsung’s greatest disadvantages to Apple is that it does not own its platform. Apple runs on iOS which has been its competitive advantage. The firms should work on the production of its personal software which outdoes its competitors. It will work as a permanent solution to Samsung’s software issues and gain potential clients who are shunned away by the challenges in its software. It would also reduce costs as the products would end its dependability on Google for its software. 

Conclusion 

Samsung has been the world’s largest manufacturer for years. The success is attributable to the management choices of its executive team. The CEO, Lee Kun-Hee had the vision to transform the organization into a world class organization with a significantly influential market share. He laid out a plan with his team that ensured the achievement of the dream. Despite numerous challenges faced during the last three decades, the firm was adamant in working to realize these dreams. The management and employee worked as a team to change the company’s fortune. The considerable growth was steered by the strategies put in place and the personnel’s commitment to achieving the goal. The organization’s management should work towards overcoming all the emergent challenges to retain its position at the global authentic electronics manufacturer. 

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