Samsung SWOT and PESTEL Analysis

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05/02/19 Business Reference this

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SWOT ANALYSIS

Definition

This is part of a company’s strategic planning process that connects the company’s objectives and strategies to tactics and actions carried out by employees. Often SWOT is part of a company’s strategic planning process that connects its objectives and strategies to actions and tactics carried out by employees.  To better decide what changes to be made in a company and know where it stands on four key strategic areas it has to use a SWOT analysis.

SWOT Basics

Strength, Weakness, Opportunity and Threats (SWOT) is an acronym that identifies the four critical elements of this analysis.  Strengths usually explain in detail an analysis of the company’s advantages over its competitors. Weaknesses evaluate areas in which the company is at a competitive disadvantage and has a possibility of failure. Opportunities are untapped markets or business developments that the company could venture in and make profit. Threats transverse the external environment that could affect the company, an example being technological, environmental and regulatory factors.

Strengths and Weaknesses

The main reason for using the SWOT analysis is so as to be able to evaluate and assess a company’s strengths and weaknesses. This helps the company understand its main market advantages and areas that competitors could take advantage of.  Companies take advantage of its strengths by using them as marketing messages so as to differentiate them from their competitors.  By understanding their weaknesses companies can decide what areas need improvement and what areas are deeply rooted in the nature of its business.

Opportunities

By exploring untapped opportunities company leaders are able to consider ways to grow. Any strong company has to look for ways to improve and elevate its growth curve because without growth means failure and lack of utilization of opportunities, therefore, giving an advantage to the competitors. Opportunities are areas that could create more sales and profits to the company, and these can be the inclusion of new and emerging markets, new business and product developments and lastly strategic business partnerships.

Threats

Though this is not fun at all, companies always need to have an idea of what external threats they may encounter so they can always be prepared and avoid being caught unawares.  Government regulation changes may affect the level of competition or costs companies face. Ways in which a company gets access and uses natural resources can be affected by environmental or conditional changes.  Companies that do not incorporate new technologies are always affected negatively. (Hill and  Westbrook (1997).

WHAT IS PESTEL  ANALYSIS AND WHY IT’S USEFUL?

So as to be able to achieve maximum results and get to its optimum performance a company has to consider some factors. The Pestel analysis explains these factors in six categories. 

POLITICAL

These refer to the magnitude of government intervention in the economy.  Most times the foreign policy of a country plays an important role in determining the trade regulations that could either lead to trade restrictions or trade incentives.  A company can be highly affected by specific regulations imposed by the government.

ECONOMICAL

Future operation of a company/organization is highly affected by economical factors. Also, the cost of imported and exported goods are highly affected by the changes in exchange rates in different regions. The expansion and growth of an organization are highly influenced by the economy since there is a change in cost of capital. (Yüksel, I. (2012).

SOCIAL

The macro-environment of the organization is formed by different social factors, cultural and demographic aspects of the Social factors include attributes in one’s career, age distribution, growth rate, population, how individuals are conscious about their health and safety. A keen analysis of these factors helps one understand the PESTEL analysis and help organizations understand the dynamics of existing and the availability of potential markets and future customer needs.

TECHNOLOGICAL

With the speed at which technology is evolving and customers becoming more acquired to it, organizations have no option but to keep up with this pace.  New technology makes the old one obsolete and outdated. An organization/company that is not ready to embrace new technology is at a chance of lagging behind its competitors and losing its market value.

LEGAL

These are factors that affect the behavior of customers and the operation of businesses. Things which may be affected by legal factors are product transportation, profit margins, and viability of certain markets just to mention a few.

These factors help in knowing if there are any dangers behind selling certain products like drugs and sharp objects and can also affect how a company stocks their inventory or interacts with the customer.

Consumer law is used so as to protect consumers from companies that are involved in fraud and also preserve their rights when in the market. This affects business because they have to put aside resources so as to give detailed information about their products and services. 

Employment law is also known as labor law, and it explains how companies’ employees should be treated. This also helps protect children from child labor and also it makes the firing of innocent employees a bit harder.

SAMSUNG SWOT ANALYSIS

Samsung Electronics Co. Limited is the consumer electronics subsidiary of the Samsung Group, based in Suwon, South Korea. Samsung is popularly known as the world’s largest manufacturer of mobile phones, smartphones such the highly popular and successful Galaxy as well as other electronic devices like Television sets, LCD panels home theaters, refrigerators and even cooking appliances.

Having a great and undisputed manufacturing and marketing expertise, Samsung is regarded as the world’s second largest consumer electronics company the first being Apple,Inc. its American rival.

STRENGTHS

•   It is the world’s most successful electronics manufacturer of television sets, liquid crystal display (LCD) panels, mobile phones and smartphones and other electronic appliances.

•    By use of its strategic marketing style Samsung is the world’s number one mobile phones seller with the world’s largest market share of 21.4% in 2015’s second quarter. Apple comes second  with 13.9%

•    By use of its impressive research and design capabilities, Samsung has been able to create and roll out a payment app with similar capabilities to Apple Pay, in less than a year the Samsung Pay.  Also, the company has been able to incorporate many of the capabilities of both Apple phones and Google Android operating system to its mobile devices.

•    Samsung not only has strong manufacturing capabilities but also have undisputed marketing strategies that have led to the success of the company.

•    Samsung has been able to sustain long-standing relationships with retailers in the United States and Europe that have been able to provide a steady sales channel for its products through out the years.

WEAKNESSES

•   It is quite clear that Samsung has not been able to match Apple Inc.’s marketing capabilities for smartphones. This is because  Its share of the U.S. smartphone market fell by 2.3% between 2014 and 2015 yet Apple’s share price grew by 34.9%.

•    Some Chinese competitors such as Huawei and Xiaomi are catching up to Samsung in the smartphone market. In the year 2014 and 2015 Huawei’s share grew by 48.1%, and Xiaomi’s share grew by 29.4%.

•    Samsung’s dependence on customer electronics sales in markets that have limited resource for growth is dangerous. The company depends on these markets an example being the United States and Europe, for much of its revenue.

•    The public has not accepted the Android operating system in an equal manner like the tech community. This is because many consumers view Android as an inferior product to Apple’s IOS.  Samsung devices use the Google source application system and this is a weakness because it is not preferred by a majority of people. 

•    Apple products are viewed as more technology advanced and dependable on than Samsung products by a large number of consumers.

•   Samsung needs to improve its marketing efforts and standards, so as to be in the same level as Apple.

OPPORTUNITIES

•    Samsung needs to grow its market for smartphones, tablets and other technological devices in developing regions where consumers are not familiar with PCs.  This is because in 2015 sales of tablets overtook sales of traditional personal computers. An example of these regions is Africa and India.

•    Samsung should seize the increased demand for tablet and smartphone-based solutions and market some of its products that are not known to many such as Samsung Pay

•    The company should venture into new technologies such as wearable tech

•    The growth of the middle class in the developing world will increase the market for consumer electronics

•    Sales channels such as Amazon.com can be used by Samsung to grow its online market

THREATS:

•    Samsung has not been able to outdo Apple. ‘This is because Apple has emerged as the dominant smartphone and tablet brand in some markets, such as the United States.

•    The growth of Apple’s reputation for quality, reliability, and sophistication is a threat to Samsung because it seems to be lagging behind.

•    Samsung is most popular for its Galaxy devices. We could even say that it depends on these devices. The problem is, the Google Android operating system, which these devices depend upon, is not as popular with average people as iOS that is in most other devices incuding Apple is.

•   Key markets for Samsung are North America and the United States.  The declining and stagnating of the middle-class incomes in these areas could reduce consumer buying power and therefore affect Samsungs sales.

•    Samsung is experiencing rivalry from Chinese manufacturers such as Huawei and Xiaomi. This is evident because the capital share of these companies rose and Samsung’s is falling.

•    If Apple decided to produce more consumer products like home appliances and cameras, Samsung could be greatly affected.

Though Samsung has been able to maintain an impressive research, design and manufacturing capabilities, its marketing strategies are questionable. There is a need for the company to revisit and improve its smartphone marketing and design efforts so as to be able to maintain its market share in crucial arenas like the U.S.

If the Samsung wants to maintain its position as an industry leader it needs to:

1. New capabilities like Samsung Pay

2.  learn to deal with aggressive Chinese competitors like Huawei and Xioami

3.Compete with Apple’s reputation.

PESTLE ANALYSIS OF SAMSUNG

INTRODUCTION

Samsung is a global company that operates in the market for consumer appliances and gadgets. Samsung is owned by a South Korean family and has global aspirations to expand into newer markets. Since Samsung is not content with operating in some markets in the world, it wants to cover as many countries as possible. This analysis focuses on the external environmental factors that drive the Samsung’s strategy.

POLITICAL

A large number of markets where Samsung operates have a political environment that is conducive for business. This means that its operations run smoothly and though there might be some minor distractions to its operations in some of the foreign markets like India, Overall it can be concluded that Samsung is operating in markets where the political factors are not harmful. Samsung has faced significant political blows in its home country South Korea because of the country’s tensions with North Korea. Due to this instability, the company has had to take into account this political factor and also the threat of war in the Korean Peninsula. In areas where the political environment is unstable Samsung faces a lot of political pressure. This includes areas in many African and Latin American countries where the political environment is unstable and experiences frequent changes in the governing structures.This is not yet a major cause for worry for the company because it has factored the political instability into its strategic calculations.

ECONOMICS

Opening up of several markets in the developing world means that Samsung can expand in the global markets. This, therefore, means that economic factors are a critical consideration. The current global economic crisis has affected the purchasing power of customers forcing the company to seek profitable ventures in the emerging markets. The global environment in which  Samsung operates in has a lot of uncertainties and volatilities which means that the company has to keep on adjusting its strategies. Through expansion of Samsung into emerging and developing markets has made it possible for the company to adjust well to the tapering off of the consumer disposable incomes in the developed world. This is the main reason that Samsung has an aggressive push into the emerging markets with hopes that it shall recover all its lost businesses in the developed world.

SOCIO-CULTURAL

Samsung being a South Korean multinational owned by a family means that despite its global footprint it still operates from the core of a Korean company and culture. This means that among its global operations, adapting itself to local conditions is paramount. Since Samsung is a global company that has had to act locally, therefore adapting a global strategy makes it possible to be productive in emerging markets. Together with this, Samsung has had to tailor its products in markets it operates in so as to cater to their customers whose preference changes so fast.  It is important to note that Samsung operates in a market niche that is strongly influenced by the lifestyle preferences of consumers.  The fact that socio-cultural factors are different in each country; Samsung has had to reorient itself in each market accordingly.

TECHNOLOGICAL

Samsung is considered to be among the world’s leading innovative companies. Therefore, the company is at an advantage of controlling and making use of the power of technology and driving innovation for sustainable business. This has resulted into an obsessive mission by the company to outdo its rivals and competitors when it comes to technology and innovations. The company’s main goal is to be the first to reach the produce devices that are preferred by customers and also be the first products of their kind in the market.

LEGAL

Due to Samsung’s alleged imitation of the Apple’s iPad and iPhone it has had to face substantial penalties and law suits. This affected the company negatively on areas of public perception and consumer approval strategies. From Samsung’s experience of having various lawsuits with its competitors, other technology driven companies should know that having an elaborate basis of a design or model is key rather than making a fast move so as to be able to present a product to the consumers that shall, in the end, ruin your reputation.

ENVIRONMENTAL

Samsung has to be on the lookout when making its products so as to be able to satisfy its customers. When doing this, it has to take into account its social and environmental responsibilities so as to make sure they are both ethical.  Therefore, this means that the company should ensure that it does not compromise on its staff wages or their working conditions for they are all involved in producing the final product. (Grade and Pestel)

CONCLUSION

As Samsung prepares to expand globally, it has to be sure of what is expected of it. Technology changes so fast and customer preference even faster. Therefore, with this analysis, Samsung has clear guidelines on what to expect in the global consumer landmine.

REFERENCES

GRADE, G. B. PESTEL Analysis Of The Energizer.

Hill, T., & Westbrook, R. (1997). SWOT analysis: it’s time for a product recall. Long range planning30(1), 46-52.

Khan, U. A., Alam, M. N., & Alam, S. (2015). A Critical Analysis of Internal and External Environment of Apple Inc. International Journal of Economics, Commerce and Management3(6), 955-961.

Kim, M., & Park, J. (2011, February). Demand forecasting and strategies for the successfully deployment of the smart TV in Korea. In Advanced Communication Technology (ICACT), 2011 13th International Conference on (pp. 1475-1478). IEEE.

King, R. K. (2004). Enhancing SWOT analysis using triz and the bipolar conflict graph: a case study on the Microsoft Corporation. Proceedings of TRIZCON2004, 6th Annual Altshuller Institute.

Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management7(24), 52-66.

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