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Samsung has grown from a small export business in Taegu, Korea to become one of the world largest electronics company (Samsung’s History, n.d.). Samsung Electronics Company (SEC) specializes in producing digital appliances and media, semiconductors, memory, and system integration.
Samsung Electronics Company’s vision is, “Inspire the World, Create the Future.”
SEC has a wide range of electronic products: TV and video players, mobile phones and tablets, cameras and camcorders, computers, home appliances, and various electronic accessories (Samsung, n.d.). Samsung also provide their customers with after-sales services.
Samsung Electronics started into the international market in the 1970s by acquiring half of Korea Semiconductor. Samsungs acquisitions include a hospital, manufacturing plant, life insurance company, department stores, and many other businesses (Murat J.K., n.d.). Besides, Samsung Electronics was merged with Samsung Semiconductors and Telecommunications in the 1980s (Samsung’s History 1980-1989, n.d.). They have a stronger hold on the international market through this merging.
SEC and Sony joint venture to establish a LCD manufacturing company named S-LCD on 2004 (Yoshiko Hara, 2004). However, the joint venture split up and Samsung acquired all Sony’s shares and convert the joint venture into a wholly-owned subsidiary (Ricker T., 2011). Sony instead cooperates with Samsung by supplying LCD panels without operating the manufacturing facility. Besides, Samsung had set up various factories all around the world: China, USA, Mexico etc. These factories include a glass plant for Braun tubes, semiconductors, and others (Samsung’s History 1994-1996, n.d.).
2.0 Current Expansion
Being one of the top globalize electronic company, Samsung Electronics Company (SEC) leading the worldwide digital market by expanding themselves into many countries with various of innovative electronic products inventions, not only satisfy but impress Samsung’s customers. Samsung’s business is now involved in more than 100 countries.
SEC invested a joint venture that develops flat-panel plant in China for USD501 million. This project is in Suzhou and Jiangsu province, SEC owned 60 percent of the project and the remaining 30 percent and 10 percent own by Suzhou Industrial Park and Chinese TV maker TCL Corp.
Furthermore, SEC entered into India market by franchising. The Samsung India Electronics Franchise commenced in December 1995. India Franchise is currently manufacturing color televisions, refrigerators, and color monitors that are being exported to CIS, Middle East, and SAARC countries.
Next is expanding in United Kingdom, SEC acquiring the wireless technology business specializes in single-chip Bluetooth solutions, which is a publicly-listed UK fabless semiconductor company called CSR.
Besides that, SEC is going into Syrian by exporting telecom hardware. The exporting contract is signed with the Syria Telecommunications Establishment (STE) Corp with the value of USD40 million, making Samsung the largest supplier of basic telecommunications infrastructure to Syria.
Moreover, SEC also expands into United States by wholly-owned subsidiaries strategy. The subsidiaries name is Samsung Electronics America (SEA), they are focusing on expanding its position in U.S. market.
In term of Samsung’s performance, they are performing very well in the global market where their mobile market share is No.1 in worldwide by selling 10 million units of Samsung GALAXY S II. In addition, Samsung’s TV market has been sustaining the top share in worldwide for six years in the straight row. Furthermore, their memory business also on the top of market shares right now by developing the highly profitable products such as DRAMs for mobile devices and servers (Samsung_Annual_Report, 2012).
Besides that, the hottest topic in the town right now is the newly launched smartphones by Samsung – Samsung GALAXY S III, which ran out of stock very soon after it was launched. The president of Samsung mobile communications business, Shin Jong-kyun (2012) also mentioned that GALAXY S III’s global sales are expected to surpass 10 million in July even with the shortage of components that makes them hardly keep up with the demand of customers (Yahoo, 2012). Besides that, the analysis of internet data is showing that Samsung GALAXY S III is going to displace iPhone as ‘UK’s most popular phone (Telegraph, 2012).
All of these data are just showing that Samsung is performing so well in the global market. However, Samsung is in some trouble where they are being engaged in the lawsuit with Apple. Back there to the year of 2011, Apple started to sue Samsung with the claims of Samsung copying the iPhone and iPad design, and a German Court issued a preliminary injunction that preventing Samsung from selling the GALAXY TAB 10.1 in every EU nation except Netherlands. After that, Samsung GALAXY TAB 10.1 also being banned in Germany and Australia (Mashable, 2012). Besides that, Apple also sues Samsung over patents in the American Court (Forbes, 2012), and the most recent news is that Apple trying to sue Samsung to block their sales of Samsung GALAXY S III from US by filing that GALAXY S III has infringes on two Apple Patents (Mashable, 2012).
So, Samsung is somehow engaging in some complicated lawsuits with Apple in worldwide, because Apple is suing them in more than 1 country’s court. However, they are performing quite well in the global market especially in their mobile and TV market.
3.0 Future Expansion Strategies – Brunei
Samsung Electronics Company can be considered as one of very few companies that able to go beyond mere imitation of global competitors, leverage resources, and keep the same pace with the competitors. The world has 196 countries, in order to make a foreign expansion; SEC must consider some basic decisions and formulate some extraordinary expansion strategies. First of all, SEC should consider entering the Asia countries which having a strong business development and growth in electronic products. Therefore, we believe that Brunei is a potential market for SEC.
Background of Brunei
Brunei- is a Southeast Asian country consisting of two parts with the total area of 5,765 square kilometers. Crude oil and natural gas production is the main income of the country. As in most developing countries; there is a shortage of skilled workforce in the country. So, greater emphasis is placed upon education and training. The main area of interest in human resources development is managerial and industrial skills, with particular emphasis on entrepreneurial skills as well as vocational and technical training. Brunei is making an early move to ensure that it is delivering up to date telecommunications services to its population. The target of 100 percent digitalization was achieved in 1995. Telecommunication infrastructure and services throughout Brunei are generally high standard and the country ranks well in Asia in terms of both telecom service penetration and infrastructure facilities. Brunei also depends heavily on importing such as agricultural products, motorcars and electrical products from other countries. Besides, Bruneian is having high purchasing power but most of them do it outside the country. In Brunei, most of the peoples go to other countries just to buy essential goods and sometime daily necessities, takes for an example; Bruneian goes to the nearest neighbor’s countries such as Labuan, Sabah, and Sarawak. This is because things are cheaper. They don’t even cares for travelling costs, payment of tolls and fares and so on.
Entry Modes Strategies Used to Enter the Market of Brunei
Exporting – Like many other companies such as Toshiba and Sony, they are doing their business in Brunei through exporting their products from the centralized location. These companies export their products to other national market from the centralized country like China without establishing manufacturing operations in the host countries. Anyway, SEC is doing well in gaining the market share in computer memory chips through exporting. Therefore, we believe that SEC can do it better in exporting the electronic products. SEC can distribute their products to the distributors or wholesalers in Brunei which later will be distributed to the retailers and finally to the end consumers. As SEC is a new comer in Brunei, it should not establish any manufacturing plants in Brunei when it first goes to Brunei. By exporting the products from other manufacturing nations to Brunei, SEC can avoids or reduces substantial cost of establishing manufacturing plant in Brunei since the cost of manufacturing is high in Brunei. In addition to use exporting strategy, SEC can reduce the risks by entering on a small scale. However, SEC may add additional product lines once the exporting strategy is successfully implemented. This can also provide time and chance for SEC to learn and study about the foreign market before making any significant capital commitments to the market. As compared to Brunei, the cost of manufacturing in India, Malaysia and China is lower. Recently, SEC has planned to make India as an export hub for supplying the mobile phones or smart phones to the Asia countries. So, SEC should not establish any manufacturing plant in Brunei at the moment unless the market is proven to be accessible by SEC. As discussed previously, Bruneian is having high purchasing power but it is not exercised in Brunei. By exporting SEC’s products to Brunei, Bruneian can enjoy cheaper electronic products and they can get all these things in Brunei. Other than that, the demand of the electronic products is predicted to be higher as compared to the previous years since the SEC’s electronic products can be obtained easily in Brunei. In the recent newspapers, the SEC has received the honors of the Royal family as the company has been awarded with Queen Royal Warrant. With these title and honors, SEC can use the advantage of this honors to market its products to Brunei and this will be the best timing for entering others foreign market or even boost the sales in many other countries. In addition, Brunei is reducing the tax rate for exporting because the government has implemented new policy to enhance the economy of Brunei. This can be one of the reasons why SEC should expand the business to Brunei since Brunei has lowered down the barrier to entry.
Licensing – Licensing is the granting of rights and authorities to use the intellectual rights such as technology, trademark and patents. In the case of SEC, SEC can release the operating license to the service providers in Brunei. In Brunei, every defected product from Samsung which are under warranty will be sent back to the countries with established service centers. This is time-consuming and will be costly for SEC to ship the defected products from one country to another just for servicing. So, by releasing the license to Bruneian, this will bring convenience to the Bruneian and this will indirectly increase the sale. This is because service from Samsung can be obtained easily and this can be a value to the consumers in Brunei. Other than that, SEC authorized service centers can disseminate the customer database to the SEC and this will be very useful to SEC in marketing. Other than that, this can improve the unemployment rate in Brunei since the service center; R&D programs will need amber of manpower. SEC authorized service providers need to develop training programs or send employees to the training provided by SEC to train the Bruneian employees. These training programs can produce workforce which can adapt quickly to industrial and social development. The government policies of Brunei recognize the importance of skilled, disciplined, well-educated and motivated manpower to promote and sustain economic development. Brunei will get the benefits at the same time since the government is taking initiatives to enhance human resource development while SEC is paving the way.
3.1 Future Expansion Strategies – Cuba
Background of Cuba
Cuba has a unique economy, which is dual economy. It is applied socialist peso economy; this way of economy is provided free education, free health care, all of working compensation, retirement benefit , and household object such as housing and utilities with lower cost. International and export sector also sustains the socialist economy.
Cuba government has charge 50 percent an income tax rate, 30-35 percent for corporate. Overall tax revenue estimate over 20percent of GDP. Cuba is ranked last 29 countries in the South and Central America. The index is very poor from their performance.
For the past few years, Cuba government had implemented new policies towards entrepreneur, largely impact to the private sector. The clearest action of government act is around half-million state of workers will lose their jobs, become unemployment and need to find opportunities to work in private sector. This is the biggest changes in Cuba Economic system since 1990s.
Entry Modes Strategies used to enter the market of Cuba
From the situation that Cuba met, Samsung Electronics Company (SEC) should export to Cuba due to their policies and economy. Cuba Government charges a high rate of taxes such as 50 percent of income tax. In this situation, we won’t using wholly-owned subsidiaries because of many types of challenges need to overcome, such as lack of material resources, uncertainty environment base and so on.
Foreign companies who intend to have manufacturing plants at Cuba, need bearing the high cost for employment. Labor force for foreign company need to go through third parties such as agencies instead of employed directly. Once go through third parties, it would increase the cost of capital.
Therefore, SEC using exporting would be having better performance instead of wholly owned subsidiaries. Exporting can reduce the substantial cost of establish manufacturing plant and avoid the taxes charge in Cuba. Using exporting to enter a new and unfamiliar market can be reducing the risk to failure.
Besides that, Cuba can export from neighbour and nearly countries such as Mexico, Mexico has SEC manufacturing plant since long time ago. Exporting from Mexico can save time and cost of shipping or transportation. Their competitors- China is also implemented low cost concept. Therefore, SEC need sell the product with lower price, exporting is a good way to save cost.
Julio Ventures Ltd is a company in Cuba which is as distributor and wholesaler. It helps SEC distributed their goods to the retailer. The retailer can get Samsung goods from this company, and this is only one company in Cuba that helps SEC distributed their goods. For this situation, retailers get the products from this company, this will make Julio Ventures Ltd have better control of the goods distribution, because of Julio Ventures Ltd had their business in Cuba since long time ago, it had better understanding of the environment in Cuba. Therefore, distributions can be performed effectively.
Joint-venture is an effectiveness and efficiency way to company expand their business to new market, because of uncertainty, it will increase the risk of failure. By using joint-venture, combine two or more local firm, it will reduce the uncertainty and increase the confident to having business.
For SEC, Copextel Corp is a good alternative to joint-venture. Because of the nature of business, both are doing similar businesses which are electronic products, and this company has been founded since 1985. It has experience and better understanding towards Cuba Electronic market, joint-venture will benefit both parties based on Copextel Corp can get a good reputation from SEC and SEC can get the market share in Cuba market.
SEC and Copextel Corp have an agreement to invest 100 million to establish a joint-venture and planning to develop multifunctional home appliances. They have agreement state that SEC will take leading role in this joint-venture, they own 51% of share based on SEC have more expertise and professional in this industry.
Besides that, their joint-venture company can be work as service and repairing center, for solving the problem meet by resident of Cuba. SEC user can easily get repaired by professional provided by SEC and save the time and cost to send back to HQ. Convenient way to customer will increase the market share and influence customer loyalty, customer loyalty to company is an important factor to expand new market. Therefore, joint-venture is a good way to SEC to enter Cuba market.
3.3 Future Expansion Strategy – Cyprus
As stated above, SEC had been exploring their business towards nations and countries all over the world. With Samsung’s technologies and management strategies, Samsung have the ability to enter, explore new markets and compete even overrun its competitors. As another option beside Brunei and Cuba, Cyprus is a potential new market that Samsung should enter and expand its business.
Cyprus is located at the Middle East, south of Turkey (Bureau of European and Eurasian Affairs, 2012). Cyprus is currently the third largest island in the Mediterranean Sea (Cyprus Tourism Centre, 2012). Cyprus’s territory area is around 9,251 square kilometres with the population of 1,120,489 as of July 2011 (Bureau of European and Eurasian Affairs, 2012). As part of Cyprus economy income, there is exporting and production of mining, cement, construction, utilities, manufacturing, chemicals, non-electric machinery, textiles, footwear, food, beverages, tobacco (Bureau of European and Eurasian Affairs, 2012). But the GDP of service industry in Cyprus is much higher than others such as agriculture and industry. Among all kind of sectors, tourism, financial services, and real estate are the most important sectors in Cyprus’s economy scale which accounts for nearly four-fifths of GDP (Bureau of European and Eurasian Affairs, 2012). As a result, the service industry is the main sector SEC will enter.
Although Cyprus is consider a small country but it had a very high Human Development Index (HDI) up to 0.840 which stay at rank 31 all over the world. (Human Development Indicators, 2011) HDI is a composite statistic used to determine the rank of counting based on its “human development”, which means that the standard living or the quality of life of overall citizens. (Human Development Report 1990) It is use to distinguish whether the country is under develop, developing or developed. As a result of HDI up to 0.840, we can said that Cyprus have a high standard of living among the country which lead to high purchasing power. There are a lot of online shopping websites available in Cyprus such as megamallcyprus.com, shoebox.com.cy and dalcoworld.com. People can shop at home or anytime anywhere. But there is serious shortage of service centre for electronic products when consumers need assistance or technical support.
Entry Modes Strategies Used to Enter the Market of Cyprus
In order to enter Cyprus market, exporting is a suitable strategy for SEC to start. Export can be categories into direct export and indirect export. Based on the country Cyprus, indirect export will be more suitable than direct export to enter the new market. Indirect marketing refers to businesses selling products enter into an agreement with an agent or distributor for the purpose of selling or marketing the products in the target market. (Team Canada Inc, 2011) As a result, SEC should enter into an agreement with MS electronics which is currently leading distributor of audio video electronics and accessories in Cyprus. (Company profile, n.d) With the help of MS electronics, SEC will be able to export, distribute the products more efficiently in Cyprus. The probability of entering the new market successfully will increase also with the help of dedicated and professional distributor MS electronic. Furthermore, SEC also can provide service through MS electronic as their workers and technician are well trained. For an example, customers of Cyprus usually online purchase SEC products from websites such as Megamallcyprus but when there are problems about the product, the procedure is complicated and time consuming for the consumers to exchange or ask for technical support through the website. So, by using the indirect export strategy which using the MS electronic company as distributor can provide service and technical support in the first time.
Samsung Electronics Company has been expanding their market into various countries using various entry mode strategies. These strategies are proven to be successful in the host country. Joint venture, franchising, acquisition, exporting and wholly-owned subsidiaries are strategies that SEC used before to enter China, UK, USA and various other countries. They are performing well in the global market and are awarded with various awards. However, although they are performing well, Apple sued them on violation of Apple’s various patents. The lawsuits with Apple are still yet to solve but this does not stop SEC from expanding their business to achieve their goal of becoming a NO.1 business.
SEC is learning from their previous entry strategies to enter into new foreign market. In the future expansion strategies, the strategies SEC will be going to implement to enter Brunei, Cuba and Cyprus are clearly explained. Exporting is the most used strategy since it is the low-cost and low-risk strategy. SEC can explore and learn about the market before considering investing into the country itself. Licensing is also one of the chosen strategies. Licensor (SEC) provides skilled-training program to the licensee in the host country. The government policies encourage SEC to do so. Joint venture with the local firm will reduce risks and uncertainties of entering the market. Local firms have better networks and knowledge of the local market. By joining venture with them, SEC will enter the market with lower risks and barriers.
As mentioned in the introduction, SEC’s vision is to ‘Inspire the World, Create the Future’. By implementing all these strategies to enter a foreign market, SEC will gain more experience and thus, moving toward their vision. Part of their vision is to reach a $400 billion in revenue and becoming one of the world’s top five brands by 2020 (Samsung – Vision 2020, n.d.). SEC may be facing difficulties and lawsuits, but with the strategies implemented after much consideration, SEC will surely make a firm stand in the international business market.
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