Samsung Strategy for Global Competitive Advantage
Samsung Strategy for Global Competitive Advantage
According to Michael Porter, “Competitive advantage is a function of either providing comparable buyer value more efficiently than competitors, or doing business at similar cost but with unique features than your competitors thus command a premium price”. A global strategy is one in which a Multinational corporation seeks to gain competitive advantage from its international market through either a concentrated configuration, coordinating among dispersed activities or both. Configuration options range from concentrated performing of an activity in one location and serving the world from it, Co-ordination potentially allows the sharing and accumulation of know-how and expertise among dispersed activities (Govind, 2006).
Samsung as a multinational corporation uses the Red ocean strategy in which it builds competitive advantage by venturing into existing markets, building on the weaknesses of competitors through pricing and intensive marketing strategies. The major factor that has made Samsung gain such global dominance is that they design and deliver multiple products that are game-changing, differentiated and consumer centered hence they start pulling customers away from competitors. The fact that Samsung comprises of different business models, differentiated ownership structures globally and subsidiaries put the company in a strong position against its competitors in decision making, market research and design, control and profitability.
But with supply more than demand in the electronics industry, Samsung has quickly employed the marketing edge of differentiating strategies and quickly diffused in the current information driven culture while also looking at new opportunities for profitability and growth. Samsung Company is highly involved in research and design with high fund allocation in it, a strategy that has become a culture for the company over time. The company floods the market with many differentiated products meant to reach diverse markets and developed within a short time. Through this, Samsung gains a competitive advantage and counters on any moves by its competitors with its portfolio of brands (Samsung Electronics, 2015).
According to the Wall Street Journal, Samsung designs and makes its own chips and does most of its things in-house which has clearly proved beneficial to the company and its market control. Samsung’s strategy underscores a competitive advantage: The South Korean Company is able to bring products to the market more quickly than its competitors because it controls its the entire manufacturing and design process for its smart phones and electronics. Samsung makes everything from chips to screens at its own factories, allowing it to change designs and pump out new products at a rapid pace.
From its management strategists perspective, Samsung’s performance is as a the result of a very carefully crafted strategy following an evolutionary learning process from simple to more complex technologies, and taking advantage of synergy effects by synchronizing the strategy variables of different dimensions, all supported by Samsung’s highly disciplined corporate culture that has been in existence over the years. (Sang M Lee 2003).
Whittington’s Theories of Strategy on Samsung Company
Strategy is important as it gives meaning to an organization which enables the employees and the outside world to identify with that organization. Whittington made valid contribution to strategy formulations that are used across organizations to achieve the set goals. The theories condemn rigidity and calls for flexibility in strategy formulation in response to changes within business environmental variables that necessitates modification as the need arises. Whittington (2001) tried to collate the various theories about strategy over the past decades and put them into four categories namely classical, evolutionary, evolutionary and processual and the systematic perspectives. Samsung MNC has considered the classical and the systematic theories in its strategy formulation and implementation.
The Classical Theory perspective
The theory looks at the rational approach in organizations in which planning is important in decision making. It was prominent during the 1960s in the USA, the research being undertaken into large, successful manufacturing companies in which there was a top-down, rational, logical approach to formulating strategy. Implementation was the “responsibility of the operational managers” (Whittington, 2001) Thus, the Classical approach does seem more appropriate for mature and stable industries. The industry therefore does seem to have an influence on the performance of the individual firms the industry specific factors. The theory employees the use of Porter’s Five Forces model i.e. Strength of consumers, strength of suppliers, Threat of new entrants, competition rivalry and threat of substitute products which are applied to industries globally for attractiveness, profit making and competitive advantage.
This theory highly applies to Samsung based on its global strength and the competition in the electronics industry. With its strong internal management and expertise, Samsung design and manufacture products based on market research and global trends to meet customer needs. To curb on substitute products, Samsung produces mass products within a short time and allows for consumers to choose from the various varieties available while also using their differentiated pricing model to attract more consumers. The strong expertise and the fact that they own the manufacturing process ensure they invest highly in research and design to produce market needed products and beat their competitors who rely on suppliers. The competition rivalry among the electronics producing companies is stiff with many players. However, Samsung has employed the use of different business models with many subsidiaries and partnerships to ensure they are close to the market. Their marketing strategy and branding also puts it ahead of the competitors (Worstall, 2013).
The Systemic theory perspective
The systemic theory is a deliberate approach to strategy which favors goals as the outcome of strategy. It seeks an approach to strategy formulation based on the socio-economic systems of the environment and organizational goals that depends on the local rules in which the organization operates (Whittington, 2001). According to the Systemic approach, strategies are developed in complex networks and are culturally defined; the objectives and practices of strategy strongly depend on the particular social systems in which strategy-making takes place. Strategy must be ‘sociologically sensitive’ as according to Whittington (2000) both outcome and process depend on the character of the local social systems that the firm is acting in, appropriate to particular social contexts. From a Systemic perspective, there is no one best way of strategy: just play by the local rules. In this approach both the process and the outcome of strategy must align with the cultural rules of the local society.
In international business, companies are required to consider the cultures and rules of the country and people before venturing into the market to avoid any failures and product rejection. With presence in all corners of the world, Samsung and its products are designed based on market research. It highly values culture in its development of products as a way of satisfying diverse customers. Through its subsidiaries and partners globally, Samsung is closely in touch with its customers hence able to study their market patterns, cultures and produce products that are culturally accepted.
According to the business report (2015), Samsung has so far strengthened its market leadership by maintaining its wide range of product lineup from premium to mass market models and by being at the forefront of new markets. It further affirms that going forward Samsung will continue to solidify its market leadership in the premium smart phones segment with differentiated designs and new form factors such as flexible displays and, at the same time, enhance market strength by more actively addressing the mid-range and entry level smart phones markets while still make strategic investments in technologies and businesses that will become future growth engines such mobile payments and B2B and by utilizing the Company’s superior R&D capabilities which clearly confirms its strong strengths in design of its products for a long time while still staying ahead of the competitors.
Conclusion
Strategy is formed in a process based on a cognitive structure of concepts. Samsung has risen to global leadership in electronics over the past 30 decades with ambitions that were out of all proportion to their resources and capabilities. It had a strategic intent of becoming the global leader in electronics from the start of the business, which has been the essential driving force for its impressive growth and track records. The presence of Samsung products globally is highly attributed to its strategies that went beyond just formulation to implementation and meeting consumer needs globally. The success of Samsung is solemnly owed to its capabilities in design and manufacture of its products with high consideration on research and meeting customer needs globally.
Bibliography
Arensman R. 2001. More than a memory maker. Electronic business; Aug. 2001; 27, 8.
Govind Sachin, 2006, Samsung Electronics: Success by design, IBM Center for management Research.
Samsung Electronics, 2015 Business Report.
Sang M Lee, 2003. Samsung CEO Ki Tae Lee on expanding the global market. The Academy of Management Executive. Briarcliff Manor: May 2003. Vol. 17, Iss. 2, pp. 27-29.
Tim Worstall, Contributor 2013 Why Samsung Beats Apple or Perhaps Vice Versa, Forbes, Sep 9th
Whittington, R., 2000. What is Strategy – and does it matter . 2nd ed. London: Cengage Learning.
Yu Seongjae 1999, The Growth Pattern of Samsung Electronics: A strategy perspective. International Studies of Management & Organization
