Electronics Industry Life Cycle Stages

✅ Paper Type: Free Essay	✅ Subject: Marketing
✅ Wordcount: 5067 words	✅ Published: 15th May 2017

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INTRODUCTION

Samsung electronics Industry Corporation was created in 1969 as a division of Samsung group, and the name of corporation was changed to the current name which Samsung electronics in 1984. Mainly it manufacture and exported electronics products, which include color TV, electronic calculator, electronic watch, electronic cash registers, as well as electronic home appliances such as refrigerators, air conditioners, washing machines, an also telecommunication devices. Especially, it recorded the outstanding number of manufacturing black and white TVs which was going up above 10 million and took top of the world in terms of export of black and white TVs. It succeeded to develop super mini VTR (8mm) in 1983, started to export VTR in 1985, and merged Samsung semiconductors and telecommunication cooperation in 1988.

Since then Samsung electronics has dramatically grown as one of the world’s leading electronic giant with branches all over the world. Now millions of Samsung electronic products are being manufactured and sold every day and its product is seen in almost every house around the world. Samsung electronics has one of the best inventory management systems, supply and distribution chain in the world and its products are unique and durable with dedicated, efficient work force. Also, its research and development department is second to none in the electronic industry hence we decided to carry out this in-depth analysis to access the various strategies they have being applying since their existence and to advise them on the possible strategic options available to them now and in the future.

ENVIRONMENT ANALYSIS

Industry Analysis

Porter’s Five Forces Analysis

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Michael Porter stated that for any business entity there are 5 forces in action, these forces can have a great influence on the current affairs and strategy of the business. These forces consist of the following factors.

Buyers power

Buyers are the driving force of any industry including the automotive sector. Buyer behaviour is an essential part of marketing strategy and in-depth studies and research have been conducted to try to understand buyer behaviour. Typical question to ask when considering buyer behaviour are, who are our buyers? How do they buy? When do they buy? Where do they buy? Why do they buy?

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For Samsung electronics the brand strength allows them to make radical changes as they have a large base of loyal customers (due to an long history of building quality electronics), this has been evident with the radical exterior design changes to the Samsung product line up. Thus Samsung can be considered as a trend setter in their respective markets. This is a powerful position as it allows for some control of the direction of the future markets and trends. But strong competition from their rivals ensures that the changes aren’t too radical as they may lose customers to their opposition.

Suppliers’ power

Suppliers are the foundations of any industry they can supply raw materials, labour components and other supplies. Therefore it is important that a business has a good healthy relationship with its suppliers to ensure that it can operate smoothly and efficiently in cohesion with its suppliers. The power of suppliers varies depending on certain factors, for example if the product is standardised then the supplier will be weak, an example of this in the electronics industry would be silicon manufacturers. There are many to choose from and product diversity is relatively low thus suppliers are weak in this market. Suppliers are more powerful when they provide a more specialised product. Samsung has a technologically advanced component with existing patents, so in this case the supplier has more power in the relationship then in the case with silicon.

Threat of Substitute products

A substitute product is a product in another market which poses a threat because it is potentially a substitute to your product. A substitute (product) can negatively affect the ‘price elasticity’ of your product since more substitutes become available the demand becomes more elastic as customers have more alternatives a close substitute product constrains the ability of firms in an industry to raise prices.

In the electronics industry substitute products will include other similar products from other manufactures. The threat of substitutes in the electronics sector is increasing since the consumer are being motivated by both social responsibility and legislation to find alternative manufacture that meets their criteria to reduce the affect of global warming energy consumption . Legislation in the UK such as high charging for energy bill also promotes substitutes in to electronic industry so it is a growing threat in this sector.

Degree of rivalry

Perhaps this is one of the most important of Porters 5 forces, since competition is what tends drives innovation changes in the market since firms strive for a competitive advantage. The intensity of rivalry amongst firms varies across markets. In a market that is saturated rivalry can become fierce as firms compete for the same customers, but in a growing market firms don’t need to compete as fiercely as there may have their own growing customer base to which they can cater their product.

When considering direct rivals to Samsung such as Motorola and Dell they are all long established in the industry so it is likely that they have coexisted by having disciplined competition and also having a ‘code of conduct’ between themselves. This is evidence of ‘friendly’ competition within the automotive sector.

Barriers to entry

This relates to how easy it is to enter the market place, this force has only negative implications on current market competitors since the easier entry into a market is the more competitors there potentially is. But usually there are legal requirements that must be overcome before the market place can be entered for example a product must pass minimum quality and safety standards and licences are usually required for trading.

When considering the electronics industrial sector entry into the market is extremely difficult, since a large initial investment is required, and competition is fierce. In the current economic climate entry in this sector will be almost impossible unless an innovative unique selling point is achieved. Currently the easiest entry into the electronics sector is through excellent design reliability, durability and cost effectiveness of electronics being the most obvious.

Electronics Industry Life Cycle Stage

According the theory of industry life cycle, Samsung Electronics already got the Maturity stage. Because growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the space. Samsung’s products like TV, audio, video, mobile phones, camera, camcorder, PC, peripherals, Printers, home appliances and memory cards all have good reputation and occupy important place in market.

life cycle.bmp

Picture: Samsung Electronics industry life cycle.

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PESTEL Analysis

This section serves as a business environmental scan. Here a PESTLE analysis is applied of the external macro environment in which SAMSUNG operates. The pestle analysis is applied to SAMSUNG looking at its market – i.e. no specific product. The diagram below highlights the main issues within each factor. All the factors have a high level of influence on our business and our future strategy.

Social

Cultural change

Car culture

Expectations

Environment

Demographics

Family change

Fashions & Taste

Redundancies

Political

Legislation

Environment

Company cars

Competition

Taxes & duty

Subsidies

Economic

Excess capacity

Economies of scale

Diversification

Merges & strategic alliances

Technological

Energy Usage

Safety

Plant efficiencies

http://www.moldex3d.com/jla/en/images/stories/Success/Samsung/samsung-logo.jpg

Legislative

European legislation

UK directives

Environmental

Cost implications

Public opinion

Sites and locations

Portfolio Analysis

SWOT Analysis

STRENGTHS

WEAKNESSES

Samsung electronics focuses on it customer when making its product.

The first electronics company to develop the hybrid had drive in 2005

Samsung electronics seems to target the youth. By manufacturing electronic products that appeal to youths. This captures a wide range of customer base.

Samsung electronics manufactures everything by itself. From microchips to laptops and other electronic gadgets, it dominates over its competitors by manufacturing everything.

Samsung focuses on creating innovative products and in turn, captures the interest of the high end market.

Most of Samsung electronics designs are not user friendly.

Samsung electronics diversifies the product it manufactures. This diversification poses a threat as they are other larger companies with products peculiar to the industry.

Samsung electronics promotional activities cost it dearly.

The lack of innovation and fresh ideas in the electronic market is also a disadvantage as it courses the demand for products to drop.

OPPORTUNITIES

THREAT

Samsung electronics has a technological advantage with the production of semi conductors and microchips.

Samsung electronics has some serious competitors. It would take intense effort and serious planning in the near future to maintain its place on the global market.

Samsung electronics has very little popularity in the U.S as Motorola dominate and also as Nokia dominates in European market.

Current economic climate poses threat to Samsung electronics.

Porter’s Generic Competitive Strategy Analysis

Samsungs relative position within the electronics and phone industry determines whether its profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage combined with the scope of activities for which firms seek to achieve them , lead to three generic strategies for achieving the above average performance in an industry

Cost leadership

Differentiation

Focus

The focus strategy has two variants, cost focus and differentiation focus

matrix of competitive advantage vs. scope

COST LEADERSHIP

In cost leadership, Samsung set out to become one of the low cost producer in the electronics and mobile phone industry due to its structure way of accessing raw materials and its joint R&D which gave samsung a larger internal economies of scale, proprietary technology, which made Samsung a low cost producer which is an advantage

DIFFERENTIATION

In differentiation strategy Samsung seek to be unique in the electronics and phone industry buy introduce which is highly valued by buyers a type of warranty that no automobile industry have ever given in the world of automobile and its technological innovation in design, comfort ability and stability and low product price.

FOCUS

The generic strategy of focus rest on the choice of a narrow competitive scope within an industry. samsung focus in every segment and class of people be it low income, middle income, high income it does not tailor its strategy to a specific and it pays them more in market share and profitability

STRATEGIES CHOICE

GE Matrix Analysis

Mobile phone industry attractiveness and business strength assessment of Samsung phones

Industry attractiveness

Significant degree (weight)

attractiveness(rating)

â‘¢total score=â‘ Ã-â‘¡

Market size

0.25

Market growth rate

0.12

0.36

Market profitability

0.2

Competitive intensity

0.18

0.72

Technology development

0.05

0.15

Pricing trends

0.15

0.3

Demand variability

0.05

0.15

total

Industry attractiveness

3.68 Business strength assessment

Business strength

Significant degree (weight)

Strength(rating)

â‘¢total score=â‘ Ã-â‘¡

Market share

0.2

0.8

Strength of assets and competencies

0.07

0.14

Relative brand/marketing strength

0.13

0.52

quality

0.2

0.6

Customer loyalty

0.07

0.28

Relative profit margins

0.03

0.09

Production capacity

0.14

0.28

Access to financial and other investment resources

0.06

0.18

Management strength

0.1

0.3

total

—

Business strength

3.19

Depending on the analysis of the mobile phone market and industry attractive terms, the current score of attractiveness of the mobile phone industry is 3.68 points; the attractiveness of the industry is relatively high. Through the analysis of financial statements of Samsung, Samsung’s business strength total score of 3.19 points in the industry belongs to a high level, in the matrix belongs to GE leader-type to business, this score indicates Samsung mobile phones has a good market share in current market.

TV industry attractiveness and business strength assessment of Samsung TV

Industry attractiveness

Significant degree (weight)

attractiveness(rating)

â‘¢total score=â‘ Ã-â‘¡

Market size

0.18

0.54

Market growth rate

0.12

0.36

Market profitability

0.25

0.5

Competitive intensity

0.13

0.52

Technology development

0.17

0.51

Pricing trends

0.05

Demand variability

0.1

0.2

total

Industry attractiveness

2.68 Business strength assessment

Business strength

Significant degree (weight)

Strength(rating)

â‘¢total score=â‘ Ã-â‘¡

Market share

0.2

0.6

Strength of assets and competencies

0.05

0.1

Relative brand/marketing strength

0.13

0.39

quality

0.2

0.6

Customer loyalty

0.07

0.14

Relative profit margins

0.05

0.15

Production capacity

0.14

0.28

Access to financial and other investment resources

0.06

0.12

Management strength

0.10

0.3

total

—

Business strength

2.68

From the table, we can see that on the all TV market analysis, financial statements and marketing analysis of Samsung TV and Samsung in the GE matrix effort to business, the TV industry has a strong attractiveness, but Samsung in the TV business strength only belongs to middle level, which need considerable investment of resources, through the efforts of Samsung could be a leader-type business, or it will be difficult to fierce competition in the market to survive.

Washing-machine industry attractiveness and business strength assessment of Samsung washing-machine

Industry attractiveness

Significant degree (weight)

â‘¡attractiveness(rating)

â‘¢total score=â‘ Ã-â‘¡

Market size

0.2

0.4

Market growth rate

0.12

0.36

Market profitability

0.2

0.4

Competitive intensity

0.23

0.69

Technology development

0.05

0.15

Pricing trends

0.15

Demand variability

0.05

0.1

total

Industry attractiveness

2.25 Business strength assessment

Business strength

Significant degree (weight)

Strength(rating)

â‘¢total score=â‘ Ã-â‘¡

Market share

0.15

Strength of assets and competencies

0.05

0.1

Relative brand/marketing strength

0.16

quality

0.2

Customer loyalty

0.04

0.08

Relative profit margins

0.05

0.1

Production capacity

0.19

Access to financial and other investment resources

0.06

0.12

Management strength

0.10

0.3

total

—

Business strength

1.41

Through the washing-machine industry analysis and a brief Samsung washing-machine business development analysis show that the attractiveness of the washing-machine industry for Samsung is very strong, but Samsung washing-machine for production in terms of business strength is weak and the question mark in the GE matrix operations, the attractiveness of the industry itself is very easy to attract new entrants into the market and existing enterprise competition, but the washing-machine industry because of the competition is fierce, national brands in the market want a share of the domestic and international well-known brands have already endless which want to improve their competitiveness in this industry. Samsung is in a very difficult situation in the washing-machine industry.

According to the industry attractiveness and business strength matrix of Samsung mobile phones, TVs, washing-machines, we mapped the GE matrix of Samsung:

å›¾ç‰‡1.png

B: mobile phone, F: TV .H: washing-machine.

(http://www.showppt.com/ppt_79.html)

The GE matrix is displayed by Samsung, Samsung’s mobile phones plays a leader place in the market and it must keep go on. TV business in the maintenance of regional (between effort and regulator), business attraction and business position in the industry do not have the advantage of both the absence of the formation of a unique segment had to compete with many rivals, enterprise by supporting these businesses strive to improve the business’s market share, and strive to develop into a leading-type business. Samsung washing-machine business is a question mark position difficult for enterprises to compete with the market the original members, requiring substantial investment of resources, currently giving up their own production of washing-machine is an inevitable choice.

Boston Matrix Analysis

Samsung electronics was build up in 1969, it cost 40 years developed from a small company which only 36 people worked in it to a worldwide company. Now there are nearly 20 kinds of products in Samsung which got a good reputation all over the globe. Take Samsung electronics as an example, it got lots of awards in the Industrial Design Excellence Awards in America. It is the company which got the most awards in several consecutive years, which can prove the design ability of Samsung reach the world-class level. It will be analysis with Boston Matrix. The television and mobile phone can be looked as the cash cow product, because the market growth rates are relatively low and the relative market share are so high.

C:Documents and SettingsLihwæ¡Œé¢Boston.bmp

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Samsung electronics started the business of liquid crystal display from 1995, when it get to 2005, the total amount of sales volume is more than one hundred million and it is more than 2 hundred million in 2007, 3 hundred million in 2008, in last month, the total sales volume is more than 5 hundred million. The reason of why Samsung electronics can get the outstanding achievement is the extended market of the LED TV panel and the powerful sell of the big size LCD TV. In 2010, Samsung is going to sell 10 million LCD televisions with LED and 22 million all kinds of LCD TVs. In the sales amount aspect, Samsung’s market share got to 23.6% all over the globe in the fourth quarter in 2009. The high sells amount and market share of Samsung is because of the high shipments of television market in the world, the integrity layout of the product size and the leader status of the advanced technology. Samsung got the double champion of the shipment and the sales amount on television in continue 13 seasons. So they looked as the cash cow product.

The market share and the market growth rate of five TV brand in 2009

order

brand

03’09

Market share

04’09

Market share

Rate of rise

per quarter

Rate of rise

per year

1

Samsung

21.9%

23.6%

33%

13%

2

12.9%

13%

24%

20%

3

Sony

9.9%

11.5%

43%

-18%

4

Panasonic

9.2%

8.0%

-3%

5

Sharp

5.7%

5.4%

15%

-23%

others

40.4%

38.6%

18%

13%

total

100%

(http://finance.baidu.com/2010-02-23/122741032.html)

Samsung is the second biggest mobile phone producer in the world. In 2009, it paid more attention on the fashion style which attracted a great deal of young person and the shipments got to 235 million, the market share got to 19.5%. Compared with 2008, it has a big improvement, because the shipment and market share is only 199 million and 16.3% respectively. The successful of Samsung electronics is come from the swift and agility, but lack of innovativeness may lead to the loss of probability. Nowadays Samsung pay more attention on the Smartphone, the Bada system is a good example. Bada system is a platform of the new smart phone which developed by Samsung company, the interface of it is more fashion in colour and style. So it can be looked as the cash cow product because the market growth rate is low but the market share is very high, the characteristic of which is the sale volume is high but the rate of liability is low, it can provide fund for the company and the product do not need improve the invests. So it can be the supporter for recover the funds for the company, support the other product. The market is becoming mature, the company do not need to invest huge capital for enlarge the market and as a leader in the mobile phone area, it bring lots of profit for the whole company.

æœªå‘½å.jpg

(http://article.pchome.net/scripts/art_content.php?article_id=447146)

In 1997, Samsung produce a series of double door fridge named ‘ZIPEL’, in these 10 years, it was export to more than 130 countries and the market share got to the peak over about 50 countries. After sell the fridge to America for 7 years, the market share of Samsung became the highest one. In 2007, the French fridge started to sell in America, the market share was only 5.6% at that year, but after one year, it rocket to 16%. In 2009, the total sales of bridge take account of 28.6% and the sales volume take account of 27.2% in America, rank the first place. So the fridge should also be looked as the cash cow products, a company should have several kinds of cash cow products, if there is something wrong with the other dogs products, it balance the funds of the whole company.

From 2007, Samsung produce a series of camera, such as blue, WB, PL, ES and ST series. Especially Blue series which was made the advertisement by Dongjian Zhang, leave a good impression for Chinese customer, so attract lots of customer’s attention. But in the whole area, Canon, Sony and Nikon still the first three brands, Samsung cannot catch up with them. Although it developed harder on the camera area, the market share still cannot as high as the other area. So the camera area can looked as the question marks product in the Boston Matrix analysis.

Most products of Samsung electronics have a good reputation and sell very well, but there are some exceptions. Take air conditioners as an example, in 2009, all of the Samsung air conditioners withdraw from the shopping centre in Dongguan city in China, but the other products of Samsung were continue to sell. The main reason is the market share is very low, the summer in 2009 is cooler than before and the economic crisis, these all due to the sales volume of air conditioner dropped significantly. So this products can be divided into the dogs products which is low growth rate and low market share. These products need take the give way strategy. First, it should reduce the volume of the products and then pull back gradually. Second, transfer the remained resource to the other products. Last, regulation the products and combine the dogs product to the other business, because it is easy to management.

Analysis with “The Strategic Position and Action Evaluation (SPACE) Matrix”

Internal Strategy Position

External Strategy Position

Axis X

Competitive Advantage(CA)

Industry Strength(IS)

(-6 worst, -1 best)

(+1 worst, +6 best)

-1

Product quality

+6

-2

Market share

+5

-1

Brand & image

+5

-3

Product life cycle

+6

Average -1.75

Average 5.5

Total Axis X score: 3.75

Axis Y

Financial Strength(FS)

Environmental Stability(ES)

(+1 worst, +6 best)

(-6 worst, -1 best)

+4

Return On Assets

-4

+5

Leverage

-3

+3

Liquidity

-2

+3

Cash flow

-2

Average 3.75

Average -2.75

Total Axis Y score: 1

Competitive Advantage (CA) Analysis

Product quality:

According to the customers’ comments, the products of Samsung is better than most of its competitors. So I give it -1.

Market share:

Market share of mobile phone

2.PNG

(http://stats.getjar.com/statistics/world/manufacturer)

We can see from the tables that Samsung mobile phones’ market share is 10.16% in January 2010, which is the third place after Nokia and Sony-Ericesson. So I give it -2.

Brand & image:

As we all know, almost everybody knows Samsung. So I give it -1.

Product life cycle:

Electronics’ technologies innovation speed is very fast, so the life cycle score is -3.

Industry Strength (IS) Analysis

Barriers to entry:

The electronic market is mainly shared between those big companies like Nokia, Motorola and Samsung, so it’s very difficult for new entrants. I give it +6.

Growth potential:

Due to technology is the main factor in electronic industry, the market can grow as the development of new technology. So I give it +5.

Access to financing:

As a super company, Samsung has good credit which gives banks confidence to give loan to it, the same as the shareholders, etc. So I give it +5.

Consolidation:

From the Annual Report of Samsung Electronics, they have a large amount of consolidated subsidiaries, and value the performance of the subsidiaries every year in order to decide which ones should be eliminated and which ones can be kept. So I give it +6.

Financial Strength (FS) Analysis

(From: 2008 Samsung Electronics Annual Report)

Return on Assets:

Return on capital employed (ROCE)=Operating profit/(Average shareholders’ funds+ Loans)

According to Profitability (Net Income/Sales) and Asset Turnover (Sales/Asset), we can get ROCE = Profitability*Asset Turnover.

So from 2004 to 2008, the ROCE rates are 15.60%, 10.08%, 9.90%, 9.04% and 7.32% respectively.

We can see a decline in Return on Assets, but it still has good performance.

So I give it +4.

Leverage (Asset/Equity):

The rates are 2.06, 1.84, 1.74, 1.68 and 1.67 respectively from 2004 to 2008, and Earnings per share also reduce from 67,916 in 2004 to 37,684 in 2008. Considering it’s a great company, this is a good result, so I give it +5.

Liquidity:

Current ratio = Current assets/ Current liabilities

The ratios are 0.722:1.000, 0.709:1.000, 0.767:1.000, 0.826:1.000 and 0.532:1.000 from 2004 to 2008.

The company does not have very good liquidity especially in 2008. I give it +3.

Cash flow:

We can see from “Consolidated Cash Flow Statement” that the cash flow from operating activities keep almost the same level from 2004 to 2008, but the net income decreases heavily in 2008. So I give it +3.