Samsung Electronics: A Multinational Conglomerate

Samsung Electronics Co., Ltd. is a South Korean multinational conglomerate headquartered in Suwon, South Korea. Apart from South Korea, organization has expanded its business functionalities in various parts of the globe and with regards to this; organization has acquired an effective place in the top international electronics companies. Company was founded in 1969 and today, Company has expanded its network in more than 80 countries with approximately 309,000 employees across the all global locations. Initially, organization was manufacturing electrical products such as televisions, calculators, air conditioners, refrigerators, washing machines and many more (Forbes Media, 2018). Later on, organization invested in other industries and by 1981, organization had a huge record of manufacturing 10 million black-and-white televisions. In 2005, Samsung Electronics surpassed its primary rival i.e. Sony and become the world’s twentieth-largest and popular consumer brand across the globe. Since then, organization has continuously   Samsung Electronics stands on 139^th position in terms of top multinational performers as per Forbes. As of June, 2018, market cap of organization was $325.9 billion. Company is a large manufacturer of lithium-ion batteries, chips, flash memory, hard drives, semi-conductors, etc. Company has a long list of clients to whom these devices are being distributed and some of those clients are Apple, Nokia, Sony, HTC and many more. Apart from this, Samsung is known as the world’s largest mobile manufacturer since 2011 and world’s largest television manufacturer since 2006 (Martin Roll, 2018).

Apart from consumer electronics goods, organization operates its functionalities through various other business dimensions like Information Technology & Mobile Communication, Device Solutions, etc. In terms of consumer electronics goods, organization offers products like monitor, television, air-conditioners, printers, washing machines, refrigerators, and various medical devices. In terms of Information Technology & Mobile Communication division, organization offers handheld products, computer, communication systems and digital cameras. And the Device Solutions business division of Samsung Electronics includes memory, light emitting diode and system large scale integrated circuit. Company current CEO Hyun-Suk Kim has adopted several unique set of strategies in order to operate in the dynamic business environment along with the objective of approaching to the larger part of the target audience in order to attain sustainable growth and overall development. Company has moved from its origin destination to China and other Asian countries like India, Philippines, Vietnam, etc. in order to reduce their cost of production and these Asian countries are capable enough to provide low cost and high productive labour and raw materials at cheaper cost in comparison to other parts of the globe (Kelly, 2018). With regards to this, this report will focus over organizational interest in India as it is one of the largest consumer markets and most of the population of India is youth and millennials through which productivity could be increased at lower cost.   With the effect of globalisation and internationalisation, organization has moved towards the Asian countries and recently organization has set up its largest manufacturing plan in Noida, Indian and concerning this, this report will focus over key challenges faced by the organization in relation to the international business arena in order to find out the factors which attract organization to execute its operations in the international market (Wright, 2016).

Internationalization Strategies of Samsung Electronics

Samsung Electronics is one of the largest manufacturers of consumer electronics and with regards to this; organization has expanded its operations in various parts of the globe in order to serve the larger part of the audience across the globe. With the introduction of globalisation in the business market, organization has been able to expand its operations in different parts of the globe and with regards to this; organization’s major manufacturing plans are situated in China, Vietnam, Philippines and India. Recently, organization has set up its largest manufacturing plan in India with the objective to boost up its productivity so that other consumer markets could be targeted in order to gain competitive advantage as well as for enhancing its market share in the target market (Coker, 2014).

India is the second largest consumer market across the globe and it is one of largest growing economy, thus, there are lot of opportunities for international companies to expand its business in the Indian market. Samsung believes in innovation and introduction of new products on regular basis so that target audience’s demands could be fulfilled along with the objective of enhancing its market share. With regards to this, Samsung has created three messages i.e. new technology, innovative products and creative solutions in order to enhance their productivity along with matching up with the target audience’s requirements (Doiz, Lasagabaster & Sierra, 2013). While talking about consumer electronic goods, Samsung is one of the behemoth brands and in 2017, organization ranks on the 6^th position in terms of the most valuable global brands with approximately USD 56.2 billion. Samsung was initially manufacturing small appliances but later on, organization diversified its interest in other industries like financial services and trading, heavy industries, and many more. In the cutting-edge technological world, Samsung is performing its functionalities by adopting new and innovative strategies and unique talent in order to develop and maintain its separate image in the marketplace (Intriligator, 2017).  

One of the crucial elements of organizational success in the global market is its five-pillared brand strategy. Their recent sophisticated innovations are Curved and Smart televisions and Galaxy series Smartphones. These products are technically sound, user friendly and effective for all consumer segments. In terms of maintaining its identity as the innovative company, organization needs to confront its primary competitor i.e. Apple. In order to compete with Apple, Samsung has shifted its interest in Asia and other parts of the globe and it is a part of their repositioning strategy. The major factors which influences Samsung to invest in India market is the political economy and sociocultural factors. Although, Indian political situation is not stable but still, political policies of India are attractive for the multinational corporations (O’Neill & Chapman, 2015). Indian government has made several rules and regulations which are attractive for foreign companies to establish its business in the Indian market. Apart from this, India is country with different customer segments with unique set of demands and wants and Samsung has analysed Indian market conditions and introduced different products for different customers segments in terms of approaching to large customer segments as well as to enhance its revenues, profits and market share in the global market (Gillespie & Riddle, 2015).

Market Entry Approaches

Samsung Electronics has chosen Indian market for setting up their business as well as for enhancing its market share in the target market is the huge population. Apart from this, Indian economy is one of the fastest growing economies across the globe which is another most determining factor for foreign companies to grow and expand its business in Indian market. Indian population is huge and it is mainly comprises of millennials and people aged 18-40 and these are considered as tech-enthusiast due to which opportunities for Samsung Electronics and other companies have been originated for introducing their business in the Indian market. With regards to this, organization has chosen Indian market for the objective of expanding its business along with enhancing its market share in the global electronics market as well as for gaining competitive edge over other companies (Kim, Hoskisson & Lee, 2015).

Apart from these factors, Indian economy is considered as the 7^th largest economy across the globe and according to International Monetary Fund World Economic Outlook (2016), GDP of India was $ 2,251 billion and it was contributing approximately 2.99% to the world’s GDP in terms of exchange rate. Growth rate of India is another most determinant factor which attracts foreign companies to establish their business in the Indian market. For the fiscal year 2017, country’s growth rate recorded at 5.2% from 7.4% in 2016 and the major reason behind this decline was the introduction of demonetization to remove corruption and black money. In this manner, India has firmly developed its lucrative image as the most attractive destination for foreign investment. In 2016, Foreign Direct Investments in India was recorded at $46.4 billion which was 18% more than the last year. Apart from these factors, 70% of the Indian population is comprises of millennials which is considered as the significant factor for companies as this is the large part of their target audience. Thus, Samsung Electronics entered into Indian market in December 1995 in joint venture with Reasonable Computer Solutions Pvt. Ltd. in the profit sharing ratio of 51:49 (Gurung & Prater, 2017).

Infrastructure support, millennials population and governance and many more are the primary factors which have made Indian market as the most attractive locations for business enterprises to expand its business in the international market. Apart from this, regulations by government are another big factor which has played dynamic role in terms of making Indian market, a favourable destination for foreign investment. With regards to these factors, Samsung Electronics have entered into Indian market and recently, they have also set up the largest manufacturing plant in India which will generate thousands of employment opportunities for local public of India which will ultimately enhances organizational revenues, decrease cost of production and helps the organization to boost up its productivity and efficiency in the global marketplace (Bower, 2018).

Global Operations Management

Every country has certain set of resources through which a nation attains competitive advantage. Porter Diamond theory is referred to as the theory of National Advantage. This theory is designed to understand the competitive advantage due to certain factors available with them. With the help of those resources, government of particular nation could improve its position in the global market by utilising the available resources to the optimum manner. Today, global economic environment is very competitive and dynamic and with the effect of globalisation, internationalisation and introduction of internet and technology, business enterprises are continuously expanding their businesses in those countries whose global economic conditions are attractive and those who have sufficient resources. While determining the global position of India, it has been evaluated that Indian political and regulatory rules are favourable for foreign direct investments. Apart from this, Indian government has implemented several unique and effective set of strategies to make appropriate changes in the country through which challenges faced by the country could easily be removed. Apart from this, Porter’s Diamond theory also describes that countries could also create new factors and resources for attainment of competitive advantage in the global market. In this theory, four factors i.e. firm strategy, structure and rivalry, demand conditions and factor conditions, and related supported industries. Amongst these factors, firm strategy states that development of technological innovations helps businesses to enhance the production capacity Indian government has adopted technology for the objective of providing their citizens appropriate resources to match up with the other countries in terms of productivity and efficiency.  

Related supporting industries states upstream and downstream industries encourages innovation by providing appropriate resources to the people for thinking out of the box to generate innovative ideas. Demand conditions refer to the nature and size of customer base which drives product improvement and innovation. The last determinant factor is factor conditions and these include the elements which could be created by country itself like skilled and talented workforce, adaptation of technology and encouraging citizens to think out of the box for generating innovative and unique ideas, capital and infrastructure, etc. With regards to this, Indian government has encouraged forth factor of Porter’s Diamond theory in an effective manner and in consideration to this, India has developed attractive infrastructure and skilled labour for the objective of enhancing their efficiency along with gaining competitive edge over other countries. Apart from this, India is a developing nation and due to this, individual disposable income is quite low, so, government has implemented several policies to attract international companies so that employment opportunities for local people could be generated along with the objective of enhancing overall conditions of the country. With regards to this, Samsung Electronics have chosen Indian market to set up and expand their business in the Indian market through which they could have easily been able to develop their separate brand image in the global market (Fang, et. al., 2018).

Advantages and Disadvantages of International Market Entry

Samsung Electronics entered into Indian market in December 1995 as 51:49 joint venture with Reasonable Computer Solutions Pvt/ Ltd. (RCSPL). RCSPL is owned by Venugopal Dhoot of Videocon Group. Further in 1998, RCSPL diluted its 26% stakes in Samsung and later on remaining 23% stakes were also sold to Samsung in 2002 (Hofer & Baba, 2018). With the effect of this, Samsung becomes the wholly-owned subsidiary of South Korean parent company. When Samsung entered into India, its initial operations were executed in North India but later on, organization expanded its operations in all parts of the country. Within just 3 years of its presence in India, organization earned record profits of Rs. 50 million on turnover of Rs. 5.4 billion in 1998.

Although, organization faced various challenges and issues while setting up their business in the Indian market because most of the consumer segments falls under lower middle class and middle class which was quite different for Samsung because in other global parts where they were executing their operations, those were developed countries with sufficient individual disposable income. Thus, Samsung introduced a Research and Development Centre in Noida in 2000 with total investment of US $5 million with the objective of manufacturing Indian consumer oriented products through which their demands and wants could be fulfilled. Later on, this R&D centre becomes the regional hub for Samsung which serves India, Middle East and South East Asia in terms of analysing design requirements, market trends, consumer behaviour, etc. (International Trade Administration, 2017).

Since 1995, organization has set up its effective brand image in the target market and especially in terms of mobile phone industry; it has been the go-to brand buyers since then. In 2007, organization started producing in Indian market. Currently, organization has two manufacturing units in India i.e. one in Noida and another in Sriperumbudur, near Chennai. Company’s Noida plan is the largest manufacturing plan across the globe. When organization entered into Indian market, local competition and competition from other multinational companies who had already acquired great market share were the major challenges. But, organization set ups its effective image with its effective set of strategies, organization has been able to deal with the competition and with other challenges and it has developed its effective brand image in the target market (India Today, 2018).

In India, there are number of factors which are the major determinant factors through which organizational performance gets affected. According to United Nations Global Compact principles, organization is required to adopt appropriate measures through which performance could be improved. These factors are environment and anti-corruption. Both of these factors are the major factors through which organizational performances get affected. With regards to this, organization is required to adopt appropriate strategies for the objective of removing environmental issues as well as to remove corruption issues for the motive of boosting up the organizational performance as well as for enhancing organizational performance. It is required for the organization to work as per the organizational as well as on the basis of nation’s requirements (UN Global Compact, 2018).

Challenges in the Indian Market

Samsung Electronics is a multinational corporation and it is important for the organization to develop effective relations with the stakeholders in order to boost up the organizational performance along with gaining competitive edge over other electronics manufacturers. In relation with this, it is necessary to fulfil stakeholders’ needs, wants and requirement for the objective of attaining sustainable growth and overall development (Marx & Hsu, 2015)

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