Analysis of Samsung's Competitiveness in 2012

16-Aug-2012 | General Article (Non-News)

Samsung Electronics’ wide product line-up ranges from set products to components, encompassing semiconductor, TV, and LCD and LED display. In the global market, it has been presenting a successful growth in a tough business environment. For this reason, Samsung can be referred to as the benchmark for companies in development of successful business strategies.

Samsung’s sales reached a new high in 2011 despite recession in the IT industry. It recorded KRW 165 trillion in sales which increased KRW 10 trillion from 2010.

Each of communications, semiconductor and TV business presented a strong performance, driving the sales increase. Its mobile handset production surpassed 300 million units last year. In particular, smartphone shipments reached 100 million of which Galaxy series made a large contribution. The semiconductor segment continues to be the cash cow for the company with improved product mix although DRAM price fell to a record low. The digital media and home appliance business tripled in profit earnings thanks to the popularity of LED TV.

Samsung’s TV business enhanced profitability by being focused on premium LED TV products and the communications business posted a new record in terms of shipment by strengthening smartphone product line-up.

Despite the successful results, Samsung is placed under pressure to seek new growth engines because its current business structure is faced with various challenges and it needs to maintain a steady growth. To achieve the goal, Samsung will make a huge investment in five strategic businesses by 2020. In line with that, corporate restructuring has been conducted through merger, creation of new business segments and separation since July 2011.

Samsung’s restructuring efforts has three goals: first, to fill the entire product line-up with world-best products; second, to improve relations with the global partners including Sony and Apple; and, third, to shift its paradigm to a ‘Software Driven Company.’ In 2012, corporate restructuring will be focused on separation of set product business and component business, enhancement of competitiveness in software and content businesses, and preparation for future businesses. It is expected that Samsung Electronics will evolve into a new company when restructuring is completed. On the other hand, businesses struggling with low profitability due to aggravating business environment or immature market demand will be integrated with others for an efficient management. For instance, LED display business was integrated into component business on April 1, 2012 and LCD display will be merged with SMD to concentrate on OLED display production.

Samsung Electronics has been dedicated to improving its competitiveness in hardware technologies including mobile DRAM, AP, NAND flash and OLED display, which, in turn, resulted in high-quality set products by being combined with software, design and solutions.

It looks to expand the synergy effect between hardware technologies and some set products to entire product line-up, in a way to become the top-tier company in the world. Besides, solutions and display technology of smart devices will be adopted for TV and home appliance products, in line with the business goal of Samsung to become a ‘Software Driven Company.’ Samsung has been progressive in sports marketing and pursues a two-track marketing strategy which is composed of ‘Premium’ and ‘Localization.’ Its annual marketing expenditure amounts to 6% of sales.

In case of R&D, it strives to register more patents in preparation for possible lawsuits. In addition, progressive efforts will be made in the software business. Competitive software technologies are gaining importance in the market as smart devices are spreading from IT and mobile industries to others including home appliances. It seems that Samsung is willing to respond to rapid changes in the IT market, including the takeover of Motorola by Google, HP’s pulling away from PC business, and Apple’s onslaught of lawsuits around the world.

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Analysis of Samsung’s Competitiveness in 2012


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