Samsung Electronics is one of the biggest and leading multi-billion dollars corporation across the globe. It has exceeded $100bn sales annually in 2007 for the first time in the history. This success has made it one of the top companies around the world. In Korean language, Samsung means “Three Stars”, reflecting the dominance of Samsung Group in two other sectors; Samsung construction and engineering, and Samsung heavy industries. Its continuous innovation has made it a leader in the consumer electronics segment, as it provides a wide range of premium products. It is “leading the convergence revolution” (Bartleby, 2013). It has made a tremendous transition from being copy-cat producers to one of the valuable technological company of Asia. Samsung usually send more than $6bn in the research annually, as it manufactures and designs products according to the changing trend of the industry, and the consumer needs (Arsip, 2012). It is necessary for the company to be competitive in the industry, because of the numerous giants like LG, Panasonic, Dawlance, etc who works hard to take the lead. Porter’s five forces helps the company in determining the competition level of the industry and the external factors which could contribute in the success of the company. Here is the Porter’s five forces analysis of Samsung Electronics;
Bargaining Power of Buyers
It is 21st century, where consumers have high quality information available, which increases their position in terms of bargaining power. In Samsung Electronics’ case, the overall bargaining power of the consumers is moderately high. The switching cost to the consumers are very low, which means, consumers can easily switch to other brands after gaining more information for that product. Higher the competition level, advanced the technologies will be, and prices will be competitive, which greatly impact on the consumer preferences. Samsung needs to invest more in the advertising and marketing area to attract more consumers. As every brand in the industry is aggressively marketing the products to hack the rival’s consumer base (Pratap, 2017).
Bargaining Power of Suppliers
Working with the Samsung totally depends on types of suppliers. Globally, Samsung has around 579 suppliers and its supply chain involves more than 2700 suppliers around the world in different industries. Businesses who are supplying general components and parts do not require bargaining power because of the Samsung’s volume and negotiation power. However, if the alternative suppliers are not present for any particular component, then the supplier has the power to extract the high process from Samsung. Samsung always work hard to maintain good relationship with the suppliers, to avoid any inconvenience, and can take the benefits of the Supplier relationship strategies. It communicates with the suppliers through different programs like Shared Growth Day, Hot Line, Supplier Dialogue Fair etc (Dudovskiy, 2017).
Threats of New Entrants
The industry of white goods is mostly known to have high barriers for entry, but low barriers for exiting, specially where big conglomerates like Samsung are involved. Threats from the new entrants are low, because of the requirement of huge distribution network, and efficient supply chain channels, which are expensive to build. However, exiting from the industry is easy, because all it need is to sell the venture to any foreign player or domestic rival in case of low sales. Samsun has been involved in entering various emerging markets step-by-step, and exited from markets which are unprofitable (Juneja, 2019).
Threats from the Substitute Products
Samsung’s electronic category is substantial. The electronic products of Samsung can easily be substituted by ordinary machines without nay time period or cost limitation to the consumers. There is the increasing range of electronic items which represent the relevant substitute for the electronic business of Samsung. Digital visuals are in major threat because of the changing in the consumer preferences and the easy substitutes availability like cloud storage changing the reference of printers, thus reducing the sales tendency of the printers of Samsung (Dudovskiy, 2017).
Rivalry of Existing Players
Approaching the market saturation for different product categories in the industry of consumer electronics, it intensifies the competition among the existing companies and little differentiation is left among the offered products. In addition to this, the diversity of the rivals operating in the industry fuels the competition intensity. In the electronics category, Samsung is competing many big giants like LG, Panasonic, Dawlance, Changong, etc. and to maintain the market position and share of the company, Samsung needs to bring more new designs and products according to the consumer need (Pratap, 2017).
References
Arsip, 2012. VALUE CHAIN AND COMPETITIVE ADVANTAGE of Samsung. [Online], Available at: http://dewimiran.blogspot.com/, [Accessed on: 15th April, 2019].
Bartleby, 2013. Samsung Porter’s 5 Forces. [Online], Available at: https://www.bartleby.com/essay/Samsung-Porters-5-Forces-FK9S6YAXH3U4Y, [Accessed on: 15th April, 2019].
Dudovskiy, J. 2017. Samsung Porter’s Five Forces Analysis. [Online]. Available at: https://research-methodology.net/samsung-porters-five-forces-analysis/, [Accessed on: 15th April, 2019].
Juneja, P. 2019. Porter’s Five Forces Analysis of Samsung. [Online], Available at: https://www.managementstudyguide.com/porters-five-forces-analysis-of-samsung.htm, [Accessed on: 15th April, 2019].
Pratap, A. 2017. A Five forces analysis of Samsung. [Online], Available at: https://medium.com/@abhijeetpratap/a-five-forces-analysis-of-samsung-79bca289b1c2, [Accessed on: 15th April, 2019].