Porter 5 Forces Analysis of Samsung

Porter 5 Forces Analysis of Samsung represents five major forces that shape the overall business environment of the company. It further analyzes and defines the extent of competition facing the company in the market.

Introduction to Samsung

Samsung Group is one of the largest South Korean multinational electronics company. The conglomerate corporation has its headquarters in Samsung Town, Seoul, South Korea. For over 70 years, Samsung group has been and is dedicated to enhancing the quality of life across the globe, through provision of a wide range of electronics and semiconductor products. Its market is shaped by different market forces.

Defining Porter 5 Forces Analysis of Samsung

New entrants-low

Threat of new entrants is not a major hindrance to the success of Samsung Group. This is based on the fact that major multinational corporations operating in the industry including HTC, Apple and Samsung largely benefit from economies of scale. This is to a significant level in gaining cost advantage. Such an advantage is not available to new market entrants.

What’s more, entering and operating in consumer electronics and mobile industry needs massive capital investment. This fact represents a major barrier for new entrants. Additionally, access to various distribution channels including distribution centers, wholesales warehouses and consumer technology sales outlets in the high street can prove to be a major barrier for new entrants. This in the end reduces the threat of new entrants to the market.

Bargaining power of buyers-high

The bargaining power of buyers is high based on porter 5 forces analysis of Samsung. Samsung clients can easily settle for products from other companies including Motorola, HTC, LG, Blackberry, Nokia and Apple Inc. They can do so at no extra cost and it significantly increases their bargaining power.

Bargaining power of suppliers-medium

The bargaining power of suppliers working with the corporation depends on the type of supplier. Suppliers that deal with general parts and components in many cases do not yield a lot of bargaining power. This is because of the significance of the company’s order volume and its ability to negotiate for better prices.

However, one supplier, particularly Google, exercises an immense bargaining power as Android platform supplier because of lack of alternative platforms that Samsung can explore.

It is also good to note that Samsung Electronics duly recognizes the significance of creating strategic cooperation with suppliers. About 72.7 percent of its total economic value was shared amongst suppliers in 2014. In addition, Samsung maintains all-encompassing communication method with its suppliers within the scope of different initiatives including Supplier Dialogue Fair, Hot Line, Shared Growth Day and informal meetings with suppliers.

Threat of substitutes

The threat of substitutes is high because of the number of clients who are using laptops, tablets and other gadgets to watch different programs. However, Samsung Group is aware of this and has diversified its products to include any gadgets that allow clients to access the internet, watch TV programs and play games much more sophisticated applications. It has produced interactive TV models that offer seamless integrations with external devices and web applications.

Rivalry

Samsung Multinational Corporation faces fierce competition from well-known and well established brands including Motorola, LG, Nokia, Panasonic and Sony among others. Even though Samsung is a global brand and boasts of an ethical behavior that has enabled it to increase its revenue yearly, it still has to ensure it stays on top of the game by carefully analyzing its environment based on porter’s five forces model. It is for this reason that the company keeps launching high quality and tech savvy products that attract more global clients.

Additionally, Samsung has a great ambition to become a global leader in the world of electronics. This is complemented by their investment in Research and development   as well as marketing functions.

Summary of porter 5 forces analysis of Samsung

This porter 5 forces analysis of Samsung presents how external business environment can impact the marketing strategy of Samsung. The company therefore needs to ensure that its current practices are in line with the realities and demands of the consumer electronics market across the globe.

Samsung further, needs to be more aware of the necessities and desires of its clients across the globe to increase its profits and maintain its reputation or build it even further.

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Sources

http://research-methodology.net/samsung-electronics-report/

http://managementstudyguide.com/porters-five-forces-analysis-of-samsung.htm

http://research-methodology.net/samsung-porters-five-forces-analysis/

http://www.slideshare.net/chencheng0614/analysis-samsung-with-fiveforce-model-and-protein-model