PESTLE Analysis of Samsung Electronics Company Limited

QUESTION

Samsung Electronics Company Limited is one of the top and most famous companies in its industry. Why is this the case? Where is its competitive advantage?

ANSWER

PESTLE

• Political factors: A country, which suffers from any kind of political instability it, becomes war prone country and the sale of electronic goods becomes low. Most of the time the political factors, are not very much significant in the way of development for Samsung (Samsung uk, 2019). This company is always away from any kind of political disturbance of the country where it is operating. However these days the political instability and the peace of any area give direct impact on this company.

• Economic Factors: The more the area develops economically the more the chances of this company to get bigger and also open new stores in the newly developed areas. The high GDP rate of any country means that the common citizens’ income has gone up and they are having better capacity to buy electronic items. This way, the profit of Samsung will increase and then eventually it will be in a position to open more stores. Though the overall financial condition the world is facing these days has a direct impact on the company. The global uncertainties have made Samsung to change its way of operation every time.

Figure 1: Showing Pestle Analysis

Source: (CMS Voc, 2019)

• Social Factors: These social impacts are based on the local culture and believe of the common people in which country Samsung is operating. For its own success Samsung should show flexibility in all its policies towards the local culture. Samsung is a Korean company but it keeps changing its way of working and also policies as per the social aspects of every country it operates.

• Technological Factors: Samsung is famous all over the world for its innovative products. Samsung’s duty is to follow the most recent trends when it comes to technology (Aithal, 2017). These days there are many companies operating in this industry so for Samsung to stay ahead of LG, Sony (the rival companies) it has to use the latest technology. It is known to the world that Samsung is a technology driven company and it only focuses on the most recent trends for technology.

• Legal Factors: Apple is the biggest rival of Samsung and many times Apple has blamed Samsung for using its designs and features and for this Samsung had to pay huge amount as penalty. Apart from this reason, Samsung does not pay much salary to its employees compared to other rival companies. It has also been seen that if any employee leaves this company and goes to any other rival company he or she leaks the company’s secret and this happens a lot in this industry. For this reason Samsung should plan out some authorized rules and laws with all its employees.

• Environmental Factors: The customers of every country always want from favourite electronic company to be socially responsible. They always want that their company to play an important role for the betterment of the society (Gardere, Sharir and Maman, 2018). The working conditions of Samsung should be good enough to attract the best employees to be the part of the Samsung Company.  The internal and external factors are the main ingredients for the success of this company.

Can you think of anything a leading rival might do to reduce Samsung’s dominance in the industry?

Porter’s Five Force Analysis

Threat of new entry

The potential new entry in this electronics market is always low because:

• Huge capital investment is required for any organisation to enter in this segment.

• Since brand loyalty is quite high in this industry, hence this also imposes new entrants as threats. Customers try to stay loyal towards their favourite electronic brand.

• This industry always needs to upgrade and use new technology hence the evolving technology is another hurdle for any new company. It is very difficult to use technology for electronic products right from the beginning as these organisations will need some amount of time to identify with the new technology.

The Bargaining Power of Suppliers
According to the current market conditions, in electronics industry the bargaining power of the suppliers are on Low because:

• It can be said that the switching cost is negligible so the supplier’s power is low.

• The Product differentiation is also low because all the companies are producing almost same kinds of electronic products.

• Since in this industry just by changing the input technology or any raw material, the organisations cannot considerably differentiate on the prices in order to be competitive.

The Bargaining power of customers
Here the bargaining powers of all buyers are high because

• The buyers always use the internet to get all the updates and news regarding the price, technology used and so on. They can even compare the price rate and also the features of different companies therefore the buyers know more these days and educated regarding the electronic products and eventually this leads to the increase in their bargaining power.

• All buyers throughout the world are very price sensitive and therefore this leads to the increase in the power of the customers.

Figure 2: showing Porter’s Five Force Analysis

(Source: B2U – Business-to-you.com, 2019)

Threat of substitute products

• Due to the change in the technology, there is always a high threat of substitute products. For example before the year 2010 customers used to purchase CRT televisions but now they use Plasma, LCD TVs and LED TVs hence these way customers shifted to new generation products.

• Buyer have tendency to substitute the products if any organisation gives better technologically sophisticated products (Han, 2016).

Intensity of competitive rivalry

Here the competitive rivalry is very high of this industry

• There is constant development happening in this industry giving rise to intense competitive rivalry. Therefore it can be said that development of new products leads to sustainable competitive advantage (Aithal, 2016).

• This industry has powerful competitive strategy for example if LG is estimated on the competitive strategy then Samsung will be focussing more on product’s innovations and then diversification will happen and they will launch new products in market