PESTLE ANALYSIS OF SAMSUNG 2020

17 min readMay 19, 2020

EXECUTIVE SUMMARY

This article performs Samsung’s Internal and External Stakeholders analysis within the smartphone industry. The evaluation method includes PESTLE analysis that studies external factors that generate impact in the businesses through the Political, Economic, Socio-cultural, Technological, Legal and Environmental. Beyond, trends, current market perspectives, comparison with the main industry rival, stakeholder analysis and stakeholder matrix. The analysis is realised through the current information and data from Samsung and other trustful sources, including additional important information in the appendices. The analysis presents Samsung’s background, Samsung’s PESTLE analysis outcomes, structure business divisions, Functional areas, performance in the market, internal and external stakeholder and their roles, the nature and degree of main stakeholders’ interests, and implications of conflicting interests, the level of main stakeholders’ influence and the main points of stakeholder dissimilarities and analyses the differences in stakeholder interests and influences. The report concludes that even though Samsung has excellent stakeholder management and communication strategy, it still suffered negative impacts on its businesses due to internal stakeholders mistakes and external factors. Samsung remains the second place in the industry, losing only to Apple, which is its main rival.

SAMSUNG’S BACKGROUND

Samsung is a large Korean corporation that was founded in 1938 by Lee Byung-Chul. Samsung started as a business working in fruit & vegetables and dried seafood. Before Samsung has built a vast business empire with many different products across the world, the firm exported its commodities from South Korea by navigation to Beijing, China. Samsung Electronics was founded in begin of January of 1969. Unlike its main rival Apple, Samsung manufactures its own goods in manufacturing. Samsung is a visionary corporation that became a specialist in Surface Mount Technology (SMT), more specifically in smartphone process devices (Licari & Swanson, 2011). Currently, the company operates a variety of different product lines developed by its technology team, and its businesses are integrated into its South Korea matrix. Samsung has become a powerhouse in several different industries, with more than 300 thousand employees, 215 regional offices, over 50 distribution offices located in over 70 countries worldwide (Fast Facts, n.d). As Samsung is a giant in all of its actuation areas, this report will keep more focus on the principal Samsung sector, which is Samsung Electronics, more specifically in the smartphone industry.

INTRODUCTION

There are many factors driving growth in the smartphone market, including evolving customer preferences, technological advancement and the proliferation of internet-based content that may be conveniently accessed by smart devices. Following the recession in 2019, when demand for new handsets decreased due to a variety of reasons, emerged a positive projection to sales rise again in 2020. The introduction of 5G devices and services, as well as rising demand in developing economies, would fuel mobile market growth again in 2020. There is a range of variables on the international market that influence the demand and development of the smartphone industry, including economic and political influences (Pratap, 2019).

PESTLE ANALYSIS OF SAMSUNG

PESTLE is a famous efficient tool, which determines how the external factors may affect the activities of an organisation and make them more competitive in the market. This approach analyses the variables in a nation or market and explores how certain variables impact the consumer (Hall, 2020).

PESTLE analysis includes:

Political factors — Government and industry standards.

Economic factors — Marketplace conditions and financial considerations.

Socio-cultural factors — Social and cultural influences.

Technological factors — Considerations: databases and academic research.

Legal factors — Legal frameworks

Environmental factors.

Uber, Nike, Coca-Cola, Adidas and Apple are some of the giant corporations that adopted PESTLE (White, 2017). PESTLE analysis of Samsung provides visibility into the impact, performance and control of businesses also through the macro-environmental evaluation.

Political Factors — Samsung is a technology corporation that has to deal with the current that pre-existing regulatory legislation. If there is political turmoil, earnings may drop, and expenses should increase. In certain situations, volatility may lead to businesses removing their products from foreign markets. The implications may be catastrophic for the financial success of a company. Interestingly, Samsung has lost and has gained from the manipulation of political instability. Samsung supported two rival political groups in South Korea and faced terrible consequences after being associated as a supporter of the first female president of South Korea. Samsung turned over billions to the Uri Party during that year’s presidential in 2002 (Ji-young, 2010). Samsung has even given billions to the opposition side, the Grand National Side. Clearly, the South Korean public was not pleased with Samsung’s presence. In reality, the reputation of the company’s brand was undermined by this brazen deception. Samsung’s successor, Jay Y. Lee, was sentenced to five years in jail for bribery and fraud. This sentence is specifically linked to the former Korean President, Park Geun-hye’s political controversy. Considering that South Korean citizens are very disappointed and ashamed of acts from their former president, Samsung has not chosen a wise path, involving her scandals. Even though that has just prevented Samsung electronics from selling mobile in a few areas worldwide, such as Germany which had prohibited the Galaxy tablet from being offered in its market at that time, but nothing significant changed in western countries influences (Frue, 2019).

Economic Factors — This aspect is especially important for Samsung because the opening up of several markets in the developed world has made it possible for the organisation to extend its global footprint. However, this aspect is also a problem, considering that the global economic downturn has significantly eroded customer buying power in many developed markets, pushing Samsung to pursue lucrative projects in emerging markets. The primary spot to be evidenced is that the macroeconomic environment in which Samsung works globally is brimming with instability and volatility, causing the company to adjust its strategies accordingly and continuously. The impressive Samsung strategy of the business is that it has adapted very effectively by spreading into new and growing markets due to the consumer’s reduction of income in the industrialised sector. This is why Samsung has started an ambitious drive into developing markets, hoping to cover for missed revenue in the developed world. At the current economic crisis, caused by the coronavirus, the corporation will need to adapt itself again and develop strategies to mitigate the negative impact on its business.

Socio-cultural Factors — Samsung is the Chaebol of South Korea, this implies that it is a global family-owned corporation. Notwithstanding its global profile, the organisation tends to work naturally from the inside as a Korean corporation. Because of this, certain factors of multinational operations adjust according to local circumstances. Clearly stated, Samsung’s multinational corporation has had to operate locally in several emerging markets. In fact, Samsung needed to adapt its offerings and products to deal with quickly evolving customer preferences in specifics countries. Samsung works in a sector driven by consumer lifestyle preferences. In each region, socio-cultural factors differ. Therefore, it has to remodel accordingly (Pestle Analysis Contributor, 2015).

Technological Factors — Technology is the main characteristic of Samsung. Every product sold by them has high technology. Every couple of years, the organisation periodically upgrades current items. Regarding a critical production project error from Samsung Galaxy Note 7, the company watched their exploding cellphones after launching in 2016. The batteries inside Samsung Galaxy Note 7 were unreliable and quickly overheated, leading them to burst. This was a catastrophe, Samsung states over 95% of the requests in the United States were returned. It was an estimated recall of more than 2 million smartphones that would cost Samsung 5.3 billion (Lopez, 2017).

Legal Factors — Samsung has had to face substantial fines for the supposed copying of Apple’s iPad and iPhone, and this has forced the corporation to take a stance on market expectations and customer acceptance of its tactics. Samsung tried to wriggle out of the legal traps that it considers itself in the emerging economies through the new lawsuits (Worstall, 2012). However, Samsung lost most of the lawsuits to Apple (Vincent, 2015).

Environmental Factors — With the emergence of a conscientious customer who wishes its brands respect social and environmental, Samsung must be mindful of the need to ensure that its products pleasure the modern customer politically correct. In other words, it will ensure that it will not undermine the working standards or the salaries it provides to its employees who are involved in the development of the finished product (Juneja, n.d).

SAMSUNG FUNCTIONAL AREAS

The Samsung organisational structure is split into three primaries divisions:

IT & Mobile Communications (IM), Consumer Electronics (CE), and Device Solutions (DS). Given its products class divisions, Samsung’s organisational framework involves a hierarchical pattern. The corporate headquarters were the most impressive example of the structure, as part of the hierarchical architecture to maintain the cohesion and efficiency of the activities of the company. This aspect of the organisational framework includes the tactical centralisation of general strategy, as well as the lateral lines of command and control that convey strategic instructions from headquarters to everyday operations in its different divisions (Evans, 2019). Samsung operates in more than 74 countries across the world within those three divisions. Functional areas are a group of operations or processes with the purpose to realise one or more tasks. Functional areas are regarding specific departments and by type of business. (Sevilla, 2015). Samsung’s departments will differ depending on the type of business. Manufacturing, offices and sales point are some types of businesses which have their respective and relevant departments. Some of these departments are production, operations, human resources, quality control, innovation, administrative and management, marketing, customer service support, sales, accounting and finances, distribution, research and development, IT support, purchasing and legal department.

INTERNAL AND EXTERNAL SAMSUNG’S STAKEHOLDERS IN THEIR ROLES

Owners — Lee Kun-hee is the Samsung President, and also one of Samsung owners. He is the richest person in Korea and occupied the #75 position with 16.4 billion on the list of the wealthiest people in the world. Within his fortune includes his wife, Hong Ra-hee and his daughter fortunes. Lee is the third son of Samsung founder Lee Byung-Chull (Forbes, 2020). This business empire has other owners heirs from Samsung’s family beyond shareholders and investors.

Employees — Samsung has more than 309 thousand employees across the many offices, sales points and manufacturers. In this number is included, all of the employees currently contracted: Operators; Technicians; Analysts; Team Leader; Supervisors; Coordinators; Managers and Directors are most roles necessary to compose a factory.

Managers — Each manufacturing, sales point and office in each department have Samsung managers to manage the team, processes and procedures supporting the directors and stakeholders of various different levels.

Bord of Directors — Ki Nam Kim, Vice Chairman & CEO from Device Solutions, Hyun Suk Kim, President & CEO from Consumer Electronics and Dong Jin Koh, President & CEO from IT & Mobile Communications are leading the businesses in their respective areas. They have a high level of influence, governing the corporation and driving the businesses in terms of economics.

Investors — Most of them are private investors.

Clients — Operators of telecommunications such as Vodafone, Telstra and Optus in terms of Australia level. Most countries have different internal operators of telecommunications. The final customer is who buys mobile devices in Samsung’s Stores or from other operator’s store such as those mentioned above.

Government — Samsung operates in several countries across the world. The company must adapt itself, respecting and fulfilling laws and regulations from the government in each state that Samsung allocated.

Suppliers — Samsung Electronics has got over 2500 suppliers worldwide. Every supplier must pass through Samsung certification process (Samsung Editor, n.d). Some of the leading suppliers of Samsung Electronics are AAC Technologies Holdings Inc, Canon Inc, SMART Modular Technologies Inc, STMicroelectronics N.V, Tokyo Electron Ltd, BYD Co., Ltd, Hitachi Ltd, Tokyo Electron Ltd and Toshiba Corp (Samsung, n.d).

Competitors — The main Samsung’s Competitors in the smartphone market are Apple, Motorola, Xiaomi, LG, Sony, Oppo and Huawei (IDC Editor, 2020).

Community — Samsung launched the Environmental Declaration in 1992 and developed its Green Value Management Program in 2008. To generate more environmental interest was established new priorities in the Eco-Management 2020 programme in 2014. Samsung’s Philosophy cooperates with the sustainability of human life and the protection of the environment by carrying out market practices that value humanity and nature. Samsung’s Vision Provides Green Experience, Building a Sustainable World Providing consumers with modern eco-friendly solutions and pave the path to a better world for the global environment by creative and eco-conscious goods and technology (Fast Facts, n.d).

Interest of Stakeholders

Every stakeholder has an interest in his or her own area. As consumers who are betting on the product quality and value service, the workers require fair wages and benefits. The creditors or funders demand their financial returns while the society expects wellness, economic growth, social and ethical principles to be respected where the companies operate.

Influence of Stakeholders

External stakeholders may impact the performance of a company in several distinct areas in a long term, such as management of essential services, workforce, financing, products to be utilised, participation in policy implementation, such as strategic alliance in delivery markets, possession of information and expertise by inner relations, also interactions with investors. Internal stakeholders have a straight influence on the organisation which may be reached by the management or influence of strategic services on vendors, the leadership authority, the legal authority and participation in the execution of the strategy, objectives and goals.

The Nature and Degree of the Main Stakeholders’ Interests and Implications

Stakeholders are essential to corporations, their votes against or for a corporation will define the success or decline of that enterprise. Samsung divides its members into eight categories: Clients; Corporate Associates; Shareholders / Investors; Non-Governmental Organisations; Employees; Communities; Local Government and the Press. The organisation has built and strengthened a close partnership with its partners, pursuing each one with distinct strategies. In an innovative and comprehensive information knowledge management system, Samsung also meetings its partners to resolve crucial decisions and issues, such as the implementation and development of a health research centre and the improvement of management enforcement within the organisation. The organisation is in clear and transparent contact with its staff and clients in order to build a more robust consumer experience environment by monitoring and optimising client feedback surveys. The business frequently engages in government initiatives and strategies; an ambitious strategy has helped to establish an energy efficiency programme that reduces electricity use by 10%. Knowledge control has a strong effect on clients such as investors, consumers and suppliers. Suppliers should provide fresh concepts and perspectives about how to develop and boost development and operations. With the aid of information management, consumers should be able to recognise and assess the efficiency and characteristics of electronic products. Through the assistance of this innovative knowledge management system, clients and staff are respected and valued. Throughout the internal innovative knowledge management system aims to provide the correct path to the different stakeholders of the corporation. Valuable stakeholder advantages include constructive involvement, an outstanding appreciation of issues and demands, collaborative decision-making and better communication. Those advantages are achieved by an advanced knowledge management system, as this method allows to navigate the expertise and intelligence of the corporation as it is required (Abc Editor, 2019).

Table. The Level of the Main Stakeholders’ Influence

Stakeholder Matrix

A standard method utilised for stakeholder analysis is stakeholder visualisation into the matrix, such as an influence/significance matrix, which aims to position stakeholders according to their value and degree of significance in a given entity or initiative.

Figure. Stakeholder Matrix

STAKEHOLDERS DISSIMILARITIES OF SAMSUNG AND APPLE

Apple’s Background

Apple is the main Samsung rival in the smartphone industry. Steve Wozniak founded Apple in 1977 as a producer of desktop computers, software, operational system and electronic items. Apple became the first $1 trillion organisation in the market capitalisation history in 2018. Currently, the App Store and Apple Music are leading Apple’s services. The analyst of Piper Jaffray, Michael Olson reported that Apple had grown its service sector to such a degree that it was worth $502 billion. Through using an algorithm that assesses the importance of each business segment and then incorporates it for an aggregate valuation calculation. Around the same period, Olson claimed that Apple’s hardware products company was worth just $398.8 billion. That will make Apple’s technology company more profitable than the product sector. The main of Apple’s products are the iPhone 11, Mac and iPad (Delventhal, 2020).

As Samsung and Apple are big corporations and operate in the same market, there are more similarities than dissimilarities between companies and stakeholders interests.

Employees — While Samsung has 309.630 employees across the world, Apple has 132.000 worldwide (Apple AAPL, 2020). Samsung manufactures its own products, while Apple has been outsourcing its production. It is one of the reasons that Samsung has many more employees contracted than Apple.

Outsourcing — Foxconn is a Chinese company specialised in SMT mobile processes devices, which has manufactured iPhones, Macs and iPads across the world to Apple (Foxconn Group Profile, n.d). There are advantages and disadvantages to outsourcing concepts. Apple has expensive expenses with Foxconn production, also a higher level of fails and rework in their processes, however, Samsung spends less and has more quality, managing and controlling their processes by themselves. Currently, Foxconn has interrupted part of its production to making surgical masks due to the Coronavirus crisis (Davies, 2020).

Clients and Competitors — They are the same as Samsung in the smartphone market, being Samsung the main rival of Apple.

Processes — Apple adopted a different strategy for its production, where it aims to contract a outsource company to assume risks and responsibilities about its manufacturing. Apple has more quality in projects, product technology and software, however, Samsung has more quality and better manufacturing processes compared to Apple, because the South Korean corporation control, monitoring and managing closer within its house their processes while Apple contracts Foxconn to that.

Technology — Within each new generation launched of IOS and Android, the main experts has analysed which one is better. Although Android to be more intuitive and has almost the same quality, iPhone’s IOS has better performance, and security, therefore IOS has been considered better than Android so far (Goldman, Sung, & Cardet, 2020).

Coronavirus Crisis — COVID 19 is a mutation from the oldest coronavirus. It started in November of 2019 in China Wuhan city. China tried to combat the virus, however, they did not obtain great success. Then, they tried to hide information and adopted a quarantine in Wuhan. Since then, the virus has spread across the world. The world copied China way to deal with the virus, decreeing quarantine and closing its airports. Through this, the economy has been suffered an unexpected catastrophic impact. Many small companies bankrupted, and many others are trying to survive the crisis. Recently, Samsung and Apple have been forced to shut down many of their factories after workers to be infected by the virus (Cuthbertson, 2020).

CONCLUSION

Samsung is a successful giant corporation, which has a solid business structure and effective functional areas. Samsung’s processes and products have a high level of technology and quality. It is an enterprise that has been investing in innovation and enhancing its business continuously. Currently, Samsung has remained the second place in the smartphone industry, losing only to another giant Apple. Despite Samsung has excellent stakeholder management, communication strategy, Samsung suffered massive impacts on its businesses due to mistakes from stakeholders. Some of those problems as the unsuitable involvement with politicians in South Korea and the product project error of Galaxy Note 7, which caused terrible impairments. Samsung, as a leading corporation, probably learned through its mistakes and will ensure those type of problems do not happen anymore. Although Apple and Samsung have different strategies for their respective businesses, both have been achieved similar results in terms of enterprise success. Despite there was a sales projection increase in the smartphone industry in 2020, this expectation will not be reached, and it will decrease drastically more due to the current coronavirus crisis. Samsung, as Apple will have to deal with this crisis to reduce the impact and losses. Although the crisis caused by a virus is an atypical external factor, it is important to highlight that PESTLE analysis shows Samsung has vast experience facing critic external problems.

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APPENDICES

SWOT analysis of Samsung (Jurevicius, 2020).