ACCOUNTANCY PROJECT

TOPIC: cover the company

profile, assessment of financial
statements, and specific report analysis.
SAMSUNG ELECTRONICS Co., Ltd.
Financial statements
Meaning:

Financial Statements are the collective name given to Income Statement and Positional Statement of
an enterprise which show the financial position of business concern in an organized manner. We
know that all business transactions are first recorded in the books of original entries and thereafter
posted to relevant ledger accounts. For checking the arithmetical accuracy of books of accounts, a
Trial Balance is prepared.Trial balance is a statement prepared as a first step before preparing
financial statements of an enterprise which record all debit balances in the debit column and all
credit balances in credit column. To find out the profit earned or loss sustained by the firm during a
given period of time and its financial position at a given point of time is one of the purposes of
accounting. For achieving this objective, financial statements are prepared by the business
enterprise, which include income statement and positional statement. These two basic financial
statements viz:

(i) Income Statement, i.e., Trading and Profit & Loss Account and

(ii) Positional Statement, i.e., Balance Sheet portrays the operational efficiency and solvency of any
business enterprise.

The income statement shows the net result of the business operations during an accounting period
and positional statement, a statement of assets and liabilities, shows the final position of the
business enterprise on a particular date and time. So, we can also say that the last step of the
accounting cycle is the preparation of financial statements.

Income statement is another term used for Trading and Profit & Loss Account. It determines the
profit earned or loss sustained by the business enterprise during a period of time. In large business
organization, usually one account i.e., Trading and Profit & Loss Account is prepared for knowing
gross profit, operating profit and net profit.

On the other hand, in small size organizations, this account is divided into two parts i.e. Trading
Account and Profit and Loss Account. To know the gross profit, Trading Account is prepared and to
find out the operating profit and net profit, Profit and Loss Account is prepared. Positional statement
is another term used for Balance Sheet. The position of assets and liabilities of the business at a
particular time is determined by Balance Sheet.
Objective and Importance:

(i) Knowing Profitability of Business:

Financial statements are required to ascertain whether the enterprise is earning adequate profit and
to know whether the profits have increased or decreased as compared to the previous year(s), so
that corrective steps can be taken well in advance.

(ii) Knowing the Solvency of the Business:

Financial statements help to analyse the position of the business as regards to the capacity of the
entity to repay its short as well as long term liabilities.

(iii) Judging the Growth of the Business: Through comparison of data of two or more years of
business entity, we can draw a meaningful conclusion as regard to growth of the business. For
example, increase in sales with simultaneous increase in the profits of the business, indicates a
healthy sign for the growth of the business.

(iv) Judging Financial Strength of Business:

Financial statements help the entity in determining solvency of the business and help to answer
various aspects viz., whether it is capable to purchase assets from its own resources and/or whether
the entity can repay its outside liabilities as and when they become due.

(v) Making Comparison and Selection of Appropriate Policy:

To make a comparative study of the profitability of the entity with other entities engaged in the
same trade, financial statements help the management to adopt sound business policy by making
intra firm comparison.

(vi) Forecasting and Preparing Budgets:

Financial statement provides information regarding the weak-spots of the business so that the
management can take corrective measures to remove these short comings. Financial statements
help the management to make forecast and prepare budgets.

(vii) Communicating with Different Parties: Financial statements are prepared by the entities to
communicate with different parties about their financial position. Hence, it can be concluded that
understanding the basic financial statements is a necessary step towards the successful
management of a commercial enterprise.

Limitations of Financial Statements:

(i) Manipulation or Window Dressing:

Some business enterprises resort to manipulate the information contained in the financial
statements so as to cover up their bad or weak financial position. Thus, the analysis based on such
financial statements may be misleading due to window dressing.

(ii) Use of Diverse Procedures:

There may be more than one way of treating a particular item and when two different business
enterprises adopt different accounting policies, it becomes very difficult to make a comparison
between such enterprises. For example, depreciation can be charged under straight line method or
written down value method. However, results provided by comparing the financial statements of
such business enterprises would be misleading.

(iii) Qualitative Aspect Ignored:

The financial statements incorporate the information which can be expressed in monetary terms.
Thus, they fail to assimilate the transactions which cannot be converted into monetary terms. For
example, a conflict between the marketing manager and sales manager cannot be recorded in the
books of accounts due to its non-monetary nature, but it will certainly affect the functioning of the
activities adversely and consequently, the profits may suffer.

(iv) Historical: Financial statements are historical in nature as they record past events and facts. Due
to continuous changes in the demand of the product, policies of the firm or government etc, analysis
based on past information does not serve any useful purpose and gives only postmortem report.

(v) Price Level Changes:

Figures contained in financial statements do not show the effects of changes in the price level, i.e.
price index in one year may differ from price index in other years. As a result, misleading picture may
be obtained by making a comparison of figures of past year with current year figures.

(vi) Subjectivity & Personal Bias:

Conclusions drawn from the analysis of figures given in financial statements depend upon the
personal ability and knowledge of an analyst. For example, the term ‘Net profit’ may be interpreted
by an analyst as net profit before tax, while another analyst may take it as net profit after tax.

(vii) Lack of Regular Data/Information:

Analysis of financial statements of a single year has limited uses. The analysis assumes importance
only when compared with financial statements, relating to different years or different firm.

Ratio Analysis
Meaning of Ratio Analysis

Now, we have previously learned what ratios are. They are a comparison of two numbers with
respect to each other. Similarly, in finance, ratios are a correlation between two numbers, or rather
two accounts. So two numbers derived from the financial statement are compared to give us a more
clear understanding of them. This is an accounting ratio.Let us take an example. The income for the
year from operations is let us say 1,00,000/- for a given year. The Purchases and other direct
expenses cost around 75,000/-. So the Gross Profit of the year is 25,000/-. Now it can be said that
the Gross Profit is 25% of the Operations Revenue. We calculate this as

G.P. Ratio = GPSales/Revenue ×100

G.P.Ratio = 25,0001,00,000 ×100

G.P. Ratio = 25%

One factor to be kept in mind is that ratio analysis is used only to compare numbers that make sense
and give us a better understanding of the financial statement. Comparing random financial accounts
should be avoided.

Objectives of Ratio Analysis

Interpreting the financial statements and other financial data is essential for all stakeholders of an
entity. Ratio Analysis hence becomes a vital tool for financial analysis and financial management. Let
us take a look at some objectives that ratio analysis fulfils. 1] Measure of Profitability

Profit is the ultimate aim of every organization. So if I say that ABC firm earned a profit of 5 lakhs last
year, how will you determine if that is a good or bad figure? Context is required to measure
profitability, which is provided by ratio analysis. Gross Profit Ratios, Net Profit Ratio, Expense ratio
etc provide a measure of the profitability of a firm. The management can use such ratios to find out
problem areas and improve upon them.

2] Evaluation of Operational Efficiency

Certain ratios highlight the degree of efficiency of a company in the management of its assets and
other resources. It is important that assets and financial resources be allocated and used efficiently
to avoid unnecessary expenses. Turnover Ratios and Efficiency Ratios will point out any
mismanagement of assets.

3] Ensure Suitable Liquidity

Every firm has to ensure that some of its assets are liquid, in case it requires cash immediately. So
the liquidity of a firm is measured by ratios such as Current ratio and Quick Ratio. These help a firm
maintain the required level of short-term solvency.

4] Overall Financial Strength

There are some ratios that help determine the firm’s long-term solvency. They help determine if
there is a strain on the assets of a firm or if the firm is over-leveraged. The management will need to
quickly rectify the situation to avoid liquidation in the future. Examples of such ratios are Debt-
Equity Ratio, Leverage ratios etc.

5] Comparison

The organizations’ ratios must be compared to the industry standards to get a better understanding
of its financial health and fiscal position. The management can take corrective action if the standards
of the market are not met by the company. The ratios can also be compared to the previous years’
ratio’s to see the progress of the company. This is known as trend analysis.

Advantages of Ratio Analysis

When employed correctly, ratio analysis throws light on many problems of the firm and also
highlights some positives. Ratios are essentially whistleblowers, they draw the managements
attention towards issues needing attention. Let us take a look at some advantages of ratio analysis.

Ratio analysis will help validate or disprove the financing, investment and operating decisions of the
firm. They summarize the financial statement into comparative figures, thus helping the
management to compare and evaluate the financial position of the firm and the results of their
decisions.

It simplifies complex accounting statements and financial data into simple ratios of operating
efficiency, financial efficiency, solvency, long-term positions etc.

Ratio analysis help identify problem areas and bring the attention of the management to such areas.
Some of the information is lost in the complex accounting statements, and ratios will help pinpoint
such problems.

Allows the company to conduct comparisons with other firms, industry standards, intra-firm
comparisons etc. This will help the organization better understand its fiscal position in the economy.

Limitations of Ratio Analysis

While ratios are very important tools of financial analysis, they d have some limitations, such as

The firm can make some year-end changes to their financial statements, to improve their ratios.
Then the ratios end up being nothing but window dressing.

Ratios ignore the price level changes due to inflation. Many ratios are calculated using historical
costs, and they overlook the changes in price level between the periods. This does not reflect the
correct financial situation.

Accounting ratios completely ignore the qualitative aspects of the firm. They only take into
consideration the monetary aspects (quantitative)

There are no standard definitions of the ratios. So firms may be using different formulas for the
ratios. One such example is Current Ratio, where some firms take into consideration all current
liabilities but others ignore bank overdrafts from current liabilities while calculating current ratio

And finally, accounting ratios do not resolve any financial problems of the company. They are a
means to the end, not the actual solution.

Types of Financial Analysis

The most common types of financial analysis are:

Vertical

Horizontal

Leverage

Growth

Profitability

Liquidity

Efficiency

Cash Flow

Rates of Return

Valuation
Scenario & Sensitivity

Variance

Vertical Analysis

This type of financial analysis involves looking at various components of the income statement and
dividing them by revenue to express them as a percentage. For this exercise to be most effective, the
results should be benchmarked against other companies in the same industry to see how well the
company is performing. This process is also sometimes called a common-sized income statement, as
it allows an analyst to compare companies of different sizes by evaluating their margins instead of
their dollar

Horizontal Analysis

Horizontal analysis involves taking several years of financial data and comparing them to each other
to determine a growth rate. This will help an analyst determine if a company is growing or declining,
and identify important trends.When building financial models, there will typically be at least three
years of historical financial information and five years of forecasted information. This provides 8+
years of data to perform a meaningful trend analysis, which can be benchmarked against other
companies in the same industry.

Leverage Analysis

Leverage ratios are one of the most common methods analysts use to evaluate company
performance. A single financial metric, like total debt, may not be that insightful on its own, so it’s
helpful to compare it to a company’s total equity to get a full picture of the capital structure. The
result is the debt/equity ratio.

Common examples of ratios include:

Debt/equity

Debt/EBITDA

EBIT/interest (interest coverage)

Dupont analysis – a combination of ratios, often referred to as the pyramid of ratios, including
leverage and liquidity analysis

Growth Rates

Analyzing historical growth rates and projecting future ones are a big part of any financial analyst’s
job. Common examples of analyzing growth include:

Year-over-year (YoY)

Regression analysis

Bottom-up analysis (starting with individual drivers of revenue in the business)

Top-down analysis (starting with market size and market share)

Profitability Analysis

Profitability is a type of income statement analysis where an analyst assesses how attractive the
economics of a business are. Common examples of profitability measures include:

Gross margin

EBITDA margin

EBIT margin

Net profit margin

Liquidity Analysis

This is a type of financial analysis that focuses on the balance sheet, particularly, a company’s ability
to meet short-term obligations (those due in less than a year). Common examples of liquidity
analysis include:

Current ratio

Acid test

Cash ratio

Net working capital

Efficiency Analysis

Efficiency ratios are an essential part of any robust financial analysis. These ratios look at how well a
company manages its assets and uses them to generate revenue and cash flow.

Common efficiency ratios include:

Asset turnover ratio

Fixed asset turnover ratio

Cash conversion ratio

Inventory turnover ratio

Asset Turnover Ratio Formula

Cash Flow

As they say in finance, cash is king, and, thus, a big emphasis is placed on a company’s ability to
generate cash flow. Analysts across a wide range of finance careers spend a great deal of time
looking at companies’ cash flow profiles.

The Statement of Cash Flows is a great place to get started, including looking at each of the three
main sections: operating activities, investing activities, and financing activities

Common examples of cash flow analysis include:

Operating Cash Flow (OCF)

Free Cash Flow (FCF)

Free Cash Flow to the Firm (FCFF)

Free Cash Flow to Equity (FCFE)

Rates of Return

At the end of the day, investors, lenders, and finance professionals, in general, are focused on what
type of risk-adjusted rate of return they can earn on their money. As such, assessing rates of return
on investment (ROI) is critical in the industry.

Common examples of rates of return measures include:

Return on Equity (ROE)

Return on Assets (ROA)

Return on invested capital (ROIC)

Dividend Yield

Capital Gain

Accounting rate of return (ARR)

Internal Rate of Return (IRR)

internal rate of return in finance

Valuation Analysis

The process of estimating what a business is worth is a major component of financial analysis, and
professionals in the industry spend a great deal of time building financial models in Excel. The value
of a business can be assessed in many different ways, and analysts need to use a combination of
methods to arrive at a reasonable estimation.

proach)
Scenario & Sensitivity Analysis

Another component of financial modeling and valuation is performing scenario and sensitivity
analysis as a way of measuring risk. Since the task of building a model to value a company is an
attempt to predict the future, it is inherently very uncertain.Building scenarios and performing
sensitivity analysis can help determine what the worst-case or best-case future for a company could
look like. Managers of businesses working in financial planning and analysis (FP&A) will often
prepare these scenarios to help a company prepare its budgets and forecasts.Investment analysts
will look at how sensitive the value of a company is as changes in assumptions flow through the
model using Goal Seek and Data Tables.

Variance Analysis

Variance analysis is the process of comparing actual results to a budget or forecast. It is a very
important part of the internal planning and budgeting process at an operating company, particularly
for professionals working in the accounting and finance departments.The process typically involves
looking at whether a variance was favorable or unfavorable and then breaking it down to determine
what the root cause of it was. For example, a company had a budget of $2.5 million of revenue and
had actual results of $2.6 million. This results in a $0.1 million favorable variance, which was due to
higher than expected volumes (as opposed to higher prices).

Ratio Analysis
Meaning of Ratio Analysis

Now, we have previously learned what ratios are. They are a comparison of two numbers with
respect to each other. Similarly, in finance, ratios are a correlation between two numbers, or rather
two accounts. So two numbers derived from the financial statement are compared to give us a more
clear understanding of them. This is an accounting ratio. Let us take an example. The income for the
year from operations is let us say 1,00,000/- for a given year. The Purchases and other direct
expenses cost around 75,000/-. So the Gross Profit of the year is 25,000/-. Now it can be said that
the Gross Profit is 25% of the Operations Revenue. We calculate this as

G.P. Ratio = GPSales/Revenue ×100

G.P.Ratio = 25,0001,00,000 ×100

G.P. Ratio = 25%

One factor to be kept in mind is that ratio analysis is used only to compare numbers that make sense
and give us a better understanding of the financial statement. Comparing random financial accounts
should be avoided.

Objectives of Ratio Analysis

Interpreting the financial statements and other financial data is essential for all stakeholders of an
entity. Ratio Analysis hence becomes a vital tool for financial analysis and financial management. Let
us take a look at some objectives that ratio analysis fulfils.
1] Measure of Profitability

Profit is the ultimate aim of every organization. So if I say that ABC firm earned a profit of 5 lakhs last
year, how will you determine if that is a good or bad figure? Context is required to measure
profitability, which is provided by ratio analysis. Gross Profit Ratios, Net Profit Ratio, Expense ratio
etc provide a measure of the profitability of a firm. The management can use such ratios to find out
problem areas and improve upon them.

2] Evaluation of Operational Efficiency

Certain ratios highlight the degree of efficiency of a company in the management of its assets and
other resources. It is important that assets and financial resources be allocated and used efficiently
to avoid unnecessary expenses. Turnover Ratios and Efficiency Ratios will point out any
mismanagement of assets.

3] Ensure Suitable Liquidity

Every firm has to ensure that some of its assets are liquid, in case it requires cash immediately. So
the liquidity of a firm is measured by ratios such as Current ratio and Quick Ratio. These help a firm
maintain the required level of short-term solvency.

4] Overall Financial Strength

There are some ratios that help determine the firm’s long-term solvency. They help determine if
there is a strain on the assets of a firm or if the firm is over-leveraged. The management will need to
quickly rectify the situation to avoid liquidation in the future. Examples of such ratios are Debt-
Equity Ratio, Leverage ratios etc.

5] Comparison

The organizations’ ratios must be compared to the industry standards to get a better understanding
of its financial health and fiscal position. The management can take corrective action if the standards
of the market are not met by the company. The ratios can also be compared to the previous years’
ratio’s to see the progress of the company. This is known as trend analysis.

Advantages of Ratio Analysis

When employed correctly, ratio analysis throws light on many problems of the firm and also
highlights some positives. Ratios are essentially whistleblowers, they draw the management
attention towards issues needing attention. Let us take a look at some advantages of ratio analysis.
Ratio analysis will help validate or disprove the financing, investment and operating decisions of the
firm. They summarize the financial statement into comparative figures, thus helping the
management to compare and evaluate the financial position of the firm and the results of their
decisions. It simplifies complex accounting statements and financial data into simple ratios of
operating efficiency, financial efficiency, solvency, long-term positions etc. Ratio analysis help
identify problem areas and bring the attention of the management to such areas. Some of the
information is lost in the complex accounting statements, and ratios will help pinpoint such
problems.

Allows the company to conduct comparisons with other firms, industry standards, intra-firm
comparisons etc. This will help the organization better understand its fiscal position in the economy.
Limitations of Ratio Analysis

While ratios are very important tools of financial analysis, they have some limitations, such as

 The firm can make some year-end changes to their financial statements, to improve their
ratios. Then the ratios end up being nothing but window dressing.
 Ratios ignore the price level changes due to inflation. Many ratios are calculated using
historical costs, and they overlook the changes in price level between the periods. This does
not reflect the correct financial situation.
 Accounting ratios completely ignore the qualitative aspects of the firm. They only take into
consideration the monetary aspects (quantitative)
 There are no standard definitions of the ratios. So firms may be using different formulas for
the ratios. One such example is Current Ratio, where some firms take into consideration all
current liabilities but others ignore bank overdrafts from current liabilities while calculating
current ratio and finally, accounting ratios do not resolve any financial problems of the
company. They are a means to the end, not the actual solution.

Businesses Overview
1. Overview
This report includes forward-looking statements that relate to future events and can be generally
identified by phrases containing words such as “believes,” “expects,” “anticipates,” “foresees,”
“forecasts,” “estimates” or other words of similar meaning. These forward-looking statements are
not guarantees of future performance and may involve known and unknown risks, uncertainties and
other factors that may affect the Company’s actual results, performance, achievements or financial
position, making them materially different from the actual future results, performance,
achievements or financial position expressed or implied by these forward-looking statements.
Uncertain events that could positively or negatively affect the Company’s management condition
and financial performance include:

• Trends of financial markets domestically and abroad, including changes in exchange rates and
interest rates

• The Company’s strategic decision making, including disposals and purchases of businesses

• Unexpected sudden changes in core businesses such as CE, IM, Semiconductor, DP, and Harman

• Other changes domestically and abroad that can affect management condition and financial
performance

The Company assumes no obligation to revise or update this report to reflect risks or uncertainties
that arise after the reporting period.

A. Business overview, by division

In addition to our headquarters in Korea, Samsung Electronics is comprised of 240 subsidiaries
across the world responsible for sales and production. There are nine 9 regional headquarters for CE
and IM Divisions, 5 regional headquarters for the DS Division, and Harman’s subsidiaries .The
Company’s business divisions are organized in a two-pronged framework consisting of set (brand
products) and component businesses. The set business is comprised of the CE and IM Divisions, and
the component business consists of the Semiconductor and DP Business Units. The CE Division is
responsible for the production and sales of TVs, monitors, refrigerators, and washing machines; and
the IM Division focuses on the production and sales of HHPs, which includes smartphones, as well as
network systems, and computers. The DS Division comprises the manufactures and sells DRAMs,
mobile APs, and other semiconductor-related products, and the DP Business, which manufactures
and sells OLED and TFT-LCD display panels for mobile devices, TVs, monitors, and laptops. The
Harman Division (acquired in 2017) manufactures and sells products such as Head units,
infotainment systems, telematics, and speakers. The Company maintains its corporate headquarters
and 28 consolidated subsidiaries in Korea.

Industry overview
Since the first public demonstration of a true television system in 1926 and later mass production of
color TVs, technological developments have led to the creation of products such as the Trinitron CRT
(1967) and flat CRT (1996). As the penetration rate in major countries reached over 90%, the CRT TV
business stagnated. The industry regained strong growth momentum following the launch of flat
panel TVs (“FPTVs”) like LCDs and PDPs, especially with the expansion of digital broadcasting (UK/US
1998~). FPTVs replaced CRT sets on the back of their enhanced design, picture quality, etc.,
combined with a sharp decline in prices. The year 2010 saw the launch of 3D TVs, and the rise of
internet video services along with increased consumer interest in smart devices from 2011 to 2012
led to the birth of the smart TV market. The evolution continued with the launches of UHD TVs,
innovative products boasting significantly enhanced resolution and picture quality, a new form
factor with Curved TVs, followed by the commercialization of Quantum Dot TVs.

 Market condition
The market trend toward large, high-resolution screens is accelerating due to intensified competition
between manufacturers. Accordingly, market shares of major players with high-quality products and
brand power are rising. In addition, as consumer demand for high-resolution screens and slim
designs increase, LED TVs, with eco-friendly LED back light units—which increase brightness,
contrast, and energy efficiency—have become the mainstream in the market. In 2017, overall TV
demand was 215.1 million units. By product, LCD-TVs sold 210 million units, for a market share of
over 99%. In 2018, overall TV demand increased 2.9% compared to the previous year, hovering
around 221 million units.

Business condition
We have maintained the top position in the overall TV market for fourteen straight years since
claiming the number one spot in 2006. In 2017, the Company created a new category by releasing
QLED TVs, offering accurate color expression regardless of brightness and allowing viewers to enjoy
unsurpassed image quality. Furthermore, collaborating with renowned artists and galleries, we
introduced The Frame TV, a product that exhibits famous art or pictures as well as personal images,
transforming any living space into an aesthetically pleasing gallery. Moreover, our concept of ‘Screen
Everywhere’ unlocks placement opportunities for displays.
Samsung’s Strengths – Internal Strategic Factors
Dominates the Smartphone Market – Samsung has dominated the smartphone market for years.
According to Gartner, in Q1 of 2020, Samsung has maintained the No. 1 spot globally with a 18.5%
market share, where as Apple is at 13.7% market share.

Research and Development – The foundation of Samsung has always been on Innovative research
and development. Expenditure in these departments resulted in the company having a wide range
of product portfolio among its competitors. These include tablet, camcorder, mobile phone, camera,
TV/video/audio, Memory Cards, PC, and other accessories. They have 34 R&D (research and
development) centers operating worldwide.

Award Winning Brand – Samsung’s position as a pioneer for innovation is backed with credibility.
Samsung has won many awards for its offerings. Samsung has been awarded the CES (Consumer
Electronics Show) owing to its designs and products for 14 consecutive years. It went on to receive
36 CES awards in 2018 along with 400 more awards within a period of 14 years. It also secured 7
wins at the (IDEA) International Design Excellence Awards.

Ecologically Friendly Innovations – Samsung has enhanced its brand reputation through its
environmentally friendly innovations. It secured its ranking at 9th position in the Top 30 Tech and
Telecom companies of the EPA’s 2016 Green Power Partner list. It also received the Environmental
Protection Agency’s (EPA) annual ENERGY STAR Partner of the Year Excellence Award for five
consecutive years. Other companies do not share this achievement and hence increases Samsung’s
appeal across all business lines.

Stronghold in the Asian Markets – Samsung retains a stronghold in the Asian markets, particularly
India and China. Both India’s and China’s business markets are growing substantially which is why
Samsung’s Weaknesses

Heavily dependent on the American Markets – It is estimated that both Apple and Samsung sold at
least 70.8% of smartphones in the USA. While Samsung has diversified its resources and expanded
its operations in Asia, it is still heavily dependent on the American markets. The American economy
is very unpredictable and another recession could put Samsung’s revenues in jeopardy and can
damage its operational resources. That’s why Samsung needs to involve itself into the Asian and
European markets to ensure sustainability and avoid potential failures if the US economy ever
collapses.

Decline in Smartphone Sales – Samsung has been experiencing a decline in smartphone sales since
2017. A similar trend was seen in China due to the price sensitivity of the Chinese market. They
dump a lot of those products in the Indian market at a lower cost which harms the Samsung

Sale Samsung has tried to shift more focus in India, but that strategy did not produce substantial
results for the company.

Product Failures – Any product that threatens the life of consumers erodes confidence and trust in
the company. Samsung has delivered several faulty products to the market from the exploding
Samsung Galaxy A20e to a faulty foldable phone.

Dependence on Low-end Smartphones – A large portion of Samsung revenues come from low-end
smartphone sales. Recent events have impacted this segment more than the high-end smartphone
segment, which played a role in Samsung’s decline from 71 million smartphone sales and 19.1% of
market share in Q1 2019 to 55 million smartphones sold in Q1 2020 with 18.5% of market share (as
per Gartner Report).
Hereditary Leadership – Since its founding, Samsung has always been under the leadership of the
family for three generations. Even though keeping the leadership within the family has offered
Samsung immense stability, the company can stagnate due to a lack of fresh ideas. After being
dogged by several scandals, Samsung heir Jay Lee has vowed to end dynastic succession.

Bribery Scandal – In 2015, Samsung’s reputation was tainted by the revelation that the president of
the company bribed the government of South Korea to facilitate a merger. He was found guilty and
jailed for about one year until Feb. 2018, which eroded trust bestowed by consumers in South Korea
and the world over.amsung has taken advantage of the opportunity and incentivize in these
countries accordingly.

Conclusion
Through the SWOT analysis of Samsung, it is clear that the company is still a global leader in chip
making and smartphone brands. It has always sustained sufficient revenue and profits as it
progresses into the future. The primary challenge it has to face is cutting back on its overreliance on
the American markets and explore the potential to operate in other markets. It needs to focus
mainly on the Asian continent that is developing at an exceeding rate. Its limited customer base in
the US is not reliable enough and may lead to limited revenue and profits. That can become a
persistent issue for the company. They need to expand internationally and incorporate a new
consumer demographic to thrive.