This project talks about the history of Samsung, pestle analysis, port

BUSINESS ENVIRONMENT
SAMSUNG (USA )

Aravindh
STUDENT MISIS NUMBER -M00914380
CONTENTS
1 INTRODUCTION...................................................................................................................................2
1.1 History of Samsung......................................................................................................................2
1.2 Samsung’s mission.......................................................................................................................2
2 PESTEL ANALYSIS.................................................................................................................................2
2.1 Political factor..............................................................................................................................2
2.2 Economic factor...........................................................................................................................4
2.3 Social factors................................................................................................................................5
2.4 Technology factor........................................................................................................................6
2.5 Environmental factor...................................................................................................................7
2.6 Legal factors.................................................................................................................................7
3 PORTER’S 5 FORCES.............................................................................................................................8
3.1 Rivalry among existing competitors.............................................................................................8
3.1.1 Number of competitors.......................................................................................................8
3.2 The threat of substitute product.................................................................................................9
3.2.1 Buyer propensity to consume..............................................................................................9
3.3 Bargaining power of suppliers.....................................................................................................9
3.4 The threat of new entrants........................................................................................................10
4 ANSOFF MATRIX................................................................................................................................10
4.1 Market development strategy...................................................................................................10
4.2 Market penetration strategy.....................................................................................................10
5 Conclusion.........................................................................................................................................11

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1 INTRODUCTION

1.1 HISTORY OF SAMSUNG

Burris(2020) Samsung is one of the largest south Korean companies in the world. it has
several subsidiaries. The focus of Samsung is producing diversified electronics such as
TV, air conditioner, mobile phone, and smartwatches. Initially, Samsung began as a
grocery store with 40 employees selling goods and services in South Korea to its
consumers. After the war broke out, Samsung entered the electronic industry mainly
focusing on producing semiconductors and electronic devices in 1960.

1.2 SAMSUNG’S MISSION

Martin (2019) Samsung’s mission is “inspiring the world with innovative technology
products and designs that will provide the best life to the people and contribute to the
social propensity by creating a new future.

SAMSUNG VISION
Samsung newsroom (2022)To build innovative products and services which will
contribute to the society .

2 PESTEL ANALYSIS

2.1 POLITICAL FACTOR

This academic report talks about chip shortages due to supply and demand issues. How
Samsung smartphone sales are affected by the Russian-Ukraine war and covid 19. In
addition to long-standing problems in the industry, such as insufficient capacity in
semiconductor factories, the COVID-19 pandemic has brought unprecedented
challenges.
Mc Kinsey company (2021) The Covid-19 pandemic began to disrupt chip manufacturing
in the first half of 2020, as widespread restrictions around the world caused many
chipmakers to stop production. The pandemic has also forced lots of people to work
from home, spurring demand for smartphones and putting pressure on chip
manufacturing.
Thorbecke (2022) Supplies of neon and palladium are essential elements for chip
production. The US semiconductor uses 90% of its neon from Ukraine and 30% of its
palladium from Russia. The impact of war caused disruptions and affected the
semiconductor supply chain. Which threatens America politically.

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Chance (2022) semiconductors are integrated circuits which are made from gallium
arsenide which is used in electronic devices. The reliance on foreign production
capabilities has raised concerns among politicians in the US, particularly given the rising
tensions between China and Taiwan. American governments are attempting to reverse
this trend by mobilizing tens of billions of dollars in public and private investments and
introducing new legislation.
White House (2022) The chip act was introduced in 2022 by Biden and Kamala Harris.
The science and chip Act provides $52.7 billion for U.S. semiconductor research,
development, manufacturing, and workforce development. This includes $39 billion in
manufacturing incentives.

Political disruption caused 32% drop in quarterly operating earnings and a downturn
slashed demand for electronic devices operations and the supply chain, leading to
business loss of revenue.
Counterpoint (2022) Due to Political crises and post covid 19 demand and supply
created a shortage of chips causing Samsung's market share to fall from 34%(Q3 2021)
to 22%( Q4 2021 ) in the USA smartphone markets according to the report by
Counterpoint Research bringing some bad news for smartphone brands, Samsung is
bracing for extended political turmoil, as the war in Ukraine and COVID-19 lockdowns
increase risks for its businesses, even as net profit fell by 12%.
Therefore Samsung must not rely on one region manufacturing sector but focus on
multiple manufacturing units across the region.

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2.2 ECONOMIC FACTOR
This academic report on economic factors is going to focus on the rise of semiconductor
imports due to excess demand post covid 19 and how the Samsung galaxy new series
launch got delayed due to a chip shortage.

Source – industry trade balance (2022)

IBIS (2022) Experts believe that the import of semiconductors is expected to satisfy
63.8% of domestic demand in the year 2022. It demonstrates how powerful the import
of semiconductors is in the next coming year. The rise in imports is forecasted to rise to
an annualized rate of 1.9% to 56.8 billion dollars over the next five years till 2022.
supported by a 23.7% increase in imports in 2021 amid strong domestic demand for
industrial products. Due to the ongoing shortage of semiconductors, the value of imports
is going to be raised. Majority of the electronics company imported from Taiwan (18.8%)
and South Korea 7.2%.
IBIS (2022) The price of semiconductors is expected to rise by 3.6% in the year 2022.
The chip shortage that persisted throughout 2022 is expected to continue into 2023,
contributing to an estimated 1.7% increase in the chip PPI index. As a result, the price
of semiconductors is expected to rise at an annualized rate of 0.6 till 2023 which could
affect the American economy.

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IANS (2022) Samsung Electronics reported a 13% drop in third-quarter profit due to
geopolitical uncertainties that are likely to dampen demand until early 2023. It was
recently reported that Samsung could sell 270 million smartphones next year, with a
focus on its foldable devices due to a shortage of semiconductors. Samsung is
reportedly planning to cut its smartphone shipments by 13% next year.

Shead(2021) Therefore Samsung plans to build a $17 billion chip factory in Texas. The
factory aims to help boost the production of advanced logic semiconductors used in
phones and computers to meet the demand of American consumers.

2.3 SOCIAL FACTORS

This academic report is going to discuss about the fall in disposable income for middle-
class people that affects the purchasing power of premium segment smartphones and
how Samsung sales are affected due to low disposable income for middle-class
families.

Source – Disposal income of upper, middle, and lower (2022)

Pew research center (2022) The financial hardships caused by the COVID-19 recession
and the job cuts in the US were mostly borne by middle-income families. 86% of the
middle-class income in America have been impacted by covid 19 financially and 92%
between 35-49 years old adults are mostly affected. This has impacted shopping habits.
As a result, middle-class consumers have stopped buying premium-segment
smartphones.

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KLAEHN (2020)Samsung sales during the year 2020 have dropped to -23%, which is a
bad sign for Samsung because since there was a massive layoff in all the sectors
companies have taken the initiative to cut jobs to save companies profit during covid 19.
middle-class consumers are most likely to be affected as their disposable income fell
middle class consumers did not purchase new Samsung galaxy z fold mobiles as it was
expensive during covid 19 which impact Samsung’s profit in 2020. Therefore Samsung
could capture a large share market by bringing low-cost smartphones as the middle-
class income is hit the most.

2.4 TECHNOLOGY FACTOR

This academic report is going to focus on Samsung’s plans to use artificial intelligence
to make chips faster as demand is spiking.
Samsung newsroom (2022) Since 75% of consumer demand for smartphones is
exploding post covid manufacturers have started to use artificial intelligence to
automate the process.
since Samsung suffered a huge loss in market sales due to chip shortage so (IANS
2022) Samsung announces a partnership with Naver to develop next-generation AI
chips. develop next-generation artificial intelligence (AI) chips as part of efforts to
improve AI big data processing efficiency. Samsung said its collaboration with Naver will
create great synergies in developing semiconductors with high efficiency and speed for
AI-specific computing. Because 89% of manufacturers want to solve chip shortages as
consumer demand grows.

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2.5 ENVIRONMENTAL FACTOR
This academic report will focus on environmental pollution caused by the mass
production of smartphones in mega factories that contribute significantly to climate
change and how Samsung is bringing environmental initiatives.
Aziz (2022) The mass production of smartphones in the factories greatly contributes to
climate change with 85% to 90% of the carbon footprint during the production process.
Samsung newsroom (2022). As the Government forces smartphone makers to use
sustainable methods which is why Samsung has introduced ultra-low-power
semiconductors This includes the development of new low-power memory chips that
aim to significantly reduce the annual energy consumption of memory products used in
data centers and mobile devices by 2025 compared to current products. Therefore, as
per Samsung’s prediction, 50% of the pollution will be eradicated by 2025.

2.6 LEGAL FACTORS

This academic report is going to discuss the effect of data breaches and how Samsung
was affected in the American market. In today’s world data breaches are affecting
consumers’ confidence.
Henry (2022) 72% of consumers preferred to switch to other smartphones as their
privacy is well-secured and encrypted.

Fowler (2022) The Lawsuit alleges that Samsung violated privacy laws and contractual
agreements and was filed on September 6 in US District Court for Nevada by Shelby
Harmer "on behalf of Samsung customers whose personally identifiable information was
stolen by cybercriminals. Samsung informed its consumer that there has been a breach
in the security system. The hackers have stolen the Samsung consumer’s name, date
of birth, social security number, and payment card information. The suit also alleges that
Samsung failed to promptly notify 15% of affected parties, which is currently at a very
high risk of misusing their private information. Therefore, Samsung must create an
encryption, restricted access, employee and auditing to prevent hackers from stealing
information

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3 PORTER’S 5 FORCES

Source- Porter’s 5 forces model (2016)

3.1 RIVALRY AMONG EXISTING COMPETITORS

3.1.1 Number of competitors
This academic report will discuss one of Samsung’s main competitors Apple which has
captured the highest share market in 2022 and why Samsung was not able to surpass
Apple.

Passport (2022) The threat force for Samsung is medium. Apple has captured the
largest slice of the smartphone market share at 32.1%.
49% of American consumers prefer to own apple than Samsung because apple has
been consistently focusing on innovation such as releasing the new iphone14 with a
feature of magnificent improvement in the camera sensor ISO range further enhancing
the quality of smartphone users.
Passport (2022) 37% of Samsung respondents stated that they were discouraging
consumers from buying Galaxy Z flip phones though there were more features. 44% of
Samsung consumers in America feel that the brand's Galaxy Flip phone lacks the
telephoto lens offered in other premium smartphones and when folded, the phone is
clumsy despite its shorter length. Therefore, Samsung must add a telephoto lens to
compete with apple.

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3.2 THE THREAT OF SUBSTITUTE PRODUCT
3.2.1 Buyer propensity to consume
The academic report is going to focus on why Samsung users don’t feel safe about the
privacy of their data so switching to I phone.

Source - iOS users more than Samsung users (2022)

Adorno (2022) The threat force is high for Samsung than for apple According to the
survey done by beyond identity shows 49% of Samsung users wanted to switch from
Samsung to I phone due to its “perceived superiority” in privacy and security. The
survey by beyond identification which interviewed 1,003 Americans concerning mobile
phone safety behavior and sentiments, suggests that 76% of Apple users feel happy
using the I phone 13pro max instead of the galaxy S22Ultra. 40% of Samsung users
revealed that they have experienced cyber hacks and security breaches however apple
never faced any security breaches. Therefore, Samsung consumers made them switch
to the I phone 13.

3.3 BARGAINING POWER OF SUPPLIERS

This academic report is going to talk about Samsung’s manufacturing of components.
Samsung newsroom (2021) Samsung's threat force is very low since it has major
control in the supply power over its competitors because they supply its components.
Samsung manufactures 90% of its processors and components not only for its phones
but also for some of its competitors, It’s difficult for another competitor to enter the
market.

3.4 THE THREAT OF NEW ENTRANTS

This academic report talks about Samsung being the dominant force in the marketplace.
The threat force for Samsung is very low. There is no threat of new entrants in the
smartphone industry for Samsung. Samsung is constantly innovating in the technology
industry, making new entries for others difficult. 90% of the dominant forces are

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controlled by Samsung in the American market. A new entry like Lenovo captures only
15% of the market forces as Samsung remains dominant

4 ANSOFF MATRIX

4.1 MARKET DEVELOPMENT STRATEGY

This report is going to talk about the plan to introduce sustainable events. Samsung
Electronics unveils the 'Together for Tomorrow' vision at CES 2022.
Samsung newsroom (2022) To solve the problem Samsung launches events such as
“vision of "Together for Tomorrow" is the one that empowers everyone to create positive
change and fosters collaboration that addresses some of the planet's most pressing
challenges.
The keynotes illustrated how Samsung plans to turn its vision into reality by introducing
a series of sustainability initiatives, meaningful partnerships, and customizable and
connected technologies. With this together for tomorrow, Carbon Trust-certified memory
chips will reduce carbon emissions by almost 700,000 tons. Samsung Visual Display
Business plans to use 30 times more recycled plastics by 2022.

4.2 MARKET PENETRATION STRATEGY

This report is going to talk about Samsung’s plans to use social media platforms to
promote its flip phone.
Sutcliffe (2022) Samsung planned to a partnership with stem drop. The partnership
between Samsung and stem drop includes dedicated "drops" on TikTok, in which the
famous songwriter will make brand new "stems" of songs available exclusively on
TikTok. This in turn allows any artists or fans to create their story version with stem drop
songs on TikTok. According to Samsung's expectation on TikTok, the engagement rate
will increase by 6.73%. Samsung targets 96.87% of young adults to use this platform to
build brand awareness of Samsung's range of electronics for American consumers.

5 CONCLUSION
To sum up, the semiconductor shortage has impacted the sales, product launches,
delivery schedule delays, and insufficient inventory despite the strong consumer
demand. The supply chain constraints have significantly impacted the shipment of
smartphones to American consumers . Samsung and other smartphone manufacturers
realize the need for greater manufacturing capacity which will help to serve the needs of
the consumer and contribute to the stability of the global semiconductor supply chain.
Therefore, Samsung is investing 17 billion dollars in a manufacturing hub to boost the

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production of semiconductors in Texas, USA. This is the largest-ever investment from
Samsung for the future!
Reference

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