Samsung’s Improvement Process
Executive Summary
Notwithstanding the costs incurred in embracing changes and improvement processes in organizations, it remains important that organizations should capitalize on the aspects in order to overcome stiff competition. In this case, a strategic change at Samsung Company is analyzed. The company had to come up with new strategies that would see the organization gain a competitive advantage in the market. The first step the company is engaged in is diagnosing of its existing strategy and evaluation of the results hitherto. This helps in identifying the shortcomings that the organization is encountering in the event of carrying out its businesses and operation. In addition, sum sang engaged in a survey to identify customers’ need, an action that led to the establishment of Smartphone with android features that were not only on high demand but also incorporated various features that improved customer satisfaction. There is a discussion of key issues involved in the change and improvement process in the company. The aspects and lessons for change learned from the case analysis are also discussed. High-end features improved the company demand pattern where the demand remained constant over a long period. This is why the company is doing well in the industry that is saturated with high end products from competitors. The distribution channel for the company has faced drastic changes because of the need to have real-time customer feedback. The company is trying to eliminate and reduce duplication of wholesalers and retailers by incorporating and combining smaller dealers. This enhances its competition in the market in the sense that feedback reaches the manufacturer within a short period of time due to the reduced number of supply chain channels. These issues will be explained below in an elaborate manner.
DISCUSSION OF KEY CASE ISSUES
Background of the Organization
Samsung Company is a renowned multinational corporation with its headquarters in Samsung Town, Seoul in South Korea. It is one of the largest companies in South Korea and is among the companies that generate high revenue in the country. Evidently, in 2011, the company consolidated and income of C$150 billion. The secret behind the company’s success is the establishment of subsidiaries across the globe as well as frequently coming up with improvement plans (Michell 5). The company has over 144 subsidiaries worldwide. Of these subsidiaries, 18 went through consolidation at the end of 2011. It would be important to note that the company produces a wide range of electronic products, and this owes to the fact that the company consists of three core divisions.
First, the Device Solutions, which is a Business-to-Business (B2B) division, is responsible for the manufacture of semi-conductors, Liquid Crystal Display (LCD), and other components. Second, Digital Media & Communications (DM&C) Division has the responsibility of manufacturing phones, computers, television, and related electronic gadgets. Third, the Samsung Advanced Institute of Technology (SAIT) is a division that is responsible for the company’s research and handles new businesses. Since its establishment, Samsung Company has been on an upward trend economically, and today, the company has a powerful influence on South Korea’s economy and the global economy (Michell 11). Over the years, Samsung has been undergoing great improvements and innovations, and these are the key components that have led to the company’s success. Between 1938 and 1970, Samsung’s diversification led to its establishment as an industrial global leader in wide range of enterprises. The company moved into businesses such as retail, securities, as well as insurance, and these helped protect the company from competition besides providing financial support. The company’s venture into the electronics industry came in the late 1960s. Between 1970 and 1990, the company went through great improvements that saw heavy investments in research and development that were vital in achieving the company’s objective of being a leader in the global electronics industry. From 1990 to present, Samsung has made several steps in terms of economic development. It is considered one of the largest manufacturers of electronic gadgets, and this is owed to the fact that the company’s Smartphone Galaxy Series and television brands enjoy a wide customer base across the globe. Arguably, organizational improvement efforts have played an integral role in achieving the global success that the company enjoys currently. The recent improvement effort that has seen the company achieve economic growth is the inception of the Smartphone technology. In the recent years, the company has capitalized on the manufacture of the Samsung Galaxy Series, which has been accepted in the global market. The latest phone model is the Samsung S6, which despite the cost, has recorded huge sales and profits.
Current Challenges
Like every other organization, Samsung Company’s economic development efforts face myriads of challenges. Unless the challenges are resolved, the huge steps made by the company will be futile. Companies such as Apple and Nokia are hot on the company’s heels. Hence, the earlier the challenges are solved, the better. One of the biggest challenges faced by the Samsung Company currently is stiff competition at the low end (Michell 57). Research shows that despite Samsung remaining the largest Smartphone manufacturer and vendor, its market share has been seen to slip by around one percent annually in the recent years. This is owed to the fact that competition from a low end has been seen to intensify. A number of new companies such as Huawei and Lenovo from China have come up. Moreover, the new Chinese company known as Xiaomi has invaded the market through its introduction of Smartphone products with high-end specifications but very low prices. In fact, products from Huawei, Lenovo, as well as Xiaomi have attracted aspiring but budget-conscious customers. The three Chinese Smartphone companies have capitalized on the sale of their products at close to their cost price, and the revenues generated through the sales have supplemented earnings through applications and media stores. This has hit Samsung Company hard, and great improvement efforts must be put in place fast to counter the stiff competition at the low end. The other challenge that Samsung faces currently is high-end competition (Michell 57). One of the primary competitors of Samsung in the high-end Smartphone space is Apple.
In the recent years, Apple, through the manufacture of excellent Smartphone products has been aggressive in penetrating into new markets. Recently, Apple announced it would sell its iPhone to customers of China Mobile, which is considered as the largest mobile phone carrier in the world by the number of subscribers. Apple’s long-awaited deal would also include the sale of iPhone to NTTDoCoMO, which is the largest mobile carrier in Japan. The stiff high-end competition that Samsung faces from Apple is underscored by the fact that Apple plans to launch a large-screen iPhone, which is likely to attract global attention in the coming months. The fact that large-screen sized Smartphones have dominated the global market is irrefutable. Thus, Apple is a big threat to Samsung and in a bid to overcome the high-end competition, further improvement is needed at Samsung. Another great challenge faced by Samsung Company is the significant rise in manufacturing costs. Despite the rise in costs, innovation exhibited in Samsung’s products has not improved as such. In fact, Samsung’s Galaxy S4 is more or less similar to Galaxy S5. In coming up with hardware specifications for its products, Samsung has experienced significant costs. For example, the Samsung’s S5 manufacturing cost is estimated at $256. On the other hand, Apple’s iPhone 5S manufacturing cost is estimated at $207, and this was at the time of its launch. Presumably, the manufacturing costs of S5, S6, as well as iPhone 5S have gone up. That is to say, the profits generated from the sale of these phones are relatively low. Thus, there is a possibility that the rise in manufacturing costs, as well as a possible decline in average selling prices, would pressure Samsung and Apple’s gross margins going forward. The looming change in leadership is another challenge that Samsung faces in its efforts to achieve economic development and growth (Michell 58). The current chair of Samsung, Lee Kun-hee is renowned for his efforts of making Samsung a household name in countries across Europe and the United States. However, there are question marks over Lee’s successor, and there is a possibility that this could affect the company’s steady economic growth and development. Lee Kun-hee is yet to publicize how and when he will hand over the management of Samsung. There is a great fear among South Korean citizens that a change in leadership of the company would affect the country’s economic growth.
Triggers or causes of Samsung’s improvement initiative
As mentioned earlier on, the improvement initiative and turn-around at Samsung Company was the decision to venture into the manufacture of high-end specification Smartphone’s (Michell 6). It would be important to understand some of the factors that triggered or caused the improvement initiative. First, the demand for Android devices across the globe facilitated or rather triggered the improvement initiative at Samsung. It came up with large-screen phones that were appreciated and accepted in the global market. Second, the competition that saw the decline in sales of Samsung products triggered the improvement initiative. Big companies like Apple and HTC had embraced the manufacture of Smartphone’s and were recording huge sales. For several years, Apple dominated the mobile phone industry as it recorded huge sales annually.
Apple’s products such as iPhone enjoyed a wide customer base, and this meant that Samsung was behind Apple and HTC in terms of sales of mobile phones. Indeed, Samsung’s improvement initiative bore fruits. After the inception of its Galaxy Series of phones, Samsung successfully overtook Apple in terms of sales. This is owed to the fact that great innovation at Samsung facilitated the manufacture of large-screen phones whereas Apple still sold small-size phones. The third factor that triggered Samsung’s improvement initiative was good and effective leadership. Lee Kun-hee, the chairperson of Samsung Company, has been effective and efficient in his operations. He is considered as the person behind Samsung’s recent global success, and, in fact, there is fear that change in leadership could be a blow for the company.
The Improvement process at Samsung using the change model
It should be noted that in achieving its desired changes, Samsung Company capitalized on an improvement process that was designed by its experts and leaders. The improvement process adopted a model for change. First, the stakeholders of the company had to present the situation. In this case, they identified or rather came up with factors that would trigger or cause the improvement process (Chang 22). As mentioned earlier, some of the factors that were presented include the demand for Android devices in the global market, as well as stiff competition that the company faced from rival such as Apple that led to the significant decline in sales.
There was a possibility of Samsung losing its place in the global market if it did not come up with mobile phones with high-end specifications. The second step in the improvement process was diagnosis. This involved the identification, analysis and explanation of implications or impacts that the desired change would have on the company. It was realized that coming up with the strategic change would help increase the company’s sales across the globe. The third step in the improvement process was a redefinition of the situation. The experts and leaders at Samsung were obliged to redefine and refocus on the issue, and this aimed at ensuring that the decision that would be made would not have a negative influence or impact on the company’s stride towards economic growth and development.
The fourth step in the improvement process at Samsung Company involved the designation of change. In this case, experts and the leaders of the organization came up with the strategic changes that were recommended for the company. The designed changes included coming up with Smartphone’s that would compete favorably with those manufactured by companies like Apple in the global market. Designing the change was followed by a selection of an action plan. The organizational leaders and experts had to select or come up with a plan of ensuring that their new Smartphone’s penetrated into the global market. Samsung entered into agreements with global and recognized mobile carriers that would help in the distribution of the company’s new Smartphone models in the global market (Chang 23). Besides, Samsung held campaigns across the globe that aimed at making consumers aware of its new products.
The experts and organizations leaders had to plan for implementation after that. The following step was the implementation where the company launched a variety of its Smartphone’s in the global market. In counteracting the global dominance of Apple’s iPhone, Samsung launched the Galaxy S, which was later followed by Galaxy S2. A few years later, the company launched Galaxy S3 and S4. Apparently, the reception of the company’s products in the global market was encouraging, and this is where the downfall of Apple began. There were a number of critics that argued that Samsung had taken some ideas and patents for their new models from Apple Company. The implementation phase faced myriads of challenges, which included lawsuits that saw Samsung fined heavily. The step that succeeded the implementation step was the monitoring of measurement. The experts and leaders at Samsung had to measure and evaluate how successful the change or improvement initiative was. Undoubtedly, the improvement initiative was very successful as competition in the global market stiffened. In fact, Samsung toppled Apple as the largest manufacturer and vendor of Smartphones worldwide (Chang 52).
Role of organizational leaders in the change effort
The organizational leaders and other stakeholders at Samsung played an integral role in ensuring that the desired change was achieved. The current chairperson of the company, Lee Kun-hee was at the forefront in identifying the factors that triggered or rather caused the need to improve the situation at the company (Michell 123).
Lee realized that the company had to come up with an improvement initiative in order to counter the stiff competition from companies such as Apple. Lee also realized that the demand and need for Android devices in the global market were increasing significantly. Thus, an improvement initiative at the company would help address the increase in demand for Android devices. Organizational leaders at Samsung also aided in the designing of the change and selection of the plans that would ensure that the change is successful. Organizational leaders were also at the forefront in ensuring that the change was successfully implemented. This is exhibited by the presence of key leaders such as Lee Kun-hee, Kim Hyun-suk, and Donghoon Chang among others during the launch of the Galaxy series phones in various countries.
Challenges associated with designing the change
In designing the change at Samsung, there were a number of challenges that the company faced. Coming up with new Smartphones such as Galaxy S4 and Galaxy S5 was accompanied by rising manufacturing costs. In fact, research shows that the phones were sold at higher prices in the market, and this led to a significant decline in sales. This is evident in the fact that Samsung came crumbling down in 2014.
The other challenge that the company faced was the constant criticism that it received for the theft of patents from Apple as well as the large size of Galaxy S4 and S5. During the improvement process, the company together with its leaders were charged and fined. The company was to pay an estimated $2.5 billion dollars to Apple Company, on allegations of theft of patent. On the other hand, Lee Kun-hee was charged a couple of times for tax evasion (Michell 124). These challenges were great barriers to the designing and the implementation of change at Samsung.
How the organization measured the impact of the change effort
In measuring the impact of its change effort, Samsung observed the profits and sales it had obtained in the few years it had introduced its Smartphone technology in the global market. Besides, the impact of the change was measured by the fact that Samsung had surprised many by toppling Apple as the leading manufacturer and vendor of Smartphones worldwide.
The biggest barriers to successfully implementing the change
One of the biggest barriers to successfully implementing the change was the stiff competition that Samsung faced from dominant companies such as Apple and HTC, which had ventured into the manufacture of Smartphone earlier and enjoyed a wide customer base (Chang 52). The other barrier was the criticism that Samsung’s Smartphones received across the globe for their enormous size. In fact, the criticism led to some carrier companies declining to sell Samsung’s Smartphones.
What the organization learned about itself in the improvement process
Samsung’s leaders including the chairman and CEO among others learnt that in order to counter the threat of competition faced from rival companies such as Apple; they had to come with unique designs that would be accepted in the global market. The organization also learned that dealing with challenges such as a rise in the cost of manufacturing was vital in its bid to become one of the largest manufacturers and vendors of Smartphones worldwide.
Aspects Learned during the Case Analysis
From the case analysis, it can be observed that in order for organizations to remain competitive, coming up with strategic changes or improvement processes is vital. In this case, Samsung had to come up with an improvement process in order to topple Apple Company as the largest and leading manufacturer and vendor of Smart phones. Additionally, it can be observed that organizational leaders play an integral role in the achievement of strategic changes in organizations. In this case, leaders such as Lee Kun-hee were significantly involved in the improvement process. There is a possibility that without the involvement of organizational leaders, improvement processes in organizations will be unsuccessful.
Lessons for Change
Improvement processes and strategic changes are important aspects in the economic development and growth of any organization. Organizational leaders must be at the forefront in leading changes in organizations. Together with other stakeholders, organizational leaders have the responsibility of presenting the situation that needs change, conducting a diagnosis, redefining the situation, designing the change, selecting a plan of action, planning for implementation of the selected action, actual implementation, as well as monitoring measurement. It is also learned that coming up with strategic changes can be a step towards the development and expansion of any organization.
Works Cited
Chang, Sea-Jin. Sony Vs Samsung: The Inside Story of the Electronics Giants’ Battle for Global Supremacy. Hoboken: John Wiley & Sons, 2011. Internet resource.
Michell, Tony. Samsung Electronics and the Struggle for Leadership of the Electronics Industry. Singapore: Wiley, 2010. Internet resource.