Abstract

In Spite of Aggressive Goals for the Future, Internal Strategic Adjustments Are Required to Achieve Goals

At present Samsung Electronics applies different business strategies according to the specific characteristics and needs of various markets. The company also enjoys competitive advantage in the industry value chain by adopting inhouse production for the sake of integrating resources and making prompt response to the market. However, it remains to be seen whether Samsung Electronics will be able to achieve the goal of 5.7% market share in 2011.

The global economy is currently stuck in the downturn. Although the US government has implemented several major relief programs to prevent its economy from worsening, the United States is expected to still see economic declines in the near future. According to an estimate by the US Federal Reserve, it is forecasted that the United States will record an economic decline rate of 0.5% to 1.3% in 2009. As a result, consumer spending is expected to see significant declines as well.

Since Samsung Electronics entered the US market in October 2008, the company still maintains its high-end product strategy, seeking to challenge Apple and its high-tagged MacBook product line. However, to combat the impact of the economic downturn, even Apple launched a value-line model priced at US$999 at year-end 2008. Therefore, it is projected that Samsung Electronics, which is still a newcomer with little brand awareness in the US notebook PC market, will have a hard time breaking into the US market with its high-tagged products.

Samsung Electronics' notebook PC design mainly features slim form factor, and the company's design capability has already been recognized by the consumers. However, in order to sustain its design quality, Samsung Electronics will have to make considerable investments, which will inevitably be reflected in its product price tags and consequently affected its notebook PC sales. Therefore, in order to boost its overall sales volume threefold, Samsung's product portfolio will have to be complete with mid-range and value-line products, too.

Nevertheless, due to the pursuit of high-end brand image proposed by former Samsung Electronics CEO Yun Jong-Yong prior to 1999, Samsung Electronics' notebook PC R&D personnel used to focus on the development of high-end products. Even its past contract production for Dell was for high-end models, too. Consequently, although Samsung Electronics do have mid-range and value-line notebook PC product lines now, the competitiveness of these products cannot compare to the company's high-end products. Therefore, Samsung Electronics has approximately equal number of high-end notebook PC models as mid-range and value-line models, so as to make up for the losses caused by the mid-range and value-line product lines. This phenomenon also shows that Samsung Electronics' design capability is still relatively insufficient in the mid-range and value-line product lines.

In addition, to enhance quality control and ensure its product quality, Samsung Electronics insists on own production for its full product lines. Although Samsung Electronics has successfully boosted its production capacity at the Suzhou plant from the original design of one million units to three million units at present, there is still a shortage of eight million units between the current capacity and Samsung Electronics' goal. As yet, the company still has not come up with plans for new facilities or capacity expansion. Insufficient production capacity is expected to be a critical issue confronting Samsung Electronics in its future notebook PC business development.

Moreover, it is envisaged that the efficiency of resource integration and conflict between Samsung Electronics' component and terminal device businesses are difficulties awaiting solutions, too. Although Samsung Electronics' strength in component businesses is an advantage for the company's notebook PC business, the limited scale of its notebook PC production has made it hard to reach the company's goal of profits. The synergy of resource integration has not lived up to the company's expectations, either. Therefore, Samsung Electronics has set the sales goal of 11.0 million units, so as to expand its production scale and enhance the benefits of inhouse resource integration.

Conflict of Interest May Compromise Samsung Electronics' Key Component Businesses

Sony, which competes with Apple in the high-end product line, currently accounts for a global market share of around 6% in the notebook PC market. Many of Sony's key components, including display panels, are procured from Samsung Electronics. Although Samsung Electronics targets Apple as its main rival, if the company should achieve a global notebook PC market share of over 5.7% in the future, Sony will inevitably be impacted, too. As a result, Sony might consider cutting back on its procurement orders with Samsung Electronics' component business units. Therefore, considering the revenues and profits of the entire Samsung group, Samsung Electronics is expected to ponder how to adjust its notebook PC business so as to minimize direct competition with its customers.

Appendix

Glossary of Terms

List of Companies