Strategic Analysis of Samsung USA

A STRATEGIC PLAN2016 MARIST COLLEGE v1.0

We is greater than I.We are the pioneers who see the world differently to show a future that cannot be created alone.

Contents1.0 OVERVIEW 05

1.1 History 06

1.2 Business Case 09

1.3 Leadership and Culture 12

1.4 2020 Vision and Mission 14

2.0 LOOKING INTO THE FUTURE 15

2.1 Strategic Question 16

2.2 Rationale 17

2.3 Strategic Recommendation 18

3.0 SITUATIONAL ANALYSIS 19

3.1 Demographics 20

3.2 Technology and Security 23

3.3 Strategic Group Map 24

3.4 Key Success Factors 28

4.0 INTERNAL ANALYSIS 29

4.1 Key Leaders 30

4.2 Value Chain 34

4.3 Core Competencies 35

4.4 Liquidity Ratio 36

4.5 Efficiency 37

4.6 Profit 38

5.0 KEY CONSIDERATIONS 39

5.1 Key Considerations and Implications 40

6.0 SWOT PROFILE 41

6.1 Strengths and Weaknesses 42

6.2 Opportunities and Threats 44

6.3 Grand Strategy Orientation 46

6.4 Grand Strategy Clusters: Attractiveness 47

6.5 Grand Strategy Section Matrix: Investment 48

Ɨ Please see authors on last slide

7.0 STRATEGIC APPROACH 49

7.1 Strategic Question 50

7.2 Industry Reminders 51

7.3 Internal Reminders 52

7.4 Corporate Level Strategy 53

7.5 Business Level Strategy 60

7.6 Strategic Impact 62

8.0 MANAGERIAL IMPLICATIONS 65

8.1 Value Chain Implications 66

Contents9.0 STAKEHOLDER IMPACT 67

9.1 Stakeholders 68

10.0 ETHICAL FRAMEWORK 69

10.1 Ethical Implications 71

11.0 CONCLUSION 72

11.1 Next is Now 73

12.0 REFERENCES 75

Ɨ Please see authors on last slide

OVERVIEWAn Introduction to Samsung

1.0

Some of our (over)achievements.

06

1.0 OVERVIEW History

Foundation……………………………………….………......Manufacture Continuity……………………………………………….......…………………………………………….…......

Founded as a trading company in 1938 in Seoul, South Korea


07




In the 1950’s Samsung’s manufacturing processes became it’s most known function, and still remains to be that


08




In the 1950’s Samsung’s manufacturing processes became it’s most known function, and still remains to be that

Samsung has aimed to maintain a corporate identity of improving the lives of consumers and bettering the community

Who we are defines what we do.

09

1.0 OVERVIEW Business Case

(CE) TV, Monitor, Refrigerator, Washing Machine, Medical Devices, etc.

(IM) Smartphones, Network System, Computer, Digital Camera, etc.

(Semiconductor) DRAM, NAND Flash,

Consumer Electronics

Information Technology

Device Solutions

Mobile Communications

Products Divisio

ns

(DP Business Unit) TFT-LCDs, OLEDs,Mobile AP, etc. LED, etc.

Division 2015 2014 2013

Revenue Portion Revenue Portion Revenue Portion

CE 468,954 23.4% 501,831 24.3% 503,315 22.0%

IM 1,035,534 51.6% 1,117,645 54.2% 1,388,172 60.7%

DS

Semiconductor 475,867 23.7% 397,299 19.3% 374,365 16.4%

DP Business Unit 274,869 13.7% 257,272 12.5% 198,371 13.0%

Sub – Total 750,261 37.0% 657,898 31.9% 677,609 29.6%

Total 2,254,749 100% 2,277,374 100% 2,569,096 100%

10

1.0 OVERVIEW Business Case

Ɨ Unit: KRW 100 Million, %

What we do defines our success.

Culture eats strategy for breakfast.People create the culture.

A culture and a new way of thinking

12

We aim to reform our internal culture, execute as quickly as a startup company and push towards open communication and continuously innovate– Samsung Press Release ‘16

“

1.0 OVERVIEW Leadership and Culture

The leader that gives Samsung an edge.

13

Dr. Oh-Hyun Kwon,Vice Chairman & CEO Samsung Electronics

Key Achievements Developed first 64mb DRAM TIME 100 most influential people Achieved top market shares of:

Display driver IC’s Application processors CMOS image sensors

1.0 OVERVIEW Leadership and Culture

2020 Vision & MissionInspire the World, Create the Future.

CarloBarloccoVice President, Head of Sales and Marketing, Italy

14

LOOKING INTO THE FUTUREThe Question that Drives the Plan

2.0

How will home entertainment evolve in the smart home within the next one to three years?The Strategic Question for Samsung

17

2.0 LOOKING INTO THE FUTURE Rationale

How we choose to rationalize thisDo something so different that it sets us a part.

As home entertainment grows within the smart home industry, we see this as a means to challenge the way we collect data to

primarily better the lives our consumers, create valuable opportunities for our business partners, and create a better,

more insightful future.

GROWTH

BIG DATABIG

INSIGHTS

CONTENTSTREAMING

ARTIFICIALINTELLIGENCE

INNOVATION

PARTNERSHIPS

LEAD

How will home entertainment evolve in the smart home within the next one to three years?

18

We will Collect.

We will Organize.

We will Interrogate.

We will Create.

We will Innovate.

2.0 LOOKING INTO THE FUTURE Strategic Recommendation

SITUATIONAL ANALYSISThe Factors that Drive the Strategy

3.0

Know the trends of home entertainment.

20

3.0 SITUATIONAL ANALYSIS Demographics

21



22


Movies TV Shows


23

3.0 SITUATIONAL ANALYSIS Technology and Security

The way technology pushes us forward.

Smart home devices are expected to reach 9 billion by 2018 Big data will change traditional business Blockchain technology is emerging

Trends developing in security. Mobile payment apps are increasing Security concerns Data theft concerns

Understanding the industry will help you understand the competitors

24

3.0 SITUATIONAL ANALYSIS Porter’s Five Forces

Rivalry is High Smaller companies compete for

opportunity to collaborate with larger companies to reach consumers

Tight oligopoly in consumer electronics industry compete closely for market share

Buying Power: Moderate-High

Barrier to Entry: Low

Supplier Power: Moderate

Threat of Substitution: Low

Understanding Players in Home Entertainment

25

3.0 SITUATIONAL ANALYSIS Strategic Group Map

Nu

mb

er o

r Fe

atu

res

Number of Products

HighLow

High

KodakNikon

Cannon

PhillipsSonos

Nintendo

LenovoVizioBose

YamahaGoPro

LGPanasonic

Amazon

Microsoft

HTCHP

Samsung Google AppleSony


26


Nu

mb

er o

r Fe

atu

res

Number of Products

HighLow

High

KodakNikon

Cannon

PhillipsSonos

Nintendo

LenovoVizioBose

YamahaGoPro

LGPanasonic

Amazon

Microsoft

HTCHP



27


Nu

mb

er o

r Fe

atu

res

Number of Products

HighLow

High

KodakNikon

Cannon

PhillipsSonos

Nintendo

LenovoVizioBose

YamahaGoPro

LGPanasonic

Amazon

Microsoft

HTCHP


28

3.0 SITUATIONAL ANALYSIS Key Success Factors

Key Success Factors with smart home industry weighting.

Compatibility .40 Security .15 Data Collection .25 Personalization .20 Total

Samsung

Connects to 19 products & 38 other company products

4 1.6

A few product recalls since 2011, Smartthngs is hacked easily 2 .15

Various smart tech., wide array of products and appliances

4 1.0

“Passive experience”Consumer can personalize all products 4 0 3.55

Apple

Connects to 7 products but only Apple brand 2 0.8

2 product recalls, minor hacking issues

4 .45

Various smart tech, limited amount of products and few to no appliances 3 .75

Focuses on ease of use vspersonalization

2 0.4 2.4

Google

Google Homeand Google Pixel, several partnerships

3 1.2

1 produce recall, privacy policies improve

3 0.6

Various smart tech. limited to product line and no appliances

2 .50

Adapts to consumer tendencies w. permission; created Android – designed for personalization 3 0.6 2.9

SonySpace UX:Connects to 3 products

1 0.4

3 recalls

1 0.3

Limited smart tech., wide range of products and appliance

1 .25

VAIO personalization manger – learnsuser preferences; Xperia 3 0.6 1.55

INTERNAL OVERVIEWThe Culture that Drives the Strategy

4.0

30

4.0 INTERNAL ANALYSIS Key Leaders

Gregory Lee,President and CEO, Samsung North America

Key Achievements Developed strong relationships,

strategic alliances and new technology

Was previously Chief Marketing Officer

Those who lead us to higher levels by sharing their vision

31

Pranav Mistry,Vice President of Global Research and Development

Key Achievements Heads Samsung’s Think Tank

Team Created Sixth Sense Project,

Samsung Galaxy Gear, and Project Beyond



32

Marc Mathieu,Chief Marketing Officer

Key Achievements Previously CMO at Coca-Cola and

Unilever Developed the #OpenHappiness

and “Coke Side of Life” campaigns



33

Jesse Coulter,Chief Creative Officer

Key Achievements Formally the Co-Chief Creative

Officer at CAA Marketing Developed award winning work

for Chipotle Hailed one of the top 15

campaigns of the century



What makes us, us?

34

Infrastructure ROE: 9.75%; ROA: 7.91%; 161 Subsidiaries Internationally; Net Profit Margin: 8.10%

Human Resource Samsung Careers

Website Talent

Management Marketing

Department Samsung Direct

Support

Technology & Development

Global Partnerships

Second Largest R&D Spender

18 Subsidiaries

Customer Collaboration

Samsung Pay

Procurement Samsung Corning

Adv. Glass Acquisitions:

LoopPay, Viv Labs, Smartthings

UPS/FedEx External Retail

Primary

SELC Raw Material

Suppliers

Produce Electronics

Global Logistic Partnerships

42 Subsidiaries

SELC CELLO

80 Subsidiariesdedicated to Marketing and Sales

Dedicated SamsungSales Channel

Recall Program 4 Subsidiaries

Inbound Operations Outbound Marketing & Sales Service

STRENGTH WEAKNESS

4.0 INTERNAL ANALYSIS Value Chain

35

One unifying brand that stays true to ourselves

SpecializationIn

Subsidiaries

HeavyResearch

&Development

Spending

GlobalReach

ConsumerPersonalization

StrivesFor

Partnerships

4.0 INTERNAL ANALYSIS Core Competencies

36

CURRENT RATIO 2015 2014 2013 2012 2011 Company Avg

Samsung 2.47 2.21 2.16 1.86 1.61 2.06

Google 4.67 4.69 4.58 4.22 5.92 4.82

Sony 0.88 0.88 0.85 0.83 0.93 0.87

Apple 1.11 1.08 1.68 1.50 1.61 1.40

Strategic Group Avg 2.28 2.22 2.32 2.10 2.52 2.29

Ɨ From Bloomberg Terminal

4.0 INTERNAL ANALYSIS Liquidity Ratio

QUICK RATIO 2015 2014 2013 2012 2011 Company Avg

Samsung 1.91 1.66 1.55 1.31 1.10 1.51

Google 4.38 4.40 4.25 3.90 5.62 4.51

Sony 0.59 0.57 0.53 0.52 0.58 0.56

Apple 0.73 0.67 1.23 1.04 1.12 0.96


RETURN ON ASSETS 2015 2014 2013 2012 2011 Company Avg

Samsung 9.22 13.77 15.09 10.39 7.91 11.28

Google 11.82 11.77 12.62 12.91 14.93 12.81

Sony -0.81 -0.87 0.31 -3.48 -2.01 -1.37

Apple 20.45 18.01 19.34 28.54 27.07 22.68


37

RETURN ON EQUITY 2015 2014 2013 2012 2011 Company Avg

Samsung 9.75 13.08 19.82 18.77 12.67 14.82

Google 18.66 16.54 16.25 14.79 14.12 16.07

Sony -5.51 -5.76 2.04 -19.96 -9.42 -7.72

Apple 46.25 33.61 30.64 42.84 41.67 39.00


4.0 INTERNAL ANALYSIS Efficiency


38

OPERATING MARGIN 2015 2014 2013 2012 2011 Company Avg

Samsung 13.16 12.14 16.08 14.45 9.37 13.04

Google 25.82 24.99 27.74 25.43 30.98 26.99

Sony 0.83 0.34 3.38 -1.04 2.78 1.26

Apple 30.48 28.72 28.67 35.30 31.22 30.88


4.0 INTERNAL ANALYSIS Profitability

PROFIT MARGIN 2015 2014 2013 2012 2011 Company Avg

Samsung 9.32 11.19 13.04 11.53 8.10 10.64

Google 21.80 20.64 24.04 21.50 25.69 22.73

Sony -1.53 -1.65 0.63 -7.03 -3.61 -2.64

Apple 22.85 21.61 21.67 26.67 23.95 23.35



KEY CONSIDERATIONSThe Implications from the Facts

5.0

From the Facts.

40

5.0 KEY CONSIDERATIONS Key Considerations and Implications

Key Considerations Implication for Smart Home Entertainment

Increased awareness in products Allows for exponential growth within the industry

Low barriers to entry leads to many acquisitions Allows Samsung to strengthen intellectual capital

Samsung’s vision is cohesive with new culture Allows Samsung to promote new a work ethic and new work assignments

Align heavy R&D spending with marketing efforts Not directly competing through products, but investing into the future

SWOT PROFILEUnderstanding our strengths, weaknesses, opportunities and threats

6.0

What Samsung is known for, isn’t all you should know.

42

6.0 SWOT PROFILE Strengths and Weaknesses

Volume and diversity of connected products Research and development Global presence Partnerships Logistics subsidiaries

Strengths Weaknesses

Internal audit of system processes Lower profit and operating margins Reliance on external software Marketing efforts compared to competitors Decreased brand equity

43

Volume and diversity of connected products Research and development Global presence Partnerships Logistics subsidiaries

Strengths Weaknesses

Internal audit of system processes Lower profit and operating margins Reliance on external software Marketing efforts compared to competitors Decreased brand equity

6.0 SWOT PROFILE Strengths and Weaknesses


44

Growth in smart home market Trend toward video content streaming Online retail and e-commerce High merger and acquisition activity Millennials gaining spending power Families utilizing televisions the most

Opportunities Threats

Apple’s prominence in North America Emerging Chinese manufacturers Consumers security concerns Smart home products are too expensive

6.0 SWOT PROFILE Opportunities and Threats


45

Growth in smart home market Trend toward video content streaming Online retail and e-commerce High merger and acquisition activity Millennials gaining spending power Families utilizing televisions the most

Opportunities Threats

Apple’s prominence in North America Emerging Chinese manufacturers Consumers security concerns Smart home products are too expensive


6.0 SWOT PROFILE Opportunities and Threats

General Strategic Orientation

46

OP

PO

RT

UN

IT

YW E A K N E S S

TH

RE

AT

TURNAROUNDOvercome Weakness

DEFENSIVERedirect Involvement in Product and Markets

AGGRESSIVEGrowth

DIVERSIFICATIONOpportunities in Other Markets

S T R E N G T H

6.0 SWOT PROFILE General Strategic Orientation

Grand Strategy Clusters: Attractiveness

47

RE

PI

D

GR

OW

TH

W E A K E N I N G C O M P E T I T I V E P O S I T I O NS

LO

W

GR

OW

TH

RE-EVALUATE MARKETSTurnaround

Concentrated GrowthVertical Integration

Horizontal IntegrationDivestment

SEEK TO DECREASERESOURCE COMMITMENT

Redirect Involvement in Product and Markets

CONSUMER SATISFIEDREINFORCE AND HOLDConcentrated Growth

Vertical IntegrationRelated Diversification

REDIRECT CASH FLOWTOWARDS OPPORTUNITIES

Related DiversificationUnrelated Diversification

Joint Ventures and Strategic AllianceVertical Integration

Horizontal IntegrationConcentrated Growth

I M P R O V I N G C O M P E T I T I V E P O S I T I O N

6.0 SWOT PROFILE Grand Strategy Clusters: Attractiveness

Grand Strategy Section Matrix: Investment

48

IN

TE

RN

AL

D

EV

EL

OP

ME

NT

W E A K N E S SE

XT

ER

NA

L

DE

VE

LO

PM

EN

T

CONSERVATIVE APPROACHREDIRECT RESOURCES

TurnaroundRetrenchment

DivestitureLiquidation

OVERCOMMITTED BUSINESS W.LIMITED GROWTH/HIGH RISK

Strategic AllianceMerge with Competitor

Unrelated Diversification

COMMITMENT TO CURRENTBUSINESS SOLIDIFY POSITION

Concentrated GrowthInnovation

EXPAND BASE OF OPERATIONSVertical Integration

Horizontal IntegrationRelated Diversification

Joint VentureStrategic Alliance

S T R E N G T H

6.0 SWOT PROFILE Grand Strategy Section Matrix: Investment

STRATEGIC APPROACHThe Strategic Recommendation to Samsung

7.0

How will home entertainment evolve in the smart home within the next one to three years?The Strategic Question for Samsung

What we know about the industry.

51

7.0 STRATEGIC APPROACH Industry Reminders

The television isn’t going anywhere Big data is old news Security is an issue Prices are high Heavy relationship between communication and data Content streaming providers want in We’re dealing with multitaskers

What we know about Samsung.

52

#1 television provider for 10 consecutive years Has a mission that strives for partnerships, personalization and revolution Has the tools and funds to research and develop Wants an entrepreneurial culture Their devices are compatible with over 40 companies products Bought the creators of Siri

7.0 STRATEGIC APPROACH Internal Reminders

So… What does that mean for us?

53

7.0 STRATEGIC APPROACH Corporate Level Strategy


54



55


ARTIFICIAL INTELLIGENCE, MACHINE LEARNING, AND BIG INSIGHTS: ALL THROUGH THE WAY WE SPEAK.via Consultation with Linguistics Consultant

“

The unthinkable must be done.

57

Dr. Deb Roy,Chief Media Scientists at Twitter

Key Achievements Human Speechome Project Founder of Bluefin Labs PhD at MIT in Media Arts and Science Revolutionized the way we collect and measure data


Create a teamSamsung’s Digital Appliances Research Lab under their R&D department

58

Deb Roy – Media Scientist Marc Mathieu, Samsung CMO Employees from Samsung’s CognitiV Analytics Team


Form a Strategic Alliance with ComScore.

60

7.0 STRATEGIC APPROACH Business Level Strategy

WE HAVE TO IDENTIFY PATTERNS IN DATA AND SEE HOW IT ALL INTERACTS WITH EACH OTHER.via Consultation with Vice President of Corporate Strategy and Innovation at IBM

“

What does this mean?

62

Personalized mass marketing opportunities Better updates New innovative products Precision marketing Generates big insights Potentially sell market insight to content streaming providers Content streaming providers will see partnering opportunities

7.0 STRATEGIC APPROACH Strategic Impact

V E R G EForward Thinking. Entrepreneurship. Innovation.

One Goal. One Team.

68

INTERNAL CAMPAIGNS ARE GREAT FOR MOTIVATING TEAMS TO WORK STRATEGICALLY WITH OTHERS. AT NBCUNIVERSAL WE HAVE THE SYMPHONY CAMPAIGN.via Consultation with Senior Vice President of Strategic Initiatives at NBCUniversal

“

MANAGERIAL IMPLICATIONSThe implications in the activities

8.0

What would change?

66

Infrastructure Ethical implication with legal team

Human Resource

Samsung hires deb Roy

Launching internal HR campaign

Forming a team in Design Research labs

Training Deb Roy Training new

team

Technology & Development

Creating smart TV with voice-data encoding features

Using voice-datato create innovative opportunities for buyers

Software and system updates through Wi-Fi

Using data to personalize mass market to average consumers

Creatingpersonalized products and updates

Procurement

New partnering with ComScore to transcribe information and create outputs

Primary

Inbound Operations Outbound Marketing & Sales Service

STRENGTH WEAKNESS

7.0 MANAGERIAL IMPLICATIONS Value Chain implications

STAKEHOLDER IMPACTShareholders. Employees. Consumers. Clients. Suppliers.

9.0

68

Strong values is the key to good business

Shareholders

Employees

Consumers

Clients Suppliers

9.0 STAKEHOLDER IMPACT Stakeholders

ETHICAL FRAMEWORKThe ethical impacts behind the strategy

10.0

THE MARKET WILL COMBAT SECURITY CONCERNS IN THE SMART HOMEvia Consultation with Head Leader of Internet of Things at IBM

“

Devices that are too logical.

71

10.0 ETHICAL FRAMEWORK Ethical Implications

Samsung will face a few setbacks for home entertainment. Here’s how we will get around it: Agree to our terms and conditions All information is secured through blockchain technology Untraceable identity Turn it off whenever you would like

CONCLUSIONDoing what’s never been done before is not an excuse, it’s a challenge

11.0

Never been done before.

73

11.0 CONCLUSION Next is Now

Samsung pulls inspiration from “pioneering spirits.”Doing what’s never been done before is not an excuse, it’s a challenge.

NEXT IS NOW2016 MARIST COLLEGE v1.0

T H A N K Y O UANY QUESTIONS

Belson, Gerald, Scott Lippstreu, and Kevin Westcott. Digital Democracy Survey.https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us- tmt-deloitte- digital-democracy- executive-summary.pdf.

Big Data Analytics: What It Is and Why It Matters. Big Data Analytics: What It Is and

Why It Matters | SAS. Accessed November 20, 2016.http://www.sas.com/en_us/insights/analytics/big-data- analytics.html.

CMOs Are Beginning To Fill CEO Seats. Cmo.com.http://www.cmo.com/features/articles/2015/3/17/cmo_to_ceos_.html#gs.IP6qCvw.

Company Overview of Samsung Electronics Co. Ltd. Bloomberg.http://www.bloomberg.com/research/stocks/private/person.asp?personId=208549privcapId=91868.

Delivering on the Promise of Connected Homes. McKinsey | Connected Homes. Accessed November 15, 2016.http://www.mckinsey.com/spContent/connected_homes/index.html.

LCD TV Panel Market Share (%). January 1, 2013 - December 31, 2015, via Bloomberg LP accessed October 6, 2016

McQuain, John R. Smart Tvs: Everything You Need to Know. Tom's Guide. Last modified October 18, 2016. Accessed November 10, 2016.http://www.tomsguide.com/us/smart-tv- faq,review-2111.html.

Pranav Mistry: The Thrilling Potential of Sixth Sense Technology. Ted.com.https://www.ted.com/talks/pranav_mistry_the_thrilling_potential_of_sixthsense_technology?language=en#t-446488.

Samsung Management Committee. Samsung About Us. Accessed November 15, 2016.http://www.samsung.com/us/aboutsamsung/investor_relations/corporate_governance/boardcommittees/.

Samsung to Abolish Rigid Corporate Culture. Koreatimes. June 27, 2016. Accessed November 15, 2016.http://www.koreatimes.co.kr/www/news/tech/2016/09/133_207977.html.

Top 5 Smart Home Trends for 2016 - Electronic House. Accessed January 16, 2016.https://www.electronichouse.com/smart-home/top- 5-smart- home-trends- for-2016/.

REFERENCES12.0

AUTHORSBrandon Lee Heard,Business Marketing: Creative Strategy and Psychology ‘17

Daniel Goodstein, Business Marketing and History ‘17

Curtis Bruaner, Business Finance, Computer Science and Economics ‘17

Meghan Rooney, Business Finance and Paralegal Studies ‘17

Donald Spampinato,Business Marketing: Creative Strategy and Advertising ‘17

Brendan Cosgrove, Business Finance and Economics ‘17