Team 3: Matthew Kollinger Qiao Li Ryan Campbell Staton Standridge Samsung Electronics Team 3: Matthew Kollinger Qiao Li Ryan Campbell Staton Standridge

Vision, Mission, and Value Chain Analysis Vision: Samsung is dedicated to developing innovative technologies and efficient processes that create new markets, enrich people's lives and continue to make Samsung a digital leader. Mission: 'We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” For Samsung, basic research, product development and design are primary activities, unlike porter’s original value chain model. Through Samsung’s value chain, there is also spatial dimension because these activities do not take place in the same place, but across the entire globe, concentrated heavily in Korea, China, and Vietnam Primary Activities Include: Technology and product planning, design and engineering, procurement, inbound logistics, manufacturing, distribution planning and forecasting, outbound logistics, marketing, sales, and service. Supporting Activities Include: Firm infrastructure and HR management

5-Forces Model (Smartphone Industry), Key Rivals Threat of New Entrants (Low):High capital required, necessity for product differentiation, have to spend a lot of time on branding and customer knowledge. Bargaining Power of Buyers (High): Buyers can easily switch with increased choices in mobile devices with relatively no switching cost. Buyers will switch based on features and cost. Threat of Substitutes (Low): While there are still some options for buyers in the tablet market, there is still no other substitute and the majority of the population will opt for a mobile device. Bargaining Power of Suppliers (Low): There are many suppliers for the mobile phone industry. Many different components with suppliers all over the world so competition between suppliers is high while the bargaining power of these suppliers to the mobile phone companies is low. Competitive Rivalry (Very High): The threat of rivalry is the biggest threat to Samsung because of the low switching cost and the vast amount of competition between other companies in the industry. Key Rivals: Apple, Nokia, Blackberry, HTC, and Microsoft

Stage of Industry Life Cycle( Smartphone), External Environment The Smartphone industry is currently towards the end of the growth stage and should reach the mature stage in the industry life cycle in the next five years. Companies and their products are facing the necessity to differentiate in hardware because of the competition between similar operating systems. Products need to stand out in a wide array of choices in the smartphone market, having an android operating system (such as Samsung) will not be sustainable in the future as more companies switch to this platform. Apple continues to be differentiated because of their own OS and hardware. Economic: The economy of a country can be a huge determinate of whether a company enters a market. Samsung does a wide array of demographic analytics before entering a new market. Political and Legal: Samsung has recently violated Apple patents and has engaged in “willful infringement.” Environmental: Samsung is developing an environment-friendly products by driving eco-design and LCA, structuring an environment supply chain management and plan for hazardous substances regulation, and expanding a process capability of waste product and plan for EPR (Extended Producer Responsibility).

Financial Analysis 2010 2011 2012 ROA 13.1% 9.5% 14.2% ROE 19.9% 14.4% 21.4% Debt/EBITDA 0.38 0.50 0.34 EBITDA/Interest Expenses 48 45 76 2010 2011 2012 Revenue 154,630 165,002 201,104 Gross profit 51,964 52,857 74,452 Operating Profit 17,297 15,644 29,049 Profit before Income Tax 19,329 17,192 29,915 Net Profit 16,147 13,759 23,845 2010 2011 2012 Net Margin (%) 10.4 8.3 11.9 Asset Turnover 1.25 1.14 1.19 Financial Leverage 1.52 1.51 Current ratio (%) 154% 161% 186% Liability/Equity (%) 50% 53% 49% Debt/Equity (%) 12% 14% Net debt/Equity (%) - 13% - 12% - 19% In KRW (Korean Won)*

SWOT Analysis Samsung SWOT analysis 2013 Strengths Weaknesses Hardware integration with many open source OS and software Excellence in engineering and producing hardware parts and consumer electronics Innovation and design Focus on environment Low production costs Largest share in mobile phones and 2 place in smartphones sales Ability to market the brand Patent infringement Too low profit margin Main competitors are also largest buyers Lack its own OS and software Focus on too many products Opportunities Threats Growing India’s smartphone market Growing mobile advertising industry Growing demand for quality application processors Growth of tablets market Obtaining patents through acquisitions Saturated smartphone markets in developed countries Rapid technological change Declining margins on hardware production Breached patents Apple’s iTV launch Price wars

Competitve Implications VRIO Analysis Resources/Capability Valuable? Rare? Difficult of Imitate Exploited by the Firm Competitve Implications Tech & Prod. Line Capabilities Y Sustained Comp. Advantage Brand Value Quality Product Mix & Customization N Temporary Comp. Advantage Fabrication Capacity R & D Prod. Facility @ Same Loc. - Parity Partners & Customers

Samsung’s Strategy Samsung: Samsung uses a diversification strategy to maintain its competitive advantage. Because Samsung uses a huge portion of their revenue towards research and development, Samsung diversifies its products. The company currently uses 5.7% of revenue towards research while their competitor Apple only uses 2.4%. Samsung is so much more than a smartphone-maker. It is a conglomerate, a manufacturer, and the world's largest chip-maker. It makes many of the components that go into its smartphones giving it a cost advantage and allowing it to be much more flexible in terms of what it produces and when.  Apple: Apple, though it has a diverse, well-managed, and futuristic supply chain, relies on external partners, which can lead to delays and difficulties.

Strategic Recommendation Samsung currently does not own any software development companies Allocate a larger portion of Samsung's revenue to the acquisition of software companies Because software is not the companies strong suite, these software developments can create huge value and better experiences for consumers that Samsung is currently lacking.

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