ASSIGNMENT COVER SHEET
UNIVERSITY OF SUNDERLAND
BA (HONS) BANKING AND FINANCE
Student ID: 159130250/1
Student Name: BÙI THỊ THANH TRANG
Module Code: SIM337
Module Name / Title: Contemporary Developments in Business Management
Centre / College: Banking Academy of Viet Nam
Due Date: Hand in Date:
Assignment Title: Individual Assignment
Students Signature: (you must sign this declaring that it is all your own work and all sources of
information have been referenced)
BÙI THỊ THANH TRANG
1
CONTEMPORARY DEVELOPMENTS IN BUSINESS AND MANAGEMENT
SIM337
Prepared by: BÙI THỊ THANH TRANG
Student ID: 159130250/1
Submission Date:
_______________________________________________________________
Number of words: 3,500 words
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EXECUTIVE SUMMARY
External factors have always received crucial attentions from scholars and
enterprises’ managers. The focal point of this paper is to analyzing
environmental components underlying in the business of Samsung, one of the
leading manufacturers in consumer electronics. In the first part, there will be a
brief overview of four of external factors belonging to South Korea. The second
section looks at a specific influencing factor called Research and Development.
Analysis on how R&D affects Samsung’s practices and decisions is also included
in this latter part. Lastly, recommendations for branding tactics will be discussed.
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Table of Contents
I. INTRODUCTION......................................................................................................................3
II. OVERVIEW OF PRIMARY EXTERNAL INFLUENCES.................................................3
2.1. Economical condition...........................................................................................................4
2.2. Political factors.....................................................................................................................5
2.3. Technological innovations....................................................................................................6
2.4. Sociological trends................................................................................................................6
III. THE IMPACT OF RESEARCH AND DEVELOPMENT.................................................7
3.1. Some views on Research and Development.........................................................................7
3.2. Research and Development and its relevance to policies and decision making in Samsung8
3.3. Effectiveness evaluation of Samsung’s response to the market...........................................9
3.4. Recommendations for further improvement.......................................................................11
IV. CONCLUSION......................................................................................................................11
REFERENCES............................................................................................................................12
APPENDIX...................................................................................................................................15
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I. INTRODUCTION
For decades, enterprises have found themselves struggling with a fast-paced environment which
is influenced by more and more versatile factors rather than stable ones. Whether it is the largest
international corporations or the smallest unit of a business, a thorough comprehension of
external contributors to the market is required for those who want to make more effective
decisions in order to compete successfully with rivals and survive in the long run. As a result,
there have been several researches on the impacts of external factors on firms’ operation, which
seems to be never of abundance for scholars and practical managers as well .One of the most
widely used tools to describe macro-factors is PESTLE Analysis where Politics, Economy,
Society, Technology, Legality and Environment are taken into consideration (FME, 2013).
Another model should also be mentioned is Porter’s Five Forces, which is usually used to assess
possible opportunities and risks in a market (FME, 2013). In order to clearly demonstrate the
essence of those external factors, we would interpret the case study of Samsung governed in
Korea, the mother country, as the overall example. Unlike most of companies which fail to
transform in time with environmental movements, Samsung is considered to gain a certain
number of successes from seizing the opportunity of the domestic and global market’s volatility.
Starting as a South Korea family owned trademark, Samsung has currently earned the preference
throughout many countries in the world. As Samsung has operations of 156 subsidiaries and
branches across continents, a particular market should be taken into account so that impacts of
primary external factors might be properly studied. Korea is chosen to be the subject field of this
paper.
II. OVERVIEW OF PRIMARY EXTERNAL INFLUENCES
Despite the fact that there is an enormous range of factors involved in the market, the paper
emphasizes on the combination of PESTLE Analysis and Porter’s Five-Force Model to draw a
general picture of four main dominant factors contributing to the transformation of Samsung:
economic influences, political policies, technological innovations and sociological trends.
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2.1. Economical condition
There is no doubt that strong economies facilitate a favorable environment for a business to
operate. Theoretically, economic factors consist of growth rate, inflation rate, interest rates,
taxation charges and exchange rates.
South Korea, commonly known as the Republic of Korea, has become one of developed
economies in Asia and the growth of the country in every aspect since 1962 is regarded as truly
notable (Harvies & Pahlavani, 2006). Korea’s rapid economic development has been strongly
driven by high rates of domestic savings as well as investments. One of the strongest focuses of
the country is education, which enhanced the proportion of university students toward among the
highest in the area. In 2005, South Korea had a GDP of more than $637 billion with the average
income per capita of above $13,200 (IAEA, 2009). These large figures suggested a solid
recovery from the crisis in 1997 and 1998, which is reported to be faster than most other Asian
countries. In the fourth quarter of 2014, the Republic of Korea experienced a rise of 0.4% in
GDP in comparison to the previous quarter, which is at the same level of Japan (Kapitall, 2015).
Apparently, Korean favorable economy in recent years lays a firm foundation for national
income growth to grow. According to Statistics Korea, the 2014 gross national income of Korea
was reported to be 44 times larger than North Korea whose rate was 34.23 trillion Won (Yonhap,
2015). This increase in national income growth may boost demands among citizens for
Samsung’s products, meaning Samsung’s revenues are expected to stay increased.
Korean currency is one of the major factors that lay a great impact on Samsung’s revenues. For
example, Won appreciation caused a plummet by 7.2 trillion Won in the second quarterly profits
in 2014 (The New Economy, 2014). This can be explained by the fact that Samsung is an
international enterprise, and hence, the cash flows or gross revenues in Won may be heavily
affected by other currencies in terms of exchange rates. In March, 2015, the Bank of Korea
decreased interest rates by 0.25%. This move enabled Won to witness a two-week fall, followed
by a bounce back to the former exchange rate against dollar. Generally speaking, it can be said
that Won is relatively strong, which turns the green light toward Samsung to benefit from the gap
value between Korean currency and production based countries. Strong Won currency suggests
that the inflation rate in Korea is usually kept at relatively low level. In 2015, the inflation rate
was estimated to be 0.71% as compared to 2014 (World Bank, 2016). This level of inflation is
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agreeable with Samsung’s expansion as wage-increasing demands from employees are prone to
be moderate; the contrary occurs when there is a high inflation rate.
2.2. Political factors
Regarding to politics, a number of components including government’s attitude towards the
industry, political stability or even the risk of military invasion potentially affect Samsung either
directly or indirectly. Korea is even called “The Republic of Samsung” (Harlan, 2012), proving
the significance of Samsung’s current prosperity toward the country to some extent. Thanks to
the government policies which emphasize on research and development, green technologies,
technology convergence and value-added services have been developed. On the other hand, non-
tariff barriers imposed by the South Korean government along with several procedure rules,
standards set on import quality and quotas for imports have made it more difficult for foreign
countries to enter the market. Meanwhile, South Korean exports’ quantity seems to be more
substantial. As an instance, European car brands only managed to sell a total of 15,000 vehicles
with the revenue of approximately $650 million in 2007; nonetheless, South Korean automakers
experienced an export quantity of 74,000 cars to Europe, generating six- time revenue as much
as the former’s (Speer, 2008). Such restrictions have posed positive influence on the
development of Samsung when domestic consumers are prone to prefer domestic products rather
than spending more money buying foreign ones of the same quality.
Though Samsung’s business has played an important role in boosting the economic growth, the
company has been found to engage in various political issues in Korea. By 2005, there were a
number of setbacks involved in the company, leading to a huge negative reputation in public. In
regards of Financial Industry Structure Law of South Korea, Samsung initially expressed the
opposition against the law reinforcement throughout 2004. First, the courts blamed the top
managers of Everland, a unit whose capital is dominated by Samsung, for issuing convertible
bonds at a deflated price to Lee Jae-young, the son of Samsung Chairman in 1996. The Chairman
then was associated with a corruption scandal investigation. Under strong pressure of public
criticism, the Chairman made an announcement to donate his pocket 800 billion Won to the
society so as to ease the negative wave. On one hand, Samsung withdrew the confrontation
toward the enacted law on Financial Industry Structure (Sook, 2008).
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2.3. Technological innovations
It can be said that the advancement of technology has been the determinant of the overall growth
in South Korea. Dated back to more than forty years ago, South Korea was merely known as an
agriculture country in the global map. It has been like a miracle that within only few decades, the
Republic of Korea has transformed its predominant factor into industrialization and gained
noticeable achievements in technology. In 1970s and 1980s, South Korea started to launch some
introduction models imitated from the developed nations. Nowadays, its technology has earned
the reputation as self-development and innovation (Viotti, 2002). There is no doubt that high-
tech products such as semiconductors, consumer appliances, precise chemistry, etc. As stated by
Hausmann and Rodrik (2003), technology is regarded as the core feature to develop a nation’s
economy. In other words, the prosperity of a country and the advancement of the technology
would never get separated.
Thanks to technological innovations, South Korea began to deploy exports-oriented strategy.
This is because the country is heavily dependent on the external markets when the internal
resources are scarce. Exports may encourage resources to be more efficiently exchanged rather
than investments in mass production, which does not manipulate comparative advantage within
the resource-restricted condition. Since exports-based economy was implemented, there has been
a remarkable rise in gross national product (GNP) by roughly $10,843 in the period 1962-2001
(Kwon, 2010). Furthermore, exports in high-tech products have appreciated year by year at a
great growth rate. This is much related to Samsung’s yearly products. The combination of the
technology-based economy and the national strategy was likely to encourage the company to go
globalized at the very first stage. Undeniably, there is an interdependence relationship between
the growth of South Korea and Samsung: once Samsung’s technology is boosted, South Korea
tends to perform more efficiently and vice versa.
2.4. Sociological trends
Theoretically, sociology refers to the study of “how the human society is organized and how
people react” (Timms, 2011). It can be said that the perception among Koreans experienced a
considerable switch, and hence, created a unique national image. At first, the Korean wave was
just considered to be a sudden cultural phenomenon to specific regions. However, the wave was
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so strong that it exceeded expectations to leave a certain impact on the global youngsters. Unlike
its counterparts, South Korean culture make new generations more familiar with commercial
driven campaigns by a nationalistic perspective. With such an attitude toward their national
image, Koreans tend to prefer domestic products, among which are Samsung consumer
appliances. Doobo (2007) argued that “the appeal of Korean pop culture to Asians is especially
meaningful for the Korean government since the country’s national image has not always been
positive among neighbor countries. Several scholars and researchers have questioned the
primary determinants of the popularity of Korean culture. Interestingly, some findings suggest
that Korean entertainment shows appeal to Asian audiences as a result of some culture
familiarity traits (Lee, 2006). When their favorite celebrities use a trademarked product,
audiences are also prone to imitate. Besides, Samsung is very good at manipulating
advertisements represented by famous people in marketing and publicizing their products. Thus,
it is understandable that current sociological trends have made it more favorable for Samsung to
dominate the domestic market.
III. THE IMPACT OF RESEARCH AND DEVELOPMENT
3.1. Some views on Research and Development
Research and Development, or usually known as R&D is of essential importance to the survival
of a firm engaging in technology like Samsung. It is normally suggested by economists that
innovation is a production process in which a grand new product is transformed from available
resources, combined with knowledge (Elg, 2014). R&D is said to be efficient when the
proportion of outcomes in form of patents, GDP growth, and so on over the total investments is
maximized. Surprisingly, over 90% of GDP in European nations generated in activities of the
OECD (Organization for Economic Corporation and Development) was classified as emerging
from low or medium-high technologies (Hirsch-Kreinsen et al., 2005). In fact, innovation is
supposed to happen in high tech industries only. However, the concept of “high-tech” has varied
over time. In early 1990s, the definition was described as how much the industry invested
globally in R&D relative to the value added (Elg, 214). This explanation was unlikely to be
relevant to modern industries. Furthermore, new technologies do not tend to rely of the arising of
“flashes of genius” (Arthur, 2009). Instead, they are derived from a long term process of
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investments and combinations of resources. The ultimate significance of innovations depends
greatly on how well the interaction with the outside world matures. Oskarsson (1993) pointed out
another critical statement: As products become more sophisticated, the portfolio of technologies
in a single product increases and so does the quantity of competences required to manufacture
and distribute them. In addition, large enterprises are declined to gain advantages over small ones
when market preferences become more transparent and resources can be emphasized on wining
market share and streamlining production. In 1999, Henderson and Clark related this to the issue
of the consistency between needed competences and existing ones.
From time to time, the relationship between innovation and research is more and more complex.
Science based industries including biotechnology and microelectronics could not have evolved
without either modern technological instruments or scientific comprehension. The relationship
between research and innovation was once illustrated as the interaction between two parallel
processes each of which possess its own goals, evaluation criteria and social contexts (Kline &
Rosenberg, 1986). In general, the roles of R&D are multiple in the long run when the needs for
human resources may decrease and the possibility of pioneering the market is higher.
3.2. Research and Development and its relevance to policies and decision making in
Samsung
Research and Development in Korea
In 1950s, South Korea was one of the poorest nations in Asia. However, today South Korea is
among the countries which are healthily economic. As mentioned above, technological
applications are carried out massively in Korea according to the government’s priorities. With
the enactment of the Technology Transfer Promotion Act in 2000, the booming of technology
transfer and commercialization activities started. This reinforcement allowed universities and
research institutes to perform technology exchange. The national R&D costs made up $19 billion
and $22 billion in 2003, 2004 respectively (KTTC, 2005). This estimate was reported to almost
reach the same level of developed countries. Besides, during the period 1998-2000, South Korea
ranked third in yearly average number of retention patent (KTTC, 2005). In 2004, the number of
World PCT (Patent Cooperation Treaty) experienced a dramatic rise by 20% from previous year,
ranking seventh in the international board. The government’s missions have been served as huge
emphasis on technology stimulation and diverse programs provision for commercializing
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national technology. A number of programs were implemented in South Korea to encourage
technological development among nationwide enterprises. The technology transfer subsidy
program enabled technology to be transferred from research centers, universities, etc across
businesses. The patented technology transfer promotion program served to supply loans for a
part of the funds required to be merchandized within 3 years.
Research and Development in Samsung
According to a new survey, Samsung Electronics is recently reported to be the second largest
R&D investor in the world and also the largest in the consumer electronics industry (Triggs,
2014). The clearest fact about Samsung’s mass investments in R&D should be the increase by
27% in the department’s personnel since 2010 (Triggs, 2014). The costs spent on R&D
accounted for 6.4% of the overall 2013 sales revenues in Samsung. Moreover, Samsung’s R&D
network spans 24 latest technology updated centers all over the world so as to maximize the
utilization of local resources (Samsung website). As noted on the official website, R&D
performs in three-layer platform.. The Samsung Advanced Institute of Technology (SAIT)
determines growth engines for the prospective, ensures technology competitiveness and
superintends the management of technology including patents. The second layer comprises R&D
centers divided according to division. These centers’ main function is to deliver the most
promising long-term results. The third layer consists of design centers where divisional product
development teams are in charge of product commercialization for short term targets. In 2014,
according to the annual report of Samsung Electronics, the company invested KRW 15 trillion in
R&D in center expansion and talent recruitment so as to lead the industry (2014).
3.3. Effectiveness evaluation of Samsung’s response to the market
Thanks to the prioritized investments in R&D, Samsung has earned great reputation as the
leading provider of qualified products throughout the world. Samsung is one of the world’s most
diversified companies, whose products and services range from television, semiconductors,
smartphones, to fashion, advertising, construction. In the TV market, Samsung Electronics
ranked number 1 as the global TV market share holder, gaining 28.3% across product lines in
2004 (Samsung Electronics Annual Report, 2014). Currently, Samsung has accounted for nearly
a fifth of the LCD TV market. More significantly, in the computer sector, 2014 witnessed a big
success of Samsung when the company passed HP to become the world’s largest technology firm
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with total revenues of approximately $120 billion. In the same year, Samsung contributed 8% of
South Korea’s GDP (White, 2011). The market for mobile phones seems to be one of the most
profitable sectors for Samsung when the company breaks down its business in two major
segments. The first segment is bare-bones, ultra-cheap mobile phones. The second, and the more
common as well, focuses on the technologically advanced types, usually known as smartphones.
According to IDC, Samsung retained the number one leadership with a 21.4% share in the
second quarter of 2015. In Korea, the domestic market, Samsung is far ahead of Iphone. On
average, one over 10 South Koreans has an Iphone. Although Samsung has a product line of
Galaxy to compete directly with Apple’s Iphone, Samsung remains to be the single largest
supplier of semiconductor hardware for Iphones. Therefore, it is still undeniable that Samsung is
on half way of dominating the world of electronics when other firms’ mobile manufacturing
heavily depends on Samsung’s semiconductors. In the world of this small sector, Samsung
managed to gain the reputation as the world’s largest memory-chip producer. Especially, when
you come to South Korea, virtually all of your needs seem to be met by Samsung. The product
lines are broad from Medical Center to Life Insurance.
It is often believed that the more a firm invests the more profits it is likely to gain. This statement
seems to be true to Samsung. From those figures above, the policies deployed by Samsung have
proved to bring about positive effects. First and foremost, by mass investments in R&D,
Samsung has the opportunity to exploit further competences and resources in order to gain a
diverse product portfolio for different segments. For every specific market, Samsung tends to
diversify the products vertically and horizontally. As the nature of technology, it is never stable
as new customer generations require the latest updated versions of technology. Therefore, fully
taking advantage of R&D is one of the success factors of Samsung. Also, by diversifying
products, Samsung is able to touch the smallest and the most distant corner of the world to make
the brand more familiar with daily life. In addition, R&D does not only offer various versions of
products but also boosts the quality of products, which is of crucial importance in this intensively
competitive market. When goods have good qualities, they will be beneficial in terms of paying
back premium profits since they assist more values. Fourthly, it is clear that R&D is vital for a
firm to survive in this high-tech industry. When it comes to trends, customers prefer to hold the
latest version in hand to serve their own purposes. Last but not least, R&D investments have the
capacity to reduce manufacturing costs and enhance profit margins. When a new session of
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assembly line is invented, there would be fewer demands for human resources to be involved in
the production, which noticeably cuts a great amount of fixed cost. By that way, costs will have
the tendency to rely on the volumes of sales, meaning more sales result in more variable costs,
and free cash flows may be more available for other activities. From this point, economies of
scale and scope are well applied by Samsung. That might be the reason why Samsung’s products
tend to be featured with medium to high quality but at lower prices. Optimal cost efficiency is
formed in this way.
3.4. Recommendations for further improvement
Although Samsung is doing a great job in the market competition, there are still some areas that
need improvements so that the company’s history might be more fruitful. Corporate Social
Responsibility might be a good option for Samsung to compete more effectively besides R&D.
Customers are prone to pose positive attitudes towards firms that are concerned about social
contributions. It is not only beneficial to South Korea, the mother country, but also a good
channel of marketing the brand. Another good tactic should be environmentally-oriented.
Samsung should also develop products with some features related to environmental protection.
For example, a smartphone generating solar energy to run might help prevent nonrenewable
resources to run out.
IV. CONCLUSION
All in one, a business might be positively or negatively affected by external factors.
Understanding such components is always advantageous in order to make sound decisions and
perform effectively in this competitive market. Samsung plays a considerable part in boosting
South Korea’s overall economy. In returns, the national environment is also supportive to the
competitiveness of the company against other domestic and foreign brands. There are four major
factors taken into account in the Republic of Korea that puts significant influences on the
development of Samsung. They are economic growth, political platform, technological
application and sociological contribution. More than that, by analyzing R&D in technology, we
have a better comprehension of how Samsung achieved such wonderful accomplishments in its
daily operation. In purpose of brand improvements, Corporate Social Responsibility and
Environmentally-oriented products are recommended.
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APPENDIX
SAMSUNG CORPORATE PROFILE
Established as a small export business in Taegu, South Korea in 1938 by Byung-Chull Lee with
30,000 Won, Samsung has evolved to become one of the pioneers in electronics market.
Samsung specializes in digital appliances and media, semiconductors, memory and system
integration.
General Vision: Samsung is devoted to developing technological innovations and efficient
processes and enriching people’s life to become a digital leader.
Vision in 2020: “Inspire the World, Create the Future”
Philosophy: providing talent and technology for the creation of superior products and services to
better off the global society.
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