In this report the analytical model that will be used to analyse the five key environmental drivers is PESTLE. This report will be including an analysis of Samsung Mobile’s macroenvironment. Samsung is a multinational conglomerate company, its headquarter located in Samsung Town, Seoul. Their vision is to inspire the world and create the future. The report will be explaining and analysing Samsung Mobile’s key environmental drivers which are Political, Economic, Socio-Cultural, Technological, Legal and Environmental factors.
Key Environmental Drivers:
Political factors can have a deep and direct or indirect impact on businesses. One of the Political factor that effects Samsung is the one of the direct impacts that political factors have on businesses is in the form of regulation or trade relationship between countries. For instance, if two countries have good relationship, then a business will have less problems doing business in the other country and vice versa. In some cases, if the relationship between the two countries isn’t that good the reasons could be that one country may find the business environment less conducive or profitable. If Samsung does not have good relationships with other countries they will be at a loss in that country as the country would not allow Samsung to make a lot of profit this could be emphasised by reducing the amount of manufacturing products, the number of branches in that country which will cause Samsung’s expansion in that country. One of the big factors is the Politics, this can affect the business in many ways one of which is that a political disruption can make a mess of the operation and supply chain which results is disrupted business. The reason of a business disruption or a business loss is due to political turmoil. Samsung’s business is spread across 80 countries and any kind of geopolitical turmoil in any of countries will result in a loss. For example, if there is a geopolitical turmoil in India, Samsung will be making less profits in India, which will lead into reduction in profits as India is one of the most populated country. Moreover, Terrorism can also affect Samsung as the fear of terrorism materializes in several areas. Samsung will be make less profits in these areas therefore all these factors can have a negative impact on Samsung Mobile. (Pratap, 2018). One of the strategic response that Samsung could do to prevent weak relationships with other countries is by ensuring they have discounts during their festival times which will show the country that they respect their beliefs. For example, In India Samsung could have discounts on their phones or sim contracts during Diwali and other major festivals that the country celebrates.
One of the biggest economic factor that could impact Samsung are the exchange rate in foreign countries. Currency exchange rate fluctuations could impact the company’s consolidated balance sheet, cash flows and income statement when foreign currencies are exchanged or translated to Korean Won. The company’s attempts to reduce the effect of exchange rate fluctuations through a variety of hedging activities may not be sufficient or successful, resulting in an adverse impact on its results. (Eds.a.ebscohost.com, 2018). Another economic factor that is critical for Samsung is that opening up markets in developing world has meant that Samsung has expanded its global footprint. However, this factor can affect the business as the ongoing global economic crisis has severely decreased the purchasing power of consumers in many developed markets forcing Samsung to seek money-making projects in the emerging markets. One of the crucial point is that the macroeconomic environment in which Samsung operates globally is beset with uncertainty and evaporating rapidly leading to the company having had to change its strategies accordingly. (Managementstudyguide.com, 2018). Another economical environmental driver that impacts Samsung is that their sales fell in some quarters in 2016 due to growing volatility in some economies, notably China, as well as in the turmoil in currency and financial markets. For companies like Samsung, the economic factor is one of the most important dimension as the more the states will develop the more chances there are for the business to expand which will lead them to open its new units in the newly developed zones. If a country has a positive GDP it will mean that people have more income and will be prone to buy the latest models of the phone. In this way the profit of the company increases and so does the expansion of the business globally. (Marketing Dawn, 2018).Economic Factors have a strong impact on international businesses like Samsung. One of the impact was when changes in the US monetary policy, higher volatility in the emerging stocks markets as well as constant fluctuations in the exchange rates, even the Korean economy faced a lot of difficulties like higher household debts and the restructuring of shipbuilding and steel industries. Despite these economic difficulties, Samsung had a huge sale of KRW 200.7 trillion. This emphasises that rising economic activity can be highly profitable for Samsung, whereas falling economic activity could be really bad. (Pratap, 2018)
Mintel is market research company based in London. According to Mintel there is a behavioural shift in the way customers are using smartphones that is progressively causing tablets to lose their Unique Selling Point. The rise of phablets which are smartphones bigger than 5 inches has meant that were more prone to use their phones as they would perform more complex and time-consuming tasks. These time-consuming tasks could be shopping online, playing games or watching a video. This had lead to cannibalisation as the phablets were taking over tablets, which explains why tablets sales have been declining in the last 2 years for phone companies like Samsung. (123writing.com, 2018). Socio cultural factors can also have a deep impact on business such as Samsung as changing trends can either lead to a rise in profits for one business or fall for another business. As these trends change they affect the sales of businesses. In terms of marketing socio-cultural has an important value as brands like Samsung have to take care of these social factors in their marketing efforts. (Pratap, 2018). The social environment is one of the factor that has an impact on operational businesses like Samsung. These effects consist of customs, practises and traditions which varies from one environment to another. Samsung has succeeded in overcoming the social challenges which are a big threat to the success of the company by constantly incorporating itself into new markets. Samsung has incorporated the approach of thinking globally while staying locally with the aim of keep socio-cultural factors into consideration that influence their business. Another socio-cultural factor that impacts Samsung is the rise in information age which has made the telecommunication industry in which Samsung operates to be more vital for people both in business and pleasure. Samsung needs to ensure they have the latest form of technology in their phones as the society is becoming more receptive to the advancements in technology, especially the smartphones. Measuring the smartphone adoption by age shows a better understanding of the primary targets of particular products. An example could be by looking at the highest number of smartphone users is between the age of 25 to 34 years old. The fastest growing age segments of the smartphone users are between 13 to 17 years old and the adults being more than 55 years old. (Academicscope.com, 2018)
Samsung is one of the names that comes into everyone’s mind when talking about the world’s leading innovation companies. Samsung have an aim and that is to stay ahead of the technological and innovation curve. However, they had a few problems recently when Apple accused Samsung for imitating the product design. The company was going through some serious Legal and regulatory inspection due to the accusation. This incident taught Samsung a lesson of doing the basics right is the key to success. (Contributor, 2018). One of the positive environmental driver for Samsung is that they have managed to stay ahead of their rivals in many of the new developments in smartphone technology as evidenced by the fact that Samsung was the first smartphone makers to banish power cords in favour of wireless charging capabilities in its devices. This lead them to beating its rivals such as Apple in terms of more features, versatility and adaptability. (123writing.com, 2018). One of the technological driver that has an impact on Samsung is the fact that all brands are in a race to adopt technology to attract and retain its customers and to cast a better impression than its competitors like Apple. Samsung is a technology company that makes products related to electronics, smartphones and other technological equipment like the Samsung Gear VR. In order to stay at the top of the competition they need to ensure they are investing in research and development to produce phones with unique and the latest features. (Pratap, 2018). Since Samsung is largely involved in consumer electronics, it is hard to separate technology from their operations. Companies like Samsung employing the use of technology is their ability to cut down on the operational costs and to improve the quality and the design of their operations. Over the years, Samsung have successfully advanced their technology and improved the manufacturing of their products and features which has increased their marketability. (Academicscope.com, 2018)
Legal driver can be risky for businesses like Samsung as they can cause a big and severe impact on the company. Samsung has to abide to the rules which can be from employment to environment and tax related laws. Samsung are so vigilant not to break any laws that they ensure their suppliers also follow the law and remain complaint in labour, operations and other areas. Any legal issues can be costly and issues including fines in any area can range in millions and cause huge losses to the business. This shows that businesses like Samsung can have a major and direct impact from any legal issues or negative factors and the consequences of these legal issues can be quite costly for the business. (Pratap, 2018). Since the spring of 2011 when Samsung and Apple are in a smartphone patent war, this started when Apple began to institute a legal proceeding against Samsung in patent infringement suit. By July 2012, there were 50 on-going lawsuits in more than ten countries which involved billions of dollars claimed between Apple and Samsung. (123writing.com, 2018).
One of the most impacting environmental factor that has affect Samsung is the Galaxy note fiasco. Samsung have been blasted by eco-friendly companies like Greenpeace for explaining how it will dispose the millions of Note 7 smartphones. If Samsung chooses to dispose all their Note 7 phones, it would create a huge amount of toxic waste and pollute the environment heavily. Therefore, Greenpeace have advised Samsung to recycle as many phones as possible to reduce the amount of toxic waste that will be produced if they disposed all the Note 7 phones. Its report highlights the heavy human and environmental costs associated with mining and producing the precious metals and other materials contained in the phones. (123writing.com, 2018). Consumers in this generation are getting more and more ethical and decide to choose brands that make products in a socially and environmentally responsible manner. Samsung needs to ensure they are aware of the need to make its products to fully satisfy the ethical chic consumer. This mean that Samsung needs to ensure they do not compromise on the working condition or the wages it pays to its labour who are engaged in the making of the phone. (Managementstudyguide.com, 2018). Samsung are trying to be as sustainable as possible as it has become a key focus area for businesses which aren’t just trying to save energy and minimise their carbon footprint but also to protect their environment. Samsung has also focused on managing water resources risks, managing and reducing energy consumption on their phones. They have also enforced a chemical substance management policy. Samsung has taken a lot of steps to ensure their sustainability. (Pratap, 2018)
The PESTLE analysis shows that there are some improvements that Samsung should consider. One of them is that Samsung needs to consider investing only in countries with increased political stability with aim of being environmental friendly as regions with political instability and political rivalry will threaten the business operations. On the other hand, Samsung should try to be aware of all the patents and copyright issues in order to prevent the risks of getting fine or getting involved in legal issues. In the economic driver, Samsung should consider the exchange rates and economic stability of every country they are investing in this is because investing a lot in a country where the interest rates are high and the economic stability is high, the company will be getting low returns on their investments, thus putting them at a loss. Another economic recommendation would be that Samsung should invest more in countries with low inflation rates and high employment rates as such environment results in increased purchasing power. In socio-cultural terms Samsung should segment their market and target the young adults aged between 13 to 17 years. (Academicscope.com, 2018).
To conclude this report, Samsung is arguably one of the worlds largest companies that mainly focuses on electronic products to their global clients. The PESTLE analysis determines the performance and activities of the businesses short-term and long-term basis. PESTLE is a business tool used to analyse the six external factors of the company’s situation. The recommendations are pretty straight-forward and Samsung should consider improving on those areas where they are not so good at. The analysis clearly indicates that Samsung are doing their very best to maintain themselves at the top of the market and trying to be sustainable by different policies and programs.