PESTLE Analysis of Samsung. PAPER: 1/2/4/11

PESTLE Analysis of Samsung

Introduction

Samsung is a global conglomerate that operates in the “White Goods” market or the market for consumer appliances and gadgets. The company that is a South Korean family owned business has global aspirations and as the recent expansion into newer markets has shown, Samsung is not content with operating in some markets in the world but instead, wants to cover as many countries as possible. Therefore, the focus of this article is on the external environmental drivers of Samsung’s strategy.

Political

In most of the markets where Samsung operates, the political environment is conducive to its operations and though there are minor irritants in some of the foreign markets like India, overall Samsung can be said to be operating in markets where the political factors are benign. However, in recent months, it has faced significant political headwinds in its home country of South Korea because of the country’s tensions with North Korea wherein the company has had to take into account not only the political instability but also the threat of war breaking out in the Korean Peninsula. Apart from this, Samsung faces political pressures in many African and Latin American countries where the political environment is unstable and prone to frequent changes in the governing structures. Of course, this is not yet a major cause for worry as the company has more or less factored the political instability into its strategic calculations.

Economic

This dimension is especially critical for Samsung, as the opening up of many markets in the developing world has meant that the company can expand its global footprint. However, this dimension is also a worry since the ongoing global economic crisis has severely dented the purchasing power of consumers in many developed markets forcing Samsung to seek profitable ventures in the emerging markets. The key point to note here is that the macroeconomic environment in which Samsung operates globally is beset with uncertainty and volatility leading to the company having had to reorient its strategies accordingly. The saving grace for the company is that it has adjusted rather well to the tapering off of the consumer disposable incomes in the developed world by expanding into the emerging and the developing markets. Indeed, this is the reason Samsung has begun an aggressive push into the emerging markets in the hope of making up for lost business from the developed world.

Socio-Cultural

Samsung is primarily a South Korean Chaebol or a family owned multinational. This means that despite its global footprint it still operates from the core as a Korean company. Therefore, there are several aspects to its global operations some of which include adapting itself to the local conditions. In other words, Samsung being a Global company has had to act locally meaning that it has had to adopt a Glocal strategy in many emerging markets. Apart from this, Samsung has had to tailor its products to the fast changing consumer preferences in the various markets where it operates. The key point to note here is that Samsung operates in a market niche that is strongly influenced by the lifestyle preferences of consumers and given the fact that socio cultural factors are different in each country; it has had to reorient itself in each market accordingly.

Technological

Samsung can be considered as being among the world’s leading innovative companies. This means that the company is at an advantage as far as harnessing the power of technology and driving innovation for sustainable business advantage is concerned. This has translated into an obsessive mission by the company to be ahead of the technological and innovation curve and a vision to dominate its rivals and competitors as far being the first to reach the market with its latest products is concerned. however, as we shall discuss later, this has also resulted in the company cutting corners with its imitation of the legendary Apple’s product design and this has brought legal and regulatory scrutiny and troubles for the company. There is a lesson here for other technology driven companies from Samsung’s experiences and it is that no matter how fast you are to reach the consumer in this age of Big Bang Disruption, doing the basics right is still the key to success.

Legal

As mentioned in the last section, Samsung has had to face heavy penalties for its alleged imitation of the Apple’s iPad and iPhone and this has led to the company taking a beating as far as public perceptions and consumer approval of its strategies are concerned. It remains to be seen as to how the company would wriggle out of the legal maze that it finds itself in the developed markets because of the various lawsuits.

Environmental

With the rise of the ethical consumer who wants his or her brands to source and make the products in a socially and environmentally responsible manner, Samsung has to be aware of the need to make its products to satiate the ethical chic consumer. This means that it has to ensure that it does not compromise on the working conditions or the wages it pays to its labor who are engaged in making the final product.

Conclusion

The preceding analysis clearly indicates that Samsung has its task cut out for itself as it navigates the treacherous global consumer market landmine. Indeed, as the company prepares to expand its global footprint, the stakes could not have been higher in a recessionary era and an uber competitive technological market landscape.

SWOT Analysis of Unilever. PAPER: 1/2/9/11

SWOT Analysis of Unilever

Introduction

Unilever operates in nearly 190 countries around the world and has been a traditional paragon of excellence and quality in the Fast Moving Consumer Goods sector. The company derives its competitive advantage from its global footprint and its track record of enhancing value for the consumers around the world. Even in the current recessionary environment, it has managed to grow at a respectable pace though as we shall discuss latter, Unilever cannot afford to ignore the emerging threats from a wide range of global, regional, and local players. Apart from this, as the succeeding SWOT Analysis makes it clear, the battle for the emerging markets is likely to escalate into a no holds barred competition with a race to the bottom ensuing between the global giants like Unilever and Proctor and Gamble and a array of local players.

Strengths

• Unilever operates in nearly 190 countries around the world and hence, has a global footprint combined with top of the mind brand recall among consumers worldwide.
• It has a deep and broad portfolio of brands and a diversified product range, which makes it uniquely, positioned to tap into the changing consumer preferences across the world.
• Its Research and Development initiatives are heavily funded and manage to bring to the market innovative and cutting edge products in tune and in line with consumer preferences.
• Unilever has a distinct competitive advantage over its nearest competitor, Proctor and Gamble because of its flexible pricing and expertise in distribution channels that manage to reach the nook and the corner of the globe.
• The company finds its strengths in leveraging the economies of scale arising from its breadth of operations as well as synergies between its many manufacturing facilities, which totaled 270 locations around the world at last count.
• Unilever combines global thinking with local execution, which means that it pursues Glocal strategies that let it win the hearts and minds of consumers who would like to use its products that are globally famous yet retain a distinct local flavor.

Weaknesses

• The biggest weakness that Unilever faces is that it operates in an uber competitive market where the other global giants like P&G and Nestle in addition to a host of local players challenge its dominance at every turn and raise the stakes in the Trillion Dollar FMCG (Fast Moving Consumer Goods) space.
• The other weakness is that its products can easily be replaced with substitutes especially in the emerging markets in Africa and Asia where the rural consumers in the hinterland often use traditional and natural alternatives to the products that Unilever markets.

Opportunities

• With the advent of globalization and the proliferation of global media, consumers in the emerging markets are aspiring to western lifestyles and this means that Unilever has a tremendous opportunity waiting for it as it taps into this large and diversified consumer base that wants to join the league of westerners in taste and preferences for consumer goods.
• Apart from that, capturing the “Newly Affluent Trillion Dollar Consumers” in China and India means that it has a golden opportunity to leverage this huge and growing consumer base, which often tries to imitate and mimic the consumerist preferences of the material west.
• The emergence of the health conscious consumer in the developed world means that Unilever can seize the opportunity to market to this segment with its existing and yet to be launched product range that is specially geared for the health conscious consumer.
• Unilever has a good track record of social and environment responsibility and with the emergence of the ethical chic consumer who like to buy and consume products and brands that are responsibly made and sustainably complete.

Threats

• The ongoing global economic crisis has severely dented the profitability of many FMCG companies and Unilever is no exception. With the shrinking of the disposable incomes of the global consumer, they are buying less and insisting on more value for their money or “more bang for the buck”. This means that Unilever faces the threat of diminished revenues and increasing costs, which is like a “Double Whammy” to its top-line, and bottom-line.
• Though we had mentioned that Unilever succeeds and scores over P&G in the CSR or the Corporate Social Responsibility aspect, the increased awareness among the global consumers has turned the harsh glare into each and every strategic move that the company makes. Some practices of the company have been criticized which means that Unilever has to ensure that it sustains and maintains its focus especially when the spotlight is on it.
• As mentioned earlier, Unilever operates in a market segment where local products and alternatives to its brands proliferate especially in the emerging markets and hence, it faces a threat from smaller and more nimble local upstarts who can provide more value for lesser money without the associated costs that global giants like Unilever incur.
• The entry of Asian multinationals into the global arena has upped the ante for Unilever and raised the stakes in the global game for dominance in the FMCG market segment. This means that Unilever faces the prospect of having to battle not only the recessionary blues but also emerging threats from this new age and new breed of competition from Asian conglomerates that are beginning to spread their wings internationally.

Conclusion

Unilever has been in the business of consumer fulfillment for many decades and hence, we are confident that it can tide over the present gloomy conditions in the FMCG segment. Having said that, we conclude the article with a cautionary note of not taking the threat from the Asian FMCG majors lightly as they understand the continent better and at the same time are mastering the intricacies of the global marketplace

Business Strategies to Beat the Downturn. PAPER: 2/10/11

Business Strategies to Beat the Downturn

Introduction: The Effect of the Downturn and How Companies Can Cope

The ongoing global economic crisis has impacted most of the companies in the world as they have to not only reckon with falling sales, stagnating demand, oversupply, and inflation all at the same time mean that businesses are operating in “chaotic” and “uncertain” environments. Further, with globalization making it possible to produce where it is cheapest and sell where the profits are more, western as well as eastern companies are realizing that it is an entirely new ball game altogether. Therefore, they need to put in place strategies that would enable them to compete on fair basis with firms from all over the world.

The typical response of businesses during recessions is to lay off workers, accumulate cash and retain liquidity, and put off expansion plans until the business environment improves. While these are certainly understandable strategies, our contention here is that these strategies are counterproductive.

For instance, downsizing might seem attractive because it enables businesses to cut costs. However, the companies have to realize that once they downsize, the best along with the worst of the employees leave the company. The latter because they are laid off and the former because they see that in future they might be the targets. Of course, the companies can retain the best performers by increasing their compensation but this strategy is pointless when the whole objective is to cut costs.

Next, research has shown that American companies are sitting on a cash hoard, which means that they have accumulated enough cash reserves just in case they face a liquidity problem in the same manner in which banks found themselves in the aftermath of the Great Recession of 2007 when liquidity dried up and nobody was lending to anybody. Again, this is legitimate as long as the companies do not keep cash without making use of it productively. In other words, if the firm is simply having lots of cash in hand, it is akin to individuals keeping money without generating returns. Moreover, this strategy also means that recovery is delayed and no matter how hard the government tries, businesses simply do not want to spend cash.

Third, putting off expansion plans is a good idea as the uncertainty in the external environment means that businesses should wait for a sunnier day. However, in cases where the company has to enter new markets, putting off expansion might be a bad idea as nimble and agile competitors can steal a march on them. Moreover, with so much of emphasis being placed on innovation and inventiveness, putting off expansion might backfire as competitors and startups with innovative and game changing ideas might outperform the market and which leads to folding up of existing firms.

Therefore, it is the case that businesses must rethink their strategies during economic downturns. A possible solution for them would be to ramp up their IT infrastructure and invest more in cutting edge technology so that they leverage the synergies from the integration of disparate and discrete business processes as well as actualize the advantages from the economies of scale. For instance, when IT is leveraged to the fullest, the result is often an increase in productivity as well as a benefit that accrues because of more efficiency. Further, IT enables companies to produce more and ramp up the volumes as it is obvious that machines can do more than humans do and at the same time, work tirelessly.

Of course, one might point out that this strategy leads to obsolescence of workers and entails downsizing. We consider this inevitable as the processes of creative destruction that are inherent to capitalism means that the old changes into the new and that the only constant in the world is change which is relentless and hence, IT and innovation are the buzzwords for any actualization of business strategies during downturns.

Synergies, Integration, Ocean Strategy, and Cost Cutting

We have discussed how IT and innovation can help businesses during downturns. Similarly, through the use of these game changers, businesses can also integrate vertically and horizontally as well as venture into new markets (or oceans that are blue meaning that they are yet to be fished in contrast to red oceans that are already saturated). As cost cutting has been touched upon briefly, we return it to point out that IT and innovation along with integration and expansion save costs from the holistic approach that we suggest here. The point here is that businesses must think out of the box to deal with economic downturns and this means that they cannot rely on old models and discarded theories in their endeavor to remain profitable during bad times as well as good times.

Vertical integration refers to the integration of the entire value chain from procurement to after sales and including processing of raw materials, producing finished products, marketing them, enabling customer service, and closing the feedback loop. An example of a global conglomerate that is vertically integrated would be the Reliance group in India that owns all the steps in the oil and gas value chain right from exploration and drilling, to refining and processing, and ending with retail outlets which sell the product.

Horizontal integration refers to integrating breadth wise meaning that businesses can venture into blue oceans through merging their core competencies with that of aligned businesses. for instance, the TATA group in India has ventured into disparate and discrete businesses as varied as IT and steel, which means that using the core competency of sustainable and profitable business strategies, their aim, is to ensure that they make profits even during economic downturns by following their business philosophy.

The point here is that instead of just sitting on hoards of cash waiting for the business environment to improve, businesses can proactively actualize strategies that are in line with the points made above. The key aspect to note here is that businesses ought to shed their conservative mindset especially during recessions and only by recognizing the fact that the world waits for none that they can ensure that they are not left behind. Moreover, the other imperative here is that for businesses to remain competitive during downturns, they need to embrace the chaos instead of running away from it.

Ride the Recession: The Way Ahead for Businesses

We have discussed the various strategies that businesses can employ during economic downturns. Of all the strategies discussed, the common theme around them is innovation. Therefore, by recruiting visionaries and game changers, businesses can ensure that they keep ahead of the competition and they can also ensure that their existing employees are sufficiently motivated to self actualize themselves. To do this, they need to have innovative HR (Human Resource) policies that encourage out of the box thinking, make their employees become inventors, and innovators in their own right, and make the companies get ahead of the curve.

Further, by hiring the best in the field and linking their compensation to performance, companies can ensure that their employees are a source of sustainable competitive advantage. As recent trends in HRM show, companies that invest in their people during downturns are more likely to be profitable when compared to those that simply downsize just for cost cutting reasons alone.

This means that companies must ride the recession instead of waiting for someone or something to pick them up and even if it means that they ride alone in terms of being the early movers, there are benefits from this as the saying that the early bird catches the worm is very apt metaphor here. Apart from this, even if they have to take the slow route initially, they must remember that once they conserve the energy, building momentum later on becomes easy, and hence, once the green light is on as the market improves; they are in the driver’s seat, which means that they can accelerate easily.

Conclusion

A the risk of being repetitive, we cannot but overemphasize the importance of innovation and inventiveness. These qualities or traits of successful companies indicate that those with the right mindset win and those whose arteries are clogged because of inertia and apathy find that they cannot walk fast enough let alone run to outpace the competition. In concluding this article, it is the case that economic downturns are temporary whereas businesses are permanent. Therefore, if businesses suffer setbacks due to temporary reasons instead of outliving their peers, they have only themselves to blame.

Social Responsibility. PAPER: 2/10/13

Social Responsibilities of Managers

Social responsibility is defined as the obligation and commitment of managers to take steps for protecting and improving society’s welfare along with protecting their own interest. The managers must have social responsibility because of the following reasons:

1.	Organizational Resources - An organization has a diverse pool of resources in form of men, money, competencies and functional expertise. When an organization has these resources in hand, it is in better position to work for societal goals.
2.	Precautionary measure - if an organization lingers on dealing with the social issues now, it would land up putting out social fires so that no time is left for realizing its goal of producing goods and services. Practically, it is more cost-efficient to deal with the social issues before they turn into disaster consuming a large part if managements time.
3.	Moral Obligation - The acceptance of managers’ social responsibility has been identified as a morally appropriate position. It is the moral responsibility of the organization to assist solving or removing the social problems
4.	Efficient and Effective Employees - Recruiting employees becomes easier for socially responsible organization. Employees are attracted to contribute for more socially responsible organizations. For instance - Tobacco companies have difficulty recruiting employees with best skills and competencies.
5.	Better Organizational Environment - The organization that is most responsive to the betterment of social quality of life will consequently have a better society in which it can perform its business operations. Employee hiring would be easier and employee would of a superior quality. There would be low rate of employee turnover and absenteeism. Because of all the social improvements, there will be low crime rate consequently less money would be spent in form of taxes and for protection of land. Thus, an improved society will create a better business environment.

But, manager’s social responsibility is not free from some criticisms, such as -

1. High Social Overhead Cost - The cost on social responsibility is a social cost which will not instantly benefit the organization. The cost of social responsibility can lower the organizational efficiency and effect to compete in the corporate world.
2. Cost to Society - The costs of social responsibility are transferred on to the society and the society must bear with them.
3. Lack of Social Skills and Competencies - The managers are best at managing business matters but they may not have required skills for solving social issues.
4. Profit Maximization - The main objective of many organizations is profit maximization. In such a scenario the managers decisions are controlled by their desire to maximize profits for the organizations shareholders while reasonably following the law and social custom.

Social responsibility can promote the development of groups and expand supporting industries.