SAMSUNG PESTEL ANALYSIS

Samsung is a South Korea based firm that makes, sells and markets smartphones, semiconductors, consumer electronics and other products. It has achieved the leadership position in the smartphone sector and has grabbed the largest market share in this sector based on the number of smartphone shipments. Samsung has a strong position in the American markets where it is rivaled by Apple, Intel, Lenovo and others.

Samsung operates in a highly competitive business environment. It has continued to strengthen its competitive advantage through a sharp focus on innovation. The South Korean firm spends a huge sum each year on research and development.

The company enjoys strong brand awareness globally and has maintained a strong presence across 74 countries in the world through its network of sales and regional offices, production centers and R&D centers.

The international market environment is characterized by a high degree of competition as well as several types of changes including those which are technological, political or economical in nature.

In this pestel analysis, we will analyse the macroeconomic factors that affect Samsung’s international business and their impact on its business position and competitiveness.

Political:

Samsung is a global brand that operates across many international markets including the leading markets of Asia, America, Middle East and Europe. Political factors have a significant impact on international businesses since political changes and government policies affect businesses and their operations.

Changes in government policies regarding particular industrial sectors and specific products can have a sharp impact on product prices, demand and sales. There are several factors like import and export laws, government policies regarding foreign direct investment and more similar factors including taxes on specific goods that affect sales and profitability. In some countries, the taxes on products sold by foreign companies are higher which affect the prices of these products. Doing business overseas can be challenging as across several markets, the local governments have created policies that favor the local brands more than the international brands. As in the case of China, Samsung used to be the largest smartphone brand there but experienced a solid decline in its sales there since the rise of the local brands like Vivo, Oppo and Honor.1

The American markets are more open to business compared to several leading Asian markets. It is why Samsung generates a large part of its total net sales from the American markets. Geopolitical changes can significantly affect business and supply chain operations and can also force companies to alter their business strategy in regions experiencing political challenges. The Russian invasion of Ukraine forced several companies to exit Russia. Apple exited Russia and so did several more American and other large and small businesses operating in Russia previously. Samsung also suspended shipments to Russia in 20222. However, it is in an uncomfortable position in the Russian market with regards to its remaining operations there.

Political stability is important for smooth operations of international business.

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Economic:

Economic factors also have a significant impact on international businesses. Fluctuations in the global economy have a solid impact on global businesses like Samsung. However, changes in various local economies can also affect sales and profitability. The economic performance of a particular market is directly related to the level of employment there and consumer spending on various products. When the level of economic activity is higher, consumer spending on electronics products is higher and in such cases, companies like Samsung can experience higher sales of their products.

The global economy experienced a significant decline during the pandemic. While supply chain disruptions affected production and sales during the pandemic, declined economic activity across various markets also affected sales of several products. However, while on the one hand, the pandemic hurt economic activity, it also caused an acceleration towards the use of digital technology leading to higher sales of certain products including smartphones.

Several markets have recovered very fast since the pandemic. However, economic recovery across several markets has been comparatively slower. Some factors that help against economic decline include the pricing and marketing strategies of businesses.

Social:

Sociocultural factors can also significantly affect businesses and their performance in particular regions. Society and culture are not unrelated to consumer behaviour, instead they have a crucial effect on people’s tastes and preferences. Social changes including changing special trends, demographic changes and other similar factors can also affect business performance. For example, the rise of the millennial generation has forced businesses and marketers to rethink their product and marketing strategies.

Businesses are using digital channels mainly for sales and marketing to the millennial and gen Z consumers. Consumer behavior and preferences differ from generation to generation.

Samsung targets its various consumer segments through various localized marketing strategies in different markets worldwide.

Across the various societies in the world, the level of environmental awareness has increased a lot since the pandemic. People now support the brands that operate more sustainably and make products that are more sustainable and environment friendly. Samsung is also investing heavily in being sustainable and creating more sustainable raw materials for making its products.

Society and culture also have a special relevance in terms of marketing and businesses need to create localized business and marketing strategies for several different markets. It is because what sells in one market, will not necessarily sell in the other markets too. While sometimes, Samsung may enjoy higher sales of its competitively priced products in a particular market, social trends might cause the sales of its premium products to increase in the same market.

It is why businesses like Samsung also have to focus on creating a strong social image since it is a key driver of demand and sales in various regions of the world.

Technological:

Technology has a central role in the growth of businesses across various industry sectors worldwide. Companies have to invest heavily in innovation to maintain their competitive edge. Samsung is known as a highly innovative company. It is also among the leading spenders on research and development in the industry.

Maintaining an edge without investing in cutting edge technology is not possible anymore. Increased competition has also brought the focus on technology. Samsung has established several R&D centers worldwide and some AI centers to continue its research on modern technologies.

Data and analytics have enabled the company to provide a superior customer experience to its customers worldwide. Samsung is positioned against leading technology brands like Apple. Its competitors including Apple and the other smartphone and semiconductor brands are also investing heavily in research and development to bring better product models to the market and expand their market share faster.

Technological advancement has revolutionized the smartphone sector. Now, smartphones come loaded with tons of features including high tech cameras and several features for personal and professional use. The technology related needs of users have increased and they are using smartphones for multiple purposes including personal and professional needs as well as education.

Investing in technology has helped Samsung grow the popularity of its products and customer loyalty. Another key reason that the company has increased its investment in innovation is the competitive pressure. If there is an answer to maintaining a brand’s leadership position in this sector, then it is technological innovation.

Environmental:

Sustainability and environment friendliness have become some crucial focus areas for large businesses like Samsung. Worldwide, the awareness among consumers related to environmental issues and sustainability has grown a lot in recent years. Particularly, since the pandemic, people are more aware of how businesses impact the environment and natural resources. Focusing on sustainable operations and creating products using more sustainable methods and raw materials has become critical. Samsung has made sustainability one of the most critical focus areas for its business.

Apart from making its own business operations and its suppliers operations more sustainable, the company is also investing in creating sustainable raw materials for building its products. Samsung has formed an ambitious environmental strategy to reduce its environmental impact and bring more environment friendly products to the market. It aims to achieve net zero carbon emissions by 2050 companywide. Samsiung also aims to achieve the target of using 100% renewable energy by 2050. It is investing in increasing resource circularity from raw material to disposal. It means using more recyclable material that can be brought back into production after use. The company is also investing in other crucial areas like water management and waste management.

Governments around the world have also formed laws so that businesses operating at a larger scale create more sustainable solutions and operate in a manner that has the least impact on the environment. People have also grown more aware of sustainability and its importance of protecting the earth’s natural resources. Businesses that operate sustainably will win on both fronts including social and political. So, Samsung’s investment in sustainability will yield great results for the company.

Legal:

Legal compliance is also of critical importance for well known and large brands. Operating legally and ethically is critical to avoid legal action and maintaining a good social image as well. Consider a company that is dealing with hundreds of lawsuits by customers, shareholders and other stakeholders. Now, consider another one that faces less legal action and operates in a manner that is more consistent with law and social expectations. The second company will bear less operational hurdles and will also have a better social image.

Samsung operates in several markets across the globe and it is required to remain compliant with all the relevant local laws in these markets. However, in the recent past Samsung has dealt with a complex web of legal challenges related to accounting fraud and stock price manipulation. Its vice chairman Lee Jae-Yong has been in and out of prison over the past four years3. To some extent, these legal issues have also tainted Samsung’s image.

However, the company has stressed its commitment to operating ethically and in a legally compliant manner and to cooperate with law to every extent necessary. While the legal issues can prove costly and lead to hefty fines, they can taint the image of the business leaders and the brand itself. Samsung has been operating largely as a family owned business which is one of the most important reasons behind its legal troubles in South Korea. However, the Korean government itself has also received a lot of criticism with regards to lenient treatment of the conglomerates of Korea because of their significant role in the economy.