SAMSUNG ELECTRONICS, SOUTH KOREA
Porter’s Five Forces Analysis
1. Competitive Rivalry (High)
Intensity of Competition
Samsung is positioned in a very costly sensitive sector it faces competition from local
and international companies such as Apple, Sony, LG, Huawei among other companies
competing in the smartphone and electronics market. All these competitors are ever in the
market introducing new products and operating on factors such as quality, design, features
and price.
Price Sensitivity
Located in a country with a highly sensitive price level Samsung is often forced to price
its products lower. This pressure can be seen across numerous product segments like
smartphones, televisions, etc., where competitors bring in value.
Rapid Technological Advancements
Other characteristics of the consumer electronics industry include the rapid technological
advancement, a fact that requires regular enhancement of companies’ operations. It is
necessary to note that this pressure for constant innovation only increases rivalry because
companies focus on the rapid delivery of new capabilities and the refining of existent
offerings.
Brand Loyalty and Ecosystem
Samsung has established its brands to be easy to trust due to its products’ dependability
and responsiveness to client needs and has connected its devices through an eco-network
(e.g., SmartThings, the Galaxy series). However, competitors such as Apple also provide
strong ecosystems raising a challenge to Samsung to set the company aside by providing its
consumers a strong reason to hold on to its products. The competitive force is sustainable at a
high level due to the presence of strong competitors and large innovation rate.
2. Threat of New Entrants (Moderate to Low)
High Capital and Operational Costs
To enter the technology and electronics industry need a great amount of capital
investment which is seen in Samsung case. The big costs required to build the necessary
facilities for production, the research equipment already in place, and strong distribution
networks already developed by Samsung are major hurdles for new entrants. Such costs are
often disadvantage to the younger or less well-established firm to match up for.
Economies of Scale and Cost Advantage
Samsung has obtained remarkable scale economies, particularly in semiconductors and
displays, meaning that it can now reduce prices for products. New entrants without such cost
efficiencies would find it hard to compete on the price front and supply chain dexterity of
Samsung.
R&D and Innovation Requirement
New entrant would require significant Research and Development capability in order to
complete with Samsung electronics. Samsung devotes much capital into R&D to create
innovative products like the bendable display and sophisticated chip, which prohibits new
markets from entering this industry due to the high expense.
Brand Power and Consumer Trust
This indicates that Samsung global brand and its perceived quality make up another wall
that new entrants have to cross. Closely related with the previous breakpoint, customers tend
to trust established brands and expect them to perform in the similar manner. This brand
loyalty means new entrants incur high costs in advertising in a bid to capture a share of
market in what has been dubbed by some practitioners as the ‘saturated’ markets.
3. Threat of Substitute Products (Moderate)
Availability of Substitutes Across Product Lines
In the consumer electronics sector, there are substitutes available for virtually all kinds of
products within this category. For instance, a Samsung mobile phone can be substituted by a
mobile phone of another company, or a tablet, or even a smaller laptop, that depends on the
purpose of the consumer. Likewise, other devices such as tablet, streaming device, or PCs can
be used interchangeably with television for use in media viewing.
Technology and Innovation-Driven Substitution
The fast speed of technology development process opened the door to produce new
products to substituted the older ones. New technologies of smart home devices and
wearables, and Internet of Things related products can affect Samsung’s existing appliances
like TVs audio and other home appliances where consumer might opt for integrated or multi-
product devices.
Low Switching Costs
Samsung has entrenched itself around its Galaxy devices and SmartThings but the
general electronics business has low barriers to consumer switching, which offers them the
flexibility to switch to different products or technologies. Unlike in enterprise technology,
where switching costs are high, consumers electronics customers can easily switch with little
to no additional costs, especially given that the ecosystems aren’t locked as tightly.
Changing Consumer Preferences
Samsung is then in a position where it has to pull up its socks and adjust to consumers’
new trends. For example, it is possible to encounter customers who decided not to buy
conventional TV’s and use streaming on portable gadgets, or change non-portable cameras to
high-definition cameras of portable mobile phones. These shifts in consumer behavior raise
the threat of substitution in Samsung’s broad product range of goods.
