Samsung Porter’s 5 Five Forces (2021)


Samsung Company Overview:

Samsung Electronics Co., Ltd. is a South Korean multinational conglomerate headquartered in Samsung Town, Seoul. It comprises numerous subsidiaries and affiliated businesses, most of them united under the Samsung brand, and is the largest South Korean chaebol (business conglomerate). Samsung was founded by Lee Byung-Chul in 1938 as a trading company. Over the next three decades, the group diversified into areas including food processing, textiles, insurance, securities, and retail. Samsung entered the electronics industry in the late 1960s and the construction and shipbuilding industries in the mid-1970s; these areas would drive its subsequent growth. Following Lee’s death in 1987, Samsung was separated into four business groups – Samsung Group, Shinsegae Group, CJ Group, and Hansol Group. Since the 1990s, Samsung has increasingly globalized its activities and electronics; in particular, its mobile phones and semiconductors have become its most important source of income. As of 2021, it is the world’s largest manufacturer of smartphones and memory chips. Let’s now go over the company’s Porter’s Five Forces Analysis.

 

 

Samsung Competitive Rivalry:

 

Samsung has a strong competitive rivalry in the electronics industry. Many companies have tried to replicate Samsung’s success but have failed due to a lack of brand power and proper branding strategies. For instance, Apple Inc. tried to reproduce Samsung’s success in the smartphone industry but failed to do so due to an inferiority complex towards Apple. Samsung has several companies that are operating under its umbrella which allows it to have high bargaining power over suppliers while also having high-quality products. For instance, Samsung mobile phones are manufactured by the group company “Samsung Electronics” which provides bargaining power to Samsung when dealing with suppliers. In addition, the quality control of its products is also good, which gives it a competitive edge over other brands in the market.

 

Samsung Bargaining Power of Suppliers:

 

Samsung has very high bargaining power over its suppliers because it is an extremely large entity in the electronics industry. Its high bargaining power is the result of its large revenues which gives it a lot of buying power. For instance, Samsung’s revenue in 2017 was equal to 17% of South Korea’s GDP, meaning that the company is an extremely important entity in the country and has extensive control over suppliers in the market.

 

Samsung Bargaining Power of Buyers:

 

Samsung has high bargaining power over its buyers because it is the main supplier to them. For instance, Samsung mobile phones are used by many people all across the world which gives it a competitive edge over other manufacturers that are not as popular. Thus, this results in Samsung being able to have higher bargaining power.

 

Samsung Threat of New Entrants:

 

Samsung faces minimal threat from new entrants in the electronics industry because it has an extensive global presence. For instance, Samsung mobile phones are used by many people all across the world which gives it a competitive edge over other manufacturers that are not as popular. The company also has very strong bargaining power over suppliers while its products are high quality. These factors give it a competitive edge over new entrants that might try to replicate its success in the industry.

 

Samsung Threat of Substitutes:

 

Samsung faces a moderate threat of substitutes in the electronics industry because there are other companies that offer similar products. For instance, Apple is a major competitor of Samsung in the smartphone market and offers products that are similar in terms of quality and features. Thus, this gives Apple a competitive edge over Samsung and poses a threat to the company. In addition, there are other companies that offer products that are different from Samsung but may still be attractive to consumers.

 

Samsung Porter’s Five Forces Conclusion:

 

Samsung’s global presence and extensive bargaining power over suppliers give them a competitive edge in the electronics industry. The company has very strong bargaining power over its buyers because it is the main supplier to them. Samsung mobile phones are widely used across the world which gives it a competitive advantage over other brands in the market. The intensity of rivalry in its industry is also high because it is one of the major players in the market, which has resulted in low profitability margins for some companies.

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