PEST Analysis

None of the enterprises can prevent itself from the impact of the
macro environment, thus knowing how the environment will
change seems to be vital. There are a great number of factors that
can influence the company; therefore, it would be impossible to
identify all the factors and the extent they affect. Finding the key
factors and clarify how they interact would be more practical.
PEST analysis is used to explore external macro environment
independent of the firm’s size, including political environment,
economic environment, social-cultural environment and
technological environment; however they are also composed of
different aspects respectively as the graph shows below (CIPD
2011).

illustration not visible in this excerpt

Figure2–PEST analysis

POLITICAL FACTORS

Political stability should be taken into consideration if the company

wants to sustain long-term development. Recently, the strained
relationships between North and South Korea may result in war
breaking out in the Korean Peninsula. The future of China seems to
be uncertain from political and economic perspective. Moreover,
there are rising tensions in Russia, Middle East and Brazil.
Instabilities in African and Latin American countries which lead to
frequent changing governing structures also put pressure on
Samsung. In addition, political laws and regulations established by
governments should be taken into concern as companies must
follow those rules. A higher tax rate, an increase in minimum wage,
and stricter environmental standard and would lead to an adverse
impact on the company, increasing its cost and decreasing
profitability. Anti-unfair competition law helps protect domestic
corporations from competing with foreign firms. On the other hand,
a preferential trading rule encourages investment from abroad.
Since laws and regulations are different in different nations, which
makes international trade more complex. It is found that Samsung
is involved in political a scandal which damages its brand image
(Ji-Young, 2010). Overall the political risk of Samsung is quite low
because of geographical diversification, administrative
representation only in main capital cities and indirect sale through
retail dealers (Simonin 2014).

ECONOMIC FACTORS

Economic factors are critical in formulating business strategy since

growth of economy, inflation rate, standard of consumption, and
undergoing economic cycle significantly affect the company’s
profitability. Appreciation in Won reduced profits by 25% in the
second quarter (NewEconomy 2014). Financial crisis in 2007
affect the company’s profit significantly from 2.07 to 1.02 trillion
won (Dudovskiy 2015). The global economic rescission is still
ongoing, which will have an adverse impact on consumer
purchasing power as consumers are reluctant to buy products.
British exit from European Union leads to a quick depreciation in
Great Britain Pound. The uncertainties of currency values arise
which increase the price of gold. Because of the dramatic decrease
in the crude oil prices, there will be an increase in US interest rates
which leads to a higher investment cost. Additionally, financial risks
in developing countries and economic depression in Eurozone may
occur. In the unpredictable and instable economic environment
would lead to higher risks in business and make the competition
even fiercer. Thus expanding into the emerging and developing
markets may help the company increase profitability and retrieve a
loss from the mature and developed markets.
SOCIAL-CULTURAL FACTORS

Social-cultural factors are mainly demographic and cultural aspects

of the external environment, including beliefs, habits, life-style, and
status that may changing customer needs. Finding these factors
implies size of potential market is predictable. Nowadays, almost
everyone has a mobile phone, using it to communicate, find
information, and have fun. Also, trend of sharing via social
applications boosts the consumption of mobile phone produced by
Samsung. The company should identify ways to adapts itself to
various markets where it launches branches by tailoring products
that can fulfill customers’ fast changing preferences. Samsung
should behave in a local way to get itself used to the emerging
market.

TECHNOLOGICAL FACTORS

Technological factors can be regarded as the key force in mobile

industry (Kim 2002). It is composed of manufacture and
infrastructure (FreeManagementBooks n.d.). Technological advances
include automation, quality improvements, incentives, cost saving
and outsourcing (FreeManagementBooks n.d.). A mobile
manufacturer has to keep up with the technical advances otherwise
it will be soon left behind and leave opportunities for other
competitors. Nokia would be a good example that is too slow to
embrace smartphone technologies (FreeManagementBooks n.d.). In
order to maintain the market share, companies need to follow and
monitor the latest technology, seizing any opportunities available.
To support the technical development, investment should be made
to buy the equipment and hire top-talents. Using patents and
licensing is a vital strategy to protect the company’s achievement
as well.

Porter’s five forces analysis

Five forces framework emphasized five individual forces can
determine the degree of competition in a particular industry
(Porter 1979). The five forces are showed in the figure below.

illustration not visible in this excerpt

Figure3-Porter’s five forces

BARGAINING POWER OF SUPPLIERS

There are hardware and software suppliers in mobile industry as

mobile hardware and software can be separated (Savov 2012). The
hardware suppliers seem to have weak bargaining power since
there are a large number of equipment makers. Samsung Mobile’s
success in early years is contributed mainly by the releasing profit
margin friendly products, since Samsung Mobile can buy cheaper
manufacture components than almost other competitors (Covert
2014). Samsung has the right to choose the partner they want to
corporate with. Nevertheless, software suppliers may have a strong
bargaining power as there are only a few, such as Microsoft. Firm
would be placed in a weaker position when negotiating with
monopolies. Overall, the company can have a high power if it can
develop software by its own, like the case of Apple which develops
iOS system.