Samsung Comparative Advantages

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Samsung was founded in Taegu, Korea by Lee Byung-Chull in 1938 (Stickler 2013). Samsung mainly focused their business on trade exports when the company first started. According to Yu, Samsung Group pronounced to advance their competitive position in the world and established Samsung Electronics Company (SEC) in 1969. SEC was crowned the biggest manufacturer in South Korea with a sales turnover of $23.9 billion in 1997 (Yu 1999). This summary will focus on the effect of task environment on Samsung and an analysis of the influence that competitors have on Samsung’s competitive advantages.

Kew and Stredwick (2005) asserted that task environment are the forces that are related to company. Task environment affects the company’s capability to acquire inputs and discards outputs (Kew and Stredwick 2005). One of the main threats that Samsung is encountering is the rivalry with their competitors. Competitors are those the company will come across selling comparable products to surge market position and revenues (Spulber 2009).

Competitive advantage is the organization’s competence to outperform its competitors and create economic value by producing market-orientated commodity or services in a more efficient and effective way (Jones, et al. 2017). According to Michael Porter, an American academic, competitive advantage is the fundamental component of the firm’s value to create economic value for its customers (Porter 2008). The four building blocks of competitive advantages are such as improving efficiency, quality, innovation and responsiveness to customers (Jones, et al. 2017).

First and foremost, efficiency is one of the main component of competitive advantage. Samsung can improve its efficiency by reducing the wastage of resources in the production of goods or services (Jones, et al. 2017). Most importantly, Samsung ought to invest in technologies to achieve this primary objective. For instance, they invested $1 billion to replace the wafers used to cut the chips as this reduces the wastage of raw materials. Due to the investments, Samsung has 55.1 % lower raw material cost than its competitors. This technology advancement reduces the human labour required. Therefore, Samsung’s average salary is 27.3% lower than its competitors. However, Samsung invested in human resources and attained higher productivity per employee (Crews, et al. 2016). Therefore, Samsung utilizes its resources more efficiently.

Besides, the quality of products produced by different companies becomes a factor of competitive advantage. In the effort of improving quality of the products, Samsung has developed capable and specialized staff functions. For example, the company has developed R&D at HQ and product divisions. This enables engineer teams to work on important projects, which helps develop the skills of the engineers. However, Apple Inc., which focuses on producing smart phones, laptops and computers, improve their quality by forming different teams to work on a product. The team that produces the best product will get their product sold. This strategy has motivated the labours to work with innovation and creativity that improved the quality of the products (Chen and Li 2007).

The ability of speed, flexibility and innovation are essential to a company to compete with their rivals as those characteristics can improve their product’s quality (Jones, et al. 2017). Samsung is capable of innovation and produces new quality products quicker than their competitors. This has become its signature. In 2004, Samsung has 16.3% of total export quantity and ranked sixth in of innovative quality product in 2005. Sony ranked seventh in world in terms of quality. In spite of Samsung’s competitive advantage, LG keeps up with sales by coming up with innovative ideas. Hence, improving Samsung’s research and development will maintain its competitiveness in the market (Kim 2011), (Yang, Pai and Lee 2012).

Beyond, the customer loyalty of SEC contributes greatly to its competitive advantages. As businesses compete by being responsive to needs of market, market leaders ought to enhance their degree of receptivity. As consumers become environmental conscious, SEC have strived in enhancing the products to reduce its devastating impacts on the environment (Youn, Yang and Roh 2012). Besides that, SEC seeks to connect over 1.2million customers with Samsung Nation, an innovative game-like interface in a website (Harwood and Garry 2015). Another great illustration of customer loyalty program is the Samsung Rewards. This rewarding system allows users to collect points, which is for redemption of gift cards and Samsung products. Subsequently, these will lead to increase in brand loyalty (Pressman 2016). Although LG developed its own payment service, the function is only limited to its latest phone for the area of Korea (Russell 2017). Thus, the innovations of SEC had improved the benefits of customer loyalty.