Porter’s Five Forces Model
The Power of Suppliers. Suppliers facilitate business activities by providing labor and raw
materials. Therefore, companies have to maintain quality and healthy relationships with suppliers
to continue operating efficiently and smoothly. The bargaining power of suppliers in each
industry differs and can impact on competition and profit ratios. If suppliers' energy is low, the
level of competition is high, and vise versa. In Samsung, suppliers have less bargaining power
because the company operates globally, and raw materials are scattered worldwide. Hence, if a
supplier offers goods or services at a higher price, Samsung can easily contract another supplier.
The company also sets rules and regulations that are reviewed regularly to ensure that contractors
are adherent. The provisions check on product quality and labor welfare.
The Power of Customers. Buyers are critical drivers of business operations, primarily in the
electronics industry. Customers' behavior varies depending on tastes and preferences; hence they
have to be involved in decision-making processes. Samsung, as a brand, is dominant due to
loyalty from buyers and the continued delivery of quality products. The company has been in
existence for decades. It has remained true to its mission of creating better products and services
for the global society using the available technologies and resources. The brand strength has
created room for radical changes, especially on exterior product designs, and also allows the
entity to maintain control on future trends and markets. Despite the complex research and
development projects performed by Samsung, they have to conform to customers’ needs or lose
them to competitors.
New Entrants. Newmarket entrants have negative implications on existing businesses because
they increase competition on market share. However, market entry depends on the complexity of
government regulations and the legal requirement necessary for operations. For instance,
companies seeking to join the manufacturing business sector must get trading licenses and prove
that their commodities are safe and of quality standards. According to Shin, entry into the
electronics industry is not as easy as the initial capital, and competition from industry giants are
very high (406). Furthermore, extensive marketing activities and highly skilled personnel are
needed. With the current global economic status, entry into the electronics industry may be
impossible unless the product is unique and highly innovative. The commodities must also be
reliable, durable, excellently designed, and cost-effective. Companies seeking to grow their
brands to reach Samsung’s level must, therefore, start locally and use the step by step approach
to join global conglomerates. This calls for market research, due diligence and consultation with
intended subsidiary countries.
The Threat of Substitute Products. Substitutes are items or services that can be used to perform
similar tasks. Substitutes impacts on price elasticity by lowering demand and increasing
alternatives. In modernity, substitutes constitute a significant threat in the electronics sector,
given that the digital era has embraced social responsibilities and adhere to legislation.
Environmental conservation is part of social obligations, and due to the rise of global warming,
people are going green and adopting energy conservation measures. The legislations present in
different countries impact buyer behavior in terms of spending. Economic trends are currently
hard to predict hence the need to cut costs in all corners. In the United Kingdom, for instance,
charges on energy bills are too high; thus, customers mostly choose electronics with low power
consumption. This, in turn, raises the need for substitutes as the switching costs are low.
Samsung has high competition from Apple Inc., LG, and Sony; hence customers have a variety
Competitive Rivalry. Competition drives market changes, and firms have to be aggressive
innovators to gain a competitive edge. The intensity of competition varies across industries,
depending on the saturation. Highly saturated industries have a fierce rivalry as companies
compete to capture attention from the customers. Growing markets are, however, less
competitive as the customer base is also small and increasing. Companies like Dell, Toshiba,
Apple, Sony, LG, and Motorola, major Samsung competitors, have been in the industry for long,
and their client base has already been established. Therefore, the entities are likely to have
adopted a code of conduct that governs direct competition and ensures coexistence. Besides,
Samsung faces rivalry in emerging markets as it has to contend with global and local players.
A Comparison of Samsung’s Value Chain with That of Apple And LG
Inbound Logistics. It controls primary operations like the reception of raw materials and storage
in warehouses. Asia is the largest consumer of Samsung products, and it accounts for about
79.4% of the company's supply expenses (Ezell et al. 13). America is next at 14.8%, followed by
Europe at 4.4%. (Ezell et al. 13). The logistics are further boosted by the fact that Samsung has
multiple subsidiaries that offer comprehensive logistics services. Similarly, Apple has a stable
global suppliers’ network that continually meets the demand for raw materials. To manage
expenses, the management regularly implements strategies meant to minimize the number of
suppliers while still maintaining quality. The company orders raw materials in advance as it
does not participate just in time operations. LG has adopted technology in inbound logistics such
that inventory is controlled using the Global Digital Logistics System (GDLS), which keeps
records and completes product lifecycles.
Operations: Samsung has approximately 213 global operation centers, including research and
design hubs, sales offices, and subsidiaries (Keegan 22). The entity operates through – product
manufacturing, system manufacturing, and device assembly. Components and semiconductors
comprise the product segment, while applications and software form the systems department.
Among the packaged and assembled devices are batteries, chargers, and mouse. Apple has
approximately 132,000 employees and customers from America (42%), Europe (24%), China
(20%), Japan (8%), and Asia (7%) (Walcott and Fan 70). The company operates through the
outsourcing of products and locations in low-cost areas. LG's operations seek to increase
efficiency in production and minimize wastage. Besides, the entity regularly upgrades processes,
especially in India, where the central hub is located, to add value to products and meet clients’
Outbound logistics: Samsung is famous for the production of modern smartphones and the quick
launch of items. These facilitate competition and aids in monitoring of distribution processes.
The company’s outbound logistics is segmented into three parts – notification, method, and
charges. Samsung Logitech, an inhouse logistics subsidiary, provides international and domestic
logistics while enabling B2B cooperation. Apple distributes ready iPad, iPhone, Mac computers,
and other items. The goods are shipped to Apple outlets situated in urban centers, quality
shopping malls, and high-traffic regions. The company also acknowledges e-commerce because
it is cheaper than sales via the Apple store. LG has an excellent global supply chain
technologically controlled network customized by a JDA software that estimates demand,
schedule transportation, and distribution. The company also cuts outbound logistic expenses
through elaborate packaging of shipping products.
Sales and Marketing. Samsung’s regional sales headquarters are in Singapore, India, Latin
America, Russia, North America, United Arab Emirates, United Kingdom, and China.
Production centers are based in North and South America, Asia, and Europe, while sales offices
are present in North and Latin America, Africa, Asia, Europe, and the Middle East. Complaints
from clients are addressed via the website through product warranty registration, twitter
conversations, live chats, and tracking. Apple has seven sales channels – wholesalers, retailers,
direct sales, Apple retail stores, third-party network carriers, Apple online stores, and value-
added distributors. In 2018, the company’s domestic sales accounted for 37% of the net sales,
while international sales summed up 63% (Apple Inc). Direct sales accounted for 29%, and
indirect sales were 71%, thus showing the need for quality distribution channels.
Service. Samsung service centers are in North, South, and Latin America, Asia, and the Middle
East. The company offers after-sales services and guarantees product replacement if it does not
meet the requirements or provisions. Apple Inc. provides advanced services via the Apple
software installed in all Apple gadgets. Although this strategy is a monopoly, it increases brand
loyalty and market base. Apple also offers quality pre-purchase, immediate, and post-purchase
experiences. Besides, it maintains global experience centers where first time buyers can
familiarize themselves with the brand. Sales personnel at LG are technically savvy and willing to
facilitate post-purchase services like trade-ins.
Business-Level and Corporate-Level Strategies for Samsung, Apple, and LG
Business Level Strategies. They are comprised of differentiation and cost leadership. Samsung
uses the cost leadership strategy aimed at selling items at prices lower than those of competitors.
The concept is more appealing to low-income earners who are the vast majority. Differentiation
is also evident given the frequent product launches and extensive investment in Research and
Development (R&D). For long, Apple has dominated the technology industry through the
introduction of superior commodities. It also outsources hardware and operating systems from
other companies, giving it time to concentrate on designs. Apple also positions itself in high-end
markets, thus building a reputation for creating valuable items. LG thrives on product
differentiation and encourages interdepartmental coordination in the design and promotion
Corporate Level Strategies. They include vertical integrations, mergers and acquisitions, product
diversification, and restructuring. Samsung can remain competitive by standardizing products
globally. This is aided by the fact that manufacturing and engineering designs are centralized. On
the other hand, Apple Inc moderates levels of its diversified products, including mobile phones,
music stores, home, and personal computers. The company also internationalizes production by
setting base in low-cost areas such as China, where resources like labor and raw materials are
very cheap. Like Apple, LG forms strategic alliances with global entities to benefit from
information and economies of scale.
In modernity, technology is continually changing, and companies ought to be aggressive in
R&D. Apple Inc. and LG are Samsung’s main competitors and also have been operational for
long. This means that the industry giants have already established markets that are cultivated
through brand loyalty. As more entrants join the electronics industry, Samsung has an advantage
as it is stable. However, it is noteworthy that markets vary depending on legislation and
economics; hence adequate research is needed before making investments in new geographical
locations. The bargaining power of buyers and suppliers cannot be sidelined as they influence
supply and demand. Therefore, companies have to develop strategies that maximize their
dominance in the market.
Apple Inc. Apple Reports First Quarter Results. www.apple.com/ke/newsroom/2019/01/apple-
reports-first-quarter-results/. Accessed 17 February 2020.
Ezell, Stephen J., et al. "Manufacturing Digitalization: Extent of Adoption and
Recommendations for Increasing Penetration in Korea and the US." Available at SSRN
Keegan, Warren J. Global marketing management. Pearson India, 2017.
Shin, Jang-Sup. "Dynamic catch-up strategy, capability expansion, and changing windows of
opportunity in the memory industry." Research Policy 46.2 (2017): 404-416.
Walcott, Susan M., and Zhang Fan. "Comparison of major air freight network hubs in the US
and China." Journal of Air Transport Management 61 (2017): 64-72.