Strategic Management Assignment on Pestel Analysis

Submission Date: 06 Sept, 2012.

N.R. Institute of Business Management, Ahmedabad

SAMSUNG
Vision:
As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future." This new vision reflects Samsung Electronics commitment to inspiring its communities by leveraging Samsung's three key strengths: New Technology, Innovative Products, and Creative Solutions. -and to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all. As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the worlds top five brands by 2020. To this end, Samsung has also established three strategic approaches in its management: Creativity, Partnership, and Talent. Samsung is excited about the future. As we build on our previous accomplishments, we look forward to exploring new territories, including health, medicine, and biotechnology. Samsung is committed to being a creative leader in new markets and becoming a truly No. 1 business going forward.

Mission:
Our mission guides everything we do at Samsung: to be the best digital-Company.

Samsung grew into a global corporation by facing challenges directly. In the years ahead, our dedicated people will continue to embrace many challenges and come up with creative ideas to develop products and services that lead in their markets. Their ingenuity will continue to chart Samsungs course as a profitable, responsible global corporation.

PESTEL Analysis:
Political: Over the past several years, there has seen a plethora of patent lawsuits within the smartphone industry. In the highly competitive environment, manufacturers of handsets have been aggressive in protecting their intellectual properties by suing competitors by claiming infringements on patents. For example, in March 2010, Apple sued HTC for allegedly infringing on 20 Apple patents (Weil, 2010). Apple also sued Nokia in 2010 for similar patent infringements ("Patent wars", 2011). However, in April 2011 the International Trade Commission recommended that neither HTC nor Nokia should be found liable for any infringements. Further Microsoft reached a licensing agreement in April 2010 with HTC to pay royalties on Android based handsets ("Patent wars", 2011). More recently, Apple launched a lawsuit against Samsung in April 2011 claiming Samsung copied design features of the iPhone in its Galaxy line of Android phones (Quigley, 2011). These are just a few examples of legal challenges faced by smartphone manufacturers. Mentioning all lawsuits in the past several years is beyond the scope of this analysis, but it is important to recognize that manufacturers are using their patent portfolio's to make it more difficult for their competitors to gain larger market shares. Even if the majority of cases are found to be 'dubious', the costs associated with legal battles can hamper or slow down the release of new handsets and hence making it more difficult for the manufacturer to stay competitive.

Economic: The North American economy is still recovering from the financial crisis of 2008. Major factors to consider are the unemployment rates, consumer spending. In September 2011 the unemployment rate in the US was 9.1% which is well above the national average of 5.7% between 1948 and 2010 ("United States Unemployment"). The current high unemployment rate in the US is likely having an impact on reducing smartphone sales. A 9.1% unemployment rate represents approximately 28 million Americans out of work. In Canada, the unemployment rate in September 2011 was 7.1% which represents its lowest point since December 2008 ("Canada Unemployment"). Since January 2010, Canada has been experiencing a downward trend in unemployment ("Canada Unemployment").

The high unemployment rate in the US has been negatively impacting consumer confidence and has resulted in a decrease in consumer spending. Bloomberg reports consumer spending dropped 0.2% in June 2011 which provides evidence the decrease in hiring and wage increases below the inflation rate are affecting consumer spending (Chandra, 2011). Consumer spending accounts for 70% of the US economy (Chandra, 2011); any fluctuation in this area will have a significant impact on the overall economy.

In Canada, the opposite is true. Consumer spending increased by 3.8% from 1st quarter 2010 to the end of 1st quarter 2011 ("Canadian Consumer Spending"). Consumer confidence is Canada seems to be higher than the US likely resulting from lower unemployment rates and Canada's faster paced recovery from the global financial crisis.

Social: The rise of the information age has made telecommunication more important for both business and pleasure. It is important to determine how receptive a society is to new advancements in technology, particularly smartphone adoption in this case. By measuring smartphone adoption by age demographics, a better understanding of who the primary target groups can be gained. Insights into how different groups of smartphone users use their devices can provide insights into new features or improvements in established features.

At the end of 2010, there were 63.2 million smartphone subscribers in the US (comScoreInc, 2011). The adoption rate has been increasing annually; in December 2009, 16.8% of Americans owned a smartphone, while in December 2010 the adoption rate increased to 27% (comScoreInc, 2011). By March 2011, 32.2% of Americans adopted a smartphone. The increase of just over 10% over a one year period along with over a 5% increase from Dec. 2010 and March 2011 shows that the US population is very receptive to new smartphone technologies resulting in rapid market expansion. Breaking adoption down into demographic groups, 12.6% over the age of 55, 16.7% aged 18 to 24, and 27.2% aged 25-34 owned a smartphone in December 2010 (comScoreInc, 2011). According to comScore, the fastest growing age segments in smartphone adoption are 13 to 17 year old and those aged 55 and up (comScoreInc,2011).

Technological: The most important aspect of the technological environment in this case is the cellular network infrastructure. Both the US and Canada have infrastructure in place which supports both voice and data transfers. However, rural regions may have poorer quality of service, and do not always support data transfer. However, most of the population is concentrated in urban and sub-urban regions of both countries; these regions have the wireless infrastructure in place to support all uses of smartphones. The infrastructure in both Canada and the US is privatized, which means the network carriers maintain and upgrade it since it is in their best interest to retain and keep cellular subscribers happy.

Environmental:

Since Samsung does not manufacture its handsets in North America, the natural environment is insignificant in terms of strategy formulation. Typically, a manufacturer needs to be aware of extreme weather patterns and availability of local natural resources within the region they have manufacturing facilities. However certain regions, particularly along the Gulf Coast are prone to hurricanes. These massive storms can damage the cellular network infrastructure, which would render smartphones into paperweights.

Legal: Wireless communication regulations Electronic device safety regulations? Deregulation of the telephone industry Trademark and Patent Laws

Currently there is a large number of patent and intellectual property litigations/lawsuits in the US, particularly in the smartphone industry, including a dispute between Apple and Samsung. Apple claims Samsung copied iPhones design features, packaging, and user interface components.

INFOSYS
Infosys Vision

"To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people." Infosys Mission "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society

PESTEL Analysis

Political

Political stability: Indian political structure is considered stable enough expect the fact that there is a fear of hung parliament (no clear majority). It is positive. U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit. It is deep negative. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. It is positive. Terrorist attack or war. It is negative.

Economic

Domestic IT Spending (Demand): Domestic market to grow by 20% and reach approx. USD 20 billion in 2008-09. It is positive. Currency Fluctuation. It is negative. Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate. It is mildly positive.

Social

Language spoken: English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population. It is highly positive.

Education: A number of technical institutes and universities over the country offer education. It is highly positive. Working age population. It is positive.

IT

Technological India has the worlds lowest call rates. Expected to have total subscriber base of about 500 million by 2010. India has the second largest telephone network after china.

Tele density 19.86 % Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. It is highly positive Internet Backbone: Due to IT revolution of 90s, Indian cities and India is well connected with cable. It is positive New IT technologies: Technologies like SOA, Web 2.0, High-definition content, grid

computing, etc. and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry. It is positive

Environmental Energy efficient processes and equipments: Positive Companies are focusing on reducing the carbon Environmental footprints, energy utilization, water consumption, etc.

Legal

IT SEZ Requirement: IT Companies can set up SEZ Positive with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. Contract / Bond requirements: Huge debates NegativeLegal surrounding the bonds under which the employees are required to work, which is not legally required. IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies Positive to operate especially related to security of data in transmission and storage, etc.

Companies operating in Software Technology Park Negative (STPI) scheme will continue to get tax-benefit till 2010.