A great post on South Korean multinational giant Samsung for Business Students.
Samsung is a highly diversified multinational that is the most significant firm in the South Korean economy. It has achieved a strong record of improved profitability, quarter after quarter, as demand for its product portfolio has grown, particularly mobile devices.
However, in January 2014 it announced that it expected to suffer a fall in profits:
Samsung's pre-earnings guidance showed it expected to make an operating profit of 8.3 trillion won ($7.8bn; £4.8bn) for the last quarter of 2013, down 18% from the previous three months.
What were the implications for Samsung following their announcement?
We can use the Boston Matrix as a model of strategic choice to outline some of the issues and options for Samsung.
For Samsung, mobile devices became the most significant generator of profits, contributing around two-thirds of overall company profits in recent quarters. For some time, Samsung's portfolio of smartphones and tablets had been the rising stars of the Samsung product portfolio as demand soared in both developed and emerging economies.
However, competition in the market for mobile devices became much more intense (even though Apple and Samsung still dominated industry profits) with the emergence of new competitors at the "low end").
Should Samsung start treating its mobile products most as "cash cows" rather than "rising stars" and refocus their significant investment in R&D into other product areas?
It's a fascinating discussion and it touches on two very important business concepts - corporate culture and shareholder value (in particular the returns that Samsung shareholders receive via their very low dividend yield).
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