Analysis of Samsung in Australia
Samsung is a South Korean multinational conglomerate, which has its operation and distribution in Australia (Samsung.com.au, 2018). For a multinational company it is important to understand the dynamics of the external business environment in order to take decisions based on the changes in the environment aligning it with the objective of the business. In order to understand these external factors PESTEL Analysis tool is used (Guenther et al., 2016). The following analysis will be based on Samsung in Australia.
Political: The government is a commonwealth parliament and the current political conditions of the country is stable and without dispute. The government has policies and agreements that not only encourages the business and trade environment in the country but also invests foreign investments. There are less barriers in the process of initiating a business in the country as well, the goods and services that come under the licensing criterion also have a smooth and digitalized procedure which makes the process easy and streamlined, for an organisation like Samsung that operates in the white goods industry, enjoy the freedom of trade and commerce in the geographical boundary of the country. Though the country is under the constitutional monarchy, the monarch does not have any role to play in governing of the state (Gupta, 2013).
Economy: Australia is a part of the OECD and has been through a constant rise in the economy over the years. During the recession, Australia was the only country that remained unaffected compared to the other countries of OECD. Stable development of the economy and the high standard of living among the people make the country attractive for any foreign investors like Samsung (En.portal.santandertrade.com, 2018). The GDP of Australia is around 1,390.15 (billions USD), ranking in the 13th position in the world according to the record of IMF (En.portal.santandertrade.com, 2018). A prospective economy is what an investor looks for while deciding upon the growth and development of the company. Samsung has been operating in Australia for a long time and most of the appliances that the company comes out with are available in the country.
Social: As the country has a stable political condition and a developed economy which is constantly on the rise, the standard of living among the people are also high. The society emphasis on leading a life based on the purchasing power, there is a culture of savings and the people look forward to be technologically ahead (En.portal.santandertrade.com, 2018).
Political
Technological: There is proper infrastructure in the country for the common people to enjoy some of the basic advancement in technology. Australians like to be associated with upgraded technology and organisations like Samsung take this as an opportunity. Samsung has introduced online buying and selling of goods and services as a part of their business model and ensures the entire flagship products with advanced technology are introduced in the market as soon as it is launched (En.portal.santandertrade.com, 2018). For example: Samsung note 9 is the latest addition to the flagship line and this product is already available in the Australian market.
Environmental: in order to operate in the Australian market, companies have to abide by the environmental rules and regulations that are formulated by the local authorities and the government bodies. Samsung apart from abiding these regulations have a number of CSR activities in the country that showcase the urge of the company to highlight the understanding of their responsibility towards their society and the environment (Rakesh, 2014).
Legal: The Government and the authorities of Australia have liberal legal constraints on the trade and commerce encouraging business environment in the country. However, there are tax laws labour laws etc and agreements with other countries which have to be followed by the companies in order to operate in the country (Ho, 2014).
The industry in which a company operates has to be analyzed in order to determine the competitiveness of the company compared to the other players in the market. Management of a company formulates strategies to gain competitive advantage over the other organisations. With the help of Porter’s five forces the competitions of the industry can be determined. Hitachi construction machinery is a multinational company that has its operations in Australia (Hitachicm.com.au, 2018), the company operates in the heavy industry.
Figure: Porter’s Five Forces
(Source: Dobbs, 2014)
Threat of new entrants: For a company to enter in to the heavy machinery industry will require a heavy capital support, there are a number of major players in the Australian market, though there is hardly any barriers in the process of initiation from the government policies, the process of establishing and reaching up to the point of Hitachi is difficult. Therefore, it can be said that the threat of new entrants is low (Dobbs, 2014).
Intensity of competition: the heavy machinery industry in Australia is populated by a number of domestic as well as international organisations in the country. Due to this the companies have to have a competitive strategy which is back up with sales and marketing strategies to communicate with the right people at the right time and develop an edge over the other players. In the case of Hitachi, the company ensures the products and services are of premium quality so that the target market can be changed in to loyal clients in the future (Hitachicm.com.au, 2018). One of the advantages of operating in an intensely competitive market is that the companies have to be innovative and improve in order to keep up the edge (Hitachicm.com.au, 2018). Some of the direct competitors of the company are: JCB Construction Equipment Australia, Porter Group, Fluor Australia etc. it can be concluded that the intensity of competition is high and the company chooses to provide premium products and services along with innovative measures to combat the situation. However, Hitachi is one of the leading organisations in the international market (Dobbs, 2014).
Economy
Bargaining power of the suppliers: For a company like Hitachi the switching cost of the suppliers are high as the company has a significant brand value and goodwill in the industry. The suppliers of the company would like to be associated with the brand as it ensures that there is a constant flow of orders owing to the large scale operation as well as have a wide variety of products for which they require a number of suppliers (Takata, 2016). There is also an abundance of suppliers in the market based on the fact that there is intense competition thus making the switching cost of the suppliers high and the bargaining power low (Cheng, 2013).
Bargaining power of the consumers: This aspect of the model is based on the intensity of competition. Since the intensity of revelry in the market is high, the customers enjoy the low switching cost, if they do not like the products or services they can easily choose from other organisation in the market (Dobbs, 2014). The purchase decision of the customers are based on a number of factors mostly price and quality. Thus, it can be said that the bargaining power of the consumers are high. Therefore the company has to engage in marketing and sales along with innovation in the product and process to keep the customers interested in the brand (Cheng, 2013).
Threat of substitute: In the heavy machinery and construction industry, there are no direct substitutes. In this case the company enjoys significant opportunity as the products that the company manufactures have no other substitute (Cheng, 2013). Therefore, the threat here is low.
|
Factors |
High/low/medium |
|
Threat of new entrants |
Low |
|
Intensity of competition |
High |
|
Bargaining power of the suppliers |
Low |
|
Bargaining power of the consumers |
High |
|
Threat of substitute |
Low |
Table: Summary of the analysis
Source: Author’s creatio
Reference list
Cheng, D. S. (2013). Analyze the hotel industry in porter five competitive forces. Journal of Global Business Management, 9(3), 52.
- Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
En.portal.santandertrade.com. (2018). Economic and political outline Australia – Santandertrade.com. Retrieved from https://en.portal.santandertrade.com/analyse-markets/australia/economic-political-outline?&actualiser_id_banque=oui&id_banque=0&memoriser_choix=memoriser
Guenther, E., Endrikat, J., & Guenther, T. W. (2016). Environmental management control systems: a conceptualization and a review of the empirical evidence. Journal of Cleaner Production, 136, 147-171.
Gupta, A. (2013). Environment & PEST analysis: an approach to external business environment. International Journal of Modern Social Sciences, 2(1), 34-43.
Hitachicm.com.au. (2018). About Hitachi Construction Machinery | Machinery Sales Australia. Retrieved from https://hitachicm.com.au/about-us#Hitachi%20Construction%20Machinery%20Global
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), 6478-6492.
Rakesh, C., 2014. Pest analysis for micro small medium enterprises sustainability. Journal of Management and Commerce, 1(1), pp.18-22.
Samsung.com.au. (2018). About Us. Retrieved from https://www.samsung.com/au/aboutsamsung/home/
Takata, H., 2016. Effects of industry forces, market orientation, and marketing capabilities on business performance: An empirical analysis of Japanese manufacturers from 2009 to 2011. Journal of Business Research, 69(12), pp.5611-5619.
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