Samsung Value Chain Analysis

Samsung value-chain analysis is an analytical framework that assists in identifying business

activities that can create value and competitive advantage for the global electronics company.
Figure 1 below illustrates the essence of value chain analysis.

Figure 1 Samsung Value chain analysis

Samsung Primary Activities:

Samsung Inbound logistics
Samsung has 579 suppliers globally and the company’s supply chain includes over 2,700
suppliers in various industries across the world.[1] The majority of Samsung suppliers are
based in Asia and accordingly, 79.4% of its supply-chain expenses occur in Asia. This is
followed by Americas (14.8%), Europe (4.4%) and other places.[2] In order control inbound
logistics aspect of the business more effectively, Samsung owns a number of logistics firms
as its subsidiaries. The most notably, Samsung Electronics logistic, established in 1998, is an
integrated enterprise logistics management agent that serves logistics needs of the company
with 540 employees and 8,600 partner employees around the globe.[3]

Figure 2 Samsung supply chain management principles [4]

Strategic relationships with suppliers are one of the main sources of value creation for the
multinational electronics company. For example, the company changed the payment cycle
 from twice a month to four times a month in 2011 and implemented early payments around
Korea’s traditional holiday seasons, thereby helping to smooth the funding of operations for
suppliers.[5]
Samsung Operations
Samsung Electronics is a global company that operates 38 production bases in 17 countries
around the world.[6] The company manufactures 90% of its products in-house. Samsung
operations are divided into three key divisions:
1. IT & Mobile Communications (IM)
2. Consumer Electronics (CE)
3. Device Solutions (DS)
At the end of 2015, Samsung Electronics maintained 199 worldwide operation hubs,
including manufacturing subsidiaries, sales subsidiaries, design centers, research centers, and
15 regional head offices worldwide. Figure 3 below illustrates the full scope of Samsung
global network of operations.

Figure 3 Samsung electronics global network of operations [7]

Major sources of value in Samsung operations include the use of advanced technologies and
sophisticated operations systems. Moreover, the global electronics company heavily relies on
Six Sigma methodology in its business operations.
Samsung Outbound logistics
Although Apple, formerly led by late Steve Jobs is generally acknowledged as the pioneer in
introducing modern smartphones, Samsung has proved to be exceptionally quick in launching
its own products to compete with Apple. Effective outbound logistics system plays an
important role for Samsung in terms of being able to deliver updates of its popular products
to customers in a timely manner.
Samsung Electronics Logistic mentioned above facilitates the major part of outbound
logistics operations. Moreover, Samsung Electronics logistic conducts the comprehensive
range of logistics operations including negotiation of payment collections on behalf of
Samsung and dealing with insurance claims. It can be argued that effective integration of
information and communication technologies into outbound logistics practices is one of the
major sources of value creation for Samsung Electronics.

Samsung Marketing and Sales

Marketing and sales as primary activities aim to channel the attention of the target customer
segment to the perceived competitive advantage of the brand associated with high quality and
advanced functions and capabilities of products. Samsung marketing budget in 2016
amounted to USD10.2 billion (11.5 trillion won), including USD3.9 billion (4.4 trillion won)
advertisements expenses, a 15% increase from 2015[8]. The marketing budget is spent on
print and media advertising, events and experiences and public relations programs and
initiatives. The global electronics company has 53 sales bases internationally.
An effective appeal to customer needs and wants in an emotional level is one of the main
sources for value creation for Samsung in marketing and sales aspects of the business. For
example, Samsung commercial series ‘Do What You Can’t’ encourages members of the target
customer segment to be bold in terms of pursuing their dreams and passions. Importantly,
these commercial series position Samsung products and services as effective tools that can be
used to pursue passions and achieve dreams.

Samsung Service
Samsung strives to deliver the customer services of the highest standards. The company
conducts customer satisfaction surveys managed by external parties in a regular manner in
order to achieve and sustain high levels of customer satisfaction. There is a universal phone
number for Samsung Direct Support and unlike the majority of multinational enterprises;
Samsung promises to get back to customers in developed countries within 24 hours.
Samsung Group Report contains a full version of Samsung value chain analysis. The report
illustrates the application of the major analytical strategic frameworks in business studies
such as SWOT, PESTEL, Porter’s Five Forces and McKinsey 7S Model on Samsung.
Moreover, the report contains analyses of Samsung leadership, business strategy,
organizational structure and organizational culture. The report also comprises discussions of
Samsung marketing strategy and addresses issues of corporate social responsibility.