Innovation refers to the process, which an organisation undertakes by adding extra features to add value to its existing products or services (Drucker, P., 2014). The report is based on Samsung Electronics Co., Ltd. which was established in 1988 in Suwon, South Korea and is a global leader in electronic industry. It would emphasize on Samsung Televisions. Purpose of making this report is to develop an understanding of role of innovation in this organisation. It includes overview of the firm and its innovation history, its existing innovation performance and capabilities and the current state of electronic industry.
The Organisation And Its Innovation History
In 1969, Samsung Electrical Industry was established in Suwon, South Korea. Due to lack of resources and technology, firm had to face strong competitors back in time. After successful joint ventures with Japanese companies, the firm started its business of selling televisions. In 1988, Samsung electronics was founded which was an amalgamation of Samsung Electricals and Samsung Semiconductor & Communications. The innovation history of Samsung Electronics can be effectively discussed by performing the PESTLE Analysis of the firm. This would determine the factors of external environment that has supported the innovation of the firm (Zalengera and et. al., 2014).
Political- Samsung has its overseas R&D centres in major developed countries. The political structure and federations of these countries have been favourable for Samsung Electronics since the firm sold its first TV in 1970 (Evolution of the TV, 2018). The policies and regulations promoted freedom of expression and freedom of press. These supporting policies helped Samsung Electronics to use innovation in making their televisions such as UHD and QLED Televisions.
Economical- Samsung Electronics is headquartered in South Korea. Accounted for more than 14% of GDP of South Korea, Samsung is the biggest chaebol of the country which has been profitable for the country's economic stature (South Korea's Chaebol Challenge,2018). Chaebol is the term used by South Koreans to describe their family-owned businesses. Samsung sold more than a million units of its black and white TV in Korea itself by 1976 (Evolution of the TV,2018). The economic environment of the country paved way to innovate its designs and introduce curved screens in televisions.
Social- In many developed countries, with rise in films, fashion trends and sports, the culture of countries' youth shifted towards televisions. 1998 marked the year of world's first digital TV that was developed by Samsung Electronics. It was widely accepted by the population of these countries. Their increasing demand of improvisation in their experience of entertainment has been a constant driver of innovation in Samsung Televisions.
Technological- Samsung in 2006, launched Bordeaux, which had an LCD display and wine glass-inspired form. By this time, almost all the major developed and developing countries were inclining towards use of superior technology which became another driver of innovation in Samsung to redefine its television designs. ([Infographic] Looking Back at Samsung’s Milestone TV Innovations,2018). Around this time, the company presented Crystal Rose LCD TV in the market which marked the use of double injection technology for the first time.
Legal- Legal environments of countries like South Korea, US and UK made it accessible for Samsung electronics to patent designs of its televisions to secure the innovations from infringements. Such exceptional legal structure helped the company develop world's first slimmest TV in 2009 ([Infographic] A Timeline of Samsung Electronics’ Firsts in the TV Industry,2018)
Environmental- Environment has become a major concern for the world. Televisions contained hazardous innards. They emitted chemicals like brominated flame retardants and hormone disrupters polovinyl chloride.These factors became the drivers of innovation for the firm and Samsung Electronics took initiative and developed OLED televisions that were less hazardous than other LCD televisions present in the market.
To determine its industrial attractiveness on the basis of its innovation, Porter's Five Forces Model could be an appropriate approach for Samsung Electronics (E. Dobbs, 2014).
Supplier Power- Earlier, with limited suppliers, their bargaining power was higher than the firm. However, with introducing some of the world's first television designs like Dual-Colour Bezel; it increased its suppliers all over the world like Digi-Key Electronics and Avnet Abacus in the United Kingdom, thus, decreasing their bargaining power.
Buyer Power- Bargaining power of buyers was higher earlier with existing competition in the market. Yet in the present scenario, buyers' power is high due to aggressive pricing of the company. Reason for this pricing is the innovative designs like curved screens introduced by the company for the first time in the world. It introduced Curved UHD TV that was the world's first curved television.
Threat of substitutes- During its earlier days, the firm was subjected to this threat of substitutes. Even today, after introducing innovation in Quantum Dot Technology, this threat remains intact due to regular experiments done by its competitive firms.
Threat of new entrants- Earlier, with Samsung itself was new in the market, this threat was high. However, with multiple innovations, like OLED TV and Bendable UHD TV it has become a market leader which reduces this threat to a great extent.
Competitive Rivalry-This factor has always been high due to presence of companies like Sony, LG and Phillips which are also considered leaders in television industries. They are innovating their designs and adding extra features to compete with Samsung Electronics. These competitors are the biggest drivers of innovations in Samsung Electronics to keep innovating their designs. For instance, Samsung created QLED TV which provides 100% volume in colour to stay ahead of its competitors.
Innovation Performance And Capabilities Of Samsung
Samsung Electronics is known to be a market leader in television industry. It has introduced various innovations in its products in the past decade. Currently, its the solo leader of the electronic industry. With rise in Artificial Intelligence, new opportunities are crossing the firm's path to eradicate competition in terms of innovation.
Samsung Electronics have one of the best R&D departments of the world. The firm spent almost $15 Billion on R&D in 2017 (Samsung Electronics Spends Over $15 Billion in R&D in 2017,2018). With such heavy expenditure, the company focuses on enhancing its products in ways that it captures the market sector. With such enhanced capabilities, Pocket Holographic Television can be a competent product for Samsung Electronics. Required activities for this product would be to acquire a patent, effective use of technology, and expenditure towards development of this product. The firm has already acquired a patent for Holographic TV in 2016 (Samsung Patents Holographic TV Tech for Future Displays. 2018). With effective R&D and production, this new technology can be a breakthrough for Television viewers. Pocket Holographic Television would allow customers to carry their TV's in their pockets. This television, if displayed against the wall regardless of its design and colour, would give clear 4K display and 7.1 sound quality to its viewers. The firm offers an extra feature of installing a solar tracker in the television device that would activate a tracking and alarm system when exposed to sunlight in case it gets stolen. SWOT Analysis would serve best to determine the existing innovation performance and capabilities of the firm, as well as a development audit for this new product (Comino and Ferretti, 2016).
Strengths- Currently, Samsung is one of the biggest television manufacturers of the world. With such heavy expenditure in R&D allows the firm to clearly depict the needs of the customers. Such expenditure has enabled the firm develop the largest patent portfolio among its competitors. With inclination towards environment friendly and technologically advanced production methods, Samsung Electronics is attracting more customers in the market. This is because buyers are being more aware about their safety and health hazards. They require products that are safe for them to use. Samsung's Pocket Holographic Television would do justice to this concern of its customers. In addition to this, the key strength of Samsung is that it enjoys first mover advantage on the basis of introducing innovation in its products.
Weaknesses- One of the biggest weaknesses of Samsung electronics is that its online store fail to provide better deals to its customers in terms of price or discounts. Other companies, despite of having a wide range of products provide impressive offers to its customers. Another weakness of Samsung is its high pricing strategy. This weakness drives away its customers in developing countries who wish to enhance their television viewing experience. Moreover, the firm is majorly dependant on the markets of developed countries for its revenue. Changes in these markets hampers the innovation capacity of the firm. These weaknesses would affect the new product developed by the firm. Even with its innovative features, if the current pricing strategies are implemented, it would develop a negative perception of the product in front of company's buyers.
Opportunities-There are many opportunities that Samsung's Pocket Holographic Television can avail in the market. The biggest of them being inclination of customers towards Artificial Intelligence. Customers all around the world are waiting for new innovations to happen which could enhance their experience of watching Television. With advancements in technologies a greater quality and clarity in television would attract various customers all around the globe. Another opportunity for the firm to enhance its innovation capabilities is diversification. In television, their new product would allow the firm to make the customers familiar with a whole new perspective regarding television. It would enhance its profitability in markets where customers need easier ways to view their favourite television shows and films in enhanced picture quality (Herold and et. al., Microsoft Corp, 2015).
Threats- The biggest threat of Samsung is enhanced competition from competitive firms like Sony, LG and Phillips. These companies are no less in implementing innovation in their production process (Murschetz, 2016). These competitors are also working on quantum dot technology to enhance quality of their televisions. Moreover, they have also developed their market share in curved OLED TV's with an emphasis on them being environmental friendly. Such close follow-up of Samsung's strategy is threatening to the firm and its new products. Another threat is high expenditure the firm would spend on marketing its new product. With not so effective 3D display, it is very necessary for this new product to succeed in the market.
Electronic Industry (Television)
Electronics industry, mostly Television have witnessed a drastic improvement in terms of technology, picture quality and designs. Electronic companies all over the world have been working towards developing innovative designs and features that could provide the customers to use TV for multiple purposes. Smart Televisions were created with in-built internet connectivity. Along with watching TV, viewers could use internet effectively through their television boxes. Almost all the manufacturer followed Samsung in creating Smart Televisions. Followed by this innovation, Samsung created world's first Bendable UHD TV around 4 years ago from today. This was one of the biggest innovations in Television industry and the firm opened the for new innovation pathway for innovation. Further, with use of quantum dot technology, televisions could offer the most colourful and brightest picture quality. However, QLED technology was a game changer as it could offer 100% colour volume to its viewers. This meant a substantial increase in clarity, as well as durability.
The innovations in this industry were not limited only to technology used in the picture quality, designs of televisions too have been subjected to innovations recently. After bendable Televisions, LG is bringing world's first roll-able Television in the market. The company has unveiled the design which would just sit flat on the wall like any other flat screen Television. However, it would shrink down with a single touch of a button. Another innovation worth denoting is the transparent television that is being developed by Panasonic. Its design is just like a transparent window until the power is turned on. It gives a complete clear opaque picture quality to its viewers (Futuristic TV Screen Technology You Have to See To Believe,2017). These continuous technological advancements are drivers of innovation in electronic companies like Samsung Electronics. It can be expected to witness new and better changes in the electronic industry soon.
Innovation in the Television Industry has been quite consistent. It began with Bandwidth Regulation. Federal Communication Commission (FCC) allowed a frequency of 6MHz for both audio and video signals. Another major innovation witnessed in the industry was use of cable technology. In 1940s regular lines were laid for cable televisions. In 1970s, the industry witnessed creation of optic cables to fasten the process of television. Then came the era of Satellite TV by 1980's. This innovation by far has been the most outstanding innovation in the history of television.
Thus, it can be concluded from the report, that innovation is the key to success for firms in the electronic industry. To effectively examine the macro-level factors that could affect the business, PESTLE Analysis seems to be the most appropriate approach. Porter's five forces model could be used to analyse industrial attractiveness of a company. It could help the firm formulate effective strategy and implement innovations that enhances this attractiveness in the market. To accurately judge the existing innovation performance and capabilities, SWOT Analysis can be used by companies of electronic industries. This would allow the firms to judge their inner strengths and weaknesses as well as opportunities and threats which would encourage them to strengthen their core competencies. Lastly, electronic industry has been subjected to ample innovations recently in televisions. It can be fairly concluded, that more innovations to enhance viewers' experiences will be brought to the market in future by electronic companies.
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