Secondary To know their secret to survive through global recession and strengthening their leadKnow their driving strengths and weaknesses facing the companyEvaluate their strategies adopted to achieve their goalsAttain assurance if goal of $400billion dollar by 2020 is achievablePresent conclusions to enable a potential investor to make a well informed decision regarding investment in the company
Limitations and ethical issues arising
SWOT ANALYSIS Its strategic planning tool and a technique which helps uncover both internal and external factors which impact the business. The factors are namely strength, weaknesses, opportunity and threatsLimitations-It helps but does not identify these four aspects or provide any solution to them.Categorizing four aspects may be very subjective because of the element of uncertainty
RATIO ANALYSIS It is a financial tool which provides the monetory information in a way easy to interpret and more understandable for all stake holdersLimitations-It analyses trend on basis of historic data but investors are more concerned about future of the company.It requires a industrial or sector benchmark or else alone doesn’t assist in judgment.It’s a financial tool and completely ignores all non financial information.They are generally distorted by inflation.
INTENSITY OF COMPETETIVE RIVALRY (HIGH) Fierce competition over its mobile and tablet division from Apple, Htc.LED TV and other home appliances division also in stiff competition from Sony, PanasonicSlow growth in market size so more pressure to steal market.
ANALYSIS AND EVALUATION OF BUSINESS AND FINANCIALPERMORMANCE OF SAMSUNG ELECTRONICS FROM JAN 1, 2009 TO DEC 31,2011 VSBy Asif ShakeelACCA registration no 1512792
OBJECTIVESPrimaryTo do a business and financial analysis over 3 year period ending31st December 2011Secondary• Know their secret to survive through global recession andstrengthening their lead• Know their driving strengths and weaknesses facing the company• Evaluate their strategies adopted to achieve their goals• Attain assurance if goal of $400billion dollar by 2020 isachievable• Present conclusions to enable a potential investor to make a wellinformed decision
INFORMATION GATHERINGSources of information- Annual accounts of Samsung electronics and Apple Inc- Financial Analyst Statement. Bloomberg, CNN money- Print Media. Books, magazines, journalsMethod used for collection of information- Online reading. Official website- Other Media. Financial programs on TV, Financial news channels- Library research. Newspaper columns, financial timesmagazines, money magazineLimitations and ethical issues arising
ACCOUNTING/BUSINESS TECHNIQUE USED AND THEIR LIMITATIONSPORTERS 5 FORCES It is framework for industry analysis and business strategy. It draws microeconomics which derive 5 forces which determine the attractiveness/profitabilityof the company. Limitations-Model is designed for individual business strategies and not for large multicorporations, conglomerate.It simply under estimates the strength and strategies of business.SWOT ANALYSIS Its strategic planning tool and a technique which helps uncover both internal andexternal factors which impact the business. The factors are namely strength,weaknesses, opportunity and threatsLimitations-It helps but does not identify these four aspects or provide any solution to them.Categorizing four aspects may be very subjective because of the element ofuncertainty.
RATIO ANALYSIS It is a financial tool which provides the monetary information in a way easyto interpret and more understandable for all stake holdersLimitations-It analyses trend on basis of historic data but investors are more concernedabout future of the company.It requires a industrial or sector benchmark or else alone doesn’t assist injudgment.It’s a financial tool and completely ignores all non financial information.They are generally distorted by inflation.
ANALYSISCompany overview Founded in year 1969 in South Korea A flagship company of Samsung Worlds largest IT company by revenue, worlds largest mobile maker. Headed by Lee Kun Hee who inspired a trend of change.Known strategies of company•Create core design around which all products can be customized•A wide product category (dominate the entire category for a broad market play)•Collocation of R&D facilities•Easy access to Asian market
PORTERS 5 FORCESTHREAT OF NEW ENTRANTS (LOW)High capital investment,High cost of research and developmentTHREAT OF SUBSTITUTE PRODUCTS OR SERVICES (MEDIUM)Samsung devices adding more and more features minimizing substitutesIncreased threat of substitute being innovatedBARGAINING POWERS OF CUSTOMERS (HIGH)Increased choices available with near same featuresCustomer switching to device with more features and cheaper pricesBARGAINING POWER OF SUPPLIERS (LOW)Input taken from several suppliersDifference in substitute or alternate product negligibleINTENSITY OF COMPETETIVE RIVALRY (HIGH)Fierce competition over its mobile and tablet division from Apple, HTC.Slow growth in market size so more pressure to steal market.
SWOT ANALYSIS STRENGTH WEAKNESSES - Technological advancement - Cannibalism - Efficiency in supply chain -Inconsistent sales growth - Increased presence in growing -Perception of low durability products economies - Reliance on software from Google - Market leader Samsung Electronics -Increase in electronics demand -Chinese products -Growing Asian economies - Slowing demand for DRAM -Sponsorship - Technology battle with competitors OPPORTUNITY THREATS
RATIO ANALYSISSales Revenue Growth Sales Growth 150,000 Million $ 100,000 50,000 0 2009 2010 2011 Samsungs slowing growth rate and uneven sales trend Apple’s double digit growth rate
PROFITABILITY RATIOS Profit margins over 3 year 45% 40% 35% GM Samsung % of turnover 30% 25% GM Apple 20% 15% OP Samsung 10% 5% OP Apple 0% 2009 2010 2011 Samsungs profit margins consistent with sales Adopting of green management style resulting in efficiency in operations Apple proving 3 times more efficient than Samsung and the industry norm
LIQUIDITY RATIOSSamsung slightly above the industry average and maintain its liquidity at 1.2 inyear 2011Apple well above the industry standard with 1.6 and are lowering towards theaverage.EFFICIENCY RATIOS Inventory and Creditor days 90 80 SE inventory days 70 60 Apple inventory No of days days 50 40 SE creditor days 30 20 Apple creditor days 10 0 2009 2010 2011
GEARING RATIOSDebt ratio Debt percentage 37% Samsung Electronics 36% 35% Debt % Apple 34% 33% 32% 31% 2009 2010 2011Interest coverSamsung had a attractive interest cover of 26 above the industry average 17-18 times.Apple has no long term debt and paid no finance cost in entire 3 year period ending2011
CONCLUSIONApple and Samsung have many similarity and differences in themselves Both struggled through initial cradle years but gained lead on base of thereinnovation and creative ability. Both have flourished through recession years growing stronger than ever Samsung has very poor control on its sales and experiences uneven salesgrowth which hurts its own plans. Apple has a very controlled and constant doubledigit growth. It earns moderate profits despite its lead over the whole industry whereas Applehas a very controlled and enormous double digit growth. It has high reputationamong investors due to its profitability and free of long term debt balance sheet.
RECOMMENDATION•Samsung should concentrate in tablet division to ensure its future as itsubstitutes PC, laptops and many of its products•It takes special precaution that its product do not resemble close to itscompetitors to avoid further hefty fines from courts.•It attracts the investors more by presenting itself better. Improvingefficiency, cleaning long term debt from balance sheet to match the mighty ofits giant rivals like Microsoft, Apple etc ANY QUESTIONS/ COMMENTS