Samsung – 5 Years’ Stock Analysis Essay

The stock prices of the Samsung Electronic Co Ltd increased in the Korean Stock exchanges with a great deal between 2004 and 2006, but by the prices observed a downturn in the next couple of years to follow and prices continued to fall until 2008. During 2008 the prices reached their maximum a record 5 year high of 741,000KRW in May 2008, but after that the prices fell again and continued to fall until Dec 2009 when the pace in the market picked up and the prices rose again (Samsung Electronics -Growth Chart, 2009).

The recent dip in prices was due to the global economic downturn that is faced by the entire planet at the moment, with economies suffering all over the world the impact on the Korean markets was inevitable and Samsung being one of the major players in the market suffered as well. The prices fell touching the lowest low of 451,000KRW on Dec 1, 2008 a drop of almost 300,000KRW within seven months.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Since that point on the company has been following a growth trend, sustainability is being achieve and prices have begun to increase this was a result of some radical cost cutting measures employed by the management in order o ensure profitability and maintain the trust level of the investors and motivate them to invest further into the organization even after the dramatic decrease in prices.

The consumer electronic market is a very vulnerable market with tight monetary conditions of a common man worldwide the spending power has decreased for everybody result in a downfall of sales just for the simplest reason that people are not able to afford items they were able to afford a few months back.

6 Month Stock Analysis. The prices continued to fall during all these months, it hit the lowest on Dec 1, 2008 when the prices were closed on 451,000KRW (Samsung Electronics Co. Ltd. , 2009). This was the time the global recession was in its full swing and it had hit the stock markets all over world, with huge corporations collapsing and causing the downturn to strengthen even Samsung couldn’t be immune to these changes.

The profits shrunk and called for the management to make some brave decisions, in order to ensure profitability the company was only left with two options either to give in to the rising inflation and raise the prices but with the spending power of the consumers already decreased this option couldn’t be employed the other option that was there was to maintain the prices and cut the costs of the company, hence the radical changes were brought including lay offs and every mean possible that there was.

Technological advances and new techniques were employed which improved the efficiency and reduced costs. Recent Prices In the fourth quarter of 2008 Samsung Electronics Co Ltd declared its first operational loss and it was anticipated that the loss would widen in the first quarter of 2009. But over the months through numerous strategic alliances and introduction of new products, such as the LED TV, the company was able to send a positive vibe into the market, and it paid off as the stock prices rose in the New Year and the trend still continues as prices continue to rise (Shim, 2009).

The company also had to cut on its spending and began saving in order to improve efficiency, one of the radical steps taken was that in January 2009 Samsung announced 10 to 30 % pay cuts for its executives. Product and Category of Products Samsung Electronics is the world’s largest electronics company, it deals in more than 60 products. The focus is basically on consumer electronics, products that are used in day to day life of everyone, the products include Semiconductors, Televisions, Refrigerators, Air Conditioners, DVD Players, Washing Machines, Microwave, Flash Drives, Lap tops etc. About Samsung, 2009) Besides this the company also offers a varied range of cell phones, the company infact became the second biggest cell phone producer of the world leaving behind Motorola. Technologically these phones are very advanced and this gives an edge to them against their competitors recently Samsung enabled its users to download heir favorite movies or television shows on their mobile phones this was a technological landmark and Samsung was the only manufacture to do that.

The Market. The market is a typical Business to Consumer sort of a market; all of the products offered are consumer focused. The customer base is quite diverse and is comprised all demographics hence there is something for everybody. This sort of market is driven by numerous factors, it involves, luxury, comfort, quality, prestige, price, performance etc. heavy amounts are spent on marketing and advertisements in order to attract the customers and spread knowledge about the products (Research and Markets: Samsung Adapts to Trends in the Consumer Technology Market , 2006).

The products although are very technologically advanced but still are easily copied hence there are always a threat of a competitor developing a similar product, hence heavy spending s is done on patents. Newer and better versions of the same product are introduced into the market quite rapidly this is because of the tough competition and the variety of products available to the consumers, if the company is no able to meet the customer’s demands the consumer can quite conveniently switch to the competitor’s product.

Trends in Data. The revenues of the company have been increasing over the years and have never fallen in the past four years, this means that the strategy has worked out for the company not raising the prices and relying on cost cuts for profits ensured that the sales never dropped for the company and in fact kept on rising despite the global financial crunch (Samsung Electronics -Growth Chart, 2009). As the inflation increased with the global recession the prices of input also raised giving rise to the cost of goods sold, hence the operating expenses also increased over the years leaving the operating income to reduce.

The change have only been noticed in 2008 while in the years before that although the costs were rising but the operating income kept on increasing in response to the sales. Keeping in view the rising expenses it obvious that the profits for the company did reduce over the years; this was in general response to the recession being faced in the global economy where the consumers were left with minimal disposable income as prices of the basic commodities increased in leaps and folds.

Changes in Economic Factors. Samsung products have never been attributed with high price, quality in case of Samsung comes with a mediocre pricing, also being in the technology industry especially in consumer electronics the company comes up with new products every day to stay in competition, and hence the demand of its products has remained high. In recession when the prices of electronic items went high with rest of the commodities Samsung preferred maintaining its price and reducing its profit margin this resulted in Samsung not losing its sales but instead increasing it every year.

Economical products with good quality were offered to the consumers and they responded to it with higher demands, on the other hand the company invested in technological breakthroughs to come up with procedures that would help reduce cost so that profitability is also maintained (Samsung Electro-Mechanics to supply mobile modules to Intel , 2008). Other than that in order to stay ahead of the competition and maintain the high demand for the products Samsung made strategic alliances and entered numerous ventures for product development and maintenance.

Change made by the Company. The company in the recent years has invested a lot in the research and development; it has included a variety of products into its portfolio and has grown tremendously. The management kept this goal in 2005 of doubling the company’s revenue by 2010, and in the quest of that the company has achieved new heights. Research and development is not only focused on product development but also on the production processes involved within the company, it has been a matter of concern that how can the existing products be manufactured with minimum cost possible.

Research and development budget from 2007 to 2008 only increased by 11% (Samsung Electronics Co. Ltd. , 2009). The business grew as more products were introduced and market expanded for the existing products as well, scheduling activities in such a manner that a new product is introduced frequently was an important task as customers could only be retained if they were offered something different every single time. Samsung and Competition Samsung mainly competes with the Japanese Sony and Sharp, the biggest players in the electronics market.

Before Samsung became huge they were the market controllers and had the biggest share especially Sony, but as the business grew for Samsung they soon lost their share to the company and now they both follow Samsung in ranking as it has become world’s biggest electronic company. The competition from these companies is in the same line of product, that are Televisions, digital displays, stereo systems, laptops etc. Competitor’s Data The competitor’s both Sony and Sharp had their revenues increased over the years along with an increase in costs (Sharp Corp. 2009). Their net profits also followed an increasing trend, but what is significant in this case is that the numbers only increased in small proportions and there were no jumps in either the revenue or the profits. But Samsung even at it lowest profit in 2009 had almost 33% more profit than Sony and 400% more than Sharp, this shows the strength of the organization as the competitors showed their best profits in 2009 while Samsung showed its worse even then it dominated the electronics industry by far (SONY CORP (SNE:NYSE), 2009).

In the fierce competitive industry of electronics it is very necessary to stay ahead of the competition, to anticipate what the competitor might do and get it done before him. The changes made by the competitor are closely monitored and so are their impact on the market and their profitability, considering the impact the company takes an action.

But in such environment one has to have a proactive approach rather than a reactive approach, hence each company focuses greatly on product development, Sony is known for the quality of its products and innovation, Samsung on the other hand had to follow this approach they had to invest the in the research department in order to match Sony’s schedule and to bring better, more innovative products in less time. Samsung in 3 years Although the impact of the global recession has been significant on the company, its sales and profitability but there still lays a hope for betterment.

The stocks have been performing rather well in the past few months showing the growth trend and profitability, keeping this in perspective Samsung 3 years from now would still remain the market leader and would bring better products that fit the consumer’s criteria and needs, the demand for such products always be high (Samsung television soars to become the global top brand, 2007). I do see the portfolio of products being increased as it has been a trend of product inductions into the organization. The company would keep on investing in the research and development and would focus more on implementation of cost efficient processes.

x

Hi!
I'm Larry!

Would you like to get a custom essay? How about receiving a customized one?

Check it out