2013/08/22 Samsung Electronics : Less Than Half Done

I bet not so many people know this, but since 2009 Samsung's corporate goal for 2020 is to reach revenues of $400bn - I'm reminded of this having just updated our Dossier on Samsung. In 2012 its revenues were around $180bn (compared to Apple’s $165bn in the same period). That means it is still less than half the size it wants to be in 7 years' time. How is it going to achieve this goal? First, consider the CAGR that Samsung needs to reach $400bn: after 2012, it’s 10.5%. Then look at the CAGR it’s achieved in the 2009-12 period: 14%. Once, I would not have believed that Samsung could ever reach the $400bn goal. Now, I’m not so sure. Its growth 2009-12 is already well above the rate it would need in order to achieve the $400bn target. But as Amazon, Apple and many other companies have rediscovered (and what we all really know anyway), sustaining percentage growth rates becomes more and more difficult as you get bigger. What could Samsung do, therefore, to help achieve its goal? Relying on organic growth in Mobile is not going to be enough, on its own.

1.Get the most it can out of its key current growth driver, Mobile. Things like: expand its sales channels, the markets where it competes strongly, the platforms it operates on (grow Tizen, address Windows more strongly, consider Firefox OS for the low-end), take more share in Tablets against Apple.

2.M&A to boost market share in Mobile – like Amazon does in Books. Blackberry, HTC and Nokia would be potential acquisitions.

3.Grow new categories around Mobile, such as Wearables.

4.Grow new categories in Electronics, such as Home Automation and In-Car.

5.Unify its multiple hardware categories more powerfully, such as making Phones, Tablets, TVs, Home Automation, Wearables all work together more easily and effectively.

6.Get serious about going beyond hardware and becoming a software and services company also - do something substantial here, like IBM did when buying PWC’s consulting business for $4bn in 2002. Otherwise, changing an embedded culture from within will be tough.

7.Grow new businesses as expressed in its official strategy: Medical, Bio, Environment, Energy. Again, showing real commitment to change through M&A would be a key indicator.

8.Buy, as a strategy in itself. Organic growth alone will not be enough. The job is half done. Expect the unexpected from Samsung Electronics, if it is serious about finishing the job. See the latest GFP Dossier on Samsung Electronics at http://sa-link.cc/rY. For now, here is one graphic, showing recent Samsung Electronics growth and the role played by Mobile (IM).

Source: Strategy Analytics