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Samsung to cut costs following poor Q2 finances

In the wake of poor earnings in the second quarter of the year, Samsung is preparing to cut costs.
August 12, 2014

Following the company’s worst quarterly earnings report in years and lacklustre smartphone shipments, Samsung is reportedly set to take undertake new cost cutting measures this year. Samsung’s operating profit dropped by 25 percent last quarter, with the mobile division performing the worst after posting a 30 percent drop in yearly profits.

Samsung Q2 2014 profit at a glance
Hundreds of managers in Samsung’s mobile division have already returned their bonuses to help improve the look of the company’s bottom line, which amounted to $2.9 million, and managerial business trips are set to be first in line for the chop.

“Samsung is tightening its belt as it is forecast to face tougher competition in the global smartphone market,”

Having talked to 26 global airlines last month regarding an exclusive deal for cheaper flights, Samsung expects to save 20 percent on business trip expenses. Last year, the company spent around $38 million on airfares.

Rumors are also circulating that Samsung may need to reevaluate its labor costs too, and may have to undertake restructuring plans before the year is out.

“It could be a possible scenario for Samsung Electronics to start downsizing up to 20 percent of its executives, streamlining subcontractors, unless it see a business pick-up in near future,”

Samsung also reduced it’s advertising budget last year, in a bid to improve profitability. However, greater cost cutting measures look to be required if Samsung is to compete with nimble successful Chinese manufacturers such as Huawei and Xiaomi, which had far more successful financial results last quarter.