In the past year or so, the “fate” of Samsung seems to be a recurring talking point around the internet. Due in large part to the company’s lackluster profit performance in 2014, the Korean conglomerate pulled things together and released a radically redesigned Galaxy S6 and sibling S6 Edge to widespread acclaim. The most recent quarter has been quite successful, however there are underlying issues involving mobiles, namely how much longer they can produce profits.
Today, Vice Chairman Kwon Oh-hyun indicated the company needs some radical revision due to slow growth in smartphone, television, and other key business units. Specifically, he said that:
“Smartphones, TV’s and other key IT products are entering a slow growth phase and our rivals are changing value chains by introducing new technology and business models.”
Mr. Oh-hyun then added that:
“In order to overcome the current crisis, we need an extraordinary transition. If we resist changes, then we won’t survive…We must become a leader in the new era with a new start…We must start anew everything from product development to operations and organizational culture…Samsung has turned a crisis into a business opportunity. We need to write a new corporate history with passion and challenge.”
In addition to his position as Vice Chairman, Kwon Oh-hyun is also one Samsung’s three co-CEOs. The company is expected to announce changes to its corporate management in December.
Samsung’s “situation” has been discussed at length over the course of the past year, however today’s call to arms represents a very clear indication the company itself is critically aware of the challenges the future poses for it. For years it was the de facto winner in the Android device marketplace, due in large part to the top-tech and marketing dominance it offered consumers.
Recently however, Chinese OEMs have posed a major threat to the “legacy” players thanks to their razor-thin profit margins and penchant for selling their products online-only. Even with Samsung’s plans to release a bendable smart device in 2016, there is only so much that can be done amid fierce competition.
Indeed Samsung need only look to Sony to see the problems associated with market changes and the fiscal maladies that can result from unpreparedness. Once the crown jewel in the global consumer IT market, Sony has since sold off its once-proud VAIO line, spun off its TV, audio, and video businesses, and is now in the process of doing the same with its imaging sensor business. The company was able to make a profit in this past quarter, though in no small part thanks to the Playstation brand; its Xperia line continues to fail to thrive.
Given that Samsung’s 46th anniversary was November 1st, the company has certainly been around long enough to see, react to, and benefit from changes to its business models. The question here ultimately becomes just what changes are needed and how the conglomerate will go about implementing them. Cutting jobs or budgets is one thing, but if it ultimately affects the company’s core ability to remain competitive then the problem may become far more hard hitting.