Financial & Economic Analysis

Coursework: Economics Report (ER)

“Managing during recession”

1.0 Introduction 

Samsung was founded in 1939, it is one of the world's largest electronics multinational companies, with 206 offices and facilities in 68 countries around the world. Samsung mobile was first introduced by the company in 2004, in India. The Telecommunication Business of Samsung Electronics announced its new business strategy in 2008, having a great focus on marketing and consumers. Style, Multimedia, Infotainment, Connected, Business, and Essential are the six major categories of Samsung mobile phones (Teimouri, H. et al., 2016). Samsung is the world-leading in the global mobile phone market (Moorhead. P., 2020), with a market share of 23% in the first quarter of 2021 (Sean, 2021). Samsung target group are people from age 15 to 45 who follow the latest trends and advancement in the technology. They are heavily influenced by mobile phones, and internet media, and they are particularly interested in local shows, as well as celebrities and their aspirational lifestyles. Samsung X is a foldable mobile phone produced by Samsung in UK. Samsung X focus of people who need and want to use mobile phone and tablets simultaneously like college and university student, and people working in offices.

This paper will conduct an in-depth analysis of Samsung mobile phones, specifically Samsung X, which is being produced in UK and is exported to the rest of the world. The paper will cover the microeconomic and macroeconomic factors attached to Samsung mobile phones in the domestic and global markets. 

Figure 1.1

                                                                                                      (statcounter.com)

2.0 Analysis 

2.1 Product Attributes  

Samsung X, a foldable mobile phone, is a tangible and non-perishable luxury product. The Price elasticity of demand is a measurement of the change in consumption of a product with a change in its price product (Anderson, P.L., et al., 1997). In this case, Samsung X has an elastic demand that means when the price of the product decreases the demand increases and vice versa, this is the same for the global and domestic market. On the other hand, income elasticity is the sensitivity in the quantity demanded with a change in income (Hummels, D. and Lee, K.Y., 2018). Samsung X comes in a category of luxury goods like if the income level of people increases, they will buy Samsung X frequently and will buy new models of Samsung X. Apple and Samsung are fierce competitors, and if one fails, the other benefits – this concept is called Cross elasticity of demand. This concept is described as "a calculation of how much demand for one product varies when the price of another product increases (Prasad, A., 2010). When the prices for other mobile phones, especially for Apple fold increases compared to Samsung X, the demand for Samsung X will increase. Although the cross-price elasticity is not very high as there are loyal customers of Apple who would not choose an alternative brand for increase in price. However, the price increase can make a difference for new comers like people choosing luxury brands like Samsung X and Apple fold will have shift to alternative brand for a small price increase.

Figure 2.1.1 – price elasticity                          figure 2.1.2 income elasticity      

2.2 Macroeconomic scenario 

The smartphone market in the UK is highly regulated by the government, they provide licenses to different companies to either manufacture or market smartphones in the country. To get permits in UK companies and marketers have to pay huge amounts of money (StudyCorgi, 2018). This creates high barer to entry in the market which is good for Samsung X but at the same time this increases the cost of production for Samsung X and other manufacturers like Apple, Huawei, and many others. During the covid19 pandemic due to lockdowns of major industries, there was a downturn in the mobile industry but after a small recession Samsung X  has shown very impressive growth in the first quarter of 2021 (BBC, 2021). The trend for smartphone uses increased during the pandemic, 87% of adults in the UK owned smartphones in 2020 (Strugar, M., 2021). This global trend in the increase of smartphone ownership is due to shifting in education system into an online system which increases the demand for smart. For Samsung X this is an ideal time to market itself as it has the feature of both mobile phone and tablets at the same time in one packing. The demand for smartphones is expected to increase in the global market and the domestic market in the coming days. This means the demand for the Samsung X increases in the UK market during the pandemic. In global market, governments policies might hurt the demand for Samsung X. In many developing countries like Pakistan, Palau, Bermuda, Maldives and many more, they governments have imposed high tariffs on the import of luxury good (Hansen, S., 2021), consequently the overall price of Samsung X increases for global buyers, decreasing the demand.

2.3 Product Strategy and competitors 

In UK market the major competition is from Apple – having highest market share, which is focusing on innovation. But in this category, fordable phone, Samsung have chased out Apple, as Apple hasn’t yet introduced its fordable phone to the market. This gave Samsung first movers advantage, leading the market in this category. The already strong reputation of Samsung helps Samsung X to draw huge demand both form the local and global market. The competition which can hurt the sales of Samsung X in the global market is the Chinese companies who are offering the same featured phones at a lower prices (UKessay, 2018). This can take away a huge chunk of the market in developing countries where the majority of the population is lower middle class or lower class.

Samsung's strategy is to create an aspirational brand image by presenting the Samsung X with distinctive and distinguishing qualities – emphasizing on its uniqueness, high-quality, and easy-to-use display attributes (mmaglobal.com). 

Figure 2.3.1

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