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Pestal Analysis for Samsung Electronics Essay

Over the past several years, there has seen a plethora of patent lawsuits within the smartphone industry. In the highly competitive environment, manufacturers of handsets have been aggressive in protecting their intellectual properties by suing competitors by claiming infringements on patents. For example, in March 2010, Apple sued HTC for allegedly infringing on 20 Apple patents (Weil, 2010). Apple also sued Nokia in 2010 for similar patent infringements(“Patent wars”, 2011). However, in April 2011 the International Trade Commission recommended that neither HTC or Nokia should be found liable for any infringements.

Further Microsoft reached a licensing agreement in April 2010 with HTC to pay royalties on Android based handsets (“Patent wars”, 2011). More recently, Apple launched a lawsuit against Samsung in April 2011 claiming Samsung copied design features of the iPhone in its Galaxy line of Android phones (Quigley, 2011).

These are just a few examples of legal challenges faced by smartphone manufacturers. Mentioning all lawsuits in the past several years is beyond the scope of this analysis, but it is important to recognize that manufacturers are using their patent portfolio’s to make it more difficult for their competitors to gain larger market shares. Even if the majority of cases are found to be ‘dubious’, the costs associated with legal battles can hamper or slow down the release of new handsets and hence making it more difficult for the manufacturer to stay competitive.

Economic Environment

The North American economy is still recovering from the financial crisis of 2008. Major factors to consider are the unemployment rates, consumer spending. In September 2011 the unemployment rate in the US was 9.1% which is well above the national average of 5.7% between 1948 and 2010 (“United States Unemployment”). The current high unemployment rate in the US is likely having an impact on reducing smartphone sales.

A 9.1% unemployment rate represents approximately 28 million Americans out of work. In Canada, the unemployment rate in September 2011 was 7.1% which represents its lowest point since December 2008 (“Canada Unemployment”). Since January 2010, Canada has been experiencing a downward trend in unemployment (“Canada Unemployment”).

The high unemployment rate in the US has been negatively impacting consumer confidence and has resulted in a decrease in consumer spending. Bloomberg reports consumer spending dropped 0.2% in June 2011 which provides evidence the decrease in hiring and wage increases below the inflation rate are affecting consumer spending (Chandra, 2011). Consumer spending accounts for 70% of the US economy (Chandra, 2011); any fluctuation in this area will have a significant impact on the overall economy. In Canada, the opposite is true.

Consumer spending increased by 3.8% from 1st quarter 2010 to the end of 1st quarter 2011 (“Canadian Consumer Spending”). Consumer confidence is Canada seems to be higher than the US likely resulting from lower unemployment rates and Canada’s faster paced recovery from the global financial crisis.

Ref 1: http://www.tradingeconomics.com/united-states/unemployment-rate Ref 2: http://www.tradingeconomics.com/canada/unemployment-rate Ref 3: http://www.bloomberg.com/news/2011-08-02/consumer-spending-in-u-s-unexpectedly-falls-for-first-time-in-two-years.html Ref 4: http://www.moneris.com/AboutUs/MediaCentre/NewsAndEvents/2011/Month/Jul%2014.aspx

Social-cultural Environment

The rise of the information age has made telecommunication more important for both business and pleasure. It is important to determine how receptive a society is to new advancements in technology, particularly smartphone adoption in this case. By measuring smartphone adoption by age demographics, a better understanding of who the primary target groups can be gained. Insights into how different groups of smartphone users use their devices can provide insights into new features or improvements in established features.

At the end of 2010, there were 63.2 million smartphone subscribers in the US (comScore Inc, 2011). The adoption rate has been increasing annually; in December 2009, 16.8% of Americans owned a smartphone, while in December 2010 the adoption rate increased to 27% (comScore Inc, 2011). By March 2011, 32.2% of Americans adopted a smartphone (ref 2). The increase of just over 10% over a one year period along with over a 5% increase from Dec. 2010 and March 2011 shows that the US population is very receptive to new smartphone technologies resulting in rapid market expansion.

Breaking adoption down into demographic groups, 12.6% over the age of 55, 16.7% aged 18 to 24, and 27.2% aged 25-34 owned a smartphone in December 2010 (comScore Inc, 2011). According to comScore, the fastest growing age segments in smartphone adoption are 13 to 17 year old and those aged 55 and up (comScore Inc, 2011).

ref1: The comScore 2010 Mobile Year in Review -http://www.comscore.com/Press_Events/Presentations_Whitepapers/2011/2010_Mobile_Year_in_Review ref2:http://www.comscore.com/Press_Events/Press_Releases/2011/6/comScore_Launches_Mobile_Measurement_in_Canada

Technological Environment
The most important aspect of the technological environment in this case is the cellular network infrastructure. Both the US and Canada have infrastructure in place which supports both voice and data transfers. However, rural regions may have poorer quality of service, and do not always support data transfer. However, most of the population is concentrated in urban and sub-urban regions of both countries; these regions have the wireless infrastructure in place to support all uses of smartphones.

The infrastructure in both Canada and the US is privatized, which means the network carriers maintain and upgrade it since it is in their best interest to retain and keep cellular subscribers happy.

Natural Environment
Since Samsung does not manufacture its handsets in North America, the natural environment is insignificant in terms of strategy formulation. Typically, a manufacturer needs to be aware of extreme weather patterns and availability of local natural resources within the region they have manufacturing facilities. However certain regions, particularly along the Gulf Coast are prone to hurricanes. These massive storms can damage the cellular network infrastructure which would render smartphones into paper weights.

Political/Legal Environment
• Just random ideas right now for this section
o wireless communication regulations
o electronic device safety regulations?
o deregulation of the telephone industry
• Trademark and Patent Laws
o Currently there is a large number of patent and intellectual property litigations/lawsuits in the US, particularly in the smartphone industry, including a dispute between Apple and Samsung. Apple claims Samsung copied iPhones design features, packaging, and user interface components. o Patent ‘trolling’ has become a big issue in the US. • FCC Regulations

o Part B of the FCC rules sets rules for radio frequency strengths for 850,900, 1800, and 1900mhz bands in order to prevent interference with other communication devices and infrastructure

Economic Environment
• US Census Bureau – 2010 Census – http://www.census.gov/prod/2011pubs/p60-239.pdf o Median household income $49,445 in 2010
o Median for family household $61,544
o Median for single female householder $25,456
o Median for single male householder $35,627
• US International Trade Commission – Harmonized Tariff Schedule – http://hts.usitc.gov/ o There is no import duty or tariffs for telephones, including telephones for cellular or wireless networks

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