Prior to beginning work on this assignment, re
Prior to beginning work on this assignment, read The Wall Street Journal article Samsung’s New Challenge: Rising Component Costs (ATTACHED) and the Business Insider article Samsung Introduced 10 Times as Many Phones as Apple Last Year, but Its Mobile Division Made Half as Much Revenue (Links to an external site.).
In a three- to four-page paper (not including the title and reference pages) assess how Samsung’s technological smartphone innovation accounts for the company’s sales growth of mobile devices worldwide.
In your paper, determine whether Samsung could benefit by implementing a global product line-up strategy to pursue profitability. To make the determination go to Samsung’s.com official website and locate the “Investor Relations” link to retrieve Samsung’s financial statements. Utilize the SEC filings and annual reports to summarize Samsung’s principal goods and services, market share, geographic locations where it operates, and major competitors.
Samsung is a leading smartphone vendor worldwide. In 2017, Samsung’s market share of the global smartphone market was at around 21.6% with Apple as its closest competitor in the market. As the world’s biggest smartphone maker, Samsung tries to keep profits up in its mainstay mobile phone business, but the rising costs of the components that go into its devices proves to be a challenge.
In your paper,
- Assess whether Samsung could benefit by using Activity Based Costing (ABC). Your evaluation should include
- factor(s) that influenced your decision,
- the ramifications of implementing ABC in the Global smartphone market, and
- how you would structure the distribution of costs using ABC for Samsung.
- Assess whether Samsung could benefit by using a standard cost system. Your evaluation should include
- the factor(s) that influenced your decision,
- the ramifications of costs, quantity, and variances, and
- the ramifications of using standard costs in the global smartphone market.
- Explain how Samsung could benefit by product pricing in terms of cost-plus concepts. This explanation should include
- Samsung’s future plans, such as, expansion, consolidation, and downsizing, and
- how costs concepts could be used in the decision making.
The Samsung’s New Challenge: Rising Component Costs Final Paper
- Must be three to five double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Writing Center’s APA Style (Links to an external site.) resource.
- Must include a separate title page with the following:
- Title of paper
- Student’s name
- Course name and number
- Instructor’s name
- Date submitted
- For further assistance with the formatting and the title page, refer to APA Formatting for Microsoft Word (Links to an external site.).
- Must utilize academic voice. See the Academic Voice (Links to an external site.) resource for additional guidance.
- Must include an Introduction and Conclusion paragraph. In the introduction paragraph indicate the purpose of your paper and provide an overview of the research design used. Introduce the various topics that will be addressed in the research paper. Identify the method(s) that will be used to collect the data for the topics and how that data will be evaluated.
- For assistance on writing Introductions & Conclusions (Links to an external site.) as well as Writing a Thesis Statement (Links to an external site.), refer to the Writing Center resources.
- Must add an APA heading (Level 1 or Level 2) for each one of the topics discussed in the research paper as shown:
- Introduction (APA Level 1)
- Samsung’s Principle Goods and Services (APA Level 1)
- Global Market Share (APA Level 1)
- Geographic Locations (APA Level 1)
- Major Competitors (APA Level 1)
- Activity Based Costing (ABC) (APA Level 1)
- Production Costs of Cellphones (APA Level 2)
- Samsung's New Challenge: Cellphones Rising Component Costs (APA Level 2)
- Standard Cost System (APA Level 1)
- Cost-Plus Concepts (APA Level 1)
- Samsung’s Future Plans (APA Level 1)
Use the following APA Style blog to read about the APA Five Levels of Headings (Links to an external site.)
- Must use at least five scholarly and/or credible articles from ProQuest Business, industry databases Nasdaq.com and EY.com, and comprehensive accounting databases FASB codification, AICPA, and SEC reference library sources in addition to the course text.
- The Scholarly, Peer-Reviewed, and Other Credible Sources (Links to an external site.) table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
- Must document any information used from sources in APA style as outlined in the Writing Center’s Citing Within Your Paper (Links to an external site.) guide.
- Must include a separate references page that is formatted according to APA style as outlined in the Writing Center. See the Formatting Your References List (Links to an external site.) resource in the Writing Center for specifications.
Samsung's New Challenge: Rising Component Costs; As Samsung Tries to Keep Profits Up, Component Costs Present Unexpected Challenge.
Cheng, Jonathan.
Wall Street Journal (Online); New York, N.Y. [New York, N.Y]. 29 Apr 2014: n/a.
Abstract
According to a teardown by market research firm IHS this month, Samsung's new Galaxy S5 with 32 gigabytes of memory costs $251.52 to manufacture.
SEOUL–As the world's biggest smartphone maker tries to keep profits up in its mainstay mobile phone business, one key challenge will come from an unexpected place: the rising costs of the components that go into its devices.
On Tuesday, Samsung Electronics Co.'s first-quarter earnings showed that its smartphone margins remained flat from a year ago, highlighting the need for the South Korean technology giant to keep costs low amid uncertain demand for its new flagship Galaxy S5 smartphone.
Samsung executives said that the Galaxy S5 smartphone, which officially went on sale earlier this month, was received positively by the market and would likely do better than the previous model, without elaborating. But analysts said margins could well slip this quarter.
The company packed its latest phone with pricey features–such as an improved camera, a fingerprint scanner and a heart-rate sensor–hoping to give it a leg up against a crowded field of rivals that, like Samsung's devices, run Google Inc.'s Android operating system.
"Despite increasing sales volumes, a decline in profits seems inevitable due to falling prices and intensifying competition," said Greg Roh, an analyst with HMC Investment Securities in Seoul.
In the first quarter, the sale of mobile phones accounted for 60% of Samsung's revenue and three-quarters of its profits. Samsung said its profit margins for that unit came in at 19.8%, unchanged from a year earlier. But margins were higher than the fourth quarter due to one-off "adjustments to reserve items," the company said, declining to elaborate.
But the pressure on margins is only likely to get more intense as Chinese rivals, including Huawei Technologies Co., Lenovo Group Ltd. and ZTE Corp., crank out increasingly competitive smartphones. In the first quarter, Samsung saw its global smartphone market share slip to 31.2% from 32.4%– the first annual decline in four years–at the expense of rivals Lenovo and Huawei, according to data from Strategy Analytics.
Mr. Roh said he expects operating profit margins at Samsung's mobile division to fall to 15.9% in the third quarter and 13.5% in the fourth quarter.
Samsung on Tuesday said net profit rose 5.9% from a year earlier to 7.57 trillion won ($7.32 billion) as strong chip sales helped cushion slowing sales at its key mobile unit. Sales rose 1.5% to 53.7 trillion won.
Not helping Samsung's cause is the company's continued reliance on its massive advertising budget to keep its sales humming, and the rising cost of making its own devices.
During a conference call with analysts on Tuesday, Samsung executives said that they were working to keep marketing costs in line with sales. They said they would sell more phones for less than $100 to target the portion of the market most under threat from low-cost Chinese competitors.
But at the higher end, Samsung's relatively high manufacturing costs restrict the company's ability to compete on price at a time when selling prices continue to fall.
According to a teardown by market research firm IHS this month, Samsung's new Galaxy S5 with 32 gigabytes of memory costs $251.52 to manufacture. That sum handily outstrips Apple Inc.'s iPhone 5S, which contains $207.00 worth of components, and is a far cry from ultracheap Android smartphones sold in China and India, some of which can be manufactured for as little as $35.
IHS says its preliminary analysis is based only on hardware and manufacturing costs, and excludes software, licensing and other costs. A Samsung spokesman declined to comment on the teardown.
The high costs come amid the company's stated goal of simplicity and moderation with the Galaxy S5, a device that company executives characterized as a "back to basics" device rather than one with any flashy but little-used features.
In a February interview previewing the device, Samsung executive vice president Lee Younghee said that the company was steering clear of gimmicky new features in favor of a simple device that would offer "very competitive pricing."
On AT&T Inc.'s website, the Galaxy S5, with 16 gigabytes of memory, sells for about $650 without a contract, while Verizon Communications Inc.'s Verizon Wireless website sells the device for about $600–about the same as for the Galaxy S4 when it first went on sale.
While Samsung's profit margin has been squeezed amid a decline in the average selling price of its smartphones, the company has more control than most of its rivals over the cost of manufacturing its devices and components because it makes semiconductors and displays internally.
Samsung's latest smartphone has about 10 sensors, including the ones that underpin the heart-rate and fingerprint scanners. It also includes a camera that Samsung executives say can match the functions typically found on the chunky digital SLR cameras favored by professional photographers.
But that camera may pose a headache for Samsung, after the company confirmed reports of camera glitches plaguing an undisclosed number of Galaxy S5 smartphones which render the smartphone's shooter useless.
Credit: Jonathan Cheng
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