Global Strategy and Samsung

Mergers, Acquisitions, and International Strategies A well crafted strategy is crucial for business success in the both the local and the international market. Firms achieve this success by using business-level strategies or corporate-level strategies, or both. Business level strategies (such as cost leadership and differentiation) influence a firm's competitive advantage in its products and markets, while corporate-level strategies (such as mergers and acquisitions) affect the firm as a whole (Hill & Jones, 2012). Firms operating in the global market must also choose effective international business-level strategies and international corporate-level strategies.

This paper compares an international company, Samsung, with a history of mergers and/or acquisitions, and a US-based company, Hibbert Sports, Inc., which is based solely in the US and does not have a history of any mergers or acquisitions. The paper specifically evaluates Samsung's acquisition strategy as well as its international business-level strategies and international corporate-level strategies.

Also, the paper identifies one company that would be a profitable candidate for Hibbett Sports to acquire or merge with and proposes one business-level and one corporate level strategy the company should consider. Mergers and Acquisitions Mergers and acquisitions constitute important inorganic growth strategies for firms. A merger involves two autonomous firms joining to form a single entity, while an acquisition involves a firm purchasing another firm.

Mergers and acquisitions are informed by numerous reasons, including financial synergy, economies of scale, growth acceleration, product and risk diversification, market share expansion, strategic realignment, as well as tax considerations (Johnson, Scholes & Whittington, 2010). For instance, for a banking firm contemplating venturing into the insurance industry, acquiring an already established insurance firm would enable the banking firm to enter the insurance industry more easily. As such, the banking firm would avoid the complexity of entering the insurance industry from scratch.

Mergers and acquisitions have been integral to the growth of Samsung. Samsung is a Korean multinational firm with interests in diverse industries, including consumer electronics, textiles, insurance, retail, food processing, chemicals, construction, ship building, and securities. Nonetheless, electronics represent the firm's major source of revenue, accounting for more than 70% of the firm's total revenues (Samsung, 2016). The firm designs, develops, manufactures, and markets a wide range of electronic products, including smartphones, tablets, computers, television sets, LCD displays, household appliances, memory chips, semiconductors, and storage devices.

The products are marketed in more than 100 countries around the world. Founded as a trading company in 1938, Samsung has achieved tremendous growth over the years to become one of the most powerful business conglomerates globally (Samsung, 2016). Throughout its operational history, the firm has made several acquisitions. However, one important acquisition the firm made was the acquisition of Hanguk Jeonja Tongsin in 1980. The acquisition set the stage for Samsung's entry into the telecommunications hardware business.

At the time of the acquisition, Hanguk Jeonja Tongsin was a major producer of telecommunications hardware in Korea. For Samsung, therefore, acquiring Hanguk Jeonja Tongsin was crucial for accelerating the firm's presence in the fiercely competitive electronics industry. In the 1980s and before, the global electronics industry was dominated by giants such as Nokia, Motorola, Sony, and Toshiba. With such intense rivalry, it would have been more difficult for Samsung to successfully gain considerable market share in the electronics industry.

Indeed, one of the major reasons why a firm makes an acquisition is to gain market share in a competitive industry (Hill & Jones, 2012). Rather than pursuing the target market from scratch, the firm acquires a firm already existing in the target market. With its expertise, technical knowledge, and market knowledge, the existing firm enables the acquirer to enter the market more easily. Hanguk Jeonja Tongsin would later become Samsung Electronics, which is today one of Samsung's major business divisions.

Samsung Electronics embarked on a wide-ranging global strategy in the 1980s, setting up operations in Europe, Asia, and North America. Samsung Electronics is now the largest manufacturer of electronics in the world, especially smartphones, memory chips, and semiconductors. Clearly, the acquisition of Hanguk Jeonja Tongsin was a prudent choice for Samsung. An acquisition may also be informed by the need to diversify product portfolio. Firms may diversify into different industries in order to spread risk and overcome product life cycle challenges (Hill & Jones, 2012).

Samsung was originally established as a trading company, mainly focusing on groceries. By the 1950s, the firm already had interests in, among other industries, retail, securities, and insurance. In the 1960s, the company ventured into the electronics industry. The firm reinforced its presence in the electronics industry by acquiring Hanguk Jeonja Tongsin in 1980. Hanguk Jeonja Tongsin would soon become one of Samsung's main businesses, enabling the firm to have a more diversified product portfolio.

Whereas some firms use mergers and acquisitions as vehicles for growth, others elect to pursue organic growth. Organic growth is where a firm achieves growth by increasing output or customer base as opposed to mergers, acquisitions, and similar strategies (Hill & Jones, 2012). Hibbett Sports Inc., an American firm that retails sporting goods, is an ideal example of a firm that has grown without mergers or acquisitions. With its headquarters in Birmingham, Alabama, the retailer has operations in more than 30 states across the US.

The retailer was founded in 1945, and mainly targets small and mid-sized markets in south, southwest, and mid-west US (Hibbett Sports Inc., 2017). There are several candidates Hibbett can consider for an acquisition. First, it is important to note that a firm may acquire a firm in a related industry or in a different industry (Hill & Jones, 2012). For instance, an airline may acquire an airline. Alternatively, the airline may acquire a hospitality chain. For Hibbett, acquiring a firm in the same or related industry would be more sensible.

One company the retailer may acquire is Olympia Sports, a privately held sporting goods retailer with operations also in the US. Acquiring Olympia would be beneficial to Hibbett in several ways. First, both firms operate in the same industry. Therefore, acquiring Olympia would enable Hibbett to improve its position in the rigorously competitive sporting goods retailing market. Based in Maine, Olympia has 200 locations mainly in the northeastern and mid-Atlantic regions, with annual revenues in excess of $180 million.

As Hibbett is predominantly located in the southern, southwestern, and mid-Atlantic regions, acquiring Olympia would give the firm access to the northeastern market, resulting in a larger geographical presence. When a firm acquires a firm in the same industry, it increases its market share. Hibbett is a mid-sized sporting goods retailer, with the market being dominated by giants such as Wal-Mart, Dick's Sporting Goods, Academy Sports + Outdoors, Target, Nike, Cabela's, Foot Locker, and Costco.

In such a competitive environment, acquiring Olympia would give Hibbett greater strength in the sporting goods retailing market. Acquiring Olympia would also increase Hibbett's revenue potential and profitability. Business-Level and Corporate-Level Strategies Business-level strategies are strategies a firm employs to increase its competitive advantage in its products and markets (Hill & Jones, 2012). For instance, a firm may create value for customers by delivering products at a lower price relative to rivals (cost leadership), differentiating its products from similar ones in the market (differentiation), or a combination of both.

Corporate-level strategies on the other hand influence the overall strategic direction of a firm (Johnson, Scholes & Whittington, 2010). These may include mergers and acquisitions, diversification, strategic alliances, vertical and horizontal integration, restructuring, and so forth. At the international level, business-level strategies are influenced by four major factors: 1) factor conditions; 2) demand conditions; 3) strategy, structure, and rivalry; and 4) related and supporting industries. These four factors constitute what is known as the national diamond of competitive advantage (Frainshmidt, Smith & Judge, 2016).

The factors tend to influence the kind of strategy a firm pursues in the international market. For instance, if the market for a given product is stronger in the local market than foreign markets, local firms concentrate more on that product compared to foreign firms. The German premium automobile industry is an ideal example. Korea, Samsung's home country, has historically had a competent engineering workforce. More specifically, Korean firms have over the years developed unparalleled competitive advantage in telecommunications and electronic devices.

This largely explains why Samsung has been able to replicate its business model in the international market. With a background in state-of-the-art engineering, Samsung is now the largest producer of electronic products -- from smartphones and tablets to household appliances. Compared to its major rivals, Samsung delivers its products at a much lower price, meaning cost leadership is important to the firm. Samsung's products are not only cheaper, but also unique.

On the whole, with strong engineering capabilities in its home country, Samsung is able to offer differentiated products at a more competitive price, a clear indication of the success of the firm's international business-level strategy. There are three international corporate-level strategies: multi-domestic strategy, global strategy, and transnational strategy (Segal-Horn & Faulkner, 2010). A multi-domestic strategy encompasses emphasis on local requirements. In other words, offerings are adapted to match local preferences. The opposite of a multi-domestic strategy is the global strategy, which gives little or no emphasis to local preferences.

In other words, the firm offers a standardized product in all markets. A transnational.