Brief financial and business analysis of Samsung Electronics.

1. ANALYSIS AND EVALUATION OF
BUSINESS AND FINANCIAL
PERMORMANCE OF SAMSUNG
ELECTRONICS FROM JAN 1,
2009 TO DEC 31,2011
VS
By Asif Shakeel
ACCA registration no 1512792

2. OBJECTIVES
Primary
To do a business and financial analysis over 3 year period ending
31st December 2011
Secondary
• Know their secret to survive through global recession and
strengthening their lead
• Know their driving strengths and weaknesses facing the company
• Evaluate their strategies adopted to achieve their goals
• Attain assurance if goal of $400billion dollar by 2020 is
achievable
• Present conclusions to enable a potential investor to make a well
informed decision

3. INFORMATION GATHERING
Sources of information
- Annual accounts of Samsung electronics and Apple Inc
- Financial Analyst Statement. Bloomberg, CNN money
- Print Media. Books, magazines, journals
Method used for collection of information
- Online reading. Official website
- Other Media. Financial programs on TV, Financial news channels
- Library research. Newspaper columns, financial times
magazines, money magazine
Limitations and ethical issues arising

4. ACCOUNTING/BUSINESS TECHNIQUE USED AND
THEIR LIMITATIONS
PORTERS 5 FORCES
It is framework for industry analysis and business strategy. It draws micro
economics which derive 5 forces which determine the attractiveness/profitability
of the company.
Limitations-
Model is designed for individual business strategies and not for large multi
corporations, conglomerate.
It simply under estimates the strength and strategies of business.
SWOT ANALYSIS
Its strategic planning tool and a technique which helps uncover both internal and
external factors which impact the business. The factors are namely strength,
weaknesses, opportunity and threats
Limitations-
It helps but does not identify these four aspects or provide any solution to them.
Categorizing four aspects may be very subjective because of the element of
uncertainty.

5. RATIO ANALYSIS
It is a financial tool which provides the monetary information in a way easy
to interpret and more understandable for all stake holders
Limitations-
It analyses trend on basis of historic data but investors are more concerned
about future of the company.
It requires a industrial or sector benchmark or else alone doesn’t assist in
judgment.
It’s a financial tool and completely ignores all non financial information.
They are generally distorted by inflation.

6. ANALYSIS
Company overview
Founded in year 1969 in South Korea
A flagship company of Samsung
Worlds largest IT company by revenue, worlds largest mobile maker.
Headed by Lee Kun Hee who inspired a trend of change.
Known strategies of company
•Create core design around which all products can be customized
•A wide product category (dominate the entire category for a broad market play)
•Collocation of R&D facilities
•Easy access to Asian market

7. PORTERS 5 FORCES
THREAT OF NEW ENTRANTS (LOW)
High capital investment,
High cost of research and development
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES (MEDIUM)
Samsung devices adding more and more features minimizing substitutes
Increased threat of substitute being innovated
BARGAINING POWERS OF CUSTOMERS (HIGH)
Increased choices available with near same features
Customer switching to device with more features and cheaper prices
BARGAINING POWER OF SUPPLIERS (LOW)
Input taken from several suppliers
Difference in substitute or alternate product negligible
INTENSITY OF COMPETETIVE RIVALRY (HIGH)
Fierce competition over its mobile and tablet division from Apple, HTC.
Slow growth in market size so more pressure to steal market.

8. SWOT ANALYSIS
STRENGTH WEAKNESSES
- Technological advancement - Cannibalism
- Efficiency in supply chain -Inconsistent sales growth
- Increased presence in growing -Perception of low durability products
economies - Reliance on software from Google
- Market leader
Samsung
Electronics
-Increase in electronics demand -Chinese products
-Growing Asian economies - Slowing demand for DRAM
-Sponsorship - Technology battle with competitors
OPPORTUNITY THREATS

9. RATIO ANALYSIS
Sales Revenue Growth
Sales Growth
150,000
Million $
100,000
50,000
0
2009 2010 2011
Samsungs slowing growth rate and uneven sales trend
Apple’s double digit growth rate

10. PROFITABILITY RATIOS
Profit margins over 3 year
45%
40%
35% GM Samsung
% of turnover
30%
25% GM Apple
20%
15% OP Samsung
10%
5% OP Apple
0%
2009 2010 2011
Samsungs profit margins consistent with sales
Adopting of green management style resulting in efficiency in operations
Apple proving 3 times more efficient than Samsung and the industry norm

11. LIQUIDITY RATIOS
Samsung slightly above the industry average and maintain its liquidity at 1.2 in
year 2011
Apple well above the industry standard with 1.6 and are lowering towards the
average.
EFFICIENCY RATIOS
Inventory and Creditor days
90
80 SE inventory days
70
60 Apple inventory
No of days
days
50
40 SE creditor days
30
20 Apple creditor
days
10
0
2009 2010 2011

12. GEARING RATIOS
Debt ratio
Debt percentage
37% Samsung
Electronics
36%
35%
Debt %
Apple
34%
33%
32%
31%
2009 2010 2011
Interest cover
Samsung had a attractive interest cover of 26 above the industry average 17-18 times.
Apple has no long term debt and paid no finance cost in entire 3 year period ending
2011

13. CONCLUSION
Apple and Samsung have many similarity and differences in themselves
 Both struggled through initial cradle years but gained lead on base of there
innovation and creative ability.
 Both have flourished through recession years growing stronger than ever
 Samsung has very poor control on its sales and experiences uneven sales
growth which hurts its own plans. Apple has a very controlled and constant double
digit growth.
 It earns moderate profits despite its lead over the whole industry whereas Apple
has a very controlled and enormous double digit growth. It has high reputation
among investors due to its profitability and free of long term debt balance sheet.

14. RECOMMENDATION
•Samsung should concentrate in tablet division to ensure its future as it
substitutes PC, laptops and many of its products
•It takes special precaution that its product do not resemble close to its
competitors to avoid further hefty fines from courts.
•It attracts the investors more by presenting itself better. Improving
efficiency, cleaning long term debt from balance sheet to match the mighty of
its giant rivals like Microsoft, Apple etc
ANY QUESTIONS/ COMMENTS