How Samsung is Coping Up with Declining Sales
By Precious Silva | July 31, 2014 11:17 PM EST
Samsung Electronics Co., the tech Giant from South Korea is experiencing an earning slump. For the first time in almost three years, net profit declined. One big reason for this is the lower than expected smartphone sales due to mismanagement of inventory and stiff market competition. Apple and Chinese manufacturers are among its rivals. The improvement of value of their local currency also affected the profitability margins of Samsung.
A Samsung Gear Live smartwatch is displayed at the Google I/O developers conference in San Francisco June 25, 2014. Google Inc's Android software is coming to cars, televisions and watches this year, as the Internet search giant races against Apple Inc and other tech companies to extend its business into a rapidly broadening field of Internet-connected devices.
In order to curb these internal difficulties, Samsung has engaged itself in belt-tightening measures. They want to reduce cost while maximizing management efficiency. An estimated 150 to 200 employees in the head office might be transferred to human resources, finance, sales, public relations and other departments according to The Global Post.
They will re-structure their allocation of employees, however they may best fit the company. Cost effective travel rules will also be implemented. Travelling company executives, whose flights are less than 10 hours, will have to take economy seats instead of business class seats. To further cut costs, travel budgets will also be reduced by 20%.
Insiders say that the work environment in Samsung is too lax, so they have to adjust even the simplest of things. Lunchtime limitations will be set to merely 1 hour, except for limited special case circumstances. Working overtime will also be controlled via pre-approved slips coming from managers. Golf is also one key "costly" factor they will have to address. In addition, employees will highly be encouraged to take their annual vacation leaves.
There has been a mismatch in terms of projections. Sales have been weaker than expected while inventories are bigger than expected. In short, there is excess inventory on smartphones that have to be cleared out as soon as possible. Samsung may have to increase spending on marketing and promotions to move the extra supplies.
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