Introduction
Samsung is a multinational technology company that thrives despite high competition in its operations, particularly in manufacturing smartphones. Samsung requires effective cost-management solutions to continue dominating the market and making profits (Rhee, 2021). This study investigates the potential benefits of adopting ABC, Standard Cost System, and Cost-Plus Concepts. The study intends to offer information to help Samsung gain knowledge towards enhancing its cost structures and supporting its competitive advantage.
Samsung’s Principle Goods and Services
The principal activity of Samsung is manufacturing and providing diverse electronics products and services, with smartphones being one of its leading products. Smartphone manufacturing has to be understood in terms of value chain and cost dynamics for a company to remain competitive (Rhee, 2021). These products are a key element of Samsung’s product line, with the leading features including innovativeness, technology, and customer interface. Samsung is well aware that with smartphones monopolizing the consumer electronics market, it becomes crucial to understand intricate cost dynamics associated with their production. With the fast-paced nature of the the technology industry, it is therefore important for Samsung to be updated with production prices to maintain its competitiveness in the market.
Global Market Share
Samsung has a significant market presence in the international mobile phone industry. Due to the high levels of competition and a dynamic market, Samsung has no option but to have a strategic cost management approach. To maintain its consistent growth and profitability, the company must also overcome various challenges in consumer preferences, technology development, and competition (Masschelein, 2018). Through cost management in conjunction with strategic goals, Samsung aims not only to retain the present market share but also to build up a strategy for dominance in the aggressively competitive international smartphone industry.
Geographic Locations
The fact that Samsung runs its operations in many different geographic locations adds another complication to its cost structures. The issues surrounding the costs involved in running businesses across regions should be approached with a great deal of sensitivity as there are bound to be differences based upon differences in location (Li, 2018). Local factors like wage cost, legal compulsions, and network issues also add to the scenario. Developing a strategic approach to cost management that meets the requirements of each geographical region, tailored accordingly to improve efficiency and enhance competitiveness with an appropriate global business presence, would enable Samsung to achieve responsiveness and adaptability.
Major Competitors
To compete with major smartphone industry players, Samsung must adopt effective cost management strategies to keep the pricing competitive and generate profits. Rivals fight for market share; pricing is an important variable that helps to influence consumer decisions (Asdi & Putra, 2020). Such recognition makes Samsung understand that it is not enough to make innovative and quality smartphones with competitive production costs, as they should be in sync with market demands (Zerihun, 2023). Cost management allows the company to find a middle ground between competitive pricing and profitability, which is essential for the firm operating in such a highly competitive market as the smartphone market holds its place on today’s global playing field among major contenders.
Activity Based Costing (ABC)
ABC is a generally advanced approach to the cost accounting system that aims to apportion costs into specific organizational activities and processes. This strategy differs from the classic approaches by providing a detailed and precise view of expenditure breakdown (Aboueldahab,2022). Using Activity Based Costing, Samsung can get a more complete and precise picture of cost allocation that is quite useful in making strategic decisions to ensure the efficiency of costs in an ever-increasing level of competitiveness among smartphone manufacturers.
Production Costs of Cellphones
Developing and implementing ABC for Samsung’s basic smartphone production involves identifying and allocating costs based on specific activities like design, manufacturing, and distribution. Such detailed cost analysis can help to improve cost control and decision-making. Similarly, the detailed breakdown makes understanding each production step’s actual costs easier.
Samsung’s New Challenge: Cellphones Rising Component Costs
The escalating costs of components that need to be used by Samsung are another problem. ABC can provide a clear breakdown of the major cost-driving components that hurt profitability and help decision-makers make strategic decisions to minimize their impact. However, a significant increase in component costs could threaten unfavorable profitability, which must be responded to with a strategic move.
Standard Cost System
A standard cost system involves establishing fixed production costs that become a marker against which actual costs are measured. Samsung’s decision-making process is adequately informed by understanding the possible implications of adopting a Standard Cost System (Rosdina & Tambunan, 2022). The enhanced visibility of cost and the timely detection of variations enable the firm to undertake necessary readjustments that optimize operations through overall cost efficiency.
Ramifications of Costs, Quantity, and Variances
There are several advantages to implementing a Standard Cost System in Samsun, including cost control, quantity management, and variance analysis. The company would then be able to create a standard price level that serves as a benchmark against which costs would be compared.
Ramifications of Using Standard Costs in the Global Smartphone Market
Using Standard Costs in the rapidly changing global market for smartphones can be an advantage and a disadvantage to Samsung. Although it allows for improving competitiveness, there should be a fine balance between this opportunity and flexibility in adjusting to the dynamic market environment.
Cost-Plus Concepts
Cost-Plus Concepts are founded on the principle of price setting by adding some markup over production costs. The utility concept of Cost-Plus Concepts provides Samsung with an attractive and dynamic pricing approach that can be adapted to serve any future changes in the company’s plans (Friedl et al. 2022). In terms of enlargement, integration, or reduction, this approach empowers Samsung in that it enables the company to make rational decisions regarding pricing so that there is a balance between what is competitive and profitable.
Samsung’s Future Plans
Considering Samsung’s plans, cost-plus pricing may be useful in making a strategic decision. In cases where Samsung is considering expanding into other markets, cost-plus pricing allows the company to ensure profits by adding a markup that covers not only production costs but also accounts for the complexities involved in venturing into unfamiliar territories (Pozdílková et al. 2021). On the contrary, when efficiency and profitability occur, they enter the stage during consolidation or downs, sizing, and cost-plus pricing ensures that prices are set according to reduced operations.
How Cost Concepts Could Be Used in Decision Making
Cost concepts are also significant in influencing Samsung’s decision-making processes. Understanding the concept of costs is also critical in making informed decisions, especially when there are adjustments to be made concerning product prices; regardless of whether the company is venturing into new markets or considering cost-cutting, applying cost concepts strategically guarantees sound decision-making (Goswami, & Behera, 2021). When viewed from the perspective of entering new markets, a detailed breakdown of production costs, distribution expenses, and other related costs is instrumental in acquiring useful information.
Conclusion
Cost management strategies are vital to Samsung’s success in the global smartphone market. Evaluating the applicability of Activity-Based Costing, Standard Cost System, and Cost-Plus Concepts allows Samsung to determine a better approach in an environment marked by fierce competition and rapid change. Samsung’s smartphone manufacturing process is complex, and understanding the cost structure of these findings is key in developing its strategic decisions. Through analyzing the feasibility of these cost management strategies, Samsung seeks to manage the challenges evolving within the global smartphone market, which are diverse and dynamic due, among other things, to changing market conditions, component costs, and future intentions that are either diversification, consolidation, or downsizing.
References
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