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Samsung Prepares For Tough Year Ahead As Competition Is Heating Up In 2016

5 January 2016, 5:29 am EST By Alexandra Burlacu Tech Times
Samsung has been facing increased competition and it's now bracing for a challenging 2016, amid concerns of a weak global economic growth. The company urged employees to find ways to handle competition as software and platforms trump hardware.  ( Chung Sung-Jun | Getty Images )

Samsung may be one of the most successful companies in the world, but it's still bracing for a challenging year ahead as competition is expected to increase in 2016.

The South Korean OEM sells hundreds of millions of smartphones worldwide each year and continues to be among the most popular brands, yet that doesn't ensure smooth sailing ahead.

Citing increasingly competitive markets and weak economic conditions globally, Samsung is preparing for a tough 2016.

Speaking to employees in a New Year statement, Samsung co-CEO and vice chairman Kwon Oh Hyun said that the company expects weak global economic growth in 2016. With this in mind, the executive challenged employees to try to find new ways to counter increasing competition in a tough industry where hardware continues to lose ground to software and platforms.

Just last month, news surfaced that Samsung aimed to change its business strategy this year to focus more on software rather than hardware, borrowing a page from Apple's playbook. Apple not only sees great profits from hardware sales, but it also rakes in more dollars from software such as the App Store, iTunes and Apple Pay.

Samsung focused mostly on hardware so far, and this strategy was deemed to be the reason why the company's success has declined.

Looking ahead, Kwon Oh Hyun warns that smartphones, TVs, memory chips and other such hardware will face increased competition this year, and the company must adjust its strategy to keep up with the fast-paced rhythm of the industry.

"The territories of industries are collapsing," highlighted the executive, as cited by Bloomberg. "We have to compete in a new way that we've never experienced in the past."

"The competition landscape is changing to software and platforms, so we need to build a new system and competence," Kwon said.

Kwon Oh Hyun's comments come at a time of restlessness, amid intensifying concerns that the company's fourth-quarter performance may prove lower than expected. Just recently, Korea Investment amended its estimate for Samsung's operating profit, dropping it from 6.8 trillion won to 6.4 trillion won (roughly $5.41 billion), bolstering concerns that the compay's earnings in the fourth quarter was not as great as previously expected.

Moreover, Samsung is likely bound to take a serious blow in terms of profits because prices are dropping in the display and semiconductor markets. The company has been relying on these sectors to bank some extra profits and counter the falling revenue from its mobile business.

In 2015 alone, Samsung lost more than $8 billion in market value, as its top-end Galaxy Note 5 and Galaxy S6 face stiff competition from Apple and Chinese OEM devices. The company's shares saw a third straight annual decline in 2015 and the downward trend might continue in 2016.

Samsung should post its preliminary fourth-quarter earnings on Friday, Jan. 8, but a change in strategy seems paramount to securing greater success in 2016.

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