This Type of Projects written is not a new Idea. Many business minds due the comparison between companies and their financial statuses and comment on them, yet Im not really different. What I will do is the same thing. I will talk about the companies, do the calculation, analyse the results and then comment on both. The difference in my project, is that I will be comparing two of the major electronic companies which not only in the same industry but also both are highly competitive to each other which means that my job is to show the best of them through the financial analysis.
Background of the companies
History
Samsung
Samsung is not an ordinary company; it might be an electronics producer now however its origins are a variety of production for a lot more than electronics. The birth of this company was during the late 30's, yet it was an exporter for fish, vegetables and fruits to only china. Ten years later Samsung began cooperation for flour mills. A decade later Samsung began to diversify its businesses to include financial services, media and building components. Only until the late 60's Samsung started the electronics production. During the late 80's to early 90's there was a change of the chairman which opened the gates for Samsung to the world. Mr Lee began the global expansion in U.S, U.K, Germany, Spain, China, Thailand and Mexico. During the late 90's the Korean business all around the country got shrunk, so Samsung was forced to cut costs and employees to manage themselves through this problem and continue to grow. However, Samsung climbed back the rope very quickly, for it embraced the strategy of producing the (lightest) mobile phones which gave them a fast sprint. Afterwards, they developed the smart phones and those which have many luxurious matters by which their strategy changed from designing a type of phones to be committed to the whole 3g industry.
Sony
Sony is almost a decade younger than Samsung, it started after the World War II; however, when the company was established, it was for the production of electronics which means that it has much experience in the field than Samsung has. At first the Name of the company was (Tokyo Tsushin Kogyo) which was the first to build the first tape recorder. During the late 50's Sony embraced this name to its company after many debates over the name. In the 50's Sony was able to manufacture the transistor radios which were the teenage dream at that time causing Sony to have a huge demand for such product. The human resource department at Sony was embraced from the U.S years ago and Sony was the first to host such management which caused many companies within Tokyo to encourage this time of management. Since the 80's Sony started doing many more businesses than just electronics which is the opposite of what Samsung has done. It was the first to develop the compact disk and the first to provide the legendry game (play station) however Sony is hugely popular of its turbulent life. It cannot be trusted with investors because one day it's perfect and the other is filled with losses.
Vision & mission
Samsung
"Inspire the world, create the future"
And in order to achieve such vision Samsung established a chain of missions which are interrelated to achieve such desire. This vision is divided into 3 sub visions by Samsung; industry vision, partner vision, and employee vision. In order to achieve this vision Samsung depended on improving their strengths which are; the new technology, creative solutions and innovative products.
Sony
"Create existing new digital entertainment experiences for customers by bringing together cutting-edge products with latest generation content services"
As I believe, this vision statement is a little bit not understood, for it is not brief nor specific, rather it's too general that investors or customers might be disappointed with the technology given if it's not their potential.
This mission of Sony is to be loyal to evolving a huge range of creative products that have the latest services which challenge the customers in the entertainment industry.
Board of Directors
Samsung
Oh-Hyun Kwon
Vice Chairman & CEO, Samsung Electronics
Head, Device Solutions, Samsung Electronics (2012~Present)
Vice Chairman & Head, Device Solutions, Samsung Electronics (2011~2012)
President & Head, Device Solutions, Samsung Electronics (2011~2011)
President & Head, Semiconductor Business, Samsung Electronics (2008~2011)
President & Head, System LSI Division, Samsung Electronics (2004~2008)
Head, LSI Technology, Samsung Electronics (2000~2004)
Head, ASIC Business, Samsung Electronics (1998~2000)
Gee-Sung Choi
Head, Corporate Strategy Office (2012~Present)
Vice Chairman & CEO, Samsung Electronics (2010~2012)
President & CEO, Samsung Electronics (2010~2010)
President & Head, Digital Media & Communications Business, Samsung
Electronics (2009~2009)
Head, Telecommunications Networks Business, Samsung Electronics
Head, Mobile Communications Division
Head, Corporate Design Center (2007~2009)
Head, Digital Media Business, Samsung Electronics (2003~2007)
Head, Visual Display Division, Samsung Electronics (1998~2003)
Head, Memory Sales and Marketing, Semiconductor Business, Samsung
Electronics (1994~1998)
Ju-Hwa Yoon
President & CFO, DMC Management Office, Samsung Electronics
President & CFO, Corporate Management Office, Samsung Electronics (2011~Present)
President & CFO, Corporate Management Office, Samsung Electronics (2010~2011)
President & Head, Corporate Auditing Team, Samsung Electronics (2009~2009)
Head, Management Support Team, Corporate Executive Staff, Samsung Electronics,
Head, Global ERP Task Force, Corporate Executive Staff, Samsung Electronics (2007~2009)
Head, Management Support Team, Corporate Executive Staff, Samsung Electronics,
Head, Management Innovation Team, Corporate Executive Staff, Samsung Electronics (2004~2007)
Head, Management Support & Innovation Team, Corporate Executive Staff, Samsung Electronics (1998~2004)
Head, Management Support & Innovation Group, Corporate Executive Staff, Samsung Electronics (1996~1998)
Dong-Min Yoon
Attorney at Law, Kim & Chang Law Office (1999~Present)
Director, Social Protection and Rehabilitation Bureau at the Ministry of Justice (1998~1999)
Chief, Planning Management Department at the Ministry of Justice (1997~1998)
Public Prosecutor, Daejeon Supreme Public Prosecutor's Office (1995~1997)
In-Ho Lee
Corporate Advisor, Shinhan Bank (2009~2011)
Chief Executive Officer, Shinhan Financial Group (2005~2009)
President & Chief Executive Officer, Shinhan Bank (1999~2003)
Director & Deputy President (Executive Vice President), Shinhan Bank (1991~1999)
Han-Joong Kim
Professor Emeritus, Yonsei University (2012~Present)
Chairman, Korea University Sport Federation (2010~2012)
Trustee, Korean Council for University Education (2008~2012)
President, Yonsei University (2008~2012)
Chairman, Board of Directors, The Korean Society for Preventive Medicine (2006~2008)
Professor, Department of Preventive Medicine & Public Health (1982~2012)
Byeong-Gi Lee
Professor of Electrical Engineering, Seoul National University (1986~Present)
President, IEEE Communications Society (2010~2011)
Commissioner, Korea Communications Commission (2008~2010)
President, Korea Information and Communication Society(KICS) (2007~2007)
President, Korea Society of Engineering Education(KSEE) (2003~2004)
Vice Chancellor for Research Affairs, Seoul National University (2000~2002)
Member of Technical Staff, AT&T Bell Laboratories (1984~1986)
Sony
Howard Stringer
Sony Corporation Representative Corporate
Executive Officer, Chairman, Chief Executive
Officer and President
Ryoji Chubachi
Sony Corporation Representative Corporate
Executive Officer, Vice Chairman
Yotaro Kobayashi
Former Chairman of the Board, Fuji Xerox Co., Ltd.
Yoshiaki Yamauchi
* Former Director, Sumitomo Mitsui Financial Group, Inc.
Peter Bonfield.
Chairman of the Board, NXP Semiconductors N.V
Fujio Cho
Chairman of the Board, Toyota Motor Corporation
Ryuji Yasuda
Professor, Graduate School of International
Corporate Strategy, Hitotsubashi University
Yukako Uchinaga
Director and Executive Vice President, Benesse
Holdings, Inc.
Chairman of the Board, Chief Executive Officer
and President, Berlitz Corporation
Mitsuaki Yahagi
Chairman of the Board,The Japan Research Institute, Limited
Tsun-Yan Hsieh
Chairman, LinHart Group
Roland A. Hernandez
Retired Chairman and Chief Executive Officer, Telemundo Group, Inc.
Kanemitsu Anraku
Director, Mizuho Financial Group, Inc.
Yorihiko Kojima
Chairman of the Board, Mitsubishi Corporation
Osamu Nagayama
Chairman of the Board, President and Chief Executive Officer, Chugai Pharmaceutical Co., Ltd.
Yuichiro Anzai
Executive Academic Advisor for Keio University
Professor, Faculty of Science and Technology,
Keio University
Project Description
In this project my aim is to show the differences between these two corporations in terms of finance, not products or services. As I mentioned in the company profiles, both of them have had many turbulences, what I want to know at this point, are they financially ready for a new turbulence.
Methodology
Internet
The best resource for such project is the internet, for it holds all the numbers I seek. That is why I've used it.
Company's websites
The company's website is part of the internet method of doing this report, but it's the best resource, for all the info of the two companies are easy to be found on their websites.
Ratio Calculations
Having the income statement and balance sheet and just looking at them is not really what I am urging to do, what I care about doing is to use these numbers and calculate them through the financial ratios in order to understand where each company stands today from tomorrow.
Financial Statements
Samsung (Balance Sheet)
Samsung Income Statement
Sony Balance Sheet
Sony Income Statement
Ratio's and Analysis
Profitability Ratios
Profitability Ratios are basically means that are used to evaluate the company's ability to produce earnings compared to the expenses and other costs during a year in this case. Most of these ratios, having a higher value are a show off that the company is doing better. Gross Margin represents the revenue the company earns after deducting the costs in percentage. In this case Samsung is doing 11% much better than Sony. The operating margin on the other hand shows how much the company has money left to pay for fixed expenses like wages and interest. In this case Samsung is doing way better than Sony where Sony is in Negative value which means that something wrong is happening with it. Even in the profit margin Samsung is making profit of $0.08 for each dollar of sales while Sony is losing. ROE and ROA show the profit the company generates using either Equity I ROE or Assets in ROA. Samsung is doing better in both. What we get from these ratios is that Samsung is doing much better than Sony while Sony is actually losing its grasp.
Liquidity Ratios
Liquidity Ratios means what liquidity means, having enough liquid money to pay for short term obligations. The higher the value in these ratios the safer the company is which is crystal clear that Samsung is more liquid that Sony in all ratios. However, they are closer to each other in the cash ratio which is the most important ratio related to liquidity, for it takes out all the less liquid assets to keep to most liquid asset which is cash and see if it can cover the short term responsibilities.
Activity Ratios
These ratios are made to assess the ability of the company to convert its assets into cash or sales, for that shows how efficient a company can be by which gives a description of the management performance in such company. DSO shows how fast a company is to get the money for the sales it made. Of course as you can see, Samsung is almost 10 times faster than Sony in such activity. On the other hand, Samsung takes a long time to pay its suppliers even though its DSO is fast, such a thing could show us that Samsung maybe invest this money in another places which is something needed, but at the same time suppliers won't be happy with a long payment period and Samsung might lose its suppliers if it continues doing so. The asset turnover describes the speed of generating sales from assets and the profit doing so; in this case, Samsung earns more dollars for each dollar worth sale than Sony Does.
Debt Ratios
These ratios show the overload of debt the companies have which shows the risk a company can handle and be faced to. Debt ratio for example shows how much debt a company has related to its assets, or in another meaning, how leverage a company is. In this case, Sony is more leverage than Samsung. Not to mention the same problem has in debt to equity ratio.
Conclusion
It is so clear now that Samsung is doing much better than Sony and that Sony must do something to maintain its place in the market, since Sony is known for its fluctuation this can be seen as one of its downs. But being fluctuated is also bad for the investors' view of the company. In this way, investors will not be interested anymore in Sony. Sony has to become better in terms of profitability, activity, liquidity and debt control.
