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This case study analysis is on Samsung Electronics Company (SEC) and how it has climbed up the ranks in the past decade via calculated marketing strategies, extensive market research and analysis, and a risky bet on how the market will evolve. Samsung’s principle outlook took time and education from within and thereafter the general market.
Samsung Electronics Company (SEC) began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, “Samsung acquired a semiconductor business” which would be a milestone that initiated the future for SEC. Entering the semiconductor industry would also be the beginning of the turnaround phase for SEC. In 1980, SEC showed the market its ability to mass produce. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch & Harrington, 2008).
SEC was mainly focused in manufacturing; therefore, it’s no surprise that the executives themselves were also focused on their manufacturing plants. Profits that SEC received were soon reinvested into Research & Development, manufacturing, and supply chain activities. Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SEC’s sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4.6 billion, from $15 billion, over a 5 year period. Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch & Harrington, 2008).
In 2002, SEC posted net profits of $5.9 billion, on $44.6 billion in sales, and as a result in 2003 became “the most widely held stock among all emerging market companies”. Unlike other companies who chose to outsource their manufacturing process, SEC remained committed to its core competence, manufacturing (Quelch & Harrington, 2008).
During 1998-2003, SEC invested $19 billion into chip factories and $17 billion into manufacturing facilities for TFT-LCDs, which would be a major component for flat screen TVs and computer screens. Even though SEC was focused in the manufacturing process, it didn’t make SEC a rigid company.
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With 17,000 scientists, engineers and designers, SEC was able to create an endless amount of digital products. Due to its fast decision-making process and focus on a digital future, SEC was able to move a new product from the drawing board to its commercialization phase in only five months. This ability was almost 3 times faster than its competition (Quelch & Harrington, 2008).
II. Statement of the Problem
A major external challenge SEC had to overcome was brand recognition since it was selling its products mainly to OEMs; therefore, the company had very little interest in working on the Samsung brand. Another internal challenge was with SECs managers’ concept of marketing. The managers perceived marketing as nothing more than selling and as a result, their concept of selling was that it was only needed when the product was weak.
III. Causes of the Problem
SEC began doing business as a major manufacturer for basic electronics and home appliances for well known OEMs. As stated in the case study, Samsung’s branding was focused in neither the message nor the logo that was used. The marketing budget was focused more on short-term results versus long term branding creation. Since the marketing was focused on “cheap OEM”, Samsung was not able to develop effective branding. Branding is essentially creating a difference from one product to another. A lack of brand knowledge was also a factor in Samsung’s weak brand name since the message or the logo was not the same everywhere Samsung was sold. Since there were no campaigns related to brand knowledge, Samsung was not able to create a “unique brand association with customers” (Kotler & Keller, 2008).
Another problem was the manager’s ability to appreciate the value of marketing or in the current case branding. The root of this problem was that managers perceived marketing as being equal to selling. Again, Samsung’s top executives were on a mission to change from “cheap OEM” manufacturer to a top of the line product manufacturer (Quelch & Harrington, 2008). This change came after a decade (1980s to 1993) of being an OEM provider without much regard to their brand. SEC managers did not grasp the concept that SEC was trying to develop a global brand on high quality products that Samsung’s R&D centers were creating. The asset in the managers’ eyes was the strong product. This point of view is stated in the case study when Mr. Kim, the executive VP of global marketing, explained that managers:
“believed that good products sell themselves, that marketing was nothing more than selling, and that selling was only needed when you have a me-too or weak product” (Kotler & Keller, 2008)
IV. Possible Solutions
A solution to the weak brand is to outsource the development of the brand to an expert in the advertising field. The pros to outsourcing advertising are:
• Ability to perform a complex local, regional and global market research
• Create a logo that will be accepted and recognized globally
• Send out a strong message that will create brand knowledge among current and future customers.
The cons to outsourcing advertising would be to relinquish control of the most important asset Samsung was trying to create, it’s brand, and place it in another companies hands.
A solution to the manager’s perception of marketing was simple, education. The pro would be that Samsung would now have the total support of the entire company and the focus would now lie on branding and R&D. The con is that it will take time to have all the managers buy into the concept.
V. Solution and its Implementation
In order to resolve the manager’s lack of understanding the value of marketing, they should all be sent to a value added seminar that is focused on the scope of branding. Some of the concepts that should be covered are brand equity and brand knowledge. Regarding the development of a weak brand, the VP of Global marketing should create an effective marketing team that is composed of a:
• Marketing Strategy team whose main task is to develop global marketing strategy. This team should control the global budget, control the global brand campaign and oversee global CRM.
• Regional Strategy team that has the same focus as the Marketing Strategy team, but at a regional scale.
• Product Strategy team who will be the worker bees of the entire group and focus on conducting market research (globally and regionally), gathering the information and analyzing information (Quelch & Harrington, 2008).
The challenge behind the development of these teams would be the ability to recruit qualified personnel who are either ready to take on the challenge or have the experience to take on this important task. If the personnel fall short then micro-managing may occur or the teams may have problems sticking to a budget.
As stated in the case study, Samsung Electronics Company via its new branding strategy campaign was able to rank No. 1 in many digital/electronic categories at a Global scale. These categories included Big-Screen TVs, LCD Displays, DRAM chips, and Microwave Ovens. Under their DigitAll brand campaigns and partnerships with chains like Best Buy, SEC has instilled its brand equity and brand knowledge on consumers at a global scale. Additionally, via its marketing strategic team, SEC has continued to reinforce its brand by associating it with popular media (e.g., the movie “Matrix Reloaded”). As to educating the managers on the importance of branding, I think that the fact Samsung has climbed up the ranks in the electronic sector speaks for itself (Quelch & Harrington, 2008).
VII. End of Case Questions
1) What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing?
There were two major ingredients to SECs corporate turnaround strategy. The first was when the top management decided “to transform Samsung from a ‘cheap OEM’ to a ‘high value-added products provider’” in 1993. The second was when Samsung transitioned into a digital technology manufacturer and focused its 17,000 scientists, engineers and designers who worked in Samsung’s R&D centers. The implications for marketing were that it needed to put together a powerful and decisive marketing strategy team whose sole purpose was to make the Samsung brand competitive at a global scale. Additionally, Samsung needed to know where it stood regionally all over the globe in order to determine a marketing strategy in any global region (Quelch & Harrington, 2008).
2) How strong is the Samsung brand? Can Samsung pass Sony and become a top ten global brand?
According to the editor in www.brandchannel.com, SECs has climbed from 42 in 2001 to 25 in 2003. Samsung’s position, at 25, shows that its brand has gathered momentum against its major competitors. It is currently the third largest electronics maker in the world, behind Sony and Matsushita. The article also states that “consumers appear to take Samsung seriously as a quality brand of VCRs and TVs, and even consider it a superior brand in areas like mobile phones where it competes with Nokia, Motorola and Sony-Ericsson” (Rusch, 2003).
Samsung may eventually become a top ten global brand if it can do at least two things. It should continue to focus on quality and introduce cutting edge technology. Additionally, it should move its product from price-driven stores like Wal-Mart to more focused retailers like Best Buy.
3) As Chief Marketing Officer, what are Kim’s role and responsibilities? How has he built his influence?
As CMO, Kim’s main role and responsibilities has been to educate Samsung internally to believe that branding is just as important as the quality of the product. Additionally, he is the vital conductor within Samsung’s powerful marketing orchestra that must be in sync with the global market. Essentially, if the music is not heard, it will not be appreciated or valued. He controls the very essence of what Samsung is and wants to be, it brand name. He has been able to build his influence by demonstrating proper management of marketing resources that have been put in his charge; as a result, he helped to quickly elevate the brand to the level it is today.
Kotler, P., & Keller, K. L. (2008). Marketing Management (13th Edition ed.). Upper Saddle River: Pearson Education.
Quelch, J., & Harrington, A. (2008). Samsung Electronics Company: Global Marketing Operations. Harvard Business School , 32.
Rusch, R. (2003, July 28). brandchannel.com. Retrieved July 30, 2008 from http://www.brandchannel.com/features_effect.asp?pf_id=168