Samsung Electronics Company

Samsung Electronics Company

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Samsung Electronics Company

The Samsung brand

Originated as low-cost manufacturer of black and white televisions in the year 1969, super sized with a semiconductor segment in 1970s, Samsung delivered massive volume of low-cost consumer electronics to domestic and OEM products to both domestic and global markets until 1993. Due to this fact, company didn’t develop global brand awareness until then. In the global arena, Samsung’s brand message was fragmented and its logo presentations were inconsistent.

In the year 1993, “new management initiative” started transform Samsung from a “cheap OEM” to a high value-added products provider”. At this point, company realized to take the brand to global platform and started thinking the importance of global positioning and the powering the brand. Initially, management targeted to build corporate brand image across 200 countries with focus on 17 selected products. But, in the early period, internal challenges of marketing misconceptions among the top level managers turned down efforts of this visionary growth measures.

But, the company’s challenges turned into a different outcome in the wake of the Asian financial crisis in year 1997. Fast actions were required to curtail the financial threats and massive restructuring efforts were imminent. Samsung utilized this opportunity wisely and the result was a turnaround from $15 billion debt to $4.6 billion within a short period of 5 years.

Samsung’s global marketing director is assessing how to build the global brand reputation of the company further and upgrade the company’s worldwide brand image to show how to build a global brand. The challenge of Samsung’s marketing director is the branding strategies in global markets. Marketing team has to examine the organizational dynamics to develop a strong global brand.

Success factors:

Management Efficiency: During the 80s, the company’s refocus to manufacturing quality and technical leadership and profits reinvestments in R&D, state-of-the-art manufacturing, and supply chain activities helped the company to grow in a great extend. This management vision was not only upgraded the company’s products to compete in the high-tech electronics industry but also gave foundations of its global brand awareness.

Transparent disclosure practices: By 2003, Samsung was the most widely held stock among all emerging market companies due in part to relatively transparent disclosure practices. This is evidenced with the fact that over half of its shares held outside Korea, and the stock price had increased tenfold between 1997 and 2002.

Plant/R&D locations: To keep costs low, the company operated in different geographical locations like China (manufacturing) and India (R&D).

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Fast and efficient product life cycle: Multiple technology capabilities of its many designers and engineers, speedier decision-making processes, and fewer levels of organizational bureaucracy reduced the time taken to commercialize products from drawing board, from 14 months to 5 months. This is twice as fast as its Japanese rivals.

Innovative products: Samsung was progressing in almost all markets with its innovative products. Midrange and high-end cell phones, first mover with the color screen phones, smart phones, and wireless AV center with web surfing capabilities, systems-in-package semiconductor flash memory, SDRAM for the mobile products are some of its great products shown market acceptance.

Vertical Integration: Samsung opted to use its core manufacturing competence in all components of electronics. By transferring the capital investment and inventory risk, between 1998 and 2003, Samsung invested 19 billion in new chip factories and estimated another 17 billion in TFT-LCD manufacturing. Company’s quality products had been used by many other leading brands like Sony. This will increase the Samsung brand’s awareness in consumer’s mind. Although commoditization and downward pressure on prices and margins might argue against vertical integration, Samsung overcame this situation by customized as much production as possible.

Weaknesses

Country of origin: In highly competitive global marketplace, consumer attitude about the country of origin might be one reason of Samsung’s slow adaptation of globalizing its brand. As China became Samsung’s major manufacturing location just like any other leading brands, consumers may look into product’s originating country for a final decision of their loyalty to a product.

Although South Korea has fair image in the technological world, Samsung has to work with its government officials to strengthen and entice political freedom in global trading and manufacturing. Communicating regional values will help both tourism and trade.

Hardware focus: Unlike rivals such as Sony and Apple, who are focused on the software technologies, Samsung decided to focus on the hardware side with an open architecture concept. Samsung argued that this concept enable consumers being able to access more software through its devices that its competitor’s products. Additionally, they argued about the increased challenges associated with protecting proprietary content from piracies.

However, consumers will ultimately looking into the convenience and functionality of the product. Most of these features are coming from the software programs embedded with the hardware. So, Samsung’s argument is not convincing to the consumers as they have to go for a different vendor to use its products effectively or pay premiums to use other software in these hardware.

Multi-category focus: Unlike many of other companies like Nokia or Sony, who are specialized in cell phones and consumer electronics respectively, Samsung’s products are diversified in nature. Almost all major categories – semiconductors, telecommunications, digital media, digital appliances, and other minor categories – are all performing with operating profits. But, this diversification is not giving the company a strong footage in any one category.

Low brand awareness and loyalty: For any global brand, marketers must consider two major markets – Europe and North America. Being in strong in the southern Europe, brand is not reasonably endorsed by northern Europe. The Germans in particular are fiercely loyal to German brands and the fragmentation of retail distribution makes Samsung behind in all product categories.

Although Samsung brand was at the turning point stage in U.S., lack of brand awareness and loyalty are far below those of first tier brands like Sony. One of the main reasons was locked partnerships with low price giants like Wal-mart and Target which are not reaching a big segment of high-end consumers. Samsung has to reach high-end retail chains and price clubs extensively and market their customized products if needed.

Opportunities, Threats and Recommendations

In the beginning of year 2003, Samsung management categorically unveiled a corporate vision where the company is heading to:

"We are investing aggressively in marketing to transform our company to be truly market driven and to establish our Samsung brand as the most trusted and preferred brand in the market”

It was clear that at that time Samsung wasn’t a trusted and preferred brand in the market. This means if a household need home electronics, Samsung wasn’t the first brand come into their consideration. This is due to the lack of brand knowledge and brand is not positioned in consumer’s memory. But at the same time, other Japanese rival products are still positioned in consumer’s mind and remains as preferred brands. So, Samsung has to revitalize and revisit following areas of marketing and sales activities to position the brand as a most trusted and preferred brand in the market.

Bigger and better new products: Samsung has to increase its R&D spending to compete highly entrenched brands like Sony. This will be a better investment and too much focus on youth and creativity is not always appropriate.

Cellular phone Industry: Samsung has grown from 2.7% in 1997 to 10% in 2002. This might be attributed by the growth in the cellular communication industry. By continuing focus on mid-range and high-end cell phones, the company has potential to grow much more if they consider focusing standard level cell phones at low prices.

Handle absence of signature product: Despite all its progress, particularly in cell phones and TVs, Samsung lacks a signature product like Sony's Walkman or Apple’s iPod. Signature products are crucial in bringing crowd into the market places that people will acquire knowledge about company’s other products. Although it looks like a sales activity of signature product, it’s an indirect opportunity of marketing other products without much spending of marketing dollars.

Samsung has to either reenergize it’s R&D team to find a signature product that gives a unique value and emotions or turn one of it’s current products (Eg: TV with high-speed internet connectivity and browsing capabilities using it’s own remote control or remote keyboard) as a signature product. Latter option should be priced affordable to majority consumer segments.

Increased competition: Almost all rival products continuously releasing better functions and features in their product lines. Therefore, Samsung’s marketing communications must stress out clear differentiation and value-added pricing.

Downward pressure on pricing: Increased competition and market-share strategies are pushing Samsung prices down. Still, the company can consider a moderate realistic profit based pricing.

Compressed product life cycle: Models of big screen TVs, cell phones, LCD displays, MP3 players, and other consumer products seem to be reaching the maturity stage of their life cycle more quickly than earlier versions of these products. Samsung must have contingency plans to keep sales growing by adding new features, targeting additional segments, and adjusting prices.

Strategic Alliances: To deliver comprehensive sales, marketing and merchandising activities at top retailers worldwide, development and management of strategic alliances are required to support its retail segment. A performance-driven, full-time team of territory representatives and part-time weekend warriors task force is essential in this task. To educate Samsung’s reps as well as retail salespeople worldwide, an integrated retail support solution encompasses a brand champion program as well as a product knowledge site for consumer electronics training must be established.

Marketing budget: In 1999, despite an $800M annual marketing budget, Samsung Electronics was encountering challenges in transforming perceptions of its brand among retail salespeople and consumers. These numbers were considerably decreased in the later year and seem it had encountered marketing budget crunch. Since consumer electronics industry needs to go mass marketing, Samsung has to consider more marketing budget. Also following additional marketing techniques must be considered:

• Products must be displayed and functioned at Restaurants, clubs, and bars especially providing sports events.
• Pursue Hotel chains which required massive replacement of in-room entertainment needs to retain competitive advantage
• Improved and new volume channels to consumer markets, through direct price clubs and large chains
• Sponsorship of high profile sports events and engage in high involvement activities. While this clearly has an impact on the consumer, which in turn drives demand through the channels and other B2B relationships, special event attendance opportunities can also be used with B2B decision makers.

Production cycle: As one of the line manager commented, Samsung must be ready with its production lines that helps move products at retail next Monday morning. Current production facilities are not equipped and resourced for these speedy deliveries. Company has to automate its production facilities with most modern equipments and services.

Re-vitalization of retail segment: Samsung has to strengthen its retail operations with participations of third party consultancy services. Conduct more frequent consumer surveys in the field of trend changes, satisfaction, competitors marketing techniques, new outside

Rapid reaction: To establish a global brand, Samsung should keep an eye to respond quickly any potential market crisis. It may hurt the company if it takes long to respond to any type of crisis. Management has to mobilize sufficient incentive programs to its marketing/sales force to report any potential crisis and if it hits, sufficiently rewarded to act and resolve quickly.

Internal Marketing and consumer advocacy: To buildup a global brand, everyone inside Samsung has to understand the essence of the brand and translate internal education into communicable message. Samsung’s groundbreaking innovations are capable enough to make this possible and intrigue consumers. Visual simplicity and functional performance of new products will be added advantage in the marketing process. These first time consumer experiences make them advocates of the brand for many years.
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