Case Study: Samsung Electronics

Case Study: Samsung Electronics

[Md. Shafique Ahmed, MBA Program, North South University, Dhaka, Bangladesh]

Abstract

Samsung Electronics is one of the world giants in the business of electronic appliances such as memory chips, system-LSI and LCDs as well as A/V, computers, telecommunication devices, home appliances and other stand-alone products into a total solution of digital convergence era. The cases study has briefly focused on SamsungÐŽ¦s performance and challenges faced by them in the consumer electronics market, where I tried to describe and evaluate SamsungÐŽ¦s market targeting strategy for its consumer electronic products, analyze the challenges confronting Samsung in building a strong brand for high end products, evaluate SamsungÐŽ¦s product portfolio strategy and finally develop a critical analysis of SamsungÐŽ¦s value chain initiatives. I hope the study will give the potential readers a good understanding, based on which further research on these topics may be pursued.-Shafique Ahmed, 23 November, 2005

Description and Evaluation of SamsungÐŽ¦s Market Targeting Strategy for Its Consumer Electronics Products

Samsung has core strengths in many fields and ЎҐConsumer Electronics ProductsÐŽ¦ is one of their product lines. Their product mix has a width covering their product lines such as microelectronics, telecom equipment appliances, personal computers and consumer products. They are positioned in each of this major segment quite strongly and aim to complete with world giants like Sony, Philips and Nokia in the market of similar products with intense rivalry. The competitive structure is a perfectfectly competitive market situation, where both major players and their challengers face hard competition from each others besides their followers and market niches.

Samsung targets for ЎҐdifferentiated marketingÐŽ¦ operating in different market segments and designs different offers for each segment. Samsung produces its consumer products with innovative and cutting-edge design in VCRs, DVD players, TVs, LCD monitors and mobile phones and distributes to different geographies viz. Far East, the North America, the entire South Africa, Western Europe and Indian Subcontinent. The sheer pace of new electronic product offerings is still staggering across the world including new market like Australia and New Zealand and parts of Eastern Europe. This year Samsung launched 100 new products in the U.S., including 53 new TVs. Over the past five years, Samsung has earned 18 industrial design awards; last year alone it won five from Business Week/IDSA, a total matched only by Apple Computer.

Because Samsung has developed a stronger position within several segments including consumer products, their target marketing strategy certainly creates more total sales than an undifferentiated marketing strategy, where a firm ignores the market segment differences and goes after the whole market with a single market offer. However, by creating separate marketing plans for their different lines of products, their effort also increases the cost of business. Developing separate marketing plans for separate segments with different lines of products requires SamsungÐŽ¦s extra marketing research, forecasting, sales analysis, promotion planning and channel management across the world. And as Samsung is trying to reach different market segments with different advertising, it increases their promotion cost as well. So, Samsung should weigh their increased sales against their increased costs when deciding on this differentiated target marketing strategy.

SamsungÐŽ¦s new product line strategy also includes adaptive replacement of exiting as well as imitative products ÐŽVwhich have been influenced by the feed back from their worldwide customer base, marketing intermediaries, trade association and their own sales forces. We see that in the coming years, they want to capture the world market with future generation products ranging from affordable digital televisions and ЎҐsmart cardsÐŽ¦ loads with movies, sleek wireless phones enabling users to access the web, watch TV and listen to music.

Analysis of the Challenges Confronting Samsung in Building a Strong Brand for High End Products

A few years ago it was unthinkable that Samsung could pose any threat to leaders in the consumer electronics business. The Korean conglomerate was hardly known for breakthrough products. Its global reputation was based on manufacturing memory chips and selling cheap, knock-off microwaves and TVs through discount retailers. Samsung was focused with their overall cost leadership generic business strategy, where they worked hard to achieve the lowest possible production and distribution costs so that they could price lower than its competitors and win a large market share. They have had been good at engineering, purchasing, manufacturing and physical distribution in Korea and other far eastern countries in the early days.

With this strategy, over time, they grew large inventory costs and accounts receivables, high debts, assets unrelated to their core business, amalgamation of financial and managerial activities between Samsung Electronics and other Samsung companies. This also had resulted recruiting a huge workforce. Cheap commodities were their main dependence instead of high end products employing good innovative design. Their marketing skill was limited to target markets mainly based on economy of their consumers, more specifically the people of South Korea at that time.

Instead, SamsungÐŽ¦s main competitors like Sony Corporation and Philips Electronics concentrated on achieving superior performance in quality leadership and pursued high technology products by making products with the best components, putting them together expertly; inspect them carefully and effectively communicating their quality to the world market.

Besides, their competitors like LG Electronics, Dayoo Corporation and many other Chinese electronics companies entered the market with still lower costs and hurt Samsung that once rested its whole future on cost only. In one side the competitive attack with superior quality, high performance products and in another side, cheaper products from SamsungÐŽ¦s followers confronted Samsung in building a strong brand for high end products.

Until recently Samsung has adopted just-in-time approach to production that has enabled them to save $3 billion in inventory costs and accounts receivables. These have helped them reduce their cost dramatically and improve in other areas of