Samsung: China Tv Market - Samsung China: The Introduction of Color Tv

SAMSUNG CHINA TV MARKET

Samsung China: The Introduction of Color TV

Background

Samsung as a company was founded in 1938 in Korea. 46,500 employees are working at six Samsung Electronics facilities in Korea. Although they are at different locations, all share the same goal and that goal is satisfying global customers by producing a quality product. Here in the U.S. Samsung is a very recognized brand, sitting along side Sony, Panasonic, Phillips, Toshiba, Matsushita and other more know brands of TVs. In South Korea, Samsung was a governmentally subsidized large business until in the 1990's. In the mid 1990's one of the most significant threats to Korean corporations was that their major advantage in low labor cost had been deteriorating against the labor costs in many of the competing Southeast Asian countries. The average wage of $1,144 a month that Korean workers earned was one of the highest wages paid in Asia outside of Japan. Korea had been the low cost labor supplier until the point at which The Peoples' Republic of China entered the competition for manufacturing of color TVs. The low cost of labor in China would cause Korea's position being the lowest cost provider to be a position that was in danger. The Korean government at this point was discontinuing subsidies and export credits to Korean manufacturers and at this time the Korean products which had been the low end market

Strategic Planning

In 1995, production of color TV sets in China was starting to hit a high volume. It was estimated that 16 million sets were produced, including two million that were exported to Europe, North America, Africa, and Australia. At the time, the Chinese government felt its production of color TVs were fulfilling their expectations in regards to demand in export and domestic markets. As 1995 ended, the Chinese color TV market was the second largest behind the United States and the third largest behind NAFTA and EU in regards to unit sales.

With the increase in demand of color TVs in China, Samsung China Headquarters (SCH) was born in 1995 in Beijing. SCH began to coordinate more than 16 operations, with each being separately managed by various units of the Samsung Group. The establishment of SCH helps the image of Samsung in China since it already showed commitment to the Chinese market.

In October 1995, Chung Yong, President of SCH, met with the SCH marketing director, Hyun Young-Koo, who was responsible for putting together a marketing strategy for marketing color TVs in China. The following issues were raised during this meeting:

* Should SCH cover all the marketing segments and product lines?

* Should SCH focus on the low-end market segment with a limited line of products?

* Should SCH target the high-end segment, as most Japanese markets have done in the US and China markets?

In 1994, China had 300 million households, with only 41% of the households holding a color TV sets. However of the 80 million urban households, 80% already owned a color TV, where only 28% of the 220 million rural households owned color TV sets.

A SWOT analysis will show the strengths, weaknesses, opportunities, and threats SCH is looking at when they put together their potential marketing strategy in the Chinese economy.

Strengths:

* China was a market where the first mover enjoyed advantages over late comers.

* The first image of the product lasted long in the eyes of the consumer and the first to enter the market could gain the largest market share

* SCH is committed to enhance its image to the Chinese market as investors

* SCH was building a wholly owned manufacturing plant in China to show the

Chinese the commitment Korea had to the Chinese society.

* Labor costs in China were less and would defray the cost of producing high-end

* Samsung has been making color TVs for many years in Korea before moving to

the Chinese market.

Weaknesses:

* SCH must continue to control all costs to maintain success

* China has a reputation of being a protected market (protectionism)

* China was a market where the first mover enjoyed advantages over late comers,

SCH is trying to overcome the first comer advantage Japan manufacturers have over them by being those first comers

* Companies such as Sony and Matsushita had built sales and service networks that

were favorable to their sales programs in China, while Samsung would have to

catch up in that area

* Samsung is not as experienced in manufacturing high-end TVs for a higher-end

market segment

Opportunities:

* Based on the data that on 28% of the 220 million rural households own a color TV. SCH focus on the domestic China market should be to penetrate the rural household market, which would mean that for those purposes the low-end production of sets in the 13" to 20" range should be produced to appeal to that segment's purchasing ability.

* Larger more high-end models can be produced to appeal to an urban customer in China, as well as being an export to the U.S. and European higher end customers.

* With success in the higher-end manufacturing and sales of premium TVs in China; SCH can establish themselves as high-end producers around the world

Threats:

* SCH faces intense competition in the color TV market

* A premium-priced product wouldn't sell in large volumes, so pricing can be a problem.

* Since SCH didn't have an established marketing strategy, issues of how to market the