Marketing Strategy Of Samsung Mobile Essay Contest

Table of contents

Executive Summary

Introduction

Overview of Samsung
Development of Samsung
Company structure

Samsung mobile external environment analysis
PEST Analysis
Political factors
Economic factors
Social-cultural factors
Technological factors
Porter’s five forces analysis
Bargaining power of Suppliers
Bargaining power of Customers
Rivalry among existing firms
Threats of new entrants
Threats of substitute products of services

Key drivers of the mobile industry to influence Samsung international performance
Technology
Regulatory
Cost reduction
Buyer power

Evaluation and recommendation

Conclusion

References

Executive Summary

Samsung Group is a giant multinational enterprise composed of more than thirty affiliated corporations in various industries. Samsung Group is acting a significant of roles including supplier, designer, engineer and producer etc. As a global conglomerate, Samsung has achieved a great success in both domestic and foreign markets. Samsung mobile business has contributed enormously to the whole company, providing mobile phones that satisfy consumers’ needs. Samsung maintain the first position with innovated products, such as the Galaxy S5, Galaxy Note 4 and Galaxy Note edge across the whole mobile and smartphone markets in the world in 2014 (Samsung annual report, 2014). A closer look will be taken on Samsung’s mobile communications business. As Samsung intends to expand global footprint, international business strategy would be adopted inevitably by the company. The purpose of this paper is to exam a case of Samsung Mobile and explores how the environment impacts on Samsung’s international strategy by using appropriate strategic tools.

Introduction

Samsung Mobile is positioned as one of the best mobile phone manufacturers successfully. It is developing quickly and wins a great amount of market share in mobile industry. The business philosophy Samsung follows is to devote all the talents and technologies to create superior products and services that make the society better in a global range (Samsung n.d. Values&Philosophy). This report will firstly take a brief look at Samsung by viewing the company’s development history, corporate structure and what international strategy it is now undertaken. Then strategic tools are going to be used to deeply analyzing both the company’s internal and external environment. Key drivers of the mobile industry will be identified and how they interact to Samsung’s international strategy will also be explained in this report. Finally, historical examples will be provided to support the findings above.

Overview of Samsung

Development of Samsung

Samsung Electronics was founded as affiliated corporation in Korea in 1969 for the purpose of promoting growth for the Samsung Group (Samsung n.d. History).When Samsung decided to start mobile phone business, this move was considered thoughtless by industry observers. However, entering mobile phone business helps Samsung own a lot of profit and obtain high reputation, and finally achieve a great success in global market. About 320 million people are hired by the corporation in 84 countries (Samsung annual report 2014). The corporation has acquired KRW 206 trillion sales and KRW 25 trillion profits in 2014 (Samsung annual report 2014). Samsung Mobile is one of the three segments of Samsung Electronics.

Company structure

As the figure1 shows below, the company is divided into three departments, including component department, consumer electronics department and IT/mobile department (Chun 2015). IT/mobile department has three divisions including wireless divisions, network divisions and media solution division (Chun 2015).

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Figure1-Organizational structure chart of Samsung Electroincs (Chun 2015)

Samsung mobile external environment analysis

When formulating an international business strategy, Samsung should take external environmental factors into consideration. There are various theoretical tools that help analyzing the external environment, such as PEST analysis, five forces analysis and external factor evaluation matrix. Due to the lack of internal resources, external factor evaluation matrix cannot be applied to exam the company.

PEST Analysis

None of the enterprises can prevent itself from the impact of the macro environment, thus knowing how the environment will change seems to be vital. There are a great number of factors that can influence the company; therefore, it would be impossible to identify all the factors and the extent they affect. Finding the key factors and clarify how they interact would be more practical. PEST analysis is used to explore external macro environment independent of the firm’s size, including political environment, economic environment, social-cultural environment and technological environment; however they are also composed of different aspects respectively as the graph shows below (CIPD 2011).

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Figure2–PEST analysis

Political factors

Political stability should be taken into consideration if the company wants to sustain long-term development. Recently, the strained relationships between North and South Korea may result in war breaking out in the Korean Peninsula. The future of China seems to be uncertain from political and economic perspective. Moreover, there are rising tensions in Russia, Middle East and Brazil. Instabilities in African and Latin American countries which lead to frequent changing governing structures also put pressure on Samsung. In addition, political laws and regulations established by governments should be taken into concern as companies must follow those rules. A higher tax rate, an increase in minimum wage, and stricter environmental standard and would lead to an adverse impact on the company, increasing its cost and decreasing profitability. Anti-unfair competition law helps protect domestic corporations from competing with foreign firms. On the other hand, a preferential trading rule encourages investment from abroad. Since laws and regulations are different in different nations, which makes international trade more complex. It is found that Samsung is involved in political a scandal which damages its brand image (Ji-Young, 2010). Overall the political risk of Samsung is quite low because of geographical diversification, administrative representation only in main capital cities and indirect sale through retail dealers (Simonin 2014).

Economic factors

Economic factors are critical in formulating business strategy since growth of economy, inflation rate, standard of consumption, and undergoing economic cycle significantly affect the company’s profitability. Appreciation in Won reduced profits by 25% in the second quarter (NewEconomy 2014). Financial crisis in 2007 affect the company’s profit significantly from 2.07 to 1.02 trillion won (Dudovskiy 2015). The global economic rescission is still ongoing, which will have an adverse impact on consumer purchasing power as consumers are reluctant to buy products. British exit from European Union leads to a quick depreciation in Great Britain Pound. The uncertainties of currency values arise which increase the price of gold. Because of the dramatic decrease in the crude oil prices, there will be an increase in US interest rates which leads to a higher investment cost. Additionally, financial risks in developing countries and economic depression in Eurozone may occur. In the unpredictable and instable economic environment would lead to higher risks in business and make the competition even fiercer. Thus expanding into the emerging and developing markets may help the company increase profitability and retrieve a loss from the mature and developed markets.

Social-cultural factors

Social-cultural factors are mainly demographic and cultural aspects of the external environment, including beliefs, habits, life-style, and status that may changing customer needs. Finding these factors implies size of potential market is predictable. Nowadays, almost everyone has a mobile phone, using it to communicate, find information, and have fun. Also, trend of sharing via social applications boosts the consumption of mobile phone produced by Samsung. The company should identify ways to adapts itself to various markets where it launches branches by tailoring products that can fulfill customers’ fast changing preferences. Samsung should behave in a local way to get itself used to the emerging market.

Technological factors

Technological factors can be regarded as the key force in mobile industry (Kim 2002). It is composed of manufacture and infrastructure (FreeManagementBooks n.d.). Technological advances include automation, quality improvements, incentives, cost saving and outsourcing (FreeManagementBooks n.d.). A mobile manufacturer has to keep up with the technical advances otherwise it will be soon left behind and leave opportunities for other competitors. Nokia would be a good example that is too slow to embrace smartphone technologies (FreeManagementBooks n.d.). In order to maintain the market share, companies need to follow and monitor the latest technology, seizing any opportunities available. To support the technical development, investment should be made to buy the equipment and hire top-talents. Using patents and licensing is a vital strategy to protect the company’s achievement as well.

Porter’s five forces analysis

Five forces framework emphasized five individual forces can determine the degree of competition in a particular industry (Porter 1979). The five forces are showed in the figure below.

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Figure3-Porter’s five forces

Bargaining power of Suppliers

There are hardware and software suppliers in mobile industry as mobile hardware and software can be separated (Savov 2012). The hardware suppliers seem to have weak bargaining power since there are a large number of equipment makers. Samsung Mobile’s success in early years is contributed mainly by the releasing profit margin friendly products, since Samsung Mobile can buy cheaper manufacture components than almost other competitors (Covert 2014). Samsung has the right to choose the partner they want to corporate with. Nevertheless, software suppliers may have a strong bargaining power as there are only a few, such as Microsoft. Firm would be placed in a weaker position when negotiating with monopolies. Overall, the company can have a high power if it can develop software by its own, like the case of Apple which develops iOS system.

Bargaining power of Customers

As customers have a plenty of purchasing choices in mobile industry, the bargaining power of customers is strong (Katkyama 2010). The highly aggressive pricing strategy is taken by Samsung and it spends a huge amount of money in marketing to target all segments (CCS 2014). Customers are price-sensitive and respond quickly by switching to another choice when product price increase as the competition is fierce in mobile industry. However, bargaining power of the firm can be strengthened if customer loyalty is built. In that situation, customers may be unwilling to change purchasing decisions if the mobile phone can show high social status and good taste.

Rivalry among existing firms

The competition in mobile industry is fierce (Mustonen 2010). The smartphone market is estimated as a duopoly with Apple and Samsung capturing most of the market share (CCS 2014). A great amount of investment should be made in R&D to keep up with the latest technological development (Brostoff etc. 2014). Only innovated products and creative technologies can differentiate products from others. It is reported that Samsung surpassed Apple and ranks first as largest smartphone manufacturer world-wide in the first quarter of 2015 (Rossignol 2015). However, iPhone is more advanced and dependable from customers’ view. It is noted that Samsung cannot match Apple’s marketing capability as data shows Samsung’s market share declined by 2.3% while Apple’s increased by 34.9% from 2014 to 2015 (PESTLEanalysis 2015). Samsung’s android system is considered inferior to Apple’s iOS. Moreover, Huawer’s share increased by 48.1% and Xiami’s share increased by 29.4% (PESTLEanalysis 2015).

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Figure4-rank of global Smartphone (Rossignol 2015)

Threats of new entrants

The entry barrier is low in mobile industry. An open-source solution is provided by Google known as the advent of Android (CCS 2014). Completed packaged solutions are provided by chipset companies such as Qualcomm known as the advent of turnkey reference designs (CCS 2014). All these trends benefit new manufacturers, especially China-based firms (CCS 2014). On the other hand, it would be difficult for firms to differentiate from other competitors and gain market share because of intense competition. Heavy investment in R&D is needed which lead to high cost that new entrants can rarely afford.

Threats of substitute products of services

Traditionally, the main function of a mobile phone is to make phone calls and send messages. These functions can be achieved through internet with multiple applications. A laptop and a pad would be a substitute for a mobile phone; however, it would be inconvenient to carry them around. It is predicted that there may be possibility that laptop being replaced by smartphone (Greenbot 2015). The threat of substitute is low, but new substitutes may be created in the future as technology develops quickly.

Key drivers of the mobile industry to influence Samsung international performance

Technology

Being viewed as the world’s leading innovative company; Samsung acquires advanced technology that enables the company creating latest innovative smartphones. Multiple layouts of functions besides browsing websites, listening to music, drawing pictures, taking photos and playing games are required. Product quality, reliability, and software compatibility also matters as rational customers would take these factors into consideration. Samsung Mobile as the largest Samsung community around holds the concept of providing “fashion-leading technology”. Since the early 1970s, Samsung was devoted to catching up with foreign technologies. After nearly twenties years, the new product development gap behind leading firms is reduced to less than a year (Verbeke 2009). Effects has been made by Samsung in enhancing R&D and in investing high-tech firms such as AST Research and LUX (Verbeke 2009).Samsung’s technological position is improved by building an R&D lab in Silicon Valley and employing experienced engineers from leading companies such as Intel and IBM (Wilkins &Schroter 1998). A large amount of investment is made by Samsung in expanding R&D and hiring top talents, which ultimately create innovative products and achieve remarkable performance, including the smartphone with curved display. Samsung’s strategy of heavy investment in technology leads it the way to future success.

Regulatory

Lessons should be learnt from Apple of which design and technology has been imitated by other competitors, bringing legal and regulatory troubles and scrutiny (Buckler 2012). Samsung is facing with lawsuits related with patents and copyrights and has to spend billions on them (Simonin 2014). Therefore, application for patent on creative designs and innovative technologies should not be made immediately. It is not only how fast the product presented to customers that matters, but also how difficult the techniques can be copied and utilized.

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1. Introduction
Nowadays, electronic products are loved by people, and have become the trend of the necessities of life and the pursuit of goods. In the face of fierce competition and huge market potential of electronic industry, the major foreign manufactures and domestic manufacturers both want to occupy the leading position in the market, grab market share. In this period with opportunities and challenges, how to enable enterprises to be invincible is an important problem that every electronic enterprise explored actively. Therefore, many companies established their marketing strategy for the further development.

1.1 Samsung Company
Samsung Company is the first big business in South Korea, and also is a multinational enterprise group. Samsung Group concludes numerous international affiliated businesses, such as Samsung Electronics, Samsung Corporation, Samsung Life, and Samsung Aviation and so on, and its business involved many areas of electronics, finance, mechanical, chemical, and others, which is in the list of the world’s top 500 enterprises. Samsung Electronics is its largest subsidiary, which is the world’s largest mobile phone manufacturer and revenues the largest of the electronics companies. In 2011, its global enterprise market capitalization is up to $150 billion. Samsung Group is a family business, the Lee family hereditary, its Samsung industries are a family business, and other members of the family to manage, now the current leaders of the Group has spread to the Lee’s third generation. (Samsung, 2013)

1.1.2 Historical
Samsung Company was established in 1938, and is an international marketing company. It’s mainly industry, Samsung electronics, is established in 1969, is a semiconductor, communications, computer products and consumer electronics products in one of the major electronics companies, and is committed to the perfect experience for global customers through advanced technology and thoughtful service. 30 years ago, when Samsung Electronics is just established, it worked for Japan’s Sanyo to manufacture low-cost 21-inch black and white TV. In the early 1990s, Samsung Electronics, in the minds of consumers, products is just a company to imitate others cheap products. With its development, nowadays, Samsung has become to one of the world’s largest companies in the electronics industry.

1.1.3 Products
Samsung Electronics is the main industry, and came into the top 500 companies in the world. The mainly products include: Samsung mobile phones, television, digital audio and video, computer office BSV LCD splicing screen, etc. Samsung has nearly 20 kinds of products occupied first world market share in the global enterprise, and highlights the relative strength in the international market.

2. Analysis the market of Samsung Company
This part used the SWOT method to analysis the market of Samsung Company, concludes its external and internal factors to analyze its strengths, weakness, and opportunities, and threatens (Hill and Westbrook, 1997).

Strengths:
1. Strong technical R&D and design innovation capability;
2. “People-oriented” human resources strategy to attract global talents; 3. Clear development strategy and effective execution;
4. Strong after-sales service system;
5. High brand awareness and good corporate image;
6. Own outstanding business leader;
7. Good relations between the government and enterprises;
8. Product position is high-end with high profit margins;
9. Strong market leadership, market share high.
Weakness:
1. Personnel structure is not enough international that the overseas recruitment of senior corporate leadership most Korean people; 2. Product line is too long, that it concludes so many products, and some not dominant products may be fall. 3. Cost is too high;

4. Product life cycle is short. Especially Samsung Electronics aims to increase its market share through product differentiation strategy, leading to further shorten the product life cycle of Samsung Electronics. Opportunities:

1. The world economy continues to take a good, for the majority of products targeted at the high-end, Samsung Electronics is a further opportunity to increase its market share; 2. Samsung 3G technology is mature, and the 4G technology is under study; 3. Samsung mobile market share is on the top, and has a large development space.

Threatens:
1. Under the global trade protectionism, some may be anti-competitive behavior are investigated by other countries; 2. In the electronic industry, it has some competitive pressure, such as the Apple, LG, Nokia and so on; 3. Flat screen monitors market demand continues to weaken, Samsung Electronics as a global flat-panel TV market in the second, facing the pressure of the growth rate slowed down.

3. The Strategy of Samsung
3.1 Positioning
The brand positioning is the enterprise market positioning and product positioning based on specific brand commercial decisions on cultural orientation and personality differences, and it is to establish a target market the brand image of the process and results (David and Erich, 2000). Through the analysis of the market of Samsung, it can be seen, with strong R&D and design capability to product high-end fashion products, not only in
the positioning is different from competitors’ products, but also to meet the target consumer demand, Therefore, Samsung Electronics chose the high-end fashion as their own brand positioning concept. Its target group is mainly the fashionable young people, which have a certain amount of spending power, like to try new things, and about the age of 22 to 35 years old young white-collar workers.

3.1.1 Product
Samsung Electronic began to develop the semiconductor business from 1980s, and then gradually to the development of high-end products. Now, its main business includes the four major categories of semiconductors, digital media, and communication networks. Samsung Semiconductor is the main competitor to Intel-core businesses, mainly in the memory market. Samsung random access memory business market share is firmly in the first over the past 10 years, and the flash market share is also in the global forefront. Digital media, film liquid crystal displays and recorders share ranks first in the world. Telecommunication Network Business, Samsung is the largest mobile phone manufacturers in the world now and has exceeded Apple, Nokia and so on and it also world’s largest manufactures the CDMA handsets.

Samsung’s high-end fashion brand philosophy is embodied in Samsung different areas products. Take the mobile phones for example, Samsung has used three words to express their ideals: Wow, Simple, and Inclusive. In this concept, Samsung has pioneered the use of flip phones, the first to promote the color screen, slider phone design, and vigorously promote the camera phone. In addition, Samsung also launched a number of mobile phone for women. Compared to the Nokia and Motorola that pursuit of comfort and reliability, Samsung are more prominent products fashionable and aristocratic, and are better able to attract the attention of consumers.

3.1.2 Price
Marketing strategy is the critical part in the marketing plan. In this part, company select the appropriate combination of marketing strategy based on the analysis above including the marketing environment, market opportunities, internal resources and target market (Subhash, 2000). After
market research, Samsung products are focus on creating unique high-end products with high price, and not position on the low-cost, low-price and low-end products. So in order to establish a high-end brand positioning of Samsung electronics, it implements high-price strategy in the global to enhance the brand image, and opened the grade with other manufactures of similar products. The high price strategy creates a first-class high-end image for Samsung and brings more profits for Samsung, which provide strong financial support for the new R&D.

3.1.3 Promotion
Promotion strategy is how company uses the personal selling, advertising, public relations and sales promotion to communicate product information to consumers, in order to arouse their attention and interests and stimulate their desire to buy and purchase to achieve expand sales (Johny and Johansson, 1997). In the promotion strategy, Samsung adhere to brand position, through a variety of means of promotion to build brand image.

Advertising is the most direct way of branding promotion. In 2001, Samsung has invest nearly $ 400 million worldwide to launch an extensive advertising campaign, which it played a moving slogan that “digital world, everyone share”, has greatly changed the cheap, low quality image of Samsung products in the minds of consumers in Europe and the United States and other developed countries and Samsung products linked to fashion, high-end for the first time. At the same time, Samsung also invite youth, fashion star as the spokesperson, make the consumers soon shift from the original concept that low-grade, obsolete, outdated to the now concept of high-end and fashion. After that, Samsung also make full use of international activities for the promotion table to make more consumes understand and prefer Samsung.

3.2 Segmentation
Faced to the trend of customer demand characteristics and complexity, Samsung adhere to the market segmentation strategy that category management customers, focus on customer needs, and take the initiative to create demand, adopt differentiation to applicability to personalization strategy to achieve customers trust and make full use of the integration of the sales to do a full range of service for customers. For the target of customers, it
segments the customers through different demand of different ages (Peter and James, 1985). Customers under 18 years old are mainly students, who have no revenues and the attention to telephone is low. 19-25 year old customers are pursuit personalities but economics revenue is not stable, and 25-35 years old customers are pursuit fashion and brands. These two stage customers are the mainly target for Samsung.

3.3 Competition
Samsung competition strategies mainly focus on differentiation competitive advantage and brand competitive advantage. First, Samsung has always been to provide customers with high quality, high-tech electronic products for the purpose, and this is undoubtedly an important symbol to distinguish between Samsung and other brand electronic products. Behind the support of strong R & D team, Samsung product differentiation competitive advantage can be achieved. Second, In addition, the age of more than half a century brand, especially in the late 20th century Samsung monopolies ground almost five generations established the brand so that the Samsung brand that is synonymous with high-quality, high enjoyment undoubtedly is one of the important competitive advantages.

4. The competition between Samsung and other companies
4.1 Samsung and Apple
In the electronic industry, apple is the mainly competitor to Samsung in the international market. Competition from Apple and Samsung defines the global mobile device market. The two companies together accounted for half of the global smartphone market share. Analysts said Samsung is to get rid of the identity of the “fast follower”, and became to a true innovator, Apple has been the world’s leading innovator, and however, recently the company’s innovation is slowing. In 2012, Samsung Electronics’ global market share is 28%, more increase than the last year of 20%. In contrast, Apple’s market share amounted to 20.5%, slightly more than last year’s 19% (Samsung, 2013)

The competition between apple and Samsung is the competition between Apple iOS and Google Android two mobile platforms. Currently, over 2/3 of the smart phone are using the Android system. Meanwhile, Apple component
procurement and assembly of products has been largely outsourced. This brings to the Apple Company a higher profit margin, but it cannot well control suppliers, while, most of Samsung’s components and products are produced by the company itself. In addition, Apple focus on high-end mobile device market, Samsung is also aimed at the new user for the further development.

4.2 Samsung and LG
LG is South Korea’s second large group second only to Samsung, LG Group continued to infinity technology challenge, and is committed to the development of new technologies, research and development the LG development priorities, but also the strong backing of the Business Development. LG is the production of flat-panel TVs, audio and video products, one of the world’s leading enterprises of mobile phones, air conditioners and washing machines. In the mobile phone market, LG Electronics was the world’s third largest mobile phone manufacturer in the past, however, in 2012, has fallen for the fifth-largest mobile phone manufacturer, which also reflects the inability of the company to launch a competitive product to the market, to compete with Apple’s iPhone and Samsung Electronics Galaxy products compete. In the South Korea’s electronics industry, Samsung occupied the mainly market, while LG behind it to compete the second position.

5. Conclusion
Samsung Company should make full use of its own advantage, explore market full, against external threats as well as to improve the internal environment and secure and expand its competitive advantage status. This needs the correct formulation and implementation for the Samsung’s market strategy on the product, price, and promotion and so on to become to the true market leader. Meanwhile, at the analysis of competitors, Samsung should clear its competitive advantage, strengthen brand building, explore consumer demands and with the spirit of innovation to achieve further development in the world electronic market.

Reference

David, A. and Erich, J. (2000) The Brand Relationship: The Key to the Brand Architecture Challenge. California Management Review, 42 (4), pp. 53-67.

Hill, T. and Westbrook, R. (1997) SWOT Analysis: It’s Time for a Product Recall, Long Range Planning, 30 (1), pp. 46–52

Johny, K. and Johansson, M. (1997) Global Marketing-Foreign Entry, Local Marketing and Global Management, The McGraw Hill Companies, Inc.

Peter, R., Dickson, J. and Ginter, L. (1985) Market Segmentation, Product Differentiation, and Marketing Strategy, Harvard Business Review, 14(4), pp. 182-221.

Subhash C. J., (2000) Marketing Planning & Strategy, Journal of Business Administration, 4, pp. 23-27.

Samsung Inc. (2013) Introduction of Samsung [Online] available from: http://www.marketingweek.co.uk/brands/samsung/ [Accessed: 20 March, 2013]

Samsung Inc. (2013) Introduction of Samsung [Online] available from: http://www.samsung.com/us/ [Accessed: 19 March, 2013]

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