Samsung: from Gallop to Run

I.Situation Analysis

A.Company Philosophy

Samsung Electronics has to be the cutting-edge product leader in consumer electronics producing new sleek, bold, and beautiful products which they called as “lifestyle works of art” intended for the high-end users. Each product has to pass the “WOW” test. If it did not get the “WOW” reaction during market testing, it is scrapped or sent back to the design studio.

B.Current Strategy

The company is focused on the development and production of innovative, stylish, and new consumer electronics product intended for high-end customers. Along with this, the company also changed its distribution system abandoning low-end distributors and choosing to build strong relationship with high-end and specialty retailers.

C.Relevant History

•Samsung Group of Companies, the parent company of Samsung Electronics, was founded in 1938 by Lee Byung-Chuil. It is now the world’s largest conglomerate, second largest shipbuilder, a major global construction company and the largest insurance company in South Korea.

•In 1969, Samsung Electronics was established. It started as a maker of cheap consumer electronic products like calculators and black and white TV’s through the mid – 1990’s.

•In 1993, CEO/Chairman Lee Kun-Hee unveiled his “new management” strategy bringing Samsung Electronics to ambitious new direction. Instead of being a copy cat, the company has to produce new, sleek, bold, beautiful and innovative consumer electronic products. The company hired new crop of fresh, young designers who unleashed a torrent of new products. The goal was to become no. 1 in consumer electronic products.

•Beginning 1993 Samsung Electronics also changed its distribution strategy abandoning low-end distributors and choosing specialty retailers for its new, stylish, and innovative products.

•Samsung achieved its goal to become number 1 in consumer electronic products in 2005. They’re no.1 up to now.

D.Financial Analysis

•Samsung Electronics is backed up by the biggest conglomerate in the world, The Samsung Group, which is so big that it accounts for 25% of all corporate profits in South Korea.

•With its new stylish and innovative products and revamped distribution system, it dislodged Sony as No. 1 in 2005. In 2009, Samsung rang up revenues of $117 Billion with profits of $8.3 Billion compared to Sony’s $77 Billion in revenues and a net loss of $1 Billion.

•Recently, Samsung unveiled a $23 Billion investment plan intended for new equipment, plants, capital expenditures, and for research and development. This $23 Billion investment plan is bigger than the combined investments budgets of Intel, IBM, and Sony.

E.Marketing Audit

•Product Development – Samsung has developed many consumer electronic products with cutting edge technology such as TV’s, cell phones, DVD players, home theatres, digital cameras, camcorders, laser printers, and home appliances. It also produces electronic components like LCD and LED panels, mobile displays and flash memory for other electronic companies.

•Market Development – the company altered its distribution system focusing on high-end and specialty retailers for its products. Its products are distributed around the world.

•Market Penetration – the company is not competing with low priced consumer electronic products. Its stylish and innovative products are intended for high end users. Despite this strategy, Samsung became the No. 1 TV manufacturer and the 2nd largest cell-phone producer.

F.Management Capabilities

The management style of the company is to be always forward looking moving all of its products towards new styles and innovation. In its “new management strategy” all of its products has to pass the “WOW test”. If it will not get a WOW reaction during market test, it will be sent back to the design studio. Despite being No. 1, its CEO always reminded everybody that their products will be obsolete in the next 10 years. Samsung’s new strategy of “MAMBULJUNGLE” which means “the horse that never stops” characterize the company’s management style to be always forward looking and not to be complacent in determining the product that the consumer wants. G.Core Competencies

Samsung is in the development and production of high quality, and innovative consumer electronic products. It is also a leading producer of electronic components intended for other electronic companies. It is now developing consumer electronic products that will be interactive with each other like cell phones with TV’s and TV’s with internet.

H.External Forces

•Samsung’s success is attributed to improving economies in many countries around the world. If family incomes are increasing, more people can able to afford the high quality products of Samsung.

•Competition from other companies such as Sony, IBM, and Apple also required Samsung to invest more in capital expenditures and research and development in order to produce much better and competitive products.

II.PROBLEM STATEMENT

Samsung with its present strategies and products become the No. 1 consumer electronic product manufacturer in the world. Its primary concern is how to maintain and improve its market so that it can retain its lofty status.

Evidence of the Problem

•CEO and Chairman Lee admitted that after 17 years of success, the company’s current main products will become obsolete in 10 years.

•In one launching ceremony, CEO Lee warned that despite Samsung’s success, the company risked losing market share if it did not completely overhaul its business model.

III.Objectives

1.To ensure that it is Samsung which will produce the electronic products that the consumer wants in the future.

2.To ensure that Samsung will retain its No. 1 ranking as the biggest manufacturer of consumer electronic products.

3.To develop more cutting-edge consumer electronic products.

IV.Alternative Courses of Action

1.Market Penetration Strategy a)Conduct more research study on the behavioural aspects of consumers in the electronic product industry to determine what they want and what they need.

b)Develop products that will cater to low-income and middle –income consumers so that it can penetrate consumers with less disposable incomes.

2.Market Development Strategy a)Develop distribution systems that will also allow low-end distributors to sell Samsung Products.

b)For its high-end products, develop display centers that will cater exclusively to this kind of product.

3.Product Development Strategy a)Invest more in the product development research in order to be the first to produce the product that the consumer wants.

b)Continue to improve its existing products like its cell phones which now are smart phones – The Galaxy S –

V.Recommendations: I would recommend that the alternative courses of action will be implemented by Samsung to retain its No. 1 status. In developing new products and in improving its existing products, lower priced electronic products should also be considered in order to develop markets in low and middle income segments. For its high end products, it should develop a new distribution system that will have exclusivity such as display shops exclusive high end Samsung products.

SWOT Analysis Strengths: 1)Stylish, innovative high quality products. 2)Well established brand in the market being the No.1 manufacturer of consumer electronic products. 3)Big budget for R&D and Capital Expenditures.Weaknesses 1)Consumer electronic products “obsolete” very fast. 2)Most low and middle income families cannot afford Samsung products. Opportunities: 1)Improving economies in many countries enables many consumers to afford Samsung products 2)Large segment of high-end buyers prefer quality products like Samsung.Threats: 1)Competition from other companies like Sony and IBM.

2)Economic downturns in many countries like in Europe now.

Ateneo de Davao University

A CASE ANALYSIS Samsung: From Gallop to Run

Submitted By:

Erik Duval E. Fabiaña 2 Mgt-B

Submitted To:

Marilou M. Baarde, MBA Proffesor/Instructor Basic Marketing