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Executive Summary Samsung Electronics was established in 1969 and successfully developed its own products internally in 1980s. The company grew very fast and even continued to lead the market with an 8% growth in gross sales during Asian crisis in 1997. Now it is transforming to a global digital company with many products occupying substantial market shares in the world.
Samsung Electronics attributed its success to four main factors; (1) Highly creative employees can develop new technologies; (2) cooperation among business partners throughout the supply chain; (3) its ability to penetrate new markers; (4) high speed of innovation and product development. The company spent high budget on R&D, product design and marketing and successfully differentiated its products from the competitors and positioned the products as “high quality” and “high-tech”. Samsung Electronics faced a challenge of differentiating its product from the competitors.
The company needed to defend the market share and profitability due to the fierce competition with many global competitors. Some competitors offering the products at low cost base also posed question on Samsung’s R strategies. Many competitors outsourcing R and product design works to lower the costs. The new trend also let Samsung Electronics to rethink R and product design outsourcing strategies. Samsung Electronics can explore new market given the past successful experience to enter the market like India.
The existing R, product design and marketing strategies successfully differentiated the products from the competitors and should not be changed. Low price strategy is also not a viable option for Samsung Electronics. Background Samsung Electronics Company was established in 1969 in Korea and improved its capabilities via joint-venture with many foreign technology suppliers in 1970s. In 1980s, Samsung Electronics established Korean based R centers to develop products internally and to reduce the reliance on foreign uppliers. From 1990 onwards, the imported electronics good in Korea increased from 5% in 1990 to 15% in 1991 and the competition of Korean electronics good companies with the global competitors was very fierce. Samsung Electronics unveiled its “New Management” in 1993 to transform the management and emphasized decentralization, innovativeness, globalization, and out-looking management. During Asian financial crisis in 1997, Samsung Electronics still continued to lead the market with an 8% growth rate in gross sales.
In 2000, the company had a new mission to transform the company to a digital company of leading the digital convergence. The company in 2007 held the largest market share for LCD and TV. Successful Business Strategy Samsung Electronics attributed its success to four main factors; (1) Highly creative employees can develop new technologies; (2) cooperation among business partners throughout the supply chain; (3) its ability to penetrate new markers; (4) high speed of innovation and product development. Samsung Electronics also spent huge R budget, say 6. 35% of net sales in 2007, higher than 3. % and 4. 1% of net sales for Apple Computer Inc. and LG Electronics respectively. Moreover, the company not only had 6 R centres in South Korea but also operated 16 R centres in 8 countries. The company gathers the worldwide expertise and understand the market demand of different countries. Samsung Electronics had worldwide design centres to understand lifestyles, trends, cultures of different countries and allowed the local design centre to accommodate specific market needs and cultural context in the product design. In 1990s, the United States realized products from Korea as cheap commodity.
Samsung Electronics spent 3% of net sales on marketing and advertisement to reposition its brand as “high-tech” and “high quality”. It was evidenced by its brand equity sharply increasing from USD15 billion in 2005 to USD16. 1 billion in 2006. Challenges Design advantages of Samsung Electronics started to diminish as more and more competitors increase their budgets in R and product design. The company has the problem of differentiating the products from the competitors’. High competition in the consumer electronics market causes the company to defend both the market share and the profitability.
Samsung Electronics has a high R&D cost as compared to the competitors. It may disable the company to offer the products at lower price base. Many competitors lower the R&D costs and shorten the time to market by outsourcing the R&D works and product design. For a company like Samsung Electronics with the edge of strong R&D and product design, the new trend seems not in line with the strength of the company. Besides, Samsung Electronics also need to consider the problem of intellectual rights, patents, product differentiation, etc. Recommendations
Samsung Electronics has an excellent experience to explore new market. In 2000s, Indians unlike Japanese, Americans or Hong Kong people did not have any idea that product from Korea was a cheap commodity. Samsung Electronics offered mobile phones at very low price in India to build up its brand name and penetrated into the new market. Indians now regard those Korean (not Japanese) electronics products as “high-tech” and “high quality”. Samsung India continues to lead the color monitor market in India for the third consecutive quarter of the Year 2008.
Samsung retained its top position by leading the CDT and the LCD monitor segments in the non bundled or the open market, both in quantity and value. Samsung leads the open market for LCD monitors with a 25. 1% volume market share and 25. 7% market share, while in the case of CDT monitors, it leads with a 22. 3% volume market share and 24. 1% value market share for Q3, 2008. [1]Samsung Electronics should continue to explore new market by using the past experience. Samsung Electronics invested huge sum of R&D on technologies and designs in the new products to attract customers.
The company received 19 IDEA Design awards between 2001 and 2007 and registered 17,377 patents worldwide in 2006. It may reduce the price competitive power as compared to the competitors offering their products at low cost in the market. However, the leadership of Samsung Electronics in the R&D and design space will contribute to differentiate its products from the competitors. Samsung Electronics used huge resources on R&D, product design and marketing and spent many years to design the new products and rebuilt the product image to walk away from the customers’ concept of “cheap commodity”.
It is not a prudent way to adopt the low-price strategy in the market. Therefore, Samsung should continue to invest in R, product design and marketing to differentiate the products from those global competitors. R and product design outsourcing strategies should not be adopted given that patents, intellectual rights are the invaluable assets and key to success for the Samsung Electronics. Conclusions Samsung’s R&D, product design and marketing strategies successfully differentiate its products from the competitors and positioned its products as “high quality” and “high-tech”.
Many competitors lowered the R&D costs or even outsourced the R&D and product design works in order to offer their products at low cost base. Samsung Electronics should maintain its existing R&D polices in order to keep the competitive power in the market. (word count : 904) ———————– [1] Business News, 13 Feb 2009, “Samsung Leads Color Monitor Market in India” http://www. ednindia. com/article-23214-samsungleadscolormonitormarketinindia-Asia. html-Asia. html ———————– 08 Fall