A Comparative Analysis of Samsung: Marketing Strategy and Future Plan - Case Study Example

• A Comparative Analysis of Samsung: Marketing Strategy and Future Plan
• Name of the Student
• Name of the University
• 1. Introduction

Technology and innovation are changing the communication pattern all across the globe. Mobile phone is one of the great examples of how the technology is growing at a rapid pace. In recent years, all the mobile phone manufacturers have been looking to capture the global market by incorporating more advanced technologies and applications in their operations. At the initial level, the mobile phones were mostly used for communication with the people across the globe but at present, it is serving almost every possible issue associated with communication and networking such as e-mail, voice messages and social communication by using social websites such as Facebook, LinkedIn etc. Availability of Wi-Fi and web browsing are helping people of modern generation to get access of all kind of information at any moment (Thomas, 2015). All across the globe, apart from the big brands such as Samsung, Nokia, Apple Inc., there are number of local players as well which are developing very fast in terms of acquiring market share. A great example is Nokia which once was the leading player in the mobile phone industry but now has lost its market share with a significant margin to the companies like Apple Inc., Samsung, Lenovo etc. The mobile phone market, especially the smart phone market is growing at a rapid pace in all the developed and developing markets and there is a trend of people having more than one mobile handset. Samsung is one of the leading mobile phone manufacturers in the world and it is one of the closest competitors of Apple Inc., Lenovo and other top most brands across the globe (Danova, 2014).

The main objective of this paper is to analyze the overall market position of Samsung across the globe along with its present marketing strategies to strengthen its position in the present market. The paper also focuses on how the five force model can control the marketing strategies of Samsung and what future steps that the organization can take keeping in mind the increasing competition and changing market scenario.

• 2. Global Smartphone Industry Trend

On the basis of market analysis, it is very clear that the smart phone industry will show a tremendous growth potential in coming years as well. According to the survey, the cell phone industry is likely to reach a valuation of $334.8 billion by the end of 2017 with a CAGR rate of 6.8 % from 2012-2017 (Research and Markets, 2012). The majority of the growths will come from the developing countries as most of the organizations are now targeting nations like India, China and Russia to gain their market share and also increase the profitability level. In last five years, competition in the mobile phone industry has intensified as three organizations entered into the market and became the top five players in the market. Companies like Motorola Mobility Holdings Inc., Ericsson, and LG Electronics Inc. were replaced by 3 of the new players namely Apple Inc., HTC Corporation and Research In Motion Limited in the year of 2011 and since then, the competition become very much intensified (Research and Markets, 2012). A comparative study of Smartphone market share between 2013 and 2014 is shown below:

Image 1: Comparative Analysis of Smartphone Industry between 2013 and 2014

(Source: Danova, 2014)

With the increasing demand and affordable pricing, sales of mobile phone have increased throughout 2015 especially in the third quarter. There was a huge increase in the sale of smart phone as the segment recorded a 15.5% growth YoY with total 353 million units’ sales (Danova, 2014). During this phase, the high end model of Samsung recorded a slow growth rate and the organization shifted its focus to the manufacturing of lower price group products to compete with other players. In the premium segment, Apple Inc. continued to dictate the market with the launch of brands such as iPhone 6 and 6 plus during the third quarter of 2015. The following table is a clear indication of how the mobile phone sale has increased in last one year:

Table 1: Comparison of Market Share of Top Mobile Band

Number of

% of Market

Number of

% of Market

Units sold

Share

Unit Sold

Share

Name of the Brand

(2015-3Q)

(2015-3Q)

(2014-Q3)

(2014-Q3)

Samsung

83586

23.7

72929

23.9

Apple

46062

13.1

38186

12.5

Huawei

27262

7.7

15935

5.2

Lenovo

17439

4.9

21314

7

Xiaomi

17197

4.9

15772

5.2

Others

161296

45.7

141246

46.3

(Source: Gartner Newsroom, 2015)

• 3. Samsung: Organizational Overview

Being one of the leading players in the modern smart phone manufacturing industry, Samsung is continuously changing its style of business operation as well as marketing strategies to keep its dominance in the mobile phone industry. The organization started making mobile phones way back in 1980s and since then it is one of the well known brand in the market. In recent years, the organization has become the leading manufacturer of smart phones as the current market trend all across the globe is focusing more on the same (Samsung newsroom, 2013).

• • Business Performance of Samsung:

As an organization, Samsung electronics reported a growth of 82% in the third quarter of 2015 with an operating profit of 7.39 billion won ($6.5 billion). This was the first time that the organization was able to declare a profit in their business operation. One of the major reasons behind the loss making of the organization was the tough competition that the organization was continuously facing in the Smartphone industry. For a long period of time, Samsung was the frontrunner in the Smartphone industry as there was no competition. With the entry of new organizations and decreasing price range, Samsung has started to face competition and it has started to affect the overall business performance of the company itself (Team, 2015).

The condition was started to change from 2015 as the organization started to alterits business operation style as well as marketing strategy to compete with the other players in the market. In third quarter of the year 2015, revenue from the mobile phone segment increased by 8% YoY with 26.61 billion won ($23.4 billion) sales figure. This division also recorded an operating profit of 2.40 trillion won ($2.1 billion) which was 37% more than that of the 2014. Despite recording such a huge growth, the Smartphone unit was only able to contribute 1/3rd of the company’s total profit for the third quarter of 2015. In comparison to overall growth of the Samsung by 82% (profitability), the smart phone segment was able to record profit of 37% only, which was very low according to the previous standard set by the organization itself (Team, 2015).

• • Strategic Analysis of Samsung

Before getting into details about the strategic analysis of Samsung mobile, it is important to discuss about the five force model and how it impacts the overall marketing process of Samsung mobile.

Porter’s Five Force Model: One of the most significant management conception associated with strategic analysis is Porter’s Five Force Model. It helps the organization to understand the present market scenario and at the same time, the necessary changes that the organization needs to make to remain at the top. It is a method through which an organization can analyze the degree of competition present in the sector in which they are operating (Porter, 2008). All the factors associated with the Porters Five force model are macro environment factors as any changes into these can create a huge impact on the organization’s overall performance in terms of customer service and at the same time book profitability (Hill and Jones, 2009).

• Threat of Competitors: In the mobile phone industry, fast changing technological development increases the level of competition to a great deal. Few years back, the organization used to enjoy monopoly in the market whereas in the recent years, it is facing very tough competition from brands like Apple Inc. in the premium segment and also from the mid range segment like Xiaomi, Lenovo etc.
• Threat of New Entrants: In the mobile phone industry, especially in the smart phone segment, threat associated with new entrants is very high. There were number of organization started very late in this segment and grow at a rapid pace to give tough challenges to the existing big brand. Despite having barriers such as requirement of high capital investment, government across the globe are encouraging new investment in the IT field to make sure more people are getting the benefits of technology and innovation. As a result, more start-up companies are entering the market which is forcing Samsung to look forward and take necessary actions to regain its strong hold in the market.
• Bargaining power of the buyers: In any industry, buyers are most important factor as the profitability and success of the organization always depends on the expense power of the buyers as well as on the bargaining power (Hill and Jones, 2009). Generally, when there are numbers of alternatives available in the market, buyers get more opportunity to choose from number of options and the bargaining power increases. To cope up with the challenges, companies like Samsung are coming up with more and more mobile of different price segments to attract more customers.
• Bargaining power of the Suppliers: Organizations which are dependent on other IT firms to provide software support generally faces this issue in the smart phone industry. With the increasing number of organization in the market, leading companies such as Samsung is now focusing on R & D more and more on in-house basis to not only reduce the cost but at the same time to gain the competitive advantage as well. Apart from that, there are enough suppliers available in the market that can provide support to Samsung in terms of various applications.
• Threats of Substitutes: In the smart phone industry, products of the competitors can be a substitute for the brand itself. There are no products available in the market which can replace the smart phones as this device itself now acting as the substitute of laptops. Organizations like Samsung is focusing on making it more and more updated in terms of application and specification.
• 4. Competition in the Market Current Strategies of Samsung:

As one of the leading players in the market, Samsung is facing tough completion in the recent years from other Smartphone manufacturers across the globe. The major players in the market in terms of competitor of Samsung such as Apple Inc., Huwai, Xiaomi and Lenovo are able to increase their market share at a rapid pace. Small overview on how all these organizations are giving tough competition to Samsung in last five years is discussed below:

• Apple Inc.: It is the leading player in the premium smart phone market segment and is continuously dominating the market. With the launch of its new model iPhone 6plus, the organization is able to get a strong hold in the market. In the last quarter, total shipment of smart phone of this organization was 47.5 million units which were 22.3% less compared to that of 1st quarter in 2015. Majority of iphone6 plus model was sold in China due to faster adoption of 4G technology. If one considers the overall sale, Apple Inc. recorded a growth of 35% on YoY basis out of which 51.4% was from emerging market only making it the closest competitor of Samsung (IDC, 2015).
• Huawei: In recent years, Huawei is able to increase its market share to a great deal. To gain the market share and compete with leading brands like Apple Inc. and Samsung, the organization started to focus more on premium devices such as Ascend Mate 7, P-Series, and Honor portfolio. The mid and high end product of the organization is accounted for over 35% of sales during the first half of 2015 (IDC, 2015).
• Xiaomi: This organization was able to replace LG and gain a position in the top five. The main reason behind the success of this organization is the launch of Redmi 2A model along with the success of Redmi 2 and MI-4 models. The growth of this organization is more extraordinary considering the fact that majority of the sales of this brand has come from China and Asia Pacific (Whitney, 2015).
• Lenovo: Presently, the organization is having 4.7% market share of the global mobile industry. It has lost two spots in the last quarter due to fast growing local players and started to focus on marketing and promotional strategy to regain its position.
  • Marketing Strategy of Samsung Mobile

The main marketing strategy of Samsung mobile is to offer better product in the market at a comparatively lower price and at an exceedingly fast pace. The main business strategy of Samsung mobile is to develop products which are same like other players in the market but with additional features, better design in a lower price (Sang-Hun, 2012). As the competition begin to intensify in the smart phone market, Samsung in order to strengthen their position started to focus on development of more updated software and also to diversify its product line to attract more customers across the sectors (Sang-Hun, 2012.

The initial strategy of Samsung was to develop more products to capture the market. Primarily, the organization launched more than 10 models to capture the market. All these smart phones were able to capture all the available market segments at the initial level. Later on, when competition started getting stronger, Samsung reduced its product line to manage the operating cost and increase profitability. Focusing on less number of products helped the organization to strengthen the presence in the flagship or premium segment and reduce the product count in the entry level (Zeman, 2016).

• • Reason behind Decreasing Market share of Samsung:

Despite being the market leader in the smart phone segment, Samsung is continuously losing out its market share to the newcomers in the industry. Major reason behind the downfall of Samsung was the rift between the company’s operational process in the USA and Korea. Due to the lack of understanding between the two regional teams, the mobile division was affected in a big way during 2013-2014 financial years. Launch of Galaxy S4 was not a success as compared to other flagship models (Kovach, 2015).

One of the biggest factors that hampered the success of Samsung was the launch of Chinese Smartphone manufactures like OnePlus and Xiaomi. Despite being start-up organizations, these companies were able to develop mobiles with almost same kind of features and benefits as Samsung and Apple Inc., but providing those at half price.

Initially, Samsung was able to expand their business all over the globe and enjoy the largest market share due to absence of any other competitors. Apple Inc. being the flagship segment product generally focused on premium segment, therefore no such competition was there in the market. However, as the Chinese startup organizations are able to capture the global market with low price same quality product, Samsung started to lose its market share at a very fast pace (Whitney, 2015).

• 5. Recommended Strategy

To regain the profitability and at the same time strengthen the position of the smart phone industry, it is necessary for Samsung to analyze the marketing strategy as well as product offerings. Here are some key areas that Samsung can look at in next few years as possible business strategy to regain their position in the market:

• Organization must ensure that it has a well diversified product line in both flagship end and also at the starting level in order to attract all the segments. By increasing the bottom-line, it can easily challenge the stronghold that organizations like Xiaomi etc are having in the low price segments.
• Organization can focus on developing every kind of platforms such as android, windows etc so that users can enjoy the benefit of all kinds of applications. The closest competitors of Samsung and Apple Inc.does not have this facility as the iPhone only support their own platforms.
• To reduce the operational cost of the organization, Samsung can focus on only those top end products which recorded maximum profitability and sold most all across the globe. Regular update in those mobile in terms of features can help Samsung to regain customer’s faith.
• To attract the young generation, Samsung can tie-up with different popular e-commerce sites as it is growing at a rapid pace all over the globe. People, mostly the young generation are more reluctant to do marketing from various e-commerce sites therefore, association with those platforms can help them to make more customer base.
• To capture the developing nations like India and China, Samsung can tie up with the local organizations which will help the organization to understand the demand and buying pattern of the consumers in those developing nations. Service related issues can also be resolve effectively once they tie up with the local players (Tibken, 2014).
• Organization must give more emphasis on software as well as services to ensure that all the models are up to the mark and people are getting timely service.