Transformation of Samsung from Copycat to Product Leader - Essay Example

? Case Study Based Report Contents Contents Introduction 4 Transformation of Samsung from copycat to product leader 5 New Product development focus5 Adoption of the test marketing concept 5 Product positioning and commercialization 6 Concept of New product Development and key aspects of the new product development of Samsung 7 Concept of NPD 7 Key aspects of the new product development of Samsung 9 Team based product development focus 10 Systematic new product development 10 The concept of Product Life Cycle (PLC) and its importance within the context of Samsung with its high-tech products 12 Concept of PLC 12 Importance within the context of Samsung with its high-tech products 13 Introduction stage 13 Growth stage 14 Maturity Stage 14 Decline Stage 14 Conclusion 15 References 16 Bibliography 16 Introduction In the world of consumer electronics, copy cat brands are in abundance. Consumer usually buy products belonging to such brands when they do not want have to pay higher prices required to buy products of reputed brands. Samsung electronics was a brand that was known for producing cheap products. It used to make black and white television and calculators from the year 1969 to 1990. But then things started to change. Samsung unveiled a new strategy called “new management” which was a top to bottom strategy for the whole company. In the year 2009, Samsung reached a revenue of $117 billion with profit of $8.3 billion. Inter-brand selected Samsung as the fastest growing brand for a time span of more than five years. Samsung electronics became one of the leading producers of semiconductors. Samsung became one of the largest consumer electronic conglomerates in the world. As a brand, Samsung also got listed in the list of Fortune Magazine’s hundred largest global corporations. The report looks to focus on some of the key aspects of the overall business and marketing strategy followed by Samsung that led such an astonishing transformation of the company over a period of time. Special emphasis has been given to the marketing strategies undertaken by the company for such a transformation. Transformation of Samsung from copycat to product leader From the overview of the study it can be easily made out that Samsung has indeed successfully transformed from a copycat cheap brand to a product leader. Hence, the main focus should be on as to what are the factors that led to such a massive transformation. Based on the case analysis it can be figured out that the Top to bottom strategy adopted by Lee Byung Chull had three important factors that were instrumental is providing strategic direction to the company. The three main factors happened to be the new product development process, adoption of product test marketing and positioning strategy of the products (Czinzota, Ronkainen, Moffett, Marinova & Marinov, 2009, pp. 423-429). New Product development focus Samsung hired some new fresh young designers to get a set of fresh ideas. These designers unleashed a surge of new products. The product development team focused on producing sleek, beautiful and bold products to target high end user in terms of product quality. The difference with the past was that the team was not looking to produce “me-too” products. The concentration of the company on new product development, existing product improvement and overall R&D was the key (Henry, 2008, p. 89). Adoption of the test marketing concept Product test marketing is an actually one of the steps of the new product development. In order to be a really “Wow” product each and every product produced by the company started going through market testing. Products that did not a get “Wow” feedback from the customers went back to the design lab. Samsung started conducting integrated tests of the products as well as the total marketing program including branding, advertising, distribution, packaging, segmentation, targeting, positioning at each and every marketing and budgeting levels. This helped the management to get valuable information regarding the “go or no go decision” regarding the launch of the products (Kolb, 2008, p. 92). Product positioning and commercialization The improvements in the product designs by the company were in itself one of the biggest contributors to the overall product positioning strategy of the company. Samsung revamped the positioning strategy by creating stylish and innovative products. The products were not cheap any more as the brand began to target the high end customers. Another key contributor to the product repositioning strategy of the company was the association with major retailers. Samsung started to place the products in major speciality retailers like Best-buy, Circuit-City as well as major retailers that operate in everyday low price format such as Wal-Mart and K-Mart. The diagram below actually shows the evidence of the transformation of Samsung. Concept of New product Development and key aspects of the new product development of Samsung Concept of NPD A new product is something that opens up a completely new market. A new product is something that replaces an existing product. A new product can be an old product launched in a new market. A new product can be an old product packaged in a new way. A new product can be an old product marketed in a totally new way. It can be brand new product launched in a new market or a new product launched in an old market (Brown, 2009, p. 209). The different stages of new product development process are shown below in the diagram Idea generation- All new products by the very nature are innovative. These innovations are result of free and creative thinking. The source of the idea generation could be the production department, Research and development department, Sales and marketing team, Business intelligence team, customers and even competitors. Idea Screening – The main objective of idea screening is to select the good ideas and eliminate the poor ones. The ideas are usually assessed based on financial, technical and market feasibility and viability. The ideas are rated according to strategic, production and marketing factors. Concept Testing – During this stage the consumers are presented with proposed products to measure the attitude and intentions. Samples of the potential buyers are usually presented with the product idea to understand the attitudes towards to products and the buying intentions of the customers. Business analysis – During this stage the potential profitability of the new products are evaluated. In this phase the potential sales, BEP, profit and ROI are reviewed. During this phase the company looks to analyze the technical and financial feasibility of the product. Various statistical analyses such as hypothesis testing, regression are used in this phase. Product Development- The research and development looks to turn the product in to an idea. The production and other engineering issues are also involved. The concern with materials, design, production process, safety and quality of the product is taken care of. The product development team looks to convert the product concept into an actually physical product. Test Marketing – The product is launched in a small geographical area. This is more of a field experiment in the realistic market setting. Releasing the product into a small but a potential representative market in which the consumer reactions can be assessed and the performance of the marketing mix can be checked. Product Launch – This is the final phase where the product is launched or introduced to the market. The promotional expenditure during the launch of the product is high during the introduction stage. The product has to be well targeted and positioned. Key aspects of the new product development of Samsung It has been already discussed that the new product development strategy of Samsung was one of the key drivers for the transformation of the brand. However, in order to analyze and understand the effectiveness of the new product development process followed by Samsung, it would be important to look at the new product development process of Samsung from certain different basis. Team based product development focus Samsung adopted team based new product development by creating new products in which each and every department would work closely together in a set of cross functional teams to improve communication, team work leading to increased level of effectiveness. Also in this way the new product development would also save time leading to increase in efficiency. Instead of passing the new product from one department to the other, the company decided to assemble a team of employees from various departments that worked closely through the stage of the new product development (Burgemeister, 2003, p. 192). Systematic new product development The systematic innovation and new product development approach looks to produce two important outcomes. This process helped the management to develop a company that had installed innovation as one of the most important parts of the corporate culture. Also the company wanted to yield large number of new product ideas among which the company would select the good ones in terms of feasibility and viability. This would actually be an application of the idea screening stage. The main objective of the implementation of the systematic process was the fact that the management wanted the new product development to be systematic and holistic rather than a haphazard one. In this way the company made sure that there is abundance of new ideas rather than a situation where only a few new ideas would surface. Samsung stalled innovation management system that can be used to collect, evaluate and manage new product ideas that would be encouraged and most importantly these ideas would not get lost (Kotler, 2001, p. 25). The concept of Product Life Cycle (PLC) and its importance within the context of Samsung with its high-tech products Concept of PLC Each and every product goes through a series of stages, the combination of this series of phases in known as product life cycle of PLC. Product life cycle is a generic description of the way certain product behaves or performs in the market. Each and every product passes through such identifiable stages. The product life cycle consists of five stages introduction, growth, maturity and decline (Belch and Michael, 2005, p. 325). Introduction- This is the stage where the product is introduced to the market for the first time. This is one of the most risky stages as the brand awareness along with the sales volume level is very low. As a matter of fact the sales volume level is likely to be zero. This makes it the stage of negative return (Churchill, 2009, p.211). Growth- In this stage the product has gained certain degree of awareness. The sales volume begins to grow quickly and profit level begins to peak. During the latter half of the phase the sales volume begins to dip as new competitors begin to enter the market. Maturity- This is the most profitable stage as the product has gained certain level of acceptance among the customers. The sales look to increase but at a relatively slower speed. The promotional expenditures would be reduced as the brand awareness is strong. The company is not looking to extend the market share but also looking to defend the existing market share. Decline – The sales starts to dip as the demand of the product start to go down. The product also begins to technologically obsolete. During this phase the company have certain options in hand. The company can look to maintain the product and hope that the competitors would actually exit the market. The company may also decide to cut down the price to stimulate the sales. The company may also decide to go for repositioning strategy or may decide to exit the market and discontinue the product. Importance within the context of Samsung with its high-tech products After seventeen years of success, the founder of the company admitted that the main products of the company may actually become obsolete in the next ten years. Therefore the company has decided to activate the forward thinking mode. That is the reason; Lee Byung-Chull has adopted new strategy called the “mabuljungje”, i.e. means that the horse does not stop. Introduction stage The introduction stage brings in two main challenges. A lot more money is needed to attract the distributors and develop the inventories. The promotional expenditures of the company are also likely to be high to generate awareness about the new high tech product of the company. Also the advertisements are going to be very important. As a matter of fact advertisements are likely to be compulsory, especially for the new products. With advertisements, more people would get to know about the high tech products launched at a high cost. Growth stage In this stage the growth stability of the products would determine the sales volume. Profits levels of the product are also likely to increase during these stages. The evidence of this is visible as the case itself shows that in 2009 the company earned $117 billion of revenues. Samsung is by far the biggest consumer electronics company in the world. The company is the second largest mobile phone and the largest television manufacturer. Maturity Stage Samsung took home a total of eight prizes at the international design of excellence awards (IDEA) where the entries were judged on the basis of functionality, appearance and the idea behind the products. As the cell phone industry moves towards the adoption of smart phones, Samsung looks to double the share of the high end markets from five to ten percent. It is believed that Samsung would also look to compete in the market of the DVD players, digital cameras, Tablets, home theatres, home appliances, camcorder and laser printers. This is because there are various products that offer the almost the same products as Samsung does. This may create a situation for greater competition and lead to the decline in the profit levels of the company. Decline Stage There are many competitors that provide same kinds of products. These include strong rivals such as Apple Inc and Sony. This provides a lot of opportunity to the customers. This also means that a relatively weak product can actually become very costly for the company, not just in terms of profits, but also in terms of reputation and market share. There are various hidden costs. A weak product may need a lot of time to manage. It may need frequent adjustments in price and inventory. This would also need a lot of sales force and advertisement attention. The company is investing heavily to make sure that the pioneers the development of the new high tech products instead of other rival companies like Sony or Apple Inc. Even, keeping the past success of the company in mind it can be said that Samsung should have probation for the repositioning of the branded products in this business model keeping the present state of market competition in mind, especially for the decline stage. Conclusion Samsung founded by Lee Byung Chull in the year 1983, was mainly known as the manufacturers of cheap electronic product from the time span of 1969 to 1990. However, since then things have changed as the company has adopted top to bottom strategy. Samsung has now become a product leader in the consumer electronic market. Three main elements of the top to bottom strategy happen to be the new product development. The new product development strategy adopted by the company is something that sets it apart from the other competitors as the company has a customer centric, systematic cross functional product development that thrives on systematic innovation. The performance of the products of the brand in the product life cycle stages would be critical. The introduction stage would need the company to invest in the promotional activities to create awareness about the new products. Keeping the huge amount of competition in mind it has to be said there should also be scope for repositioning of weaker products in the market as weak products can harm the profit as well as the reputation of the company. References Belch, G and Michael, G.2005. Advertising &Promotion-An Integrated marketing Communications Perspective.UK: McGraw-Hill. Brown, L. 2009. Marketing and Distribution Research. US: Ronald Press Company. Burgemeister, S. 2003. Market analysis. DE: GRIN Verlag. Churchill, G. 2009. Marketing Research. UK: Cengage Learning. Czinzota, M., Ronkainen, I., Moffett, M., Marinova, S. & Marinov, M. 2009. International business (European edition). UK: John Wiley Henry, A. 2008. Understanding Strategic Management. UK: Oxford University Press Kolb, B. 2008. Marketing Research: A Practical Approach. UK: Sage. Kotler, P. 2001. Marketing Management. UK: Prentice Hall Bibliography Rao, V. 2010. Handbook of Pricing Research in Marketing. Edward Elgar Publishing: India. Frank, N. 1964. Market analysis: a handbook of current data sources. Scarecrow Press: US. Read More