The Growth Path of Samsung Home Entertainment - Essay Example

Table of Contents Executive Summary………………………………………………………. 2 I. Introduction and Method…………………………………………………3 II. Analysis and Interpretation…………………………………………….. 6 III. Conclusions and Recommendations…………………………………. 9 References………………………………………………………………….. 11 Executive Summary Samsung Electronics Co. Ltd. is a one of the recognized leader in telecommunication, semiconductor and digital convergence technologies. The vision of the company is to become a pioneer of the digital convergence revolution and in order to achieve this mission the company has altered its operations which placed digital technology at the centre of its organizational activities. Therefore, this study will investigate the marketing growth strategies of Samsung home entertainment, which helped the company cope with fast-paced global technology and product development. Particularly, this study will put emphasis on Samsung’s marketing strategic decisions in relation to product development, technology, manufacturing and overseas marketing. Based on the analysis of available data on the company’s marketing and financial performance it seems that the marketing solutions that Samsung is trying to emphasize are process benefits and relationship benefits. The former makes transactions between consumers and the company easier, convenient, quicker, cheaper and pleasant whereas the latter rewards the eagerness of the consumers to recognize themselves and to divulge their purchasing capacity. Conclusively, the growth path of Samsung Home Entertainment is along its product dimension and can be viewed from the point of views of product price level, diversification and product features, which altogether provided groundwork for establishing the company’s unique competitive advantage. I. Introduction and Method Samsung Electronics Co. ltd. (SEC) has progressed into one of the biggest manufacturer in the world. In marketing, product development, and technology development, SEC has been the leading corporation in expanding the frontier of the electronic industry. In 1971, with the introduction of monochrome televisions, Samsung began to grow on an average of 38 percent annually, expanding its product line from basic consumer electronics to home entertainment (Yu 1998). This case study will investigate the marketing growth strategies of Samsung home entertainment, which helped the company cope with fast-paced global technology and product development. Particularly, this study will put emphasis on Samsung’s marketing strategic decisions in relation to product development, technology, manufacturing and overseas marketing. Therefore, this study will try to answer the following questions: 1) What are the marketing strategic choices and decisions did Samsung Home Entertainment implement in order to build competitive advantages in an unfriendly market environment? 2) What are the distinctive and logical patterns behind these marketing strategic choices? 3) Are corporate culture and organizational structure part of the marketing strategic framework of Samsung Home Entertainment? Samsung Electronics Co. Ltd. is one of the biggest manufacturers of semiconductor, digital media, telecommunication and digital convergence technologies (Internet Wire 2007). Employing roughly 150,000 people in 134 offices in 62 countries, the company consists of four main business units, namely, Semiconductors, Telecommunication, Digital Media and Digital Convergence Technologies. In 2007, consolidated sales turnover was US$ 108.4 billion (OLED TV Reviews 2008, para 15). Samsung Electronics is recognized as one of the fastest growing global brands with the highest global market share in the manufacturing of LCD panels (Samsung 14.8%, Sony 9.3%, and Panasonic 8.3%) (Marketing Week 2007, para 8). The vision and mission of Samsung is to become the pioneer of the digital convergence revolution. In order to realize this goal, the company has modified its processes, making digital technology the core component. The primary strategy for this vision is the mission of the company to become a Digital Company. Samsung is dedicated to maintaining its reputation as a market-driven solutions provider and pioneer in the marketplace of the digital convergence. Core competencies of Samsung in home entertainment enable the company to generate digital solutions for the home and workplace that offer digital entertainment. Core competencies of the company are: control in user-friendly design, world’s leading brand in digital media, flexible chain relationships, and adaptive to changes in the external environment. The company market focus is in the new generation of home cinema and peripherals specifically LCD TV, Blue-Ray DVD and package based home cinema systems. In 2008, Samsung was named as the 21st best global brand and leader in C.E. market. It has a 29.9% market share in the UK home entertainment market (OLED TV Reviews 2008, para 16). Its unique product aesthetics such as the piano style LCDs distinguishes the company from key competitors. And the company takes benefit from the competitive advantage of having committed R&D teams for each of its four business unit (Ashbrook 2006, 6). However, the fragile points of the company are brought about by instability in profitability in the UK with a 48.8% decline in pre-tax profits in 2005. Moreover, price point is beyond the purchasing capacity or affordability of the mass market. And lastly, the company is quite slow in introducing new technologies to the consumer market (Ashbrook 2006, 6). In studying the marketing strategies of Samsung with regard to its strengths and weaknesses, I will use the theories of product differentiation and consumer research in examining the present strategic marketing framework of the company and the possible solution to challenges it confront in the area of product innovation and consumer market. Marketers of Samsung succeed in providing high-quality and superior products and other unique functional benefits. However, this is no longer enough nowadays, for such competitive advantages can be easily imitated; in the electronic industry, quality and performance growingly intersect, and are seen by consumers to intersect, evenly high standards. Therefore, Samsung marketers should discover innovative ways of differentiating their products and services based on the findings of their consumer market research. II. Analysis and Interpretation The opportunities for Samsung to differentiate their products and conduct consumer research are made possible by the forecasted switching from analogue to digital signals in the 2012, the newly appearing technologies such as Blue Ray, the surfacing of innovative retail chains, and changes in demographic features such in increase in 25-54 year olds. However, there are constraints to these developments in the electronic industry such as the current global financial crisis possibly resulting in a global recession, the increase in prices of raw materials, transfer pricing costs, consumers confront minimum switching costs between brands, and established high end producers in home entertainment market such as Bose, Bang & Olufsen (The Journal 2002, 39). Based on these opportunities and threats to Samsung’s successful implementation of product differentiation and consumer market research, I will attempt to answer the questions aforementioned: 1) What are the marketing strategic choices and decisions did Samsung Home Entertainment implement in order to build competitive advantages in an unfriendly market environment? Samsung marketers identified brand targets which they referred to as high life seekers. It was concluded that the features which set apart Samsung from its competitors are largely appreciated by the demographic of educated, style conscious, mid to high income, 25-45 year-old male and female. This segment is made up of urban professionals, consisting of budding and knowledgeable members of the labour force, is versed in emerging technologies as they are regularly informed by colleagues and are aspiring towards career development. They have been determined as the primary brand target market because of their seemingly higher disposable income in contrast to the younger generations or students who subsist on allowance (The Journal 2002). Moreover, in terms of technical attitudes, this demographic has great interest in C.E., spends most of their financial resources on C.E., easy adopters, and uses technology in their everyday lives. Hence, Samsung decided to embody creative design and revolutionary technology for the ingenious urban professionals, who value attention to detain and superior product quality. Apparently, the marketing solutions that Samsung is trying to emphasize are process benefits and relationship benefits. The former makes transactions between consumers and the company easier, convenient, quicker, cheaper and pleasant whereas the latter rewards the eagerness of the consumers to recognize themselves and to divulge their purchasing capacity. 2) What are the distinctive and logical patterns behind these marketing strategic choices? The brand target of Samsung is determined by the company’s marketing and financial objectives. Marketing objectives of Samsung are the following (The Evening Standard 2005, 44): to achieve 75% customer awareness of our brand in our target market. (SR) To increase their current 29.9% (Panasonic 2nd 15.9%) share of home cinema market, to 32% by the end of 2009. (SR) Strengthen their image as a UK super brand from position 170 (TCBA¹) to overtake UK rivals in terms of super brands Panasonic (134) and Philips (167). (LR) For their financial objectives (The Evening Standard 2005, 44): Maintain their year on year improvements in profit margins which is increasing annually Regain ground in terms of sales after the 2006 decline of 58.3% in the home entertainment sector on the previous year. Samsung is anticipating stability in 2005/2006 decline in revenue by the end of 2009. Based on the company’s marketing and financial objectives, it is clear that the company is planning to make investments flow efficiently into the regions which they determined they could have the greatest impact. Apparently, a step is involved in this marketing strategy. Since a small portion of the company’s customer base provides an uneven share of the profits, the initial step is to allocate financial resources on the basis of the current and future profitability of their customers, not revenue. Through determining the profit potential and benefit inclinations of the segment and moving reallocating marketing costs to those with greater potential, the company could generate profits. In doing this, the company net sales figure could increase by £45 million through reductions in reworks, repairs and defective stocks. The realization of the company’s marketing and financial objectives obviously lies on effective product differentiation which would increase consumer satisfaction and interest to new technologies. 3) Are organizational weaknesses and strengths and environmental opportunities and threats part of the marketing strategic framework of Samsung Home Entertainment? Samsung integrated in its strategic options internal or organizational and external or environmental concerns. Consumer market research is obviously the core of the company’s organizational strength and environmental opportunity as shown in their market penetration strategy. On the other hand, product differentiation is apparently the company’s weakness but it is their environmental opportunity given the radical shift in global digital technologies. III. Conclusions and Recommendations The growth path of Samsung Home Entertainment is along its product dimension and can be viewed from the point of views of product price level, diversification and product features, which altogether provided groundwork for establishing the company’s unique competitive advantage. From a price-level standpoint, the growth path started from products at the lower price range and eventually moved up due to the increasing incomes and technological skills. Beginning from the lower end was a strategic decisions based on organizational and environmental conditions as shown in their strategic options. In relation to diversification, Samsung Home Entertainment originally operated with a basic product structure and then the company started to diversify its product lines. These diversification attempts not merely have led to a more even-handed profit structure by trimming down the contribution of long-established consumer electronics and home appliances, but also have considerably established a foundation for a feasible business organization capable of maintaining growth in the unfriendly and highly competitive electronic s market. Samsung’s framework to marketing strategy formulation constantly has been to go with internal technological capacities with externally accessible opportunities and threats. Hence, in order for Samsung Home Entertainment to realize its marketing and financial objectives the following could be done: Activities should be planned in order to move up increased levels of brand awareness within the consumer sector Enlarge distribution channels to consumer markets through opening a more expansive high-street availability and presence of Samsung Home Cinema products Establish a London Concept Store founded on the New York Experience Centres References Ashbrook, Stanley B. (2006) Samsung, PSA Journal, Vol. 72, Issue 9, p. 6. Douglas, Susan (2000) International Marketing Research. New York: John Wiley & Sons. Internet Wire (23 May 2007) IBM, Chartered, Samsung, Infineon and Freescale Expand Technology Agreements; Alliance Partners Will. "IBM, Chartered, Samsung, Infineon and Freescale Expand Technology Agreements; Alliance Partners Will", Internet Wire, May 23 2007 Issue Marketing Week (22 November 2007) Samsung: Bigger than Sony. "SAMSUNG: Bigger than Sony.", Marketing Week, Nov 22 2007 Issue Monitors & Display (2002) The Journal, Vol. 29, Issue 6, p. 37+ OLED TV Reviews (04 October 2008) Samsung. (11-4-08) http://www.all-oled-tv-reviews.com/2008/10/ PR Newswire (05 July 2007) Samsung Devices Launch with Music Service from MusicNet. "Samsung Devices Launch with Music Service from MusicNet.", PR Newswire, July 5 2007 Issue The Evening Standard (15 April 2005) Gloom for Tech Stocks as Samsung Profit Slides, p.44. Yu, Seongjae (1998) The Growth Pattern of Samsung Electronics: A Strategy Perspective, International Studies of Management & Organization, p. 57. Zawya (13 April 2008) Samsung Torch Bearers’ Journey Kicks Off Today. (2-15-09) http://www.zawya.com/story.cfm/sidZAWYA20080413135915 Read More