New Product Development Strategy Of

Samsung R&D

Introduction To New Product Development New product development is one of the most important aspects of a new enterprise start up

and is the activity that will most influence and guide the direction of the firm throughout its life. The process of new product development and the success of the product in the market will primarily determine how well the company will sustain itself and be the key to developing any competitive advantage of the firm over others. The new product development function has been neglected in entrepreneurship literature, yet it is an extremely important key to success in the new venture and an extremely difficult process considering new entrepreneurs may not as yet developed the all round expertise, experience and resources of large companies. Another area of neglect in new product development and entrepreneurship literature is the actual formulation, design, packaging and manufacturing process development of a new product, which is the link between technology and the market in any new venture creation.

One of the keys to successful new product and process development is the design and production of a new product with the minimal resources possible without sacrificing any quality of the finished and marketable article. For the entrepreneur, this process must be undertaken in a heuristic manner (discussed later), rather than through any strict disciplinary approaches, advocated and practiced by large companies. This is one of the ways a new venture can gain competitive advantage over larger companies, if the product and process can be designed and built for a fraction of the cost that more established enterprises can achieve. Thus product development is one of the most important processes of new venture creation. New product development is a discipline where the technical aspects are learned as you go along the process, as most of these aspects are not in any text books, but come from people’s lives and experiences. This is a reality of new product development that even MNCs have to face. New product development is both a manifestation and extension of strategy in terms of what the company puts into the marketplace, steering the direction of the enterprise and at the same time, an influence upon strategy or a restraint upon strategy because founder and/or team capabilities limit the set of options available to the new venture in terms of what can be done in the marketplace in terms of product.

The Role Of Product Development In The Enterprise

As mentioned in the introduction, new product development is the manifestation of the idea to exploit the chosen opportunity. It is the centre of all strategies and the vehicle that will get the enterprise going in the market. New product development is the chosen basis of growth for companies like Siemens, Nokia, Sony, Apple and Glaxo of which they have completely relied upon as a strategy. These companies are what they are today because of new product development. The place of new product development in the web of company strategies and operations is shown in figure 1.1.

Growth

Sales

Survival

Profits

Marketing

Finance

Production

Purchasing

Accounting

Strategic Management

Supply Chain Management

Resources New Product Development

Regulation Product Design

Intellectual Property

Standards

Process Development

Skills & Learning

Strategy

Invention Verses Innovation Many people relate new product development to invention. However invention only makes up a small part of new products

and less than 2% of all patents are actually commercialized. Inventors are usually good at developing ideas into concepts and tangible items, but not all inventions satisfy consumer wants and needs. It is particularly difficult for an inventor to successfully develop a product in the market by themselves because of the tremendous resources needed to develop the market to make consumers aware and educate them about the new product. Many inventions, although novel, fail to solve any real consumer needs, or fail to satisfy them effectively and thus fail to gain much interest from consumers.

1. Personal Computers 2. Microwave oven 3. Photocopier 4. Pocket Calculator 5. Fax machine 6. Birth Control Pill 7. Home VCR 8. Communication Satellite 9. Bar Coding 10. Integrated Circuit 11. Automatic Teller 12. Answering Machine 13. Velcro Fastener 14. Touch-Tone Telephone 15. Laser Surgery 16. Apollo Lunar Spacecraft 17. Computer Disk Drive

New Product Development By Technology Intellectual property must be defined widely to include trade secrets and commercially confidential information,

which can also be called proprietary technology. Patents as a form of intellectual property rights have issues related to their scope of protection, are sometimes hard to justify in terms of costs due to the small market the novelty will serve, are expensive to gain registration and take a long period of time before they are accepted through process and review procedures. Jaffe and Van Wijk state that in many jurisdictions patent enforcement is very difficult due to slow court systems, bias against foreign plaintiffs, lack of technical competence and a general inability to enforce judgements. A survey undertaken by Lessor found that companies tended not to patent their innovations in many cases, due to the fear that waiting would allow other companies to copy and counterfeit the product first in developing countries that had markets too small to justify the cost of registering a patent. Grubb argues that in biotechnology, patents as a form of intellectual property rights do not serve the same purpose as in the electronics industry, where patents are used as ‘bargaining chips’ in cross licensing agreements and patent pooling as there are common product standards imposed by necessity and regulation.

There are other alternative forms of intellectual property protection used by companies that maintain trade secrecy and advantage over competitors. Trade secrets can be guarded and protected within an organisation by maintaining employment contracts with secrecy agreements that can be enforced through contractual remedies. These include specifically tailored production processes, mode and control of reactions and formulations used in the production of products by a company. Under legal license agreements, this technology, although unpatented can be protected as proprietary knowledge under contract law. The rapid changing nature of technology and continual improvement upon processes and product, is itself a mode of protection, as long as the company maintains pro-active R&D in process and product development. Patents applications can often become redundant before the application is even reviewed by the patent office in an environment of continual technology change.

Nogus, N., Patents and Pharmaceutical Drugs: Understanding Pressures on Developing Countries, Washington DC, World Bank, Sept. 1990, WPS 502.

Jaffe and Van Wijk, The Impact of Breeders’ Rights in Developing Countries, University of Amsterdam, Inter-American Institute for Co-operation of Agriculture, October 1995. http://www.wipo.int/about-ip/en/studies/pdf/study_jaffe.pdf

Lesser, W., Role of IPR in Biotechnology Transfer – Corporate Views, Undated, P.5. http://www.wipo.int/about-ip/en/studies/pdf/ssa_lesser_biotech.pdf

Grubb, S., Patents for Chemicals, Pharmaceuticals and Biotechnology, Oxford Clarendon Press, 1999, P. 377.

Introduction Of Samsung Company Over the past 39 years, Samsung Electronics Company (SEC) has

evolved from a low cost manufacturer of black and white televisions, to one of the most technologically advanced and prestige companies of modern day time. Throughout the 1990’s, SEC’s chairman, Kun Hee Lee, demanded that the company as a whole re-think their key fundamentals and set the stage for long-term commitments to investment in innovative, premium products and brand value. As a result of the recognized opportunities, Samsung pursued a bold combination of strategies to re-define themselves. Many of these methods were unconventional but lead to great success over the next several years (Exhibit 1). As Samsung continued to grow, Executive VP of Global Marketing, Eric Kim, was forced to make a difficult decision. Should Samsung continue to offer a “one size fits all” product promotion or shift their focus towards more complex customer segmentation? The most important factors in determining whether or not Kim should pursue more customized devices in his marketing planning revolve around Samsung’s ability to continue to reduce manufacturing costs and increase marketing costs, and their ability to make the brand name more personal through customer insight and exposure.

History Samsung Group was founded in 1938 as exporter of dried fish,

vegetables, and fruits and flour mill and confectionery machines. Samsung Electronics in 1938

In Korean War, Samsung lost all assetsaimed to help rebuild Korean economy; entered the manufacturing industry (sugar,fabrics). It became a leader in modern business practices (recruiting from outside) In 1960’s expansion of key industries, entered electronics and chemical industries

In January 1969 Samsung Electronics Co.was established. In 1970’s bet the future on electronicslaid the groundwork for

electronics in Korea which helped the domestic economy grow and paved the way for exports

In 1980’s, a more comprehensive electronics company; it established plants in Portugal and US. It also established Semiconductor and Communication corporation and began memory chip business

  

Methodology

PlanningResearch

(e.g. patents)

Samsung design lab (e.g. GUI/ Interfaces

)

Standard Product

Development (in Korea)

Customized Product Developm

ent Regions

(India /US/

Vienna)

Testing (alpha/ beta)

Improve and

Version releases

Samsung’s Investment for R&D

In 2010, Samsung Electronics invested $ 0.01 trillion, or 6.1% of consolidated sales in R&D. Currently, has 50,084 R&D personnel which is equivalent to 26% of our total workforce. In recognition of R&D endeavors, Samsung Electronics was included among the top 10 global companies in R&D investment announced by the U.K. Department for Business, Innovation and Skills.

Conclusions Within smartphones, the South Korean manufacturer

banked on its AMOLED screen and custom UI for its Android-powered flagship smartphone, and single-handedly created the phablet (phone/tablet) market, with its Note smartphones sporting a large screen back in late 2011.

Samsung demonstrated that it was not short on ideas and was focused on catching up with both Apple and Nokia in the mobile arena, as well as on strengthening its lead in digital televisions in 2012. Now that Samsung is the market leader, there must be a significant shift in its strategic direction if it is to build on its position.

Samsung has to show its competitors that it is confident and knows exactly where it intends to steer the market. The market is expecting Samsung to create category defining products, much as Apple has done with smartphones and tablets