samsung china
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Marketing challenges faced by Samsung on entering the Chinese colour TV marketTRANSCRIPT
Samsung ChinaColour TV
Any multinational that ignores marketing to a quarter of mankind is putting its future in jeopardy
Xu 1990
China
Samsung and its competitors in the Colour TV Industry
SWOT Analysis The Marketing Mix Marketing Strategy Samsung US experience and lessons
for China venture
Contents
High-end: Japanese firms, Sony and Matsushita, with excellent brand recognition had a combined market share of 75% in the high-end market segment. Sharp, Sanyo, Mitsubishi, Toshiba, JVC and Hitachi had also established significant market share.
Medium-end: Served partly by MNCs and partly by local firms.
Low-end: More than 20 indigenous firms focused on the low-end market.
Market Segments
Its area of expertise is semi-conductors, and its business strength lies in hardware development
Core Compentency
“to devote our talent and technology to creating superior products and services that contribute to a better global society”
Business philosophy
SWOT Analysis
Prior International experience 6 Fully functional Overseas Production
Bases Ranked 221st in the fortune global 500 Seoul -China fully functional diplomatic
relationships
Strengths
Samsungs investment in building up production capacities – making it difficult to move away from the idea of high-end TV sets
Late mover’s disadvantage
Weaknesses
Lower cost of production in China Chinese market is strategically
important: as a hub, you can cater to a host of other markets
Chinese firms were less competitive due to low technology, insufficient capital base and lack of promotion
App. 300 million household – Chinese market – only 41% currently stands tapped
Opportunities
Japanese firms intended to expand their production base (in China) from 19 to 30
Local Chinese companies manufacturing for the low to medium end market, becoming increasingly competitive
Late mover are at a relative disadvantage in China
Social Profitability taking strong precedence over economic profitability
Threats
Marketing is about projecting the right product at the right price in the right way to the right customers
The 4Ps: Product, Price, Promotion and Place.
The Marketing Mix
Detailed market research Identify the market Understand the needs of the market Identify what features the product must
have to meet customers’ needs.
Product must deliver value to customers in the target market by meeting customer requirements
Samsung China has high levels of knowledge in electronics. Samsung China (Color TV) Analyzer was the first product of its type in a growing market.
The product differentiation through brand name recognition posed another barrier against firms relying on low prices for their unknown branded product
Product:
Price needs to be competitive and offer customers value of money
Samsung China needs to make positive return on its investment
Price
Late-comer disadvantage In 1994 China had 300 millions
household. The percentage of households with a color TV set was just 41%
Rural market largely untapped
Place
To achieve market penetration, setting a relatively low price can attract customer but reduce the profit margin
Possible to make short-term profit on low to medium price product in China this approach offers little in the longer term
Price
Chinese TV set industry had invested heavily in advertising, after-sales service facilities and dealer networks to support their brand image and to move from the low-end to the high end market segment.
Samsung would have to be able to compete with the others in the high-end sector.
Used its specialist knowledge of the market and personal links with key customers to promote its product.
Promotion
Marketing Strategy
Samsung should target both the high-end market segment as well as low-end market segment because in both areas there are opportunities.
International brand: entry into either market should not pose great problems
Target Market
To enter in high-end market segment Samsung has to build a competitive advantage over others, which it can by its better technology, plethora of features, or low prices as compared to Sony and Matsushita.
Market Share
Market Share
25%
75%
0% 20% 40% 60% 80%
Others
Sony &Matsushita
300 mn households Penetration: 41% Urban: 80% Rural: 28% Opportunities
boundless
Market Penetration
Should focus brand image on traditions and culture, as China has a traditional culture
Focus on Pride of the nation so that a person feels proud to buy a Samsung
Positioning
Samsung has a great future in Chinese markets if it finds the right mix, and creates a niche for itself
Recommendation: concentrate on medium to high-end markets, keeping in mind core competence and business philosophy
Conclusion
Samsung’s has 24 years of experience in the US (1979-1995)
6 international production bases, 4 upcoming
Decades of int’l experience to be applied in China
Samsung’s US Experience:Lessons to be learnt from China
USA Home-country, low-
cost labour advantage Large demand for low
end Very little
competition Could compete better
with low-end producers than with Japanese
China Chinese labour
cheaper Large market
potential, esp. in Rural China
Indigenous firms better chance
against locals, than against Japanese firms
Market Entry: Low End
USA Japanese firms
changing focus to high end
Low end market open for other countries
China Japanese firms
dominating the market: First mover advantage
Market Entry: High End
USA Popular size: 13”
and 19” selected for low-end
China Rural market
demand: 19” and 21”
TTSEC manufacturing 14” in China
Largest consumer electronics of Korea
221st in Fortune Global
Economies of Scale: Experience Curve
USA Stable business
volume Long-term plan One of top 12
companies in US market
Market Share: 3%
China Would give an
insider image Invested more
than $4bn in 2000
Brand: Samsung
USA Anti-dumping suit
filed by US firms Shifted
production from US to Mexico to avail advantage from NAFTA
China High tariff on
foreign brands to encourage local competition
MNCs encouraged to export
Tariffs expected to be lowered
Legal issues, etc.
USA Low operating
profit margin on low-end products
Total Sales1994: $14.6bn 1995: $21bn
Net Income1994: $1.2bn1995: $3.2bn
China Highly
competitive Chinese firms could lower already low profit margins in low-end segment
Thank You Very Much!
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