SAMSUNG

Course Name: Globalization & Strategy

A report on “Samsung Electronics”

Submitted to

Dr. Syed Golam Maola

Submitted by

Md. Monowar Hussain

Student ID: 3-12-23-010

Md. Zunayed Bin Rakib

Student No: 3-12-28-054

Date

18-April-2015

1

SAMSUNG

Introduction of Samsung Electronics

2

SAMSUNG

Samsung is known globally for its electronic products and it is one of the successful brands in the electronic industry. It is an established company almost all around the world.

Samsung Electronics is a South Korean multinational electronics and information technology company headquartered in Samsung Town, Seoul.It is the flagship subsidiary of the Samsung Group. With assembly plants and sales networks in 80 countries across the world, Samsung has approximately 489, 000 employees.

In 2009, the company took the position of the world’s biggest IT maker by surpassing the previous leader Hewlett-Packard. Its sales revenue in the areas of LCD and LED displays and memory chips is number one in the world.

In the TV segment, Samsung’s market position is dominant. For the five years since 2006, the company has been in the top spot in terms of the number of TVs sold, which is expected to continue in 2010 and beyond. In the global LCD panel market, the company has kept the leading position for eight years in a row.

With the Galaxy S model mobile phone, Samsung’s Smartphoneline-up has retained the second-best slot in the world market for some time.In competition to Apple's ipad tablet, Samsung released the Android powered Samsung Galaxy Tablet.

3

SAMSUNG

History of SamsungSamsung’s History of Success can be viewed as below:

1938: Founded in Daegu, South Korea.

1969: Samsung-Sanyo Electronics established (renamed Samsung Electro-Mechanics in March 1975 and merged with Samsung Electronics in March 1977).

1970: Samsung-Sanyo started to produce black-and-white TV

1978: Microwave Oven Production Started

1980: Air Conditioner Production Started

1983: Personal Computer Production Started

1992: Samsung Developed Mobile Phone Systems

2001: Samsung Electronics ranked No. 1 of world’s Top 100 IT Companies by BusinessWeek.

2007: Samsung Electronics attained No.1 worldwide market share position for LCD for the sixth year in a row.

2009 :Samsung Electronics built the world’s largest mobile phone as recorded in the Guinness Book of World Records.

2013: Samsung ranks 8th in Interbrand’s ‘Best Global Brands' with a brand value of USD 39.6B USD

4

SAMSUNG

Business Area:

Consumer Electronics

-Visual Display Business

-Digital Appliance Business

-Printing Solutions

-Health & Medical Equipments

IT & Mobile Communications

-MC Business

-Network Solutions

Device Solutions

-Memory Business

-System LSI

-LED

The Samsung Philosophy

Samsung follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society.

Every day, our people bring this philosophy to life. Our leaders search for the brightest talent from around the world, and give them the resources they need to be the best at what they do. The result is that all of our products—from memory chips that help businesses store vital knowledge to mobile phones that connect people across continents— have the power to enrich lives. And that’s what making a better global society all is about.

Company’s Values -

We believe that living by strong values is the key to good business. At Samsung, a rigorous code of conduct and these core values are at the heart of every decision we make.

5

SAMSUNG

People

Quite simply, a company is its people. At Samsung, we’re dedicated to giving our people a wealth of opportunities to reach their full potential.

Excellence

Everything we do at Samsung is driven by an unyielding passion for excellence—and an unfaltering commitment to develop the best products and services on the market.

Change

In today’s fast-paced global economy, change is constant and innovation is critical to a company’s survival. As we have done for 70 years, we set our sights on the future, anticipating market needs and demands so we can steer our company toward long-term success.

Integrity

Operating in an ethical way is the foundation of our business. Everything we do is guided by a moral compass that ensures fairness, respect for all stakeholders and complete transparency.

Co-prosperity

A business cannot be successful unless it creates prosperity and opportunity for others. Samsung is dedicated to being a socially and environmentally responsible corporate citizen in every community where we operate around the globe.

6

SAMSUNG

Vision 2020 -

As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future."

This new vision reflects Samsung Electronics’ commitment to inspiring its communities by leveraging Samsung's three key strengths: “New Technology,” “Innovative Products,” and “Creative Solutions.” -- and to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all.

7

SAMSUNG

As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the world’s top five brands by 2020. To this end, Samsung has also established three strategic approaches in its management: “Creativity,” “Partnership,” and “Talent.”

Samsung is excited about the future. As we build on our previous accomplishments, we look forward to exploring new territories, including health, medicine, and biotechnology. Samsung is committed to being a creative leader in new markets and becoming a truly No. 1 business going forward.

Samsung Electronics Company (SEC) began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, “Samsung acquired a semiconductor business” which would be a milestone that initiated the future for SEC. Entering the semiconductor industry would also be the beginning of the turnaround phase for SEC. In 1980, SEC showed the market its ability to mass produce. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch & Harrington, 2008). SEC was mainly focused in manufacturing; therefore, it’s no surprise that the executives themselves were also focused on their manufacturing plants. Profits that SEC received were soon reinvested into Research & Development, manufacturing, and supply chain activities. Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SEC’s sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4.6 billion, from $15 billion, over a 5 year period. Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch & Harrington, 2008). 

8

SAMSUNG

In 2002, SEC posted net profits of $5.9 billion, on $44.6 billion in sales, and as a result in 2003 became “the most widely held stock among all emerging market companies”. Unlike other companies who chose to outsource their manufacturing process, SEC remained committed to its core competence, manufacturing (Quelch & Harrington, 2008). During 1998-2003, SEC invested $19 billion into chip factories and $17 billion into manufacturing facilities for TFT-LCDs, which would be a major component for flat screen TVs and computer screens. Even though SEC was focused in the manufacturing process, it didn’t make SEC a rigid company. To cope with supply-chain demands, the company remained flexible by building 12 manufacturing plants in China during 2003 and setting up R&D facilities in India (Quelch & Harrington, 2008). With 17,000 scientists, engineers and designers, SEC was able to create an endless amount of digital products. Due to its fast decision-making process and focus on a digital future, SEC was able to move a new product from the drawing board to its commercialization phase in only five months. This ability was almost 3 times faster than its competition (Quelch & Harrington, 2008). 

A Shift in Business Focus, A Change in Culture

Samsung’s business system was so tightly integrated with its home market of South Korea that it faced the challenge of securing its future in global markets. Samsung needed to reinvent themselves. To do so, Samsung began by shifting their business focus. Instead of focusing on process improvement, Samsung shifted to focus on innovation. With the focus on innovation came a complete shift in the workforce as well. Once a homogeneous work environment, Samsung introduced innovators that could not speak the language and were unfamiliar with the company’s culture. As a result, the culture shifted from a Confucius-like paradigm to a workforce where innovation and forward thinking was rewarded through merit pay and promotion.² The previous reverence and authority restricted to senior employees had been diluted, and in many instances younger workers were put in positions of authority over their elders.

Certainly these internal changes were received with scepticism and doubt, but Samsung Chairman Lee Kun-Hee recognized that the key was to only change what needed to be changed. He ensured that people understood the new practices, and never wavered in his commitment to these efforts. Lee demanded a complete rethinking of key fundamentals and set the stage for long-term investment in innovative, premium products and brand value.With the appointment of Vice Chairman Yun Jong Yong and Executive Vice President for Global Marketing Operations, Eric Kim, Samsung pursued a bold combination of new strategies, many of which contradicted their previous business approach and corporate culture.¹

9

SAMSUNG

Digital Product Innovation

When most people think of Samsung they think of Samsung Electronics, producer of semiconductors, cell phones, TVs, and LCD panels—the group’s highly diversified businesses span a wide range of industries, including financial services, information technology services, machinery, shipbuilding, and chemicals.² By 1987, when Lee Kun-Hee succeeded his father as only the second chairman in the company’s history, Samsung was the leader in Korea in most of the markets it served. However, outside of Asia, Samsung’s position as a low-cost producer was becoming less and less desirable as competition from Japanese electronics-makers grew. In order to get ahead, Samsung would have to figure out a way to diversify their offerings.

During the early 1990s, consumers began flocking to digital technologies that were being introduced in consumer goods like cameras, audio equipment and other electronics. As the analog marker leaders, Japanese companies were reluctant to adopt this new technology. Lee championed digital product innovation, opening the door for Samsung to develop the agility, innovation and creativity needed to succeed in the digital market. While this was a risky move, investing in the digital convergence set Samsung apart from the competition.  Samsung forged ahead creating an array of digital products across a remarkable range of consumer goods.

In addition, Samsung, once stymied in its tunnel-vision focus on improving business processes, was now able to use those skills to better understand the finer points of the marketing mix, including pricing models, product development and how to optimize these factors to make the most of short product life cycles. Samsung had the ability to move a product from concept to commercialization in just five months, as opposed to the previous 14 months five years earlier. This was twice as fast as its competition. As a result, Samsung could refresh its product line twice as often.¹ Product life cycles shortened and prices fell.

Anticipating the Digital Convergence

Lee took advantage of a huge opportunity by staking Samsung’s claim in the market by anticipating the switch from analog to digital. This fluency in the digital space led to a keen insight on how consumer behavior was changing and where the industry was headed. Samsung was among the first to recognize that different technologies were merging into single products and that these products themselves were further enabled by connectivity to the network.¹

How was Samsung able to foresee the digital convergence? Many believe it was probably because of Samsung’s position in the fabrication of semiconductors and manufacturing of allied technology like liquid crystal display (LCD) and other electronic components. Samsung’s rivals like Apple and Sony were caught up in creating proprietary software and content (music, video games, movies, etc.), while Samsung was focused on developing advanced hardware and vertical integration.¹ They focused on creating devices that could collaborate with content providers, letting customers access more software through its devices than its competitors.

10

SAMSUNG

Global Marketing Prowess

In the early 1990s, there was very little interest in building the Samsung brand globally. Samsung’s logo and brand messaging was fragmented and inconsistent. Plus, product managers controlled the marketing budgets and were more favored to promote “below-the-line” price promotions to meet short-term sales goals instead of long-term “above-the-line” brand building.¹ However, in 1993 all of this changed with the new management initiatives and focus on innovation and converting the company’s product line from an emphasis on low-end commodities to high-end premium goods.

For Samsung and many high-tech companies, the focus had historically remained on R&D, product development and manufacturing. Samsung’s executives set out to invest their efforts in one of the areas they were lacking in the most; creating a strong brand. And, they succeeded in doing it! Eric Kim was just the right guy to usher Samsung into the global market. Kim was Korean-born, US educated and experienced in the technology sector. Chairman Lee Kun-Hee gave him the clout, the money and the opportunity to remake Samsung as a global business leader.

Kim set out to build the corporate brand image across 200 country markets and Samsung’s 17 business units worldwide. With assistance from an internal computer program, M-Net, Kim was able to determine where funds would reap the highest returns. The program collected data on sales, margins, market shares and expenditures to analyze the efficiency of previous marketing plans in order to recommend where marketing funds should be spent moving forward. The system also made pricing adjustment recommendations.

As the company and product lines changed, it was essential that the allocation of marketing resources was evaluated and adjusted as well. Previously, Samsung had enlisted over 55 different advertising agencies world-wide to sell their products using 20 different slogans. Kim and his Global Marketing Operations (GMO) team developed new logo and product presentation guidelines and consolidated advertising efforts using one global advertising agency. They also combined global marketing initiatives with a very niche approach to country markets, recognizing that the Samsung brand had different positions in various countries.

All in all, this focus on marketing and brand strategy is really a testament to Samsung’s leadership and executive vision. Chairman Lee and Vice Chairman Yun championed Kim’s GMO strategies, but employees were sceptical and there were many challenges in getting internal buy-in. Educating the importance of marketing was fundamental in achieving these changes. At the very granular level, I feel the shift in Samsung’s corporate culture and focus on innovation were the most essential factors in harnessing their potential as a global brand. There is nothing accidental or coincidental about their marketing success; it’s just smart.

11

SAMSUNG

Challenges of Samsung:

Life Cycle for Electronics Goods is short Rapid change in Business Environment Increased demand Protection of new technology Chinese Companies aggressive entry in global market

Strategies:

In 1996, Strategy of Samsung changed from competing on price to competingin technology (Digital appliances were introduced by Samsung).

Because of Global operations, Samsung is able to protect its innovations

by patents(they have good idea about lawsuits and country laws).

R&D Centers are dispersed across the globe so that, consumers preferences

can be reflected in their product innovation.

Creation Higher Brand Value among consumers.

- Localized marketing strategy.

Premium Pricing of product.

Core Competencies:

Technology & Leadership innovation

- Continuously invests more than their rivals in R&D- Spent almost up to 9% of their annual revenue on R&D- Global R&D network- Lead time for New Product Commercialization is 5 months.

Customer Value Creation

-Receives feedback from their consumers and distributors (Best Buy) to

Identify customers needs and demands

Brand Image

- Samsung has create a sense of exclusiveness among consumer’s mind

Strong Human Resources Management

- Best talents are recruited - Pay Scale is high- Promotion is based on performance, not based on seniority

12

SAMSUNG

Own Manufacturing Facility & Vertical Integration

- Own Manufacturing facility for faster response- Most of the cases, Samsung is it’s own supplier for raw materials.

Samsung’s Financial Profile 2013

Consolidated Statement of Financial Position

13

SAMSUNG

Consolidated Statement of Income:

Samsung’s revenue is growing every year by 11%.

SWOT Analysis of Samsung

Strengths:

• Strong brand equity• Constant focus on R&D• Diversified Product Portfolio with attractive design & feature• Involvement in CSR activities throughout the world

Weakness:

• High Promotional activity Cost• Too much dependence on software from other companies• Weak Consumer perception regarding durability• High Cost in R&D

Opportunities

• Growth in CE Market• Opening more store • Strong Customer demand for innovative product & value-added features.• Improvement in Customer Service• Entry to new emerging markets

(E.G: Bangladesh)

14

SAMSUNG

Threats:

• Highly Competitive Business environment• Currency Risk• Chinese Competitors taking market share• Social Resistance & Environmental effect• New Nano-technology may replace Samsung’s technology

Strategies of Samsung

Transnational Operational Strategy

- Product is highly standardized.- Best People are recruited irrespective of any country preference.- Manufacturing is done in cost effective locations ( 12 factories in China).- Marketing activities are aligned to local culture( Local festivals are highlighted)- CSR Activities are done throughout the world

Product Innovation -

Samsung's product range in India included CTVs, audio and video products, information technology products, mobile phones and home appliances. Its product range covered all the categories in the consumer electronics and home appliances. Analysts felt that the wide product range of Samsung was one of main reasons for its success in the Indian market. Samsung positioned itself on the technology platform.

Pricing -

Pricing also seemed to have played a significant role in Samsung's success.

Distribution -

Along with the launch of new products, Samsung also consolidated its distribution system. Samsung had 18 state-level distribution offices and a direct dealer interface. The direct dealer interface helped the company get quick feedback from dealers, and enabled it to launch products according to consumer needs. Advertising and Sales Promotion -

In 1995, when Samsung entered India, it realized that Indian consumers were not familiar with the company. So, in order to establish itself in the Indian consumers ‘mind, Samsung launched corporate advertisements highlighting its technologically superior goods.

The Making of a Global Brand -

In 1993, as a first step in its globalization drive, Samsung acquired a new corporate identity. It changed its logo and that of the group. In the new logo, the words Samsung Electronics were written in white color on bluecolor background to represent stability, reliability and warmth. The words Samsung Electronics were written in English so that they would be easy to read and remember worldwide. The logo was shaped elliptical representing a moving world - symbolizing advancement and change.

15

SAMSUNG

Advertising and Promotional Strategies -

In 1997, Samsung launched its first corporate advertising campaign - Nobel Prize Series. This ad was aired in nine languages across Europe, the Middle East, South America and CIS countries. The advertisement showed a man (representing a Nobel Prize Laureate) passing from one scene to another. As the man passes throughdifferent scenes, Samsung products transform into more advanced models. Accordingto company sources, the idea was to convey the message that Samsung uses Nobel Prize Laureates' ideas for making its products.

Samsung Electronics: Innovation and Design Strategy -

In January 2008, Samsung Electronics won 32 innovation and design engineering awards at the Consumer Electronics Show. This is a management strategy case that explores product design, innovation strategies and strategic planning in a changing competitive landscape. While investment in R&D and product design has rewarded Samsung Electronics with its dominant market position and premium brand perception, such dominance may not be sustainable in the long run, especially now that competitors are achieving higher profitability with lower investments in R&D per product. The case also discusses such issues as product design philosophies, innovation strategies, localization of products, product design outsourcing for consumer electronics products.

Design strategy–

Design strategy is a discipline which helps firms determine what to make and do, why do it and how to innovate contextually, both immediately and over the long term. This process involves the interplay between design and business strategy, forming a systematic approach integrating holistic-thinking, research methods used to inform business strategy and strategic planning which provides a context for design. While not always required, design strategy often uses social research methods to help ground the results and mitigate the risk of any course of action. The approach has proved useful for companies in a variety of strategic scenarios.

CSR Activity

Around the globe, Samsung Electronics has developed Corporate Citizenship programs that focus on education, professional training and healthcare, while also reflecting the needs and characteristics of the region. They work to improve education in disadvantaged areas by offering educational infrastructure and e-learning opportunities to students. They expand job opportunities for young adults with IT vocational training. They also improve the health and quality of lives in disadvantaged regions with high-tech medical equipment. Their specialized programs are co-developed and implemented with regional NGO partners so to best understand and address local issues.

16

SAMSUNG

Conclusion

Samsung envisions days that begin with amazing surprises and everyday lives informed by wonderful change. The more we increase joyous moments, the more we gain indelible memories. By living and working more efficiently, Samsung is committed to build both health and energy. Samsung Electronics creates that value for customers and the world with their advanced technology, wide range of products and differentiated solutions. They answer to the needs of time while responding to customer expectation. From semiconductors to visual display, digital appliances to business, medical equipment and IT to mobile communications, They are providing happier today and more creative tomorrow. Electronics has longWe are connected witheveryone around the world whodreams of being a good neighborand trustworthy companion aswe create a better world

17