Case Analysis: Samsung Electronics Company - Global Marketing Operations [PDF]

Zitiervorschau

INTERNATIONAL BUSINESS Case Analysis : Samsung Electronics Company- Global Marketing Operations Case Analysis Submitted By : Neha Nayak

About Samsung (as in 2018) u

Samsung Electronics Co., Ltd. (“SEC”) was incorporated under the laws of the Republic of Korea in 1969 and listed its shares on the Korea Stock Exchange in 1975. u

SEC and its subsidiaries operate four business divisions:

u

Consumer Electronics - digital TVs, monitors, air conditioners and refrigerators

u

Information technology & Mobile communications - mobile phones, communication systems, and computers.

u

Device Solutions – Semiconductor – Memory, foundry, system LSI, Display - LCD, OLED panels

u

Harman : connected car systems, audio and visual products, enterprise automation solutions and connected services.

u

Headquarters : Seoul, South Korea

u

Founder : Lee Byung-chul

u

Vision 2020 is at the core of our commitment to create a better world full of richer digital experiences,through innovative technology and products.

u

No. of employees : 320617

u

Reach in 73 countries – 53 R&D sites, 7 product design offices, 39 production sites

SOURCE : https://images.samsung.com/is/content/samsung/p5/global/ir/docs/2018_con_quarter04_note.pdf

Samsung’s Major Milestones (case based) 1938 : Produced agricultural products (Samsung Sanghoe)

1969 : Samsung Electronics Company (SEC) founded. Low cost manufacturer of Black & White Television

1970 : Shipbuilding, chemicals, textiles ; Acquired semiconductor business àElectronics business

Semiconductors : Future growth in electronics

1993 : New Management initiative launched (Objective : remake Samsung as global business leader) Focus on rethinking of key fundamentals, long term commitment to investment in innovation, premium products and brand value

1997 : Asian Financial Crisis Sales $16 billion (neg profits) ; Major restructuring and dismissal of 29000 workers ; Corporate Asset worth $2 billion sell off

2002 : Debt reduced from $15 billion (1997) to $4.6 billion ; Net margin from -3% (minus) to 13% ; Net profits of $5.9 billion on sales of $ 44.6 billion (In 1999, $2.8 billion on $28 billion) Market Capitalization : $41 billion

1980 : Global markets – large quantities of commodity products - TV, VCRs, microwave ovens (Samsung sold to other OEM who resold under own, better brand name) Mission focus: Manufacturing quality, technical leadership (mainly consumer electronics). Profits reinvested in R&D, state-ofthe-art manufacturing, supply chain activities

2003 : Transparent disclosure practice ; widely held stock among emerging market company (Over half of shares held outside Korea)

Samsung’s position in annual brand ranking World’s most valuable brands Year

2003

2002

Rank

Valuation

Rank

Valuation

Samsung

25

10.8*

34

8.3*

Sony

20

13.2*

21

13.9*

Comparison year on year * In $ billions

Close to Sony (Sony has been there for 20 years more) In 2000 : Samsung was not even ranked 1993 : Third tier commodity brand/ Little product differentiation 2003 : Top 25 (rank) ; almost premier league Only Korean brand in top 100 list Target : Top 10 (rank) by 2005 (Rater : Businessweek)

Response to Questions

1. What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing? u

Business Strategy : Agile business strategy

Initial

Change

Remarks

Scale of economies manufacturer of low cost products – third tier commodities (Only known in Korea)

Premium brand / Globally known (Aspiring for top ten)/ High value added products

Manufacture existing products/ Very Little Differentiation

Differentiation, Investment in R&D, hardware technology, Innovation and many world first products and technology

Adequate organizational restructuring, allocation of resources, skills and training, building culture, marketing and sales alignment, global brand push etc. was accordingly utilized

B2B (to OEMs)

In addition, Consumer products (B2C)

Brand only known in Korea

Global Brand

u

Focus on Vertical Integration

Area

Description

Core Competence

Kept manufacturing as core competence (gradually developing advanced products due to technical expertise)

Technology

Build advanced technology, develop inhouse skills, R&D

Investments in R&D, innovation, new products, expansion, Process improvements

• 1998 to 2003 - $19 billion in new chip factories • 2003 -plans to invest $17 billion in manufacturing facilities for TFT-LCDs (used in products such as flat-screen TVs and computer screens) over the next 10 years • Plant competition with outside companies for internal business (with Sumitomo Chemical Company of Japan to supply the company with its colour filters. ) In 2002, the company received five awards for industrial design excellence, tying for first place in number of awards. In all of its major product categories, Samsung was one of the top three brands by market

Setting up plants and intellectual capacity (cost advantage)

• 12 manufacturing plants in China by 2003. • R&D facilities were set up in India (low-cost human capital, especially in the technology sector)

Customization in products and so could keep higher pricing (with value addition)

• Avoiding the commoditization trap, Samsung customized as much production as possible. (over half of its memory chips were special orders for Dell, Microsoft, and even Nokia.) . It focused high on reliability and timely supply of chips and could charge 17% above industry levels. • The mobile telephone market was another category in which Samsung prices were higher than the industry average. • Vertical integration and the investment in manufacturing facilities and research and development was not a fixed cost but a source of flexibility and control over the entire production process.

Response to Questions

1. What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing?

u

Hardware Focus u Focus on hardware and devices and collaborate with content developers (Strengthened infrastructure, R&D, innovation, marketing, skills, advanced products) u Didn’t go for proprietary software and went for an open architecture approach (enables customers access to more software and becoming more at advantage than competitors) u Product Diversification, many world firsts products (possible due to R&D, keeping manufacturing inhouse as competitive advantage) Product Breadth u

u

While many competitors focused on single line products, Samsung focused on product diversification (High quality + differentiated goods)

Company

Nokia

Intel

Sony

Samsung

Product

Cell-phones

Chips

Consumer Electronics

Semiconductors, Telecommunications, Digital appliances ,Digital Media, Others

Management focus : SEC Chairman Lee’s 1993 new management initiative à Yun refocused on innovation of higher-quality products across all categories in 1997àBy 2003, associated with latest products (LCD televisions & video cell phones).

Within top 3 in every major category

u

Response to Questions

1. What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing? u

u

u

Digital Product Innovation u

Analog to Digital products (late 1990s)

u

Merging of different technologies into one device

u

Continually improving in quality standards for quality performance and award-winning design

u

Huge investment in R&D, technology and skills (17,000 scientists, engineers, and designers - costed $2.45 billion annually)

u

Pillar product development

u

Less time to commercialize (5 months) – fewer levels of bureaucracy, multiple technology capabilities of human resources (rivals took 14 months)

u

Sashimi theory (sell at high prices on the first day when they are fresh, but prices decline dramatically thereafter) – useful when product lifecycle time is decreasing

Digital Convergence u

Through innovative technology and products : merging of different technologies into one major product, and multiple technologies linked by one major network.

u

Single devices integrating multiple services

u

Single device controlling multiple electrical devices

u

Ubiquitous network, more computing power, advantage of technology leader

Marketing Efforts u

Focus on developing strong brand image (From home brand to a strong global brand)

u

Marketing Organization (two teams dedicated to home market and other country markets)

u

New management initiatives and Market driven approach ; Consumer research

u

Changing culture and beliefs about the traditional marketing objectives and alignments

u

Necessary strategies, objectives, goals, budgets, plans and resources

Porter’s five forces analysis (upto 2003 – case) Low

• • • • •

• • •

Medium Many other players exist (Nokia, Sony, Motorola, Apple etc.) Competition for market and new market penetration Focus on emerging markets Product differentiation strategies (strength) Inhouse R&D and own manufacturing (strength)

Low Own manufacturer of many components and products Own R&D Vertical Integration

• Technology Leader • Patents • Own Manufacturing (Competitive Advantage) • Intensive R&D/ Intellectual capital • Many world first products/ technology • Product Diversification/ Differentiation • Investment Capital requirement • Vertical integration • Global presence

High • Access to market and product information • Other competitor products

• • •

High Decreasing product lifecycle Competitors bringing in new products and technology Product + Service (Value addition) competition

Samsung : Porter’s strategic positioning From Cost focus to Differentiation • • • • •

Product Diversification and Differentiation Innovative technology and products Value added products and services Product designs, customization, features Heavy Investment in R&D

SWOT Analysis Strength

Weakness

Opportunities

Threats

Product Diversification, Product Breadth

Already existing reputation of manufacturing cheap products and being a supplier to other OEMs – Need to reestablish the brand !

Emerging Markets

Competitions from other small / known brands

Brand value (after premium repositioning)

Positioning in other parts of the world

Increasing Market share

Other low cost products

R&D, Innovation, Design, technology

New technology and products

New companies (imitating the technology and products)

Global presence

New designs, features, patents

Product cannibalization

Own manufacturing

Partnerships and service enhancements

Lower product lifecycle

Being a supplier to other major OEMs Customers : B2B and B2C Marketing organization : build global brand

Price wars and Customer switching

Samsung’s Marketing Organization

1. Global Marketing Operations (GMO)

Marketing Strategy Group

Responsibilities :

• Develop global marketing strategy • Control the GMO budget • Control the global brand campaign, in coordination with Samsung’s inhouse agency (Cheil) and its outside advertising agency (Foote, Cone & Belding) • Control the Samsung.com Web site and develop Internet-related partnerships with service providers and other corporations • Oversee global customer relationship management (CRM) strategies and shared marketing best practices across subsidiaries

Regional Strategy Group

Responsibilities : • Plan strategic direction for regional markets • Interface with line managers to set the marketing budgets by region

GMO : Established in 1999 with Headquarters in Seoul Staff Strength : 90 pax Role : Coordinate Samsung’s marketing efforts ; Develop overall marketing plan (non home segment)

Product Strategy Group Responsibilities : • Conduct market research and gathered and analysed information on competitors • Plan corporate marketing exhibits at trade shows • Conceive and implement strategic marketing alliances and “killer” new product concepts Home Segment (Korea)

2. Marketing Operations

Samsung’s Implications

• • • •

Sony performing better in terms of brand Different geographies have different perceptions towards the brand – marketing needs customization Existing perception of Samsung’s brand to be changed within organization and external in market Flat marketing organization – need for better organization (regional, global, product)

Response to Questions 1 What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing? – How they tackled it ! u

Transition from low cost strategy and economies of scale to product diversification and differentiation (Strategies of marketing too had to be aligned accordingly)

u

Marketing Organization to reposition Samsung as a global brand

u

Wide range of products catering to various segments (Marketing organization accordingly)

u

Monitoring competitors, markets, consumers and building marketing strategies around it

u

Market driven initiatives – personalization and customization to suit to markets and its segmentations

u

Consumer research – to bring human connection with consumers and design products and processes

u

Consolidate SEZ advertising (55 advertising agencies) into a single central agency (Consistent brand message control and leveraging)

u

Samsung products were advertised using 20 different slogans

u

Standards and guidelines (Eg : Logo and its use on products, letterheads, packaging, billboards)

u

Marketing as a took to boost internal morale and strengthen brand presence in market

u

Reduced resource use by stripping away sub brands and their decentralized management

u

Focused allocation of budgets for marketing ($400 million in 2003) – Management commitment – countrywise, product wise

u

Use of digital resources for marketing (DigitAll Campaign)

u

Use of market and consumer information to build a strong brand

Response to Questions 1 What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing? With change in Business Strategies, the marketing strategies got realignment 4 P’s of Marketing Time

Product

Price

Place

Promotion

Earlier (Business strategy)

Third Tier Commodity Brand

Low cost

Sell bulk quantities of commodity products to global markets (other OEMs)

Mostly B2B focused

Now (Business strategy)

Differentiation New (many world firsts)- value added Service enhancement

Premier, valued added

Go International (+ under own name +Consumer electronics, mobiles, semiconductors etc)

B2B and B2C focused

Now (Marketing Strategy)

• • • • • • •

Transform company’s branding to reach amongst the top Reorganization of marketing function Consumer Research – Relationship monitor for improving consumer relationships with brand and brand loyalty – region specific studies Rebrand as a global premier brand (valued and within the top 10) and global business leader Brand strengthening (Image, value, awareness) Campaigns focus (Eg : DigitAll) – to tackle the issue that it lacks human face and emotions Tie ups with popular entities for branding (Eg: Warner Brothers for The Matrix Reloaded movie, International Olympic Committee (IOC) , Sponsor for many important events such as 2002 Winter Olympic Games in Salt Lake City, 2004 Summer Games in Athens, the 2006 Winter Games in Torino, and the 2008 Summer Games in Beijing. • Billboards and Print Advertising • Video Games (Eg : Enter the Matrix) – 20 to 30 year old • International Expansion –Local adaptation of marketing and brand-building communications strategies and tactics (Market segregation – Accelerator, Turning Point and Advanced) • One size fits all marketing strategy to Market segmentation (personalized, customized) • Focused marketing (Accelerator-high reach awareness, Turning point- build reach, freq and advanced markets - CRM) By 2003, Samsung was the most widely held stockcommunications among all emerging market companies Over half shares held outside Korea Market capitalization of $41 billion in 2002, making it the largest Asian electronics company by this measure

Response to Questions 1 What are the ingredients of SEC’s corporate turnaround strategy? What are the implications for marketing? International Markets

Accelerator

Markets where the main objective was to build Samsung brand awareness, both aided and unaided Focus : Brand elevation, Awareness, Increase reach, demand generation

Turning Point

Markets where awareness was good, generating significant demand in some product categories, but where the brand image had to be reinforced to improve repeat- purchase probabilities Focus : Brand Loyalty ; Make it to advanced ; increase reach

Advanced

Markets where Samsung’s unaided brand awareness and brand reputation were strong across all categories and where loyalty needed to be reinforced further Focus : Strengthen customer relationship , Brand loyalty

2. How strong is the Samsung brand? Can Samsung pass Sony and become a top ten global brand? Yes ! Factors which will lead to it : • • • • • • • • • •

Strong business and marketing alignment Focused marketing strategies (geographical/ market segmentation) Continual innovation (products, processes) Strong R&D and technical leadership Global brand - consumer preference and loyalty Consumer research (future trends of consumer behavior, needs, preferences) and putting that in product features, designs etc. High revenue and profit margins Strong relationships with stakeholders (Customers, R&D, Distributors and supply chain handlers etc.) Strong inhouse intellectual resources Strong infrastructure setup and supply chain

Samsung and Sony Samsung

Sony

Focus more on H/W + collaborate with content providers

Proprietary software and content + hardware

Wider portfolio of products

Limited profile

More R&D and technology firsts

Focused more on customer electronics R&D but lost in differentiation and market expansion

Market segmentation and wider reach

Appealed to youth (video games), consumer electronics segment

Didn’t appear in the ranked list

Product leader and top rated brand global brand (known for 20 years more than Samsung)

Initially not strong but later reorganized Huge spend on advertising and had budgets for marketing to establish as a global brand

2. How strong is the Samsung brand? Can Samsung pass Sony and become a top ten global brand? u

Yes !

High revenues, profit margins, international markets, Goal : Top 10 brands

Consumer Research to strengthen to brand connection Future trends for product design determined through study of consumer preferences and behavior

Consumer Research, Perception Surveys. Awareness Surveys, Campaigns

One brand, Logo, awareness campaigns

Discussed in Q1

Consumer Research, Perception Surveys. Awareness Surveys

Brand Expression

Brand Perception

Brand Value – Samsung vs Sony (Source : Forbes global brand values) 2019

https://www.forbes.com/powerful-brands/list/

Fortune 500 global rankings (revenue wise) 2017

India’s brand trust of Samsung and Sony Source : Business Today Apr 2018 Samsung, Sony and LG are the three most trusted brands in India, according to The Brand Trust Report 2018 released by TRA Research (a Comniscient Group company). Trust is measured through the company's proprietary tool, The Brand Trust Matrix. Samsung, the consumer electronics giant, leapt 17 spots from its 2016 rank to reach the top position last year and retained its top slot this year as well. Sony, ranked second, and LG, ranked third, have been steady for three years in a row. Samsung continues to display its supremacy due to its innovative products coupled with aggressive marketing initiatives that have contributed to the brand's success in India & worldwide, said the report. LG was always among the top five in all the previous eight reports. Dell and HP, both in the personal technology category, moved up by 2 positions to rank 6 and 9 respectively.

Response to Questions 3. As Chief Marketing Officer, what are Kim’s role and responsibilities? How has he built his influence? Roles and Responsibilities :

Eric Kim joined as Executive vice president for Global marketing operations in 1999

• Reposition Samsung as a premium brand through increased emphasis on marketing • Take the company to rank : Top 10 by 2005 • Carry forward the essence of ‘New Management Initiatives’ • Build the corporate brand image across 200 country markets and 17 product-focused business units worldwide (Global brand) • Allocation of marketing resources and improvement in organization • Training and education of employees on importance of marketing • Setup strategies, objectives and goals, processes, budget plans, marketing plans, monitoring, reviewing and establishing Marketing as an important function

Response to Questions 3. As Chief Marketing Officer, what are Kim’s role and responsibilities? How has he built his influence? u

Kim was born in Korea but had pursued a successful business career in the United States in the technology sector – his prior professional experience gave the career path to Samsung

u

Drove the importance of ‘brand’ as core strategic asset

u

Obtained support from top executives towards brand building

u

Internal education about marketing (Wow, Simple, Inclusive) – key features of pillar products

u u

Educate divisional managers on the role of marketing and the value of developing and communicating superior solutions for target customers. To emphasize on important of marketing and to gain trust of employees who had ‘show me’ attitude, he developed marketing planning and budgeting processes from scratch for both new and existing products, for headquarters and field operations (After R&D, Marketing costs were the next largest expense)

u

Elevated the perceived professional stature of marketing within Samsung and developed a marketing career path to attract, train, and retain top-quality marketers who can make the case for marketing expenditures to general managers

u

In 2001, under Kim’s leadership, the GMO implemented the initiative to consolidate SEC advertising with a single agency to deliver a consistent brand message worldwide. Previously, various units of SEC were using more than 55 advertising agencies worldwide, and Samsung products were advertised using 20 different slogans. Kim explained:

u

Consolidated advertising to a single global agency, Foote, Cone & Belding [FCB].

u

Developed worldwide guidelines for logo, its presentation in all communications (letterheads to product packaging to billboards). FCB also developed a unique brand essence for Samsung to differentiate us in the marketplace and boost internal morale. Consolidating agencies has also helped us to gradually strip away sub-brands, which had distracted management and diverted resources.

u

Marketing reorganization and Deploying Systematic approaches in Marketing, Market driven changes (customer insight to new product development)

u

Through M-net program (computer based) determine where funds could reap the highest returns. Eighteen months were spent gathering data on Samsung sales, margins, market shares, and marketing expenditures by country and by product category into a central database. The M-Net program analyzed the results of past marketing plans to recommend where marketing dollars should be spent by country and by category. Pricing adjustments were also recommended.