Ho Kim Khoi

Marketing Assignment

FT DipHTM 4

Modules: Marketing Principles.

Title: The Environmental Analysis of Samsung Smartphone Segment in China.

Name: Ho Kim Khoi.

Class Code: DipHTM 4.

Word Count: 2,100.

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Ho Kim Khoi I. Introduction:

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The Chinas Mobile Phone market has a great potential to growth. Since construction of China's first mobile network began in 1987, mobile telephony has transformed personal communication in China. As recently as 10 years ago, China had just 10 million mobile subscribers, and many urban residents still relied on public phones for making calls and pagers to make sure they didn't miss one. By 2001, the number of mobile-phone subscribers had exploded, along with China's growing economy, and 100 million Chinese were carrying phones around with them. ( Chinas Consulate is Los Angeles Website, 24 May 2012). In recent years, growth has been faster than ever, with mobile phones becoming ingrained in the daily lives of urban Chinese. Besides that, the Chinese market is the most dynamic and fastgrowing market in the world, due to the huge potential, it is considered among the most markets for all mobile phone makers. Consequently, the market competition is more and more fierce. And this creates a great reason in order to do a market research in China. II. Executive Summary: The paper will take Samsungs Smartphone division as an example, to make an environmental analysis on its marketing strategy, to find out the correct direction to expand its market share in China. As a relatively new player in this market, Samsung faces very challengeable environment, and the experience or strategy Samsung adopts will be helpful for other companies which want to build up their own competitiveness, including the branding, distribution building etc, in Chinese market. I want to take a thorough review of Samsungs marketing strategy, to find out a sustainable strategy for the companys continuous growth, to improve its market share in Chinese market. For that reason, I will use PEST model to analyze the general external environment, find out the factors that affecting the companys performance. Then I will use SWOT matrix

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to analyze the opportunities, threats, advantages and threats for Samsung in order to set up a suitable marketing strategy and the detailed enforcement instructions for Samsung. III. The Attractiveness of China market: Since the birth of first mobile phone was developing by Motorola in 1986.The mobile phone industry so far has 25 years development history. (IDA Singapore Website, 24 May, 2012). However due to the technological limits, people always struggled to find out a good balance between mobility, computer capacity and energy saving. Year by Year, with the development of other technologies, mobile phone industry in general and Smartphone segment in particular found a good solution between mobility and capability. Since then, the Smartphone segment became more and more strategically important in mobile phone makers mind, and they are eager to develop more and more multimedia-functioned Smartphone products to satisfy the increasing demand in the market. And besides that, with the development of China, the country, which has the largest population in the world, is becoming more and more important for the mobile market. More middle-class people in the country have Smartphone, thus making it a huge potential market in the world. There is an incredible increase of the telecommunication industry in the past ten years, and the user of phones increases from almost none to 1 billion. Smartphones, with more advanced computing ability and connectivity than a feature phone, occupy a large market share. The most important Smartphone in China is Android OS. About 38% of Smartphone users choose Android OS in China because of its relatively lower prices and convenience. (Onbile Website, 24 May 2012). I Phone, another great Smartphone, is increasing from less than 2% in 2007 to around 29% in 2012. (China Daily Website, 24 May 2012). Moreover, according to the article was recently posted in BBC News, Deliveries of smart phones to operators and retailers in China grew 58% in the third quarter from the previous quarter to 24 million units. That surpassed 23 million units delivered to the U.S.

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market, down 7% from the previous quarter. As a result, China has become the world's largest Smartphone market by volume after it overtook the US in the third quarter. ( BBC News, 24 May 2012). IV. External Environment Analysis: In this section, I will use PEST tools to provide an outlook of China market as well as how these factors will affect the growth rate of Smartphone segment. Political: China nowadays has become the producing centre for most multinational

companies; meanwhile, it becomes the research centre for some MNC also. With the opening in financial, retailing industries, China could become the operation centre for some MNCs. China is involving the globalization trend and integrating with world closely. It rectifies some policies and rules towards foreign investment, which improve the legal and administrational environment for all investors. ( US Department of State Website, 24 May 2012). Although facing the economic downturn, lots MNC still list China as one of the most important producing and consuming market, and will keep investing inward. In addition, China is among the first countries to announce the RMB 4 trillion (1 USD=6.8 RMB) huge economic stimulus package. Besides some newly announced decrees, the government aims to tap specially the domestic market; it announced a scheme called house wares into rural parts in order to increase the domestic consumption. ( US Department of State Website, 24 May 2012). Economy: In Year 2008, although the Chinese economy faces the financial crisis

challenges, it still keeps a relative high growing speech than any other big economies. The authoritarian capitalism makes China easier to weather the financial crisis. The China Communist Party guide the country into a scientific growing path, and with further economic reform, the system becomes more and more efficient and optimized. In Year 2008, the Chinese GDP achieves 24661.9 billion Yuan, increased by 1.1%. In terms of different

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industries, the First industry increased by 3.7% to RMB 2391 billion. The second industry increased by 13.4% to RMB 9632.8 billion. The share of first industry in whole GDP is 11.7% which is constant compared to the previous year. The second industry counts 49.2% in whole GDP up by 0.3% and the third industry slides in terms of shares by 0.3% to 39.1% of total GDP. ( Chinas Consulate is Los Angeles Website, 24 May 2012). Social: The China Smartphone market is a potential market with high growth rate.

Currently, the market is penetrated by some domestics low quality producers such as Huawei, Meizu They offer for their customer the multi-functioned Smartphone with low technology integrated, copy designed from big company like: Samsung and Nokia and the quality of product is not stable. (NTD Television Website, 24 May 2011). So this is an advantage for Samsung to take over this market because in the Chinese society, they believe the first mover always come with the highest product quality. Once the brand name get into their subconscious deeply, it is very hard to change their perspective about this. Moreover, in China, many people are not reported income to the government, so their actual income much higher than recorded. Hence, this is also a big advantage for Samsung in order to penetrate the market because people are willing to buy the product with high technology, fancy design and good quality with a reasonable price. ( Council on Foreign Relations Website of United States of America, 24 May 2012). Technology: China has developed a number of industrial centres where transport,

telecommunications and energy infrastructures are widely available. China has also demonstrated a widespread adoption of new technologies, for example mobile phone subscriptions has sharply increased to 461 million, compared to the 368 million land lines (Central Intelligence Agency world fact book, 24 May 2012). The number of internet users has also peaked in 2007 to 162 million thanks to a comprehensive broadband network infrastructure based on submarine trunks, fibre-optic cables and satellite links, making China

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the third largest internet community after the European Union with 247 million and the US with 208 million. In addition, China has over 1 billion mobile phone users in their entire territory. ( China Knowledge Website, 24 May 2012).

V. Internal Environment Analysis:

The PEST analysis will provide for us a general overview of the environment and how these factors affect the business. In this part, I will use SWOT analysis to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in this business as well as specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieving that objective. ( G. Armstrong; P. Kotler, 24 May 2012). Strength: There are two main strengths of Samsung Electronics. First, it has a robust

market position reinforced by strong brand equity in most of the segments where it is engaged. It is among the worlds leading companies in the Smartphone, monitor, television, and memory chip markets. The company gained over 20% worldwide market share in five areas. These include the four-door refrigerator market (39.5%), LCD panel market (25.7%), television market (22.1%), laser printer market (20.6%), and mobile phone industry (20.6%). Moreover, it has consistently built strong brand equity for many years (Datamonitor, 24 May 2012). Fortune magazine (2011) ranked the company as the 22nd Worlds Most Admired Company and second in the global electronics industry. (CNN Website, 24 May 2012). Its robust market position in combination with strong brand equity facilitates its competitiveness to expand its business (Datamonitor, 24 May 2012). Second, its portfolio of products is diversified. The company produces a significant number of products in different segments, such as televisions, audio-visual devices, MP3 players, computers, air conditioners, washers, vacuum cleaners, and integrated circuits. This indicates that the market share of the

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company across diverse markets is enhanced. In addition, it means that various sources of income are secured. It will also give an opportunity to diversify when some of the markets are depressed (Datamonitor, 24 May 2012). Weaknesses: The price of Samsung is not cheap compared to some domestic

competitors. In the Chinese market, normal consumers are more pricing sensitive than their peers abroad. Samsungs Smartphone production is not huge, so the economy of scale is not obvious. Samsung Entered Chinese market bit late, and the current markets are mainly in the big cities. The sales or distribution channels network is still undeveloped and instable; the marketing exploration ability is limited. Lacking market control skill, because of the scale and market position, Samsung cannot control the price on the major component, and doesnt have much bargain power to key suppliers. The network of service is mainly located in the big cities in order to build a stronger network Samsung needs to expand. ( The China Business Solutions Website, 24 May 2012). And last but not least, marketing tactic is normal, so far there hasnt any bombing marketing events of Samsung happened in China. Consumers normally dont have enough brand awareness of between Samsungs Smartphone. ( Marketing 91 Website, 24 May 2012). Opportunities: Through make itself distinctive from competitors, it can gain more

market share. By providing distinguish services it can increase its customer base. Another opportunity is product variation, by introducing unique products and existing products with variety; it can attract its target market and can get more market share. As the demand for the cell phone is increasing as compared to other electronic market, Samsung has the great chance to introduce user friendly mobile phones at affordable price. It would help to beat customers and also to lead market share. ( Samsung Official Websites, 24 May 2012). Threats: The major threat of the company is that it is vulnerable to foreign currency

exchange rates. Approximately 85% of its revenues are generated outside Korea, and raw

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materials and investments are usually procured from overseas. As a result, the currency risk is regarded as a significantly important factor for the company. ( The Economist Website, 24 May 2012). Moreover, the speed of innovation is quite fast, to the most conservative estimate the turnover period is only 6 month. (Datamonitor, 24 May 2012). If taking the components updating into consideration, there will be new products coming out every one or two months. And lastly, some key components always face supplying constraints. For example, the shortage of LCD screen will influence the production of Smartphone, and brings the potential risk to mobile phone vendors. VI. Conclusion: Under the fast growing background, Smartphone industry draws lots attention from IT companies. Hence, after the SWOT and PEST analysis, I recommend Samsung to improve from two different perspectives, first, set up a clear and detailed marketing goal and plan, and ensure the enforcing of such strategies. Secondly, manage the distribution channels effectively and efficiently. There are two trends Samsung need to be aware: 1) As customers requires a high technology integrated, fancy design and friendly user interface with an acceptable price. 2) Distribution channels will play more and more important role in this industry. Finding a most suitable distribution channel management solution is among the priorities for Samsung.

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Ho Kim Khoi References:

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1. IDA Singapore- History of Mobile Phones. (2012). Retrieved on 25 May, 2012. http://www.ida.gov.sg/news%20and%20events/20050906140107.aspx?getpagetype= 37 2. China Daily Newspaper Online- Chinas mobile phone users exceed 1 billion. (2012). Retrieved on 25 May, 2012. http://www.chinadaily.com.cn/bizchina/2012-04/21/content_15106537.htm 3. BBC News- China overtakes US as worlds largest Smartphone market. (2011). Retrieved on 25 May, 2012. http://www.bbc.co.uk/news/business-15850028 4. US Department of State- Diplomacy in Action- China Overview. (2012). Retrieved on 25 May, 2012. http://www.state.gov/r/pa/ei/bgn/18902.htm 5. The Consulate general of the peoples republic of China in Los Angeles- Overview of Chinas economy. (2012). Retrieved on 25 May, 2012. http://losangeles.china-consulate.org/eng/commerce/economy/t27689.htm 6. Onbile Website- The number of Smartphone usages in China. (2011). Retrieved on 25 May, 2012. http://www.onbile.com/info/smartphones-usage-in-china/ 7. China Environmentals Challenges: Political, Social and Economic ImplicationsCouncil on Foreign Relations. (2012). Retrieved on 25 May, 2012. http://www.cfr.org/china/chinas-environmental-challenge-political-social-economicimplications/p5573 8. NTD Television Website- China: The Worlds Biggest Smartphone Market. (2011). Retrieved on 25 May, 2012.

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http://english.ntdtv.com/ntdtv_en/news_china/2012-04-16/China-the-World-sBiggest-Smartphone-Market.html 9. CIA The World Factbook- China. (2011). Retrieved on 25 May, 2012. https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html 10. China Knowledge Website- China Infrastructure. (2012). Retrieved on 25 May, 2012. http://www.chinaknowledge.com/Business/CBGdetails.aspx?subchap=1&content=6 11. Datamonitor Website- Samsung Research. (2011). Retrieved on 25 May, 2012. http://www.cib-casestudy.com/downloads/Profile_Samsung_Electronics.pdf 12. CNN Money Website- Fortune Global 500 2011: The Worlds Biggest CompanySamsung Electronics. (2011). Retrieved on 25 May, 2012. http://money.cnn.com/magazines/fortune/global500/2011/snapshots/10340.html 13. Marketing 91 Website- The SWOT Analysis of Samsung. (2011). Retrieved on 25 May, 2012. http://www.marketing91.com/swot-analysis-samsung/ 14. Samsung Websites- Samsung Global Strategy. (2012). Retrieved on 25 May, 2012. http://gsg.samsung.com/Life_at_GSG/01Life_at_GSG_Diversity01.asp 15. The Economist Website- Chinas currency: The rise of the red back. (2011). Retrieved on 25 May, 2012. http://www.economist.com/node/17959580 16. The China Business Solutions Website- An Overview of Mobile Phone Distribution Channels in China. (2010). Retrieved on 25 May, 2012. https://docs.google.com/viewer?a=v&q=cache:0NdTOnWuxM0J:www.chinabusiness solutions.com/dbimg/overview_of_handset_distribution_channels_in_china.pdf+&hl =en&gl=sg&pid=bl&srcid=ADGEEShwMObiBgx-DWY8UWM_HtlGmgjRDMPeiFy0Z12VbZwAaYinAhgIJOuR30qcbZE7oQQpR0lwHt_45v1bIs_yudthU21

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Ho Kim Khoi fPRaPDVjAxQ4A62xW8I-

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EKO_AJiXTPv2TrVWmP79LNww&sig=AHIEtbQlwhN4BZENrZOwGytAWKdAdLzPA 17. Gary Armstrong & Philip Kotler. Marketing: An Introduction. (2011). Published by Pearson Education Ltd, 10th edition; pp 83-85.

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