Case 4: Samsung Electronics

Date:

2012-04-4

Executive Summary The case basically address the idea of how international marketing strategy has been used effectively in Multinational National Companies (MNC) to upgrade a company such as Samsung Electronics Company (SEC) global brand image from being humble and non differentiated one to a world class brand compete in every aspect of innovation. When Samsung set a goal to be as good as Sony as brand, they hired a Marketing Chief Executive Officer to transform Samsung brand image to be in top 25 most valuable brands in the world. The Idea was clear that to have a good marketing strategy you should first have a good product that could compete in every aspect of differentiation and only then a company such as Samsung could reach this world class.

The ingredients of SECs corporate turnaround strategy and marketing implications Samsun Electronics Company (SEC) was founded in the year of 1969. At beginning of its business, it operated mainly on the manufacturing of the black and white televisions. Then it expended from televisions to VCRs and the microwave ovens. During all this time, SEC was focused on imitating others and producing what is called commodity products. In the year of 1997, due to the Asian financial crisis, there had problems handling the company high operating cost. However, this was a huge turning point for the company and only then SEC found a way to be successful global brand. They realized there should have products that are unique and can distinguish them from their competitors. The first thing they did is they remain committed to manufacturing as a core competence. The reason is easy to understand and since technology is the same for everyone, the difference is which company can produce its own products. SEC forced its plants to remain competitive by forcing them to compete with outside manufacturers for attracting business. Samsung was also flexible in choosing its plant locations. Another thing that has to be mentioned is that Samsung had to customize as much production as possible. For example, half of its memory chips were special orders for DELL, Microsoft and even NOKIA. Because of its customization and reliable timely supply of chips, the average prices of Samsung were usually higher than the industry average, therefore, they gained a high profit margin in the sector. Second, Samsung Electronics Company remained focus on producing hardware products and no thing but hardware. In addition, they did not focus on producing one certain type of products but they diversified their product portfolio to include almost every thing that a human being could use such as LCDs, Shaving machines, Semiconductors, Cellular phones, Refrigerators and other. Finally, Samsung managed to ride the digital technology wave early during the beginning of the new millennium. Taking an advantage of shifting technology from analog to digital TVs and the revolution of home satellite receivers made SEC one of the leader in this market and made it for the first time compete head to head with Sony TVs. 3

For the marketing part, the new corporate strategy brought many changes in the company marketing strategy. First, focusing on innovation as the first line of marketing through emphasizing and spending massively on R & D rather than advertising made Samsung Electronics Company an innovative market leader instead of an imitator. This strategy made marketing the company products easer job where the company product positioned it self automatically as a superior to others and therefore sold for premium price. In term of advertising, these types of products made it easy to build a global brand name that is capable to compete in global stage. Distribution was never been an issue to Samsung but with the change in product status, an upgrade in distribution channels was established as a reflect of the upgrade of the product status.

Samsung brand strength and chances of passing Sony and becoming a top ten global brand Samsung brand strength lies within its ability to position it products as high quality, durable, and design appealing goods. Samsung became one of the world most valuable brands because of the effort that was put building it brand in the global market. The company intelligently positioned its products in different counties differently according to market situation. For example they categorized markets into three types; (1) Accelerator where the company main objective was to build a brand awareness in countries like Germany (2) Turning Point where the company thought that customers in this market were aware of the brand but further reinforcement was needed in some categories to strengthen repurchases in countries like the U.S. (3) Advance where the company thought the brand were strong in all categories and only loyal programs needed to maintain repurchase like in home land Korea. Samsung brand was stronger in emerging than developed countries such as Brazil, India, Russia, and China. Samsung sought a huge potential for success in these markets where market indicators shows great opportunity in cellular phones in China, mobile internet in Latin America, and computer peripherals in India.

Samsung has strong focus on hardware and devices. It was the number of one global manufacturer of DRAM, SRAM, NAND flash chips. Samsung was the first to introduce color screen phones in United States in 2002. In addition, Samsung had been a long-standing leader in liquid crystal display (LCD) televisions due to its ability to mass produce them at low cost. At this time, Sony did wisely decision to joint venture with Samsung, which not only can help them to save capital, but also can meet their requirements for LCD. Sony has had twenty years more than Samsung to build its global brands, and spends three times as much as on advertising each year. Sony was known best for customer electronics, and Intel focused on chip production, while Samsung R&D and manufacturing spanned multiple categories. R&D is the source of innovating and supporting innovating. Samsung will focus on the production diversity in the future and keep on cooperating with famous brands, it is not only a process of co-operating, but a process of learning other high level brands design concept. After that, Samsung can utilize the advantages in its own brands in order to improve them. Even though Sony did excellent job in last decades, but it is lacking innovating products, its loyal customers are declining. Samsung is better in some aspect than Sony, but it still needs improvement. It is possible for Samsung to pass Sony not for a long time. There is a great potential for Samsung to do if could invent something like the Sony Walkman. Otherwise, it could continue improve its global brand image and capture more of the market share great advertising campaigns such as DigitAll.

Samsung Chief Marketing Officer Kims Responsibilities and how has he built his influence

Role

And

Kim was the master mind behind the historical transformation that happened to Samsung during the new millennium. Kim role was a complement to the Samsung general corporate strategy. Kin strived to build Samsung new image which upgraded Samsung from a company that produce a low cost commodity products to a company that compete through differentiation in global stage. His American education background and work experience helped him visualize the target destination, to beat Sony, and the road became clear to him.

As the head of Marketing, Kim did a good job of building a perfect international brand image. He translated internal education into three words: wow; simple; inclusive. Wow mean groundbreaking innovations that intrigued consumers; simple and inclusive referred to the ease of use and accessibility along with ubiquity, availability and affordability of products. In terms of marketing organization, Kim headed the GMO which had three teams, such as Marketing Strategy Team, Regional Strategy Team and the Product Strategy Team. With the Kims effective leadership, the GMO fulfilled the initiative to corporate SEC advertising with single agency to deliver a consistent brand message worldwide. Lastly, He had an intense control of marketing resources. He has been able to build his influence by demonstrating proper management of marketing resources that have been put in his charge with a more systematic approach; as a result, he helped to quickly elevate the brand to the level it is today. Kims mission was to build the corporate brand image that is equivalent to Sony, which is the most important assets for the company, across 200 country markets and SECs 17 products-focused business units worldwide. However, by the time Kim arrived, he suffered major internal challenges that the true value of marketing was not widely appreciated at Samsung. Kim recognized that the internal education of marketing would be vital in order to achieve changes. Kim believe that the internal knowledge of the essence of the Samsung brand name should be understood by all the employees before it could be reasonably promoted externally. Kim built his influences by a set of marketing initiatives complements: being a Chief Marketing Officer through heading the corporate Global Marketing Operation (GMO); changing the way of marketing resources; changing the market driven. Marketing Organization Kim headed the corporate GMO unit, which was established in 1999 and based at world headquarters in Soul. GMO has three major teams: the marketing strategy team; regional strategy team; product strategy team. Under the leadership of Kim in 2001, the GMO executed the creativity of the associate SEC advertising with a single agency- Foote Cone & Belding (FCB) to deliver a consistent brand message worldwide. Allocation of Marketing Resources The GMO changed the way of setting marketing budgets to improve the marketing education and organization. The old marketing budgets at

Samsung were set as a percentage based on current sales. Kim the introduction of M-Net, which is a program for analyzing the results of past marketing plans to make recommendation of where marketing budgets should be used by country and by category, and also including the recommendation of pricing. Samsung now decides its marketing budgets based on to growth potential. M-Net enable GMO staff to allocate marketing budgets by analyzing different scenarios, which lead to positive results such as the initial resistance from regional and product managers to major change; the better usage of marketing dollars, shown by the brand preference; market share; and operating profit. Kim also backed changed in management incentive to make sure the line managers were rewarded in part for global performance in order to complete the M-Net system. Market Driven Change Kim also made a sweeping set of company-wide changed collectively referred to as market driven change (MGC), which insisted Samsung managers to see marketing as a vital business function rather than advertisement campaigns and promotions. With a greater focus on customers insight into new products development process by MGC, Samsung identified customer in different segmentations that are willing to pay high prices for particular functional or aesthetic innovations. With the research of MDC initiative, Samsung was revealed that it lacked of stature of the brand and also lacked of emotion and a human face of its brand image. In 2002, Samsung launched a new umbrella campaign, backed by a new emphasis on the use of DigitAll. After the success of launch of the DigitAll campaign, Samsung took its branding activities to the next level by co-marketing campaign with the Warner Brothers blocked buster movie The Matrix Reloaded in May 2003. In addition, it singed an agreement with the International Olympic Committee in 1997 and become a official Olympic sponsor for the 2000 Sydney Olympic Games, the 2002 Winter Olympic Games in Salt Lake City, the 2004 Summer Olympic Games in Athens, the 2006 Winter Games in Toronto, and the 2008 Summer Game in Beijing. Kim by using the a new set of marketing initiatives complements to increase the internal education of the brand image and better deliver it in worldwide.

Conclusion When ever there are a new senior management staff assigned, they always brings changes with them. In the case of Samsung Electronics Company Eric Kim the Vise President of Marketing Operations at Samsung intelligently transformed the new management initiative which aimed to make Samsung a global business leader to reality by being in the top 25 most valued brands in the world.