Samsung China

Samsung China Colour TV

China   

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Any multinational that ignores marketing to a quarter of mankind is putting its future in jeopardy Xu 1990

Contents  

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Samsung and its competitors in the Colour TV Industry SWOT Analysis The Marketing Mix Marketing Strategy Samsung US experience and lessons for China venture

Market Segments 

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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.

Core Compentency  

Its area of expertise is semi-conductors, and its business strength lies in hardware development

Business philosophy  

“to devote our talent and technology to creating superior products and services that contribute to a better global society”

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SWOT Analysis

Strengths 

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Prior International experience 

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6 Fully functional Overseas Production Bases

Ranked 221st in the fortune global 500 Seoul -China fully functional diplomatic relationships

Weaknesses  

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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

Opportunities  

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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

Threats 

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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

The Marketing Mix  

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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.

Product must deliver value to customers in the target market by meeting customer requirements     

Detailed market research Identify the market Understand the needs of the market Identify what features the product must have to meet customers’ needs.

Product: 

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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

Price 

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Price needs to be competitive and offer customers value of money Samsung China needs to make positive return on its investment

Place 

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 

Price  

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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

Promotion 

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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.

Marketing Strategy

Target Market 

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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

Market Share 

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. M arketS h are

 0 %

20 %

4 0 %

S o ny& M a tsushita

O the rs

6 0%

8 0 %

75 %

2 5 %

Market Penetration     

300 mn households Penetration: 41% Urban: 80% Rural: 28% Opportunities boundless

Positioning 

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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

Conclusion 

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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

Samsung’s US Experience: Lessons to be learnt from China 

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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

Market Entry: Low End USA  Home-country, lowcost 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: High End China USA  Japanese firms  Japanese firms changing focus to dominating the high end market: First mover advantage  Low end market open for other countries  

Economies of Scale: Experience Curve 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 

Brand: Samsung 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 

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Legal issues, etc. 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 

USA  Low operating profit margin on low-end products  Total Sales 1994: $14.6bn 1995: $21bn  Net Income 1994: $1.2bn 1995: $3.2bn 

China  Highly competitive Chinese firms could lower already low profit margins in low-end segment 

감사합니다 Thank You Very Much!

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