It’s kinda unusual for me to put entry here after I put another yesterday due to my laziness But I told myself that I should maintain my blogs. If I didn’t want to maintain my blogs then, it would be better that I delete it instantly.

And I didn’t want to delete this blog.

So here we go, case study reading. Actually this case is one of other case studies in my Brand Management Class. My group was the first one to present (last Tuesday) and we presented this case study. So onward we go to the analysis

History and Background

In every case study, it’s always important for us to understand the history and background of the company itself because many things that happened in the future based mainly on the company’s background and past history. Things that become the fundamentals of the company usually affecting many many aspects of the activities within.

1969 – The beginning of Samsung Electronics Company (SCE.) The company itself was the low-cost manufacturer of black and white televisions.

1970 – This, I could say, would be the turnaround phase of SCE. The primary milestone which decided the next future of SCE. During this year, Samsung acquired semiconductor business.

1980 – SCE showed off their fangs. During this year, SCE was the supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to global market. This explains a lot why Samsung is playing in electronic home appliances products.

The company also was an OEM company where they made brand-less products and sold it to other companies which re-sell it again with that company’s brand name in higher price.

Since SEC’s background was mainly in manufacturing, it’s not a surprise for the executives themselves to focus heavily on their manufacturing plants. Profits that SEC received were reinvested in R&D and manufacturing and supply chain activities.

1997 – The big crisis that hit Asia. SEC’s sales were $16 billion but with negative net profit. During this time, the executives conducted major restructuring efforts. SEC dismissed 29,000 workers and sold off $2 billion worth of corporate asset.

However, SEC survived. The company’s debt of $15 billion in ‘97 has been reduced to $4.6 billion by 2002 and the net margins rose from -3% to 13%.

2002 – In this year, the company recorded net profits of $5.9 billion on sales of $44.6 billion.

2003 – SEC was the most widely held stock among all emerging market companies.

Vertical Integration

If we get out of manufacturing, we will lose. Everyone can get the same technology now. But that doesn’t mean they can make an advanced product.

- Jun Yong Jong (1997 Vice Chairman)

Unlike other companies who choose to outsource their manufacturing process, SEC remains committed to its core competence: Manufacturing.

During 1998-2003, SEC invested $19 billion in new chip factories and $17 billion in June 2003 for manufacturing facilities for TFT-LCDs over the next 10 years.

SEC’s policy to its sub-manufacturing group is that they should remain competitive by forcing those groups to compete with outside companies for internal business just like happened with one of internal manufacturing groups that should compete with Sumitomo Chemical Company of Japan to supply the company with its color filters.

However, being focused into manufacturing process didn’t make SEC as a rigid company. To cope with supply-chain demands, the company remains flexible by building 12 manufacturing plants in China during 2003 and setting up R&D facilities in India.

Avoiding Commoditization Trap

There’s nothing more horrendous for a company other than being ‘commoditized.’ That is, where your product is ‘just the same with many millions and trillions products out there.’ For me, a ‘meh’ product.

And electronic gadget products are sooo easy to become a commodity. In Indonesia here, Nokia is the biggest player. They are the market leader in term of market share. Seemed that everybody got same hand phone everywhere.

In order to avoid that, SEC customized as much as production as possible – which makes me wonder… More customization means MORE COSTS!!! YIKES!!! How these guys do that??!

However, as a result of customization and reliable, timely supply of chips, SEC’s average prices were 17% above industry levels.

Going Basic

In hand phone market, Samsung decided not to develop proprietary software and content (music, movies and video games) unlike its rival: Apple, Sony, etc. SEC tend to focus on hardware and devices to collaborate with content providers when appropriate. This kind of approach is recognized by SEC’s executives as ‘Open Architecture’ where customers are able to access more software through its devices than its competitors’ products.

Another reason why SEC is focusing on hardware only (and I believe that this would be the most reasonable reason) is that they want to protecting proprietary content from piracy. You see, once they develop a software, it could be pirated instantly and the legal cost would be such an amount. To save money, SEC choose not to walk the plank.

To Innovate

With 17,000 scientists, engineers and designer, I don’t think that SEC got problems with innovation. Thanks to its fast decision-making process with flatter hierarchy, the product development phase from the drawing board to its commercialization phase needs only five months

In this innovation phase, there is this thing called ‘pillar products’ that is, 4 or 5 products that would be the ‘main’ products that will be sold on that particular year/season. Pillar product is the Holy Grail for everybody inside R&D division because once their prototype made it to ‘Pillar Product’, every efforts will be poured down over to support that product in the market.

Sashimi Theory

This theory, unsurprisingly, is the foundation of electronics and gadgets market all over the world. Being implemented heavily by Nokia, ‘Sashimi Theory’ is taken based from fish market. Fish sells at high price  on the first day when they are fresh, but prices decline dramatically thereafter. Ring a bell? Yes, that over-priced Nokia suddenly decreased in price after 3 months or so.

Realizing the the market is tighter day after day, Samsung’s marketing team is proposing three ‘requirements’ that every product should have: ‘Wow’, ‘Simple’ and ‘Inclusive’.

The product should be ‘Wow’ enough which means that it has groundbreaking innovations that intrigued consumers and the product should be ‘Simple’ and ‘Inclusive’ in term of ease of use and accessibility along with ubiquity, availability and affordability of Samsung’s products to the consumer.

The Marketing Team

Samsung has its marketing team which named Global Marketing Team. The team alone is breaking down into three layers: Marketing Strategy team, Regional Strategy team and Product Strategy team.

Marketing Strategy team’s main task is to develop global marketing strategy; that is, to develop marketing strategy in international-wide. The core message that the company wanted to convey should be shown inside every promotional activities international-wise.

Regional Strategy team’s job is to continuing the task from Marketing Strategy team and breaking it down into regional level. One effort that applicable in United States doesn’t mean that it will reap the same success when being implemented in Japan. It would be Regional Strategy team’s task to develop strategy in term of regional demographics.

Product Strategy team is the frontline of the whole team. Conducting market research, gathering the information and analyzing information about competitors are their daily task. The Market Intelligence. How cool is that?

Market Driven Change

In the past, Samsung’s effort was promoting by its own way which resulted in cluttered information, unclear company and brand image and confused consumers.

Several years after that, came along a blockbuster movie called ‘The Matrix’ and Samsung thought that it was the perfect time for them to get off the dust from their shoulder and going hip. Having the slogan ‘DigitAll – Everyone’s Invited’, Samsung focused more on customer’s insights into new-product development process and cooperated with Warner Bros. for product replacement at ‘The Matrix’.

I know it was a huge success because once Neo said on the phone “I’m in” I got that urge of I-havta-hav-dat-phone.

What’s Next?

The usual question at every case study. What’s next?

Samsung has going through a long way and they realize that they need to develop more within this tight competition. Their closest competitor, LG, is doing it the rough way. Come on, that cooperation with Prada didn’t mean anything to you? You must be crazy.

In this much more demanding market, Samsung should be able to be strong and understand the market more.

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