Discuss how Samsung differentiates its products from its competitors.
Samsung believes in customization for differentiating itself from its competitors. To avoid commoditization, they customized as much production as possible. Over half of its memory chips have been special orders for Dell, Microsoft and Nokia. Vice Chairman Yun led the companywide effort to convert the company’s product line from an emphasis on low-end commodities to high-end premium goods. Historically, Samsung had been a product-driven company that focused on manufacturing products at lower cost than competitors and building market share through economies of scale. By successful new strategies, Samsung has successfully established itself as a premium brand compared to its competitors. Unlike rivals Sony and Apple, Samsung has not entered into proprietary software and content such as music, movies, and video games and has kept its focus on hardware instead. In addition to it, Samsung is more diversified technologically which gives it a better chance to exploit ‘digital convergence’. Moreover, Sony, one of its main competitors has a more hip image and appeals to youth.
Discuss the impact of new competition on Samsung’s financial performance.
Samsung faced dec line in its operating profit for the last quarter in 2008. Its operating profit was 1.48 trillion won, a 38% decline from 2.4 trillion won in the second quarter.This operating loss is associated with the severe price competition, cost increases, and sluggish demand in the industry. Samsung experienced operating loss in all the four businesses it is in, namely semiconductor, LCD, telecommunication and digital media.
The following is the snapshot of Samsung’s financial performance:
(in trillion won, consolidated basis)
Business / 3Q 08 / 2Q 08 / 3Q 07Semiconductor / 5.29 / 5.24 / 5.27
LCD / 3.75 / 3.94 / 3.54
Telecommunication / 8.87 / 7.87 / 7.01
Digital Media / 10.77 / 10.33 / 7.63
* The consolidated sales figures are net sales (They exclude interdivisional sales)
Identify any new marketing strategies that Samsung should consider in reaction to new Chinese competition.
In reaction to its new Chinese competition, Samsung should never go into price wars as it tried to separate itself from the cheap image right from the very beginning. Samsung should instead invest more into brand building and Research and Development to cut manufacturing costs and still charge a premium for its differentiated product and brand image. This will limit the target segment for Samsung to only those who can afford such high-priced luxurious products with established brand essence and identity. In addition to it, this high-end image product will separate Samsung’s target market from the target market of the Chinese competition and still be a highly lucrative niche segment of the society. Lowering down manufacturing costs will give higher profit margins to Samsung thus proving the success of the strategy.
Develop a new strategy for Samsung
Strategy 1:
The new strategy for Samsung will ultimately come from the marketplace. Not just by understanding customers better but also by anticipating customers future needs will help Samsung to be more upscale and up-to-date and consequently drive the market trends. It will also help Samsung predict what’ll customers want in future and thus design and produce accordingly.
Strategy 2:
We can also say that, for exceeding customers’ desires around the world Samsung must have a finger on the pulse of the market. Secondly, customers’ needs are becoming more diverse today. Value for scarcity, uniqueness and individual character has become more important than ever. Therefore by reflecting individualism in its products’ manufacturing and marketing, Samsung will be successfully differentiating itself from other players in the industry.
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