Organizational strategy of Samsung

Organizational strategy of Samsung In the current volatile business industry marketing plays a vital and significant role and it is a process or method to create, deliver, exchange and communicate with customers and clients. It is the mechanism that identifies the requirements, needs, expectations of a particular customer base and creates methods and offerings to satisfy that customer base. In the current situation the complete business is customer-centric and the marketing revolves around satisfying the customer at every possible opportunity. Whatever the company offer should be based on the needs of the customer, it may be a product or can be a service or it can be both. When an organization offers both service and product, it can be termed as solution that plays vital role in strategic marketing. Samsung electronics is one of the biggest players in the electronics industry world that was established in 1969 had spread its wings over 50 countries worldwide and has workforce of more than 66000 and ranks at 131st on the list of Global Fortune 500. This paper aims to evaluate the marketing strategy of Samsung Electronics in the global television industry using the available theories and concepts. Company Background Samsung one of the greatest brands available in the market aims to secure the world leadership in the industry and earn devastating competitive strength by synchronizing the development and manufacturing of product, design, marketing and sales. The organization is well known for its great accomplishment in the industry of semiconductors based on memory. Samsung maintains its high position in the industry continuously from 1992 maintaining its top rank and stretch its financial structure throughout the industry to maintain itself as a number one company in the industry of mobile phones, semiconductors, monitors, computer gadgets, televisions, TFT and LCD screens. It also achieved 4th place in the semiconductor industry and sixth place in the mobile gadget industry by selling huge volumes. Importance and the use of information in their marketing strategy It is the era of information age and the information plays a vital and unavoidable role in any field exceptionally in the marketing industry. There is a great need for the managers to incorporate loads of data, convert it into information, construct decisions on the information and then compose decisions to lead them to achieve greater success in the business For any business, information is also considered as significant resource required same like money, machinery and manpower. Information is must and crucial for the survival of the organization in the varying business industry. Previously before the computer age, it was difficult for the companies to gather, store, maintain, organise and distribute huge volumes of information and data. The growth of computer and information technology helped the managers and organizations to effectively handle the information available. Managers are able to get the current information at required time in an accurate manner. And another great advantage is that the information can be accessed by many people at the same time accurately, completely that is organized and storable. The information system is the method that makes sure the information is presented to the managers in the form they expect it and when they expect it helping them to support their effort by giving appropriate information for their decision-making. Computers or Information Technology can evidently help companies in processing information and data in a accurate and well presented manner that is timely, relevantly and completely. All kind business organizations now a days have some kind information maintenance system either it may for accounting or stock control or market monitoring. The supremacy technology changed the function of information in the business. The complete business world acknowledged the information aslifeblood. Papows (1998) accredited that the modern organization is dead without Information. Samsung as a strong business leader accepted the fact and had given priority to the process of information throughout the organization at every stage. To gain from its Managing information System and Information Technology, Samsung addressed information needs not only in its environment but also in their relationships with customers, suppliers, trade partners, Production systems, work processes, skills and labour requirement. These advancements of Samsung have created huge and complex processes and information systems, thereby creating a requirement to align them to have a universal overview of the complete information system setting it as a strategic tool. According to American Marketing Association (AMA), 2007 marketing can be defined as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Marketing people of various organizations endeavour to get the perfect goods or services to the correct people at the perfect place at the accurate time at the right price, utilizing the proper promotion techniques. This explains how marketing managers organize the several factors that eventually decide marketing success. For this, organizations must have timely decision-making information. The significance of efficient marketing changes heavily in respect to the market in which a firm operates. It also depends on the important competences existing within the company. These competences will offer the current market information based on which decisions can be taken quickly. Corporate strategy depends deeply on the scrutiny of such information. Samsung aims to achieve the world leadership and accomplish great competitive strength. It is targeting to coordinate design and development of product, manufacturing, sales and marketing with effective information management. Samsungs marketing strategy related to their overall organisational strategy Slogan of Samsung Company says that Everyones invited explains its vast marketing strategy, with a huge range of products. As per the market researches, the main strengths of Samsung are identified as Strong global business network Huge credibility of Brand Name Innovative changes and inspiring new styles The awards it is continuously receiving Samsung has strong global present with its service and sales caters locating in 4 different countries. Samsung can utilize its strengths available as major threats to other organizations. Samsung can effortlessly improve its image the by the promotional Adds and quality products. Viewing ahead, Samsungs vision is to turn out to be a leading company of the digital convergence revolution. The next generation will be a time where the Internet, wireless communications, networked systems and contents will be united. Various forms of convergence technology that link conventional stand-alone appliances through networks will be developed. Samsung Electronics vision for the new decade is, Inspire the World, Create the Future. This new vision statement mirrors Samsung Electronics dedication to stimulating its communities by accelerating its three key strengths: New Technology, Innovative Products, and Creative Solutions. And to advance new value for Samsungs core networks such as Industry Partners and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all. (www.samsung.com, 2010) SAMSUNG Vision Statement Source: http://www.samsung.com/uk/aboutsamsung/corporateprofile/visionmission.html [accessed on 20/07/2010] The main aim of the strategy of any business organization is growth (Chandler, 1962; Penrose, 1959). Even for Samsung, this growth is the main competence. The diagram above explains its motto of creating future in its industry and wants to be a leader. So Samsungs vision is clear. Samsungs strategic methods can be classified in to organic growth and alliances based on strategic. Organic growth According to moneyterms.co.uk (2010) Organic growth is the growth that is achieved by the companys existing business by increasing output and enhance sales (Investopedia, 2009 Moneyterms, 2010). Organic growth lets a firm to extend market position over the long term and helps to accomplish growth much cheaper than merger and acquisitions and is well suitable growing organizations (Coyle, 2000). This suits well with Samsung present strategic position as it is one of the market leader and has all the measures to extend into other markets. Moreover, though Samsung has huge cash reserves, organic growth permits cash reserves to be focused on other important factors such as Research and Development. At last, the external environmental analysis shows growth in the television market and the complete industry. But only the organic growth is not sufficient for an organization. Even though it is stable that is not enough when entering in to a new market in a new country. When entering in to a new country a strong understanding of local market is necessary that can be achieved only through local strategic alliances. Strategic Alliances A COPAC Commissioned Study defines (2000) Strategic Alliance as a formal and mutually agreed partnership arrangement that links specific facets of two or more enterprises or organizations. It is a mutual arrangement and understanding that allows partners to accomplish goals mutually that they could not accomplish alone. Strategic alliances are normally seen as methods for generating strong and efficient mode for competing in a globalized business. Bleeke and Ernst (1992) explain this as a formal relationship between two or more parties to pursue a set of agreed upon goals while remaining independent organisations. From 2001, Samsung has undergone with 29 various alliances (Samsung.com, 2010). They also accredit that the alliances are the best possible ways to enter in to the new market. With the new alliances Samsung may not learn anything new as they are very strong in technology and innovation. Further Analysis of Current Strategies Porter (1980) argue there are three fundamental strategic options available for companies that are looking for achievement of competitive advantage; they are Cost Leadership, Differentiation and Focus. This is explained in Porters Generic Strategies (Porter, 1985) Samsung comes under the category of Cost Leadership strategy as it augments profits by dropping costs, while charging low prices in the industry. Cost Leadership can be considered as one of the core competencies of Samsung. Apart from the cost leadership, Differentiation strategy also appropriate to Samsung as the company in continuously involved in inventing the technologies. So, Samsungs strategy is a combination of both cost leadership and differentiation strategy. Bowmans Strategic Clock (1997) is the other method used regularly to evaluate strategic options. It sees at professed additional value by the customer in opposition to price. Based on this Samsungs strategy can be explained to be mostly Hybrid. This refers to a strategy which is low cost to the consumer but still differentiated. Samsungs new 3D and Interactive TV Samsung, an industry leader for flat-screen TVs, will begin promoting its 3DTVs on 21 March in the US, before rolling out the activity globally in April. Mintzberg et al (2005) stated the Competitive advantage of an organization is usually recognized as the managements capability to set the companys assets adjacent to some external context. This can be termed as (Porter, 2004) external environment for a specific company. This external environment sets the means of survival for any company (Johnson et al, 2008:54). So, it is vital for the companies to understand this environment. This paper will look at the macro environment of Samsung using PESTEL analysis, then the Industrial environment where it operates, and finally at Competitors mainly utilizing Porters five forces model (Porter, 2004:6). It is also important to analyse the external environment of the firm to understand the opportunities and threats to achieve a strategic competitiveness. This consists of a general environmental, market, five forces analysis and competitors analysis. SWOT analysis is a prospective forecasting technique that helps to evaluate the match between opportunities and capabilities of the firm in the competitive environment. External environment The macro and industry environments will now be looked at to assess the strategic position of Samsung. Social Factors Current generation of people have strong passion and obsession for new innovative technology. Electronics industry plays a vital role in fulfilling this obsession. Children watching late night programs and getting addition to TV programs that reduces their interest towards games and studies is an important social factor. Technological Factors The electronics industry has been considered as one of the largely growing (Sixto, 2003) with low product life cycles (Mathews, 2005) that have show the way to global revenues. A 3D TV set is a special viewing TV device that utilizes 3D techniques of appearance that projects a TV program into a realistic three-dimensional field. The technology is brand new to TV industry that further reduces people going to Cinemas. Samsung is leading the industry with another milestone of new innovative Technology. Political Factors Political factors have an enormous control on the regulation of businesses that comprises of regulations forced by the government under which businesses should operate. As per the research the political environment in United Kingdom is said to pretty stable. Polices structured by the new conservative government like taxation, Cutting the Public spending and decision to raise petrol prices will have tough impact on the buying power of individuals. Additionally, the industrial policies of Korea also plays very important role for assisting international competitiveness to transfer technology in swap for market access (Kim, 1997). Economic Factors The economic factors plays very critical and significant role in marketing the 3D TV. The recession or down turn of economy reduced the spending power of individual. U.K economy is endangered by the financial downturn. As the unemployment rate increases customers passion for new technology may be sidelined. Sales has been continuously depreciating and the exchange rate is all time low that will increase the importing prices. Environmental Factors Consumers are having more awareness towards environmental and expecting increased energy efficiency, minor or no emission of dangerous radiation (Tarr, 2009; EE Times-Asia, 2009). Legal Factors Intellectual property is becoming a critical and important in the industry. There are huge chances conflicts can happen like the resent famous Apples conflict with Googles Nexus One regarding a patent issue. Samsung itself won a dispute recently in opposition to sharp regarding a patents issue that was initiated in the year 2007(Wall Street Journal, 2009). Legislations about local employee rights, Taxation and Intellectual Property will advance influence on Samsungs strategic decisions. Swot analysis STRENGTHS Strong international experience. Strong global business network Huge credibility of Brand Name Innovative changes and inspiring new styles The awards it is continuously receiving OPPORTUNITIES New technology 2012 Olympics offers an plenty of opportunity to get more sales Offering more models with stylish and individuality. The consumer will have the real entertainment for the money. WEAKNESSES Perception of High Prices Customers disinterest Buyer sophistication and knowledge Substitute products or technologies Very less availability of 3D viewing content THREATS New existing competition Price volatility Economic recession or financial downturn Extremely huge competition for customers and resources 6 Five Forces Analysis This analysis discusses five competitive forces related to the new product of Samsung Industry Competitors: Sony, Panasonic and LG. All are bigger players in the industry The competition is very High Buyers Individuals and families with high passion for technology And reasons for buying is Young passion mind, affluent professionals, status maintainers *Threat of New Entrants *Threat not significant as already many established players in the market and required a significant initial network, resources and investment Suppliers Bargaining power is low Substitutes Wide verity of TV models including Plasma, LCDs and digital TVs. Electronics Gadgets like smart phones, gamers and computers are also affect the new 3D Force Strength Trend Comments Entry Low Changing New entries are less. Suppliers Low Changing Suppliers cant negotiate prices Buyers Medium Increasing Overall consumers have medium bargaining power but generally it should be a win-win situation. Substitutes High Not Changing There are huge substitutes available at the present time. Like smart phones, Plasma, LCDs and gamers Rivalry High Increasing The competition is very high with SONY, Panasonic and LG are planning to launch the 3D TVs Lower Threat of New Entrants Threat from new companies entering in to the business is low as huge requirement of capital and Samsung have huge research and marketing process along with the proven productive process. It also has the strong brand name and best product differentiation. Overall the threat is minor. Low Bargaining Power of Suppliers Many competitive suppliers are available in the industry. The suppliers of Samsung have low switching cost and product differentiation (Lee, 2006). Overall the bargaining power of suppliers is low. The price increasing of raw materials can be easily passed on to the consumers. So the overall bargaining power of suppliers is low. Medium Bargaining power of Customers Bargaining power of customers is medium as very little range of products available in the 3D TV marketing industry. High Threat of Substitute Products There are huge number of substitutes are available for this product like Plasma TVs, LCD TVs, Mobile gadgets like smart phones, gamers, computers and laptops. Competitive Rivalry within the Industry High Overall, rivalry is high with many diverse competitors. LG, the worlds No. 2 Television brand by revenue, has put a destructive sales target for 3D TVs, planning to construct a leadership position in an emerging market where rivalry is expected to heat up. In 2010, LG targeted to sell 400,000 3D Televisions and in the next year it aims more than 3.4 million, the South Korean company announced in a news conference on 15th Tuesday December, 2009(canada.com, 2010). Electronics giant Sony is also planning to launch and leverage its power in 3D TVs business. Sony said in a press conference that it is expecting 3D TVs to account for up to 50 per cent of its total TV sales by March 2013 (canada.com, 2010). Panasonic also launched its plans to roll out 3D TVs in 2010 (canada.com, 2010). Source: http://www.canada.com/competition+heating+2010/2342815/story.html Segmentation The new generation 3D TV is initially targeted at the high class and technology lovers. The initial price of the 3D TV is very high. The Marketing Mix Marketing mix is an essential notion in current marketing and rationally it is referred to as the set of convenient tools that the organization combines to create the response it wants in the target market, so it consists of everything the firm can do to influence the demand for its product (Kotler and Armstrong, 2004). Marketing is about projecting the correct product at the correct price in the accurate way to the accurate customers. This is how value is added. Getting a product in to the market involves balancing numerous significant ingredients, i.e. the 4Ps of the Marketing Mix: Product, Price, Promotion and Place. Product The Next generation 3D TV is new innovative product. In simpler terms, the product includes all features of innovation to provide true entertainment to its customers. The 3D televisions were voiced as the biggest innovation in the television history with combination of highest performance and stylish design. With the Samsung 3D TV the customer will have the prospect of enjoying TV programs in 3D sitting at home and viewing TV will never be the same as the audience will be able to enjoy and experience the feel of their favourite stars of sports, film and TV leap off their TV in to the living room right before them. Samsung is proposes a series of 3D-capable TVs, including the LED 7000/8000/9000 Series, LCD 750 Series and the Plasma 7000/8000 Series (www.samsung.com, 2010) Price Pricing is principally fixing a specific price for a product or service offered. In simple words, Kotler and Armstrong (2004) explain the perception of price to obtain the product. Fixing a price is not something simple. Normally in general law people argue that a small price will draw additional customers. The argument is not true. Because customers not only look for price alone. The customers expect a proper service and value for the money that he pays. They act in response to value so a lesser price does not essentially signify stretched sales if the product is not fulfilling the expectation of the customers (Lazer, 1971). The price for the 3D brands starts from  £1600 to  £2000. The price is not so competent. Placement Samsung unveiled its prestigious 3D TV brands globally in the major countries like US, UK, Australia and china. The product is launched in all the major stores like John Lewis, Currys etc. Promotion The promotion takes the form of a new Starter Kit that offers U.S. consumers the chance to enjoy 3D movies in their own living rooms, rather than having to head to nearest cinema to check out the eye-popping action. Samsung utilized the FIFA Football World Cup to publicize several value-added bundles along with its new 3D TV ranges. Fresh buyers were offered bundled 3D movies, home theatre systems and Blu-ray players. People who procure certain Samsung 3D TV models from dealers all over the country will have the chance to seize the Bonus 3D bundle. This includes Samsung 3D Blu-ray player and two sets of rechargeable 3D glasses. Apart from this Bonus 3D bundle, customers are also entitled to obtain a Bonus 3D TV starter kit that includes 3D Blu-ray Disc of DreamWorks Animation SKGs hit movie, Monsters vs. Aliens, and An additional two sets of battery powered 3D glasses. Source: http://3dtvsets.co.uk/samsung-electronics-starts-3d-tv-war/ (accessed on 25/07/10) Apart from these bundled promotional offers, Samsung has launched a strong advertisement campaign for its range of 3D TVs. The TV advertisement campaign is worth of  £8 Million that runs over 3 months. Apart from the TV advertisement, it has also launched  £7 million print media advertisements (www.marketingweek.co.uk, 2010) Target Market Samsung should aim both the high-end market segment as well as low-end market segment because in both areas there are opportunities. The international brands like Sony, Panasonic, LG, Philips and Sharp have more than 75 percentage share of the high-end market segment globally. Samsung being an international brand, it can easily step in both the high-end and low-end marketing segment because of its overall knowledge and ability to invest in the market. Market research firm Generator Research(2010) forecasts a major update of the novel 3D TV technology globally, showing that by the year of 2014 the business share for 3D sets is predicted to reach over 39% and the market will value more than $117billion (Samsung.com, 2010). In reference to another market research organization, DisplaySearch (2010), the 3D TV market is predicted to increase from the year 2008s value of $ 902 million to $ 22 billion in 2018. particularly, the 3D TV business is predicted to grow to $ 17-billion, and the number of units expected to sale will increase to 64 million in the year of 2018 from 200,000 units in 2009 (Samsung.com, 2010). Globally, in the year of 2010, it is expected that there will be approximately 4.2 million 3D TVs will be sold as all the major players like Samsung, SONY, Panasonic, LG and sharp are entering in the business. The value is expected to triple to 12.9 million in the next year itself according to a new market research. Above said figures looks like huge but the fact is that the above stated figures are just a fraction of the original LCD TV sale. On the other hand, it is expected that by 2012, 27.4 million 3DTelevisions will be sold globally and by the year of 2015 the value is expected to 78.1 million units. This shows an enormous composite annual growth of 80.2% between 2010 and 2015. The figures show that the 3D Televisions here for growth and may replace all the existing TVs in near future. Samsung, however, is ready to lead in this Age as it will use its strengths in semiconductor, telecommunications and consumer electronics technology to develop innovative multi-capable products and create powerful networks that will empower the user for anytime, anywhere communications and a higher quality of life. http://www.marketingpower.com/AboutAMA/Documents/American%20Marketing%20Association%20Releases%20New%20Definition%20for%20Marketing.pdf