Samsung ChinaColour TV

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

Xu 1990

China

Samsung and its competitors in the Colour TV Industry

SWOT Analysis The Marketing Mix Marketing Strategy Samsung US experience and lessons

for China venture

Contents

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.

Market Segments

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

Core Compentency

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

Business philosophy

SWOT Analysis

Prior International experience 6 Fully functional Overseas Production

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

relationships

Strengths

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

Weaknesses

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

Opportunities

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

Threats

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.

The Marketing Mix

Detailed market research Identify the market Understand the needs of the market Identify what features the product must

have to meet customers’ needs.

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

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

Product:

Price needs to be competitive and offer customers value of money

Samsung China needs to make positive return on its investment

Price

  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

Place

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

Price

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.

Promotion

Marketing Strategy

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

Target Market

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.

Market Share

Market Share

25%

75%

0% 20% 40% 60% 80%

Others

Sony &Matsushita

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

boundless

Market Penetration

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

Positioning

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

Conclusion

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

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

USA Home-country, low-

cost 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: Low End

USA Japanese firms

changing focus to high end

Low end market open for other countries

China Japanese firms

dominating the market: First mover advantage

Market Entry: High End

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

Economies of Scale: Experience Curve

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

Brand: Samsung

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

Legal issues, etc.

USA Low operating

profit margin on low-end products

Total Sales1994: $14.6bn 1995: $21bn

Net Income1994: $1.2bn1995: $3.2bn

China Highly

competitive Chinese firms could lower already low profit margins in low-end segment

Thank You Very Much!

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