Answer

1. What recommendations would you make to Chairman Lee regarding Samsung’s response to the threat of large-scale Chinese entry?

In China, Samsung faces a unique challenge.  Despite having a clearly superior technology, it still has not been able to translate the successes it has experienced in the mobile phones market to other electronic goods.  It is especially difficult to put the losses being experienced in the washing machines and freezers markets. 

One reason could be the supply-chain constrains given the way Samsung has chosen to address the Chinese market.  Handicapped in terms of physical outlets – 1,800 compared to 20,000 for rival Hisense, Samsung could either continue in the pursuit of the direct sales stores – a choice that supports premium brand markets, or change tact. 

Samsung needs to adopt a number of strategies

• Price reduction: At the risk of cannibalizing its premium market, Samsung must reduce its prices to be competitive.  Currently Samsung handsets are up to 4 times their competitor.
• Additional stores: Samsung must invest more in developing a presence all over China.  Whereas it could focus of the mid-level (T3) cities, increasing the profitability of Samsung handset retailers will motivate them to precede the company into rural (T4 and T5) markets.
• Brand Familiarity and Consumer Trust: Samsung competitors in the key Chinese market – Huawei and ZTE, need not invest significant marketing resources to attain consumer trust and brand familiarity.  Samsung will have to significantly increase investment in this area if it is to increase consumer awareness.

2. What were the factors that led to Samsung’s dramatic rise over the past 20 years?

A few factors have contributed to the Samsung’s dramatic rise over the past two decades.  None so as the decision by Samsung leadership to adopt change.  Embracing new management has been the key.  Samsung has adopted a three-pronged strategy for growth.  The organization decided to focus of quality as opposed to quantity, synergies – allowing for differentiation as opposed to low cost, and internationalization – changing to brand and technology as opposed to wage advantage.  This have allowed Samsung to emerge from a having a humongous debt-to-equity ratio as market leader operating a lean management[1]. 

The company made the deliberate decision to achieve speed to market – make sure it was always first to get new products to market, it has a short design-cycle, a short lead-time supply chain that supports maximum flexibility, adopting a global marketing organization and human resource development – attracting the top talent at all sites[2].  Samsung as an organization has managed as a turn common competitive positions to be a source of competitive advantage over its competitors allowing it to rise dramatically over the past twenty years.

3. What are the sources of Samsung’s cost advantage?

Samsung has a number of sources that allow it to benefit from cost advantage.  To begin with, the decision to adopt a global marketing approach has allowed it to keep its costs down.  Despite marketing taking a global approach, this has not stopped from each site being responsible for the message that resonates in its local market[3].  Similarly, each production site is supported by a fully fledged Research and Development department which in turn complement the headquarters R&D team in Korea. 

This has allowed Samsung to have a cost strategy that ensures the organizations are advantageous within each site and national operations.  For example, by having the Research and Development in the different sites working in tandem with the team at the Headquarters while at the same time supported by a system that allows rapid sharing of data across sites, will allow for development of products and services at a relatively lower cost than competition. 

This was especially so in India, where the Research and Development team in India, when tasked with developing a $10 feature phone, while engineers at the headquarters had termed the task impossible, the Indian team went about the task by redoing all the coding and eliminating all unnecessary code which resulted in the development of a phone with the same features but only using half the memory.

4. What are the sources of Samsung’s price premium?

The source of Samsung’s price premium is the marketing strategy across different markets.  Different markets are served by different marketing strategies.  In China, Samsung has chosen to target on the premium market and has intentionally over-priced its lower specification phones in relation to local competition in order to protect its premium market (Kaur and Kamboj, 2013).  The same strategy has been adopted in all the developed markets – America, Europe and the main markets in Asia. 

In these markets, Samsung has ensured its low market targeted phones are not available and where they are, they are relatively dearly priced compared to competitor.  Similarly, with the knowledge that Samsung is the market leader in most electronic products markets, Samsung consumers have the advantage of in some cases enjoying technology that is not yet in other phones and when it is readily available, Samsung products will be at a competitive price[4].

5. What will be the most essential steps to implement the Global Strategies for the immediate future?

Going forward, Samsung will have to implement some steps aimed at helping it achieve all its global strategies.  To begin with, the New Management initiative is the backbone of all that is to be done.  All the steps will have to be supported by management backing in order to ensure the necessary investments are available.  Just as by focusing on semiconductors, mobile phones and LCD screens the organization was able to rise to the top of the global electronic market, in the immediate future, this will have to the same thrust that is adopted[5].  

At each site globally, the Research and Development department will have to be strengthened and aligned with other sites to allow for seamless sharing of information.  This will support the already adopted strategy of encouraging competition between teams, sharing of product development successes and challenges and developing products between teams at different sites simultaneously.  This should allow it to continue focusing on consumer electronics which has shown sustainable development and market expansion.  The challenge of uncertainty in the future cannot be addressed conclusively; however investment in new growth areas should go a long way in mitigating it.

[1] Renee Kim, “Samsung’s Competitive Innovation and Strategic Intent for Global Expansion”, Problems and Perspectives in Management, 2007

[2] Renee Kim, “Samsung’s Competitive Innovation and Strategic Intent for Global Expansion”, Problems and Perspectives in Management, 2007

[3] Renee Kim, “Samsung’s Competitive Innovation and Strategic Intent for Global Expansion”, Problems and Perspectives in Management, 2007

[4] Kaur, P and Kamboj, Vijay, “A Study of Consumer Satisfaction with Special Reference to Samsung Smart Phone Galaxy S”, International Journal of Applied Services Marketing Perspectives, 2013

[5] McFadden, Kathleen L., Lee, Jung Young., Gowen, Charles R, III and Sharp, Barton M. “Linking Quality Improvement Practices to Knowledge Management”, The Quality Management Journal, 2014.