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Marketing Strategy Of Samsung Mobile Essay

Samsung's Target Market

Introduction
Samsung is a South Korean company founded in March 1938. Initially Samsung was in the trading line that sells food products to nearby countries. Overtime Samsung have become one of the leading electronics company in the world. Samsung has been constantly expanding their product variation allowing their market share value and revenue to be one of the top of the global scale. Samsung's wide variation of products requires a vest amount of different marketing strategies. Their success in the global market is also well recognized.

Target Market

Samsung's targets a very wide range of consumers ranging from normal day to day usage devices to industrial standard equipment. The usual target age group of customers range from the 20s to 50s or even older, as long as the person has the ability to purchase and use the products that Samsung has to offer in the market.

Teenagers to early adults (age 14 ' 25) ' This age group of Samsung product consumers is usually Samsung's smartphone target customers as they are mostly technology savvy. This group of customers is growing as Samsung saw that this group has more spending power in recent years compared to in the past.

Adults (age 26 ' 50) ' This specific group of targets the largest portion of Samsung's target market as this is the group of consumers that have the most ability to purchase any of the product Samsung has to offer in the market be it smartphones, smart television, cameras or any other household products like vacuum cleaners or washing machines. This portion of customers will continue to grow in the years to come.

SWOT Analysis

Strength
Definition
Internal attributes and/or resources of the company that gives it the advantage over other companies.
- Innovation and design
- Low cost production
- Focus on environment
- Large market share
- Hardware integration with many open source OS and software
- Customer loyalty
- Good industrial standards
- Strong inventory management Weaknesses
Definition
Internal attributes and/or resources of the company that work against or place the company at a disadvantage of other competitors.
- Samsung lacks its own OS / software
- Focuses on too many variation of products
- No focus on one core competency product
- Very strong competitors (Eg: Apple)
- Samsung has a low profit margin
- Products may be deemed as not user friendly at times
Opportunity
Definition
External factors that the company can capitalize on or use for its advantage over others.
- Raising Smartphone Market
- Increasing portable promoting industry
- Growing interest for quality requisition processors
- Evolution of tablets business
- Gaining patents through acquisitions Threat
Definition
External factors that could potentially jeopardize or cause the company to be at a disadvantage over other competition.
- Slow market in developed countries for smartphones
- Rapid change in technology
- Increasing Competition
- Breached patents
- Apple's iTV launch
- Declining margins in hardware production

Increasing Competition in Smartphones
Manufacturing of smartphones are now much easier than ever as more companies are seen entering the market and markets are becoming saturated. People are switching to smartphones to connect to the internet in developing countries. Smartphones are becoming important to connect people to the web as fixed-line telephone networks are often weak in emerging markets and building new ones is expensive.
China, the world's largest smartphone market now, as well as fast-growing markets of India and Brazil, local smartphone makers in these emerging markets could become a threat over market leaders Samsung and Apple with their low-cost decent smartphones. Recent news on Xiaomi, a Beijing-based company, designs its phones with high-end specifications and sells them at midrange prices. Though Xiaomi smartphones is still inferior to iPhone or the Galaxy in terms of quality, but the company beats them on price, a significant factor for many consumers in China. On top of that, other smartphone makers like China's Huawei, ZTE and Lenovo and India's Micromax and Karbonn, are offering those features on their smart phones at a price local populations can afford.
There is nothing in the existing technologies of Samsung or Apple that cannot be matched by other companies, thus Samsung may need to create phones that are cheap but capture the aspirations and imagination of users in emerging markets to compete on cost.

Innovation and design
Samsung, the largest brand in South Korea and it is also multinational company which diversified business under name of Samsung such as Samsung electronics, Samsung heavy industries and Samsung heavy construction. Samsung from producing black white TV as their sole purpose transform to a world reputable high technology corporation nowadays, Samsung was making a lot of right in innovative their products .Samsung increasing their investment in R&D such as R&D globalization and products design. 16 R&D center was established by 2004 to improve their products design and their existing technologies and Average of 9% of revenue was spent on R&D in the year between 2002 and 2007. Samsung put their efforts to create new and better design and products, this has been brought Samsung to win many awards and get 17,377 patents worldwide. To balance between feelings and reason, Samsung's philosophy is using geometric and technological parameters and enhancing the design so the user can be emotional connection with its product.
Samsung has such as good results in innovation and design because of their co-operation have a team of creative, knowledgeable and experiences people to contribute in the development of technology and Samsung aims to satisfy more consumers with its products and services.

PEST Analysis

Political (Legal issues)
- Samsung faced several patent lawsuits issues in the smartphone industry in recent years
- Samsung protects their intellectual properties by suing competitors and claiming infringements rights on patents design and ideas Economic
- Samsung is the top dealer of android smartphones
Social
-aging demographic
-gender
-for business or personal usage
-life style
-population growth rate Technology
- World-class cutting-edge technologies across industries, including in IT, semiconductor, telecommunications and imaging.
- Samsung launched phones with HD sensitive touchscreen.
- expanding its market leadership in the memory business by demonstrating superior technology and dramatic cost savings.
- Leading innovation in electronic devices with competitive R&D and trailblazing process technology.
- Continuous eco-friendly, next-generation technology excellence and leadership in light sources in the LED industry
- Advanced pixel technology Isocell in premium mobile devices brings clearer and higher-quality pictures.

Social culture
Singapore with a population about 5.4million in 2013, increase 0.9% from the year 2010. Singapore is the 25th quality city globally, has a highest quality of living in Asia. (Mercer, 2013) Singaporean are living in a better economic condition in term of living lifestyle and GDP comparing with neighboring countries. Singapore has brisk experiences in trading condition of retail sector all year round. With an increase in expendable income, household income, and great retail promotion, therefore, people will spend on luxury items, automotive and household items, such as furniture, electronic and so on. This has been attracted a lot of branded companies to set up their business in Singapore such as Samsung. Through the household expenditure survey 2007/08 by singstat, with almost 99% of household had at least one television set and refrigerator, and also with the rising of standard of living, household appliances such as microwave oven, air conditioner and washing machines have steadily increase to reach 61%, 75% and 95%. Furthermore, for the convenience of mobile phones, the proportion of household with a mobile phone has increase sharply from 7% in the year of 1992/93 to 95% in the year 2007/08. Besides that, in this era of advanced information technology, all sort are in the fingertips, personal computer and internet are not an exception. As the result, both of these have also become common.

Source: Essay UK - http://www.essay.uk.com/free-essays/marketing/samsungs-target-market.php


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Table of contents

Executive Summary

Introduction

Overview of Samsung
Development of Samsung
Company structure

Samsung mobile external environment analysis
PEST Analysis
Political factors
Economic factors
Social-cultural factors
Technological factors
Porter’s five forces analysis
Bargaining power of Suppliers
Bargaining power of Customers
Rivalry among existing firms
Threats of new entrants
Threats of substitute products of services

Key drivers of the mobile industry to influence Samsung international performance
Technology
Regulatory
Cost reduction
Buyer power

Evaluation and recommendation

Conclusion

References

Executive Summary

Samsung Group is a giant multinational enterprise composed of more than thirty affiliated corporations in various industries. Samsung Group is acting a significant of roles including supplier, designer, engineer and producer etc. As a global conglomerate, Samsung has achieved a great success in both domestic and foreign markets. Samsung mobile business has contributed enormously to the whole company, providing mobile phones that satisfy consumers’ needs. Samsung maintain the first position with innovated products, such as the Galaxy S5, Galaxy Note 4 and Galaxy Note edge across the whole mobile and smartphone markets in the world in 2014 (Samsung annual report, 2014). A closer look will be taken on Samsung’s mobile communications business. As Samsung intends to expand global footprint, international business strategy would be adopted inevitably by the company. The purpose of this paper is to exam a case of Samsung Mobile and explores how the environment impacts on Samsung’s international strategy by using appropriate strategic tools.

Introduction

Samsung Mobile is positioned as one of the best mobile phone manufacturers successfully. It is developing quickly and wins a great amount of market share in mobile industry. The business philosophy Samsung follows is to devote all the talents and technologies to create superior products and services that make the society better in a global range (Samsung n.d. Values&Philosophy). This report will firstly take a brief look at Samsung by viewing the company’s development history, corporate structure and what international strategy it is now undertaken. Then strategic tools are going to be used to deeply analyzing both the company’s internal and external environment. Key drivers of the mobile industry will be identified and how they interact to Samsung’s international strategy will also be explained in this report. Finally, historical examples will be provided to support the findings above.

Overview of Samsung

Development of Samsung

Samsung Electronics was founded as affiliated corporation in Korea in 1969 for the purpose of promoting growth for the Samsung Group (Samsung n.d. History).When Samsung decided to start mobile phone business, this move was considered thoughtless by industry observers. However, entering mobile phone business helps Samsung own a lot of profit and obtain high reputation, and finally achieve a great success in global market. About 320 million people are hired by the corporation in 84 countries (Samsung annual report 2014). The corporation has acquired KRW 206 trillion sales and KRW 25 trillion profits in 2014 (Samsung annual report 2014). Samsung Mobile is one of the three segments of Samsung Electronics.

Company structure

As the figure1 shows below, the company is divided into three departments, including component department, consumer electronics department and IT/mobile department (Chun 2015). IT/mobile department has three divisions including wireless divisions, network divisions and media solution division (Chun 2015).

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Figure1-Organizational structure chart of Samsung Electroincs (Chun 2015)

Samsung mobile external environment analysis

When formulating an international business strategy, Samsung should take external environmental factors into consideration. There are various theoretical tools that help analyzing the external environment, such as PEST analysis, five forces analysis and external factor evaluation matrix. Due to the lack of internal resources, external factor evaluation matrix cannot be applied to exam the company.

PEST Analysis

None of the enterprises can prevent itself from the impact of the macro environment, thus knowing how the environment will change seems to be vital. There are a great number of factors that can influence the company; therefore, it would be impossible to identify all the factors and the extent they affect. Finding the key factors and clarify how they interact would be more practical. PEST analysis is used to explore external macro environment independent of the firm’s size, including political environment, economic environment, social-cultural environment and technological environment; however they are also composed of different aspects respectively as the graph shows below (CIPD 2011).

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Figure2–PEST analysis

Political factors

Political stability should be taken into consideration if the company wants to sustain long-term development. Recently, the strained relationships between North and South Korea may result in war breaking out in the Korean Peninsula. The future of China seems to be uncertain from political and economic perspective. Moreover, there are rising tensions in Russia, Middle East and Brazil. Instabilities in African and Latin American countries which lead to frequent changing governing structures also put pressure on Samsung. In addition, political laws and regulations established by governments should be taken into concern as companies must follow those rules. A higher tax rate, an increase in minimum wage, and stricter environmental standard and would lead to an adverse impact on the company, increasing its cost and decreasing profitability. Anti-unfair competition law helps protect domestic corporations from competing with foreign firms. On the other hand, a preferential trading rule encourages investment from abroad. Since laws and regulations are different in different nations, which makes international trade more complex. It is found that Samsung is involved in political a scandal which damages its brand image (Ji-Young, 2010). Overall the political risk of Samsung is quite low because of geographical diversification, administrative representation only in main capital cities and indirect sale through retail dealers (Simonin 2014).

Economic factors

Economic factors are critical in formulating business strategy since growth of economy, inflation rate, standard of consumption, and undergoing economic cycle significantly affect the company’s profitability. Appreciation in Won reduced profits by 25% in the second quarter (NewEconomy 2014). Financial crisis in 2007 affect the company’s profit significantly from 2.07 to 1.02 trillion won (Dudovskiy 2015). The global economic rescission is still ongoing, which will have an adverse impact on consumer purchasing power as consumers are reluctant to buy products. British exit from European Union leads to a quick depreciation in Great Britain Pound. The uncertainties of currency values arise which increase the price of gold. Because of the dramatic decrease in the crude oil prices, there will be an increase in US interest rates which leads to a higher investment cost. Additionally, financial risks in developing countries and economic depression in Eurozone may occur. In the unpredictable and instable economic environment would lead to higher risks in business and make the competition even fiercer. Thus expanding into the emerging and developing markets may help the company increase profitability and retrieve a loss from the mature and developed markets.

Social-cultural factors

Social-cultural factors are mainly demographic and cultural aspects of the external environment, including beliefs, habits, life-style, and status that may changing customer needs. Finding these factors implies size of potential market is predictable. Nowadays, almost everyone has a mobile phone, using it to communicate, find information, and have fun. Also, trend of sharing via social applications boosts the consumption of mobile phone produced by Samsung. The company should identify ways to adapts itself to various markets where it launches branches by tailoring products that can fulfill customers’ fast changing preferences. Samsung should behave in a local way to get itself used to the emerging market.

Technological factors

Technological factors can be regarded as the key force in mobile industry (Kim 2002). It is composed of manufacture and infrastructure (FreeManagementBooks n.d.). Technological advances include automation, quality improvements, incentives, cost saving and outsourcing (FreeManagementBooks n.d.). A mobile manufacturer has to keep up with the technical advances otherwise it will be soon left behind and leave opportunities for other competitors. Nokia would be a good example that is too slow to embrace smartphone technologies (FreeManagementBooks n.d.). In order to maintain the market share, companies need to follow and monitor the latest technology, seizing any opportunities available. To support the technical development, investment should be made to buy the equipment and hire top-talents. Using patents and licensing is a vital strategy to protect the company’s achievement as well.

Porter’s five forces analysis

Five forces framework emphasized five individual forces can determine the degree of competition in a particular industry (Porter 1979). The five forces are showed in the figure below.

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Figure3-Porter’s five forces

Bargaining power of Suppliers

There are hardware and software suppliers in mobile industry as mobile hardware and software can be separated (Savov 2012). The hardware suppliers seem to have weak bargaining power since there are a large number of equipment makers. Samsung Mobile’s success in early years is contributed mainly by the releasing profit margin friendly products, since Samsung Mobile can buy cheaper manufacture components than almost other competitors (Covert 2014). Samsung has the right to choose the partner they want to corporate with. Nevertheless, software suppliers may have a strong bargaining power as there are only a few, such as Microsoft. Firm would be placed in a weaker position when negotiating with monopolies. Overall, the company can have a high power if it can develop software by its own, like the case of Apple which develops iOS system.

Bargaining power of Customers

As customers have a plenty of purchasing choices in mobile industry, the bargaining power of customers is strong (Katkyama 2010). The highly aggressive pricing strategy is taken by Samsung and it spends a huge amount of money in marketing to target all segments (CCS 2014). Customers are price-sensitive and respond quickly by switching to another choice when product price increase as the competition is fierce in mobile industry. However, bargaining power of the firm can be strengthened if customer loyalty is built. In that situation, customers may be unwilling to change purchasing decisions if the mobile phone can show high social status and good taste.

Rivalry among existing firms

The competition in mobile industry is fierce (Mustonen 2010). The smartphone market is estimated as a duopoly with Apple and Samsung capturing most of the market share (CCS 2014). A great amount of investment should be made in R&D to keep up with the latest technological development (Brostoff etc. 2014). Only innovated products and creative technologies can differentiate products from others. It is reported that Samsung surpassed Apple and ranks first as largest smartphone manufacturer world-wide in the first quarter of 2015 (Rossignol 2015). However, iPhone is more advanced and dependable from customers’ view. It is noted that Samsung cannot match Apple’s marketing capability as data shows Samsung’s market share declined by 2.3% while Apple’s increased by 34.9% from 2014 to 2015 (PESTLEanalysis 2015). Samsung’s android system is considered inferior to Apple’s iOS. Moreover, Huawer’s share increased by 48.1% and Xiami’s share increased by 29.4% (PESTLEanalysis 2015).

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Figure4-rank of global Smartphone (Rossignol 2015)

Threats of new entrants

The entry barrier is low in mobile industry. An open-source solution is provided by Google known as the advent of Android (CCS 2014). Completed packaged solutions are provided by chipset companies such as Qualcomm known as the advent of turnkey reference designs (CCS 2014). All these trends benefit new manufacturers, especially China-based firms (CCS 2014). On the other hand, it would be difficult for firms to differentiate from other competitors and gain market share because of intense competition. Heavy investment in R&D is needed which lead to high cost that new entrants can rarely afford.

Threats of substitute products of services

Traditionally, the main function of a mobile phone is to make phone calls and send messages. These functions can be achieved through internet with multiple applications. A laptop and a pad would be a substitute for a mobile phone; however, it would be inconvenient to carry them around. It is predicted that there may be possibility that laptop being replaced by smartphone (Greenbot 2015). The threat of substitute is low, but new substitutes may be created in the future as technology develops quickly.

Key drivers of the mobile industry to influence Samsung international performance

Technology

Being viewed as the world’s leading innovative company; Samsung acquires advanced technology that enables the company creating latest innovative smartphones. Multiple layouts of functions besides browsing websites, listening to music, drawing pictures, taking photos and playing games are required. Product quality, reliability, and software compatibility also matters as rational customers would take these factors into consideration. Samsung Mobile as the largest Samsung community around holds the concept of providing “fashion-leading technology”. Since the early 1970s, Samsung was devoted to catching up with foreign technologies. After nearly twenties years, the new product development gap behind leading firms is reduced to less than a year (Verbeke 2009). Effects has been made by Samsung in enhancing R&D and in investing high-tech firms such as AST Research and LUX (Verbeke 2009).Samsung’s technological position is improved by building an R&D lab in Silicon Valley and employing experienced engineers from leading companies such as Intel and IBM (Wilkins &Schroter 1998). A large amount of investment is made by Samsung in expanding R&D and hiring top talents, which ultimately create innovative products and achieve remarkable performance, including the smartphone with curved display. Samsung’s strategy of heavy investment in technology leads it the way to future success.

Regulatory

Lessons should be learnt from Apple of which design and technology has been imitated by other competitors, bringing legal and regulatory troubles and scrutiny (Buckler 2012). Samsung is facing with lawsuits related with patents and copyrights and has to spend billions on them (Simonin 2014). Therefore, application for patent on creative designs and innovative technologies should not be made immediately. It is not only how fast the product presented to customers that matters, but also how difficult the techniques can be copied and utilized.

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