Principles of Marketing
Introduction
Organizations cope with the competition by devising strategies to integrate their goals, policies and action into a cohesive whole. This can be applied to any level of the organization and may concern any of the functional areas of the organization. Thus, the strategy may involve production, financial or marketing. If the strategy is to focus on marketing, it may be based on pricing, product, promotion, sales, advertising strategies. Strategy is primarily concerned with the effectiveness and the process of analyzing the environment and designing the fit for the organization (2000).
One of the strategic issues that needs to be addressed is the competition in the market. By analyzing the competitive position of the organization, it can lay out the appropriate market positioning strategies to cope with its competitors. Samsung has strategically position itself in the electronics and communication industry through product differentiation. It continues to invest on product design and development that are difficult to copy by its competitors. With this, the company is able to achieve its main objective of being a global household name.
Company Background
Samsung Electronics Co. (SEC) is one of the several companies existing within the Samsung Corporation. In comparison to its chaebol counterparts Hyundai, Daewoo, Lucky-Goldsatr and SK, Samsung has made significant world leading shift form a follower to a leader in the introduction of innovative new products. From the start, the objective of the company was to enter a large scale production of key products with the initial route through the manufacture of imitation products. Many of which are based on its Japanese competitors (). It gradually moved forward move forward and introduce new technologies. To date, Samsung has been recognized as a global name in electronics and communications products. It aims to maintain its position by embarking in further developments and innovation of its key products.
Samsung’s Strategic Objective
Samsung Electronics is well known in home, mobile, office networks and other core component businesses. It has used a variety of approaches to improve its competitive positioning in the global market. Strategically, Samsung wants to be a global brand that is a household name wherever its products are available. Its strategic objective is to create qualitative and quantitative growth and deliver competitive value to the customers while maintaining profitability ().
To accomplish this, Samsung integrated the Six Sigma to its entire business process to perfect its approach to products and processes. It has pursued a goal of developing its resources to promote the development and design of products. The Six Sigma includes the Design for Six Sigma for designing new products. These initiatives have led to the recent growth of the company. It has become one of the top global electronic manufacturing companies with bets operating profit rations and superior fiscal soundness. Its debt ratio is also lower than any other company ().
Competitive Strategy
The failure of the company to choose between cost leadership and differentiation means that the company is stuck in the middle with no competitive advantage. As a result, the company may suffer poor performance. There are various strategies adopted by companies to maintain competitiveness. A common adopted framework is by considering firms according to their roles in the market. Thus, firms may act as a (1) market leader (2) market challenger (3) market follower (4) market nicher.
Samsung has shifted from its status as a market follower to a market leader. As a market leader, the company has the largest market share in its products. This leadership is exercised with regards to price changes, new products and the intensity of promotions. Due to the large volume of sales, market leaders enjoy the benefits of economies of scale and accumulate experience that helps them to reduce costs and boost profits (2000).
On the other hand, the competitive advantage is built on the core competencies of the company. By describing the distinctive competencies and relating them to the core products, the company can develop a purposeful plan of using those capabilities. In searching for the competitive advantage, the business must develop its capabilities in key functional areas. Such capabilities must be difficult to imitate if the company is to remain sustainable (2001). Competencies can be developed internally through the focused investment in R&D or acquired through external arrangements. However, internal development is expensive and beyond the means of smaller organizations. Even so, Samsung being a global company has managed to invest tremendously in its R&D. In turn this has resulted to the introduction and design of new products that are differentiated and hard to imitate. In this sense, Samsung’s competitive advantage is its distinctive product design and brand strength. This core competence is consistent with the strategic intent of becoming the leading global name in the industry.
Market Positioning Strategy
Strategic intent is concerned with the business direction for the foreseeable future. It creates a sense of urgency requiring competitor focus and search for the weaknesses in the position of competitors that can offer competitive advantage to the company (2000). ‘Becoming the world leader in electronics and communications’ is a strategic direction which can be powerful in organizing and motivating a concept. The strategic intent of Samsung can be powerful by focusing on its major competitors and thus identifying the standards it must surpassed or the mechanisms it has to avoid at every aspect of the business.
Samsungs’ positioning strategies focus on the recognition of the brand in different markets. It aims to establish and maintain a name in the electronics and communication industry. The Korean Company, Samsung Electronics is reinventing itself from being a me-too producer to a designer of electronic gadgets. It has a vision of becoming the Mercedes of home electronics. To achieve this, Samsung is striving to keep all of its products at the leading edge whilst adding value for the users (2006). Positioning Strategies includes:
· Product attributes and design
· Against competition
· Away from competitors
The positioning strategy used to acquire a competitive advantage is dependent on differentiation. Differentiation strategy is one in which the wide range of quality products are offered for the convenience of the customers while providing added services and value. In this particular strategy, the product offering is different from other competitors in a way that is valued by the customers. The added value affects the choice of the customers and their satisfaction of the product. Strategies that do not rely on low cots advantage are differentiated in most ways. There are many ways of differentiation such as doing something which cannot be done better by the competitors (2000).
Differentiation needs to be difficult to copy. A creative organization with a heavy R&D investment can create such differentiation. Samsung set the target of becoming one of the top electronic companies in the world by creating a reputation for innovation, world leading technology and high quality, not low cots production. In 1993, Samsung was determined that the only way forward is to shift from becoming a follower to a leader. This was done by innovating in all areas that it could. The company has come to recognize that cheap and fast production is a thing of the past and that it has to equip itself with new capabilities. Thus, it has to make innovations in its processes and strategies (Jones, p.124). The company needed to become customer and market oriented and a developer of new technologies.
During the following seven years, Samsung has moved from the quality emulator to a technology rich leader. All of its products are innovating and class leading. From the world’s first 256M DRAM chip in 1994 to the world’s lightest CDMA phone, the fastest CPU and the first 30-inch LCD in 1997, Samsung has continually innovated with the first mass produced digital TV in 1998 and the fastest 1G CPU in 1999. It has also remained to be the leading manufacturer of microwaves and has the largest market share of other product areas including LCDs and digital TVs. Samsung was also known for its mobile phones, notebooks and monitors ().
The ‘Samsung Digitall – everyone’s invited’ slogan manifest the commitment of the company to digital technology as its core competency needs to expand the number of world leading products. In 2001, Samsung’s product range included integrated TVs, MP3 players and mobile phones with integral TV and MP3. Samsung has continued to use and promote innovation as the key enabler of growth and driver of technology evolution (). In Samsung, the products are designed by teams from various specialties. Many of the new designs are acquired outside the company and committed to customer research and testing. Because of this strategy, Samsung have been recognized for the production of innovative product designs. In 2004, it has received five citations from the Industrial Design Excellence Award (IDEA)-more than any European and American competitors- and 33 total top design awards in the United States, Europe and Asia. These designs have fostered increasing value and market share (2006). Undeniably, Samsung has made progress during the previous years. Its future will depend on the ability to continually anticipate the changing demands of the customers and maintain the advantage over its competitors.
Strong Brand Name
Differentiation strategy can also be achieved through the creation of strong brands to acquire brand equity. This proved to be sustainable since it creates competitive barriers. A high recognition of a strong brand name can be an enormous asset for the company. It generates value to the customers that can serve as enhanced brand loyalty. Brand equity is a set of assets linked to the brand’s name and symbol that add or subtract from the value provided by the product to the company or the company’s customers. These assets on which brand equity is based come in four headings:
- Perceived brand quality
- Brand awareness
- Brand identity
- Brand loyalty
Viewing the market as global, Samsung has invested heavily on product design. Today it has built not only brand recognition but also brand loyalty and brand equity as one of the top technology companies globally. It has helped the Korean customers to embrace wireless communication and broadband internet access. As a result the market has been filled with consumers who await the new gadgets from Samsung. Aside from its Korean market, Samsung has also become the brand of choice for consumers in Russia and China. It is also beginning to penetrate the US market in partnerships with Dell, Hewlett-Packard and IBM. Samsung is spending millions of dollars for advertising campaigns to establish itself as a recognizable brand among the American consumers ().
The brand identity helps to simplify the customers’ buying decisions because the brand serves as a form of identification that signifies a particular level of quality, price or value and support. The term brand as defined by the American Marketing Association is a name, term, design or symbol or any other feature that identifies the good or service as distinct from others. From this definition, it is clear that the brand encompasses all the attributes, both tangible and intangible, that the customers perceive as made exclusively for them. Simply, it is the consumer’s perception of the products and services of the company (2006).
The brand image is developed through the customer’s experience of the product either through marketing activities or through information outside of the company. Samsung’s image is developed by continuously reinventing itself to being the top designer of state-of-the-art electronics and communications products (2006). The positioning of the brand vis-à-vis competition must consider the distinctiveness of the brand. In this regard, Samsung has been effective in creating an image but maintaining it will require the company to keep its competitors at bay. Continuous investments in new product designs are necessary to maintain its position against Sony, Motorola and other emerging competitors.
Indeed, a strong brand name is essential to achieve the degree of differentiation over the competitors. The creation of a strong brand name is also achieved through advertising. Also, a number of variables besides advertising are good candidates for driving brand equity. This may involve the company’s reputation for innovation, the consumer’s loyalty for the brand and the company’s market segmentation and brand positioning.
Samsung has shifted from an image of being a relatively lowly supplier of low-priced electronic products of mediocre quality to an image of a prestigious, high quality and innovative brand. During the 1990’s, Samsung made and effort to develop its image. It has succeeded well considering that even Intel hired the marketing director of Samsung. However, its success is not as simple as it may have seemed. The electronic industry is a highly competitive and fast changing industry where leadership is not always guaranteed. To achieve its current position in the market, Samsung launched a massive internal effort to support the production of high quality products at the forefront of innovation. For example, Samsung has managed to surpass the long term innovative Sony, a manufacturer of state-of-the-art displays and threatens the existence of Nokia, as a global supplier of state-of-the-art cell phones (2005). In the case of Samsung, advertising may have played a critical role but innovation and quality controls are also important elements of its continuing success.
Conclusion
The positioning strategy of Samsung is based on differentiation. Differentiation strategy allowed the company to introduce new product offerings that is different from those of the competitors and is difficult to copy. Samsung became determined to move forward from becoming a follower to a leader. This was done by innovating in all areas that it could. The company has come to recognize that cheap and fast production is a thing of the past and that it has to equip itself with new capabilities. This recognition has led the company to produce products that are innovating and class leading. Also, the company’s reputation for innovation has led to the development of its global brand name which in turn generated consumer’s loyalty.
Today, Samsung is one of the fastest growing global brands. It has evolved from being a mediocre brand to its current position. The success of the company is attributed mainly to its shift towards a technology designer. Also, it has successfully entered new markets such as mobile phones by offering premium priced products. This has helped to give the company an edge it never had before. In addition to this, Samsung made significant shifts from being a follower to leader in introducing innovative new products. It has fully embraced digital technology that has placed the company at the leading edge.
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