Questions for Samsung China Case

Q1.Major problems Samsung faces as it tackles the television market in China?

Q2.

Q3.

Q4.

How would you segment the Chinese TV market?

What should Samsung do in terms of STP

Suggest Samsung to adopt?

Samsung China: The Introduction of Color TV

International Marketing2008120000 Yi Yong Sup

2008120000 Yi Yong Sup

Contents Introduction

00 Contents

Problems

Segmentation

Strategy

Suggestion

Current Situation

Introduction

• China is socialist state.

• Competition Among Governments : Self-Interest vs National Interest

• Difference in Emphasis on Economic Profitability vs Social Profitability

• The Over Employment problem

• At 1995 China can produce 18,000,000 TV

• Prefer TV Size 18” 20” 21”

29"2% 25"

11%

21"36%20"

24%

18"23%

17"4%

Market Share

01Introduction

Environment

The Macro Environment The Micro Environment

First mover enjoy advantages Consumers had a tendency to be loyal to a first mover’s product

1994, China had 300millions house-holdsJust 41% of the households had color TV80% of 80million urban households owned color TV28% of 220milion rural household own color TV

Rural area mostly prefer(can afford) small TV sets 19” or 21”

Cheap labor

Large market potential (rural area)

01Introduction

Rural Urban0

50

100

150

200

250

PopulationTV Owners

Environment

OLED Organic Light Emitting DiodesChange color it self

AMOLEDActive Matrix Organic Light Emitting DiodesControl OLED

01Introduction

Braun tube TV (CTR)Cathode Ray TubeShot Electron Beam to all screenUse lots of electricity

LCDLiquid Crystal DisplayLots of Liquid CrystalOpen Close

PDPPlasma Display PanelLots of Liquid Crys-talTurn on & offMore ElectricityBut clear picture

LEDLight Emitting DiodeUse LED at the Back

2011 3/4

2011 1/2

2011 1/4

2010 2009 0

500

1000

1500

2000

2500

3000

3500

4000

PDPLCD

History of TV

Problems

Chinese Govt Product differentiation brand recogni-

tion Smuggling Piracy

Sony&Matsushita

Others

0 10 20 30 40 50 60 70 80

Market Share

02 Problems

Major Problems Samsung faces as it tackles the television market in China?

Competition

• Sony Matsushita (First mover) Brand recognition High-end consumer market share

• Japanese firms expand production (19->30)

• Late mover disadvantage (customer loyalty)

• China indigenous firms focused on low-end market segment

Segmentation

• High-end: Japanese firms, especially Sony and Matsushita with mar-ket share of 75% combined. Sharp, Sanyo, Toshiba, Mitsubishi, JVC, and Hitachi had also established significant market share

• Medium-end: Partly by multi national corporations and partly by local firms.

• Low-end: More than 20 indigenous firms

Segmentation

03Segmentation

- 17~29 inch TVs were available- Demand for small size TVs were shrinking, while mid~large screen color TV market was growing rapidly- Together the 20-inch and 21-inch screen sizes represented 60 per cent of the total in 1994- Chinese firms concentrated on the popular sizes (18~21)

Se-ries1

0% 10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

17-inch or less18-inch20-inch21-inch25-inch29-inch

03Segmentation

TV Size Segmentation

Strategy(STP)

Strategy

Samsung China:- Should target high-end market- ”Premium” brand image- Aligns with Samsung’s commitments at the time

Korean Headquarter:-Should target low-end market-per capita income is only $353-Competition with local firms is easier

Vs.

-China’s rapid growth-Hard to improve brand image when started out with low-end from the beginning

-Must build competitive advantage over Japanese firms-Need to increase marketing and R&D budget (Sony invests heavily on these)

04 Strategy

Strategy- Another plausible market: low~mid-end large screen TV

- Chinese firms only have expertise in 19~21 inches TV sets

- Samsung has technical advantage in large screen TV production

04 Strategy

Suggestion

05Suggestion

1. Consumption of polarization

2. New Consumer group (want to show one’s power, money)

3. Rapid urbanization

4. Thirties led consumption of car, leisure, appliances

5. Twenties are interested in advanced tech, IT technology

China

China Customers

05Suggestion

1. Compare with neighborhood, keep face

2. Prefer quality guaranteed foreign prod-ucts (High end products)

3. Before purchasing, there is on signifi-cant impact of reputation from others

4. Large regional differences (Income level, Cultural differences)

5. Quite sensitive to national pride

6. Sensitive to price (even if is low or high)

China (Low end) Japan (High end)

AdvantageHigh demand in rural areasFast cash conversion cycleExisting production facilitiesLoyalty of consumers in low-end market(Tend to keep buying from the same firm)

DisadvantageLow profit margin Market might change to high-end cen-tered in the long runFast growth of state enterpriseslocal firms have dominance in low-end markets

AdvantageDifferentiation from local firmsIncreasing purchasing powerHigh added-value per unitSamsung Electronic's global awarenesseconomy of scale (Europe, North Amer-ica)

DisadvantageLoyalty to Japanese firmsReplacement of production lineHigh promotion cost expected (for brand image)Collision with the Chinese government(domestic market-centered vs export-cen-tered)

05Suggestion

Samsung :Where should Samsung go?

Usage

Sound

Function

Design

Life

Quality

Brand

0 10 20 30 40 50 60

Consideration Criteria at China

China Company growth is so rapid

Making New Single Brand Which target low end mar-ket

Follow the Trend Product Advantage *(cell phones) Better technology (Develop New Tech : LCD) Bigger size

Ex) Samsung vs Sony

05Suggestion

High qualityLow price quality ratio

To protect advanced image of Samsung(Not just cheap product image fresh and easy brand) *(PUMA)

High end market

Design

Brand Repositioning :

Active support of cultural industries *(LG Concert) Cultural Marketing

Naming, designing (Orion, Whisen)

Logo, Slogan, Package

Contribution to society, build positive image

Localization of production personnel

Advertising should be attractive to customer- Loyal to specific brands- High Quality *(Korea Tire, Orion)- Chinese sense of pride feel proud to buy samsung- Using Celebrities *(Amore Pacific)- Holiday

Labor day, Dano, Harvest fest, National day

05Suggestion

To make Positive Brand AwarenessMarketing :

Current Situation

2005~2008 : First China Companies Cut price Market Share 80%

Follow : Korea Japan companies Low price strategy (2005 Samsung 40” TV 24000yaun 5990yaun 70%)

Market Share 50%~60%

ButThe war of cutting price made hard time2007 Sony Samsung recorded deficit.

06Current Situation

Current Situation

LCD TV PDP TV Projection TV0

20

40

60

80

100

120

140

160

2004 2005

10"~19"

20"~29"

30"~39"

40"~

0 10 20 30 40 50 60

20052004

2008• LCD TV 85%• PDP TV 15%

After 2008 Global Crisis China companies start to cut Price30% decrease

2006 년 China market share get over 50%2009 년 68% of the market share is China Company

06Current Situation

Change in TV TV Size

Recent Market Size

• 2012 4/4 China TV Market 12,690,00012% increase from 2011 4/427% increase from 2012 ¾ 9,960,000 (Price cut)

• 2012 More than 40,000,000 Color TV will be sale

• LCD TV 89.5%

06Current Situation

Recently China Companies

Such are in Global Top 10

Low cost + China Market

TCL

Hisense

Skyworth

ChangHong

Konka

0 100 200 300 400 500 600 700 800

20112006

Korea30%

Japan36%

China20%

Other14%

World TV Market Share

To become world's top China Companies are entering new emerging market (India, Pakistan, Sri Lanka, the Philippines, South America, Egypt, Africa)

06Current Situation

TCL 6Hisense 8Skyworth 10ChangHong 13Konka 14

China Company

CF) 42” LCD TV Price

Samsung : 8000yuan (1,450,000won)

vsChina Firms : 500yuan (940,000won)

China TV Market is 20~25% of World TV MarketInside China Samsung has market share 3%

Hisense Skyworth TCL ChangHong Konka Haier Sharp Sony Samsung LG0

100

200

300

400

500

600

TV Sale

06Current Situation

China is still big market

New technology AMOLED

More Big Size

TV Technology Internet access, variety of contents, cloud computing, M2M communication

三罔融合 Fusion of 3 network (TV. Internet. Communication)

以舊換新 Buy new TV = Govt give 10% of price

Samsung is… Smart TV, 3D TV Also making low price model

06Current Situation

ChinaChinaChina

Q & A

Thank You