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Samsung MobileMarketing Strategic Plan
By Zaki Krichi
Professor : Marco Protano
Executive Summary1. The strategic opportunity is: the “virgin” flexible smartphone market
with 30% lower cost than the ordinary smartphone market, with a 9 months time advantage for samsung compared to the competitors who are planning to launch their products in the Q2 of 2014.
2. Critical Protano’s 8C insights: Category, still a “virgin” unexploited terrain.
3. The strategic alternatives are : Product: Create a flexible screen smartphone only in the high end segment or Create a flexible screen smartphone in all segments. Place: Use an exclusive distribution channel or sell the product through all existing channels. Price: Charge High Prices or Charge Normal Prices.
4. The recommendations are :
Product: Create a flexible screen smartphone only in the high end segment. Place: Use an exclusive distribution channel. Price: Charge High Prices/ Skim pricing strategy.
GE McKinsey Matrix for SmartphonesUnattractive Average Attractive
Weak
Average
Strong
Disinvest Phased Withdrawal
Double or quit
Proceed with care
Proceed with care Try Harder
Cash Generator
Growth Leader
Leader
CategoryThe Smartphone Market is very attractive, market studies recorded a growing demand in this category , In the fourth quarter of 2012 smartphone sales recorded a 36% growth.
The Market Potential is 225 million Units, 55% penetrated (123,75million units)
The Category is : Communication devices supporting apps.
The growth of most technology markets slows rapidly once the 50% penetration is reached
36% growth rate may sound like a big number, but it was 3 points below the projected 39%. A year earlier, smartphone growth was 55%, far above the 40% growth firms had projected.
CompetitionCompetitive Advantage :• Superior Technology & Innovation• Superior Collaborators
With the new technology, Samsung has a Blue Ocean Opportunity
Smartphones :
Samsung 25.7% share
LG 18.2%
Apple 17.1%
Motorola 11.2%
HTC 6.3%.
OS:
Android was also on top of all smartphone operating systems with 52.6%.
iOS has 34.3% of smartphone platform share
BlackBerry 8.3%,
Windows Phone/Windows Mobile 3.6%
Symbian 0.7%.
Porter’s 5 Forces
Substitute ProductsLevel : Very High
Why : Non-flexible-screen smartphones can replace flexible-
screen smartphonesHow to mitigate the risk : By
communicating the benefits of the new technology, and
emphasizing on that the old smartphones are outdated
Risk Of Cannibalization
Bargaining Power of CustomersLevel : LowWhy : Only Samsung who can offer customers the flexible-screen smartphones for now.
Bargainig Power of SuppliersLevel : LowWhy : Smasung is vertically integrated, they manufacture their own parts
Threat of New EntriesLevel : High
Why : The technology is available for some competitors
How to mitigate the risk : Be the first to get into the new market
and create barriers.
Intensiey of RivaleryLevel : Low
Why : only few competitors can afford the new
technology
Company
Relative Strengths
• Samsung relies on itself to supply its materials
• Innovative technology• A Stable Growth in
smartphone industry (average 30%)
Relative Weaknesses
Insight
Samsung is the leader in the US smartphone segment
Company
Opportunities
• The new flexible screen technology (30% less costly)
• Market potential not fully exploited, a remaining 45% (101,25 million) is still a huge opportunity
• The consistent and tremendous smartphone market growth (55% in 2011, 36% in 2012)
Threats
• Risk of cannibalization (new products may cannibalize the old ones)
• Possible (very probable) entry of other competitors to the new market
Possible increase in sales and market share and capitalNeed numbers
Collaborators
• Google with its Android Operating System is the main collaborator for Samsung Mobile. Samsung has a 46% of market share from Google’s OS (Android), compared to 23% in 2011. Google is also collaborating with Samsung on the new smartphone “Nexus”.
Google’s Android drove Samsung’s success in the smartphone category
Context
• Innovation : The Flexible-Screen Smartphones use plastic instead of glass
30% less costly than glass
Higher gross margin
Customers• What do customers value?
Applications : The more available on the OS app store, the more customers value the OS and therefore the smartphone.
Design : must be elegant and modern
Performance of the device : the highest and the best available in the market
Features : basic features like Bluetooth and Wi-Fi are mandatory, other features are preferable
The new generation of consumers is spending a lot more time on their smartphones than on their laptops
• Target?
Americans who are 14 years old or more.
Needs : a Telecommunication Device
Wants : a Sophisticated Smartphone
Alternatives• Product: Create a flexible screen smartphone only in the high end
segment.
Pros: better brand image and positioning
Cons:
1. Unexploited potential in the low end segments
2. The new product may cannibalize the old one. Create a flexible screen smartphone in all segments.
Pros: Exploit all possible potential in all segments.
Cons: Underperforming in one segment may harm the brand image and lead to losses of market share in other segments
• Place: Use an exclusive distribution channel.
Pros : ensure better brand image and high valuation of the product
Cons : limited access and coverage less market share Sell the product through all existing channels
Pros : ensure maximum coverage and market penetration
Cons : as a premium new technology, it may decrease the value of the product as perceived by customers.• Price: Charge High Prices.
Pros: Generate more profit, better positioning at the premium level.
Cons: not affordable by all customers. Charge Normal Prices.
Pros : better reach to the customers wallet.
Cons : Bad perception as a high end product.
Alternatives
GOST• Goal : Lead the Smartphone industry in all segments• Objective : Be the leader in the flexible-smartphone
segment with at least 90% of market share within the next year
• S:What business are we in? Flexible-Screen Smartphones
What competitive advantage are we using?
• Superior Technology & Innovation (Flexible OLED Screens)• Superior Collaborators : Google (Android) Are you using a supplying resource?
Supplying & using resources at the same time
Recommendations:• Product:
Create a flexible screen smartphone only in the high end segment.• Place:
Use an exclusive distribution channel.• Price:
Charge High Prices/ Skim pricing strategy.
GOST
Less cannibalization rate
T: SIVA : Invest in the flexible-Screen Smartphones
• Solution:
Create a flexible screen smartphone only in the high end segment.
The Samsung Galaxy S4 is to be launched mid April 2013, Therefore we should wait a little bit to launch the new flexible screen smartphone so that we reduce cannibalization rate. Our competitors are rumored to launch their first flexible screen smartphones on Q2 of 2014, we have to benefit from this given time by the customers and launch our flexible screen smartphone on July 2013, Introducing ourselves as the reference in this segment and gaining early leadership. This step will take us to a Blue Ocean for at least 9 months before any competitor can get in.
(GOST)Continued
Changing the customers’ perception about the old product is key for the success of the new product
Promotion/Information
• Before the launch of the product, Samsung should Invest a lot on advertising the new technology, customers must be aware of it. they should perceive it as a solution and as an upgrade that takes the smartphones into new dimensions.
• They should emphasize on the practicality an the utility of the flexible screens.
Preparing the marketplace to welcome the new product
The margins from flexible smartphones will cover the losses from cannibalzation
Pricing/Value• Skim pricing strategy
The absence of competitors will allow Samsung to benefit the most of the market, this pricing strategy is best for new innovations, and insures maximum profit.• The Pricing strategy will be as follows :
Launching price should be $500, as the product lifecycle of smartphones is on average 9 months, they should reduce their prices each 3 months by $50.
This is how it is going to be : July/August/September $500, October/November/December : $450 January/February/March/$400
On March, when the competitors are going to launch their flexible screen smartphone, They will find it difficult to compete with Samsung because Samsung has very low costs compared to the industry, and at a 400$ price, margins for competitors will be very low, therefore it is going to be hard to compete with Samsung in this segment.
CannibalizationWeighted Flexible Screen Smartphone unit contribution $ 46,11 Cannibalized S4 Unit contribution $ 37,89
Total Regular S4 Purchasers opting for flexible smartphones 18000000
Flexible Screen Smartphone total sales in units 57000000
Total Cannibalization Rate 32%
Total Cannibalized S4 contribution $ 2 973 238 095,24
Total Weighted Flexible Screen Smartphone Contribution $ 18 138 761 904,76
The margins from flexible smartphones will cover the losses from cannibalization
Total Regular S4 Purchasers opting for flexible smartphones 18000000
Flexible Screen Smartphone total sales in units 57000000
Total Cannibalization Rate 32%
The less available, the more valuable
Place/Access• Exclusive Distribution Channel for Branding
Reasons:
As a new technology, the flexible screen smartphones should be distributed exclusively, as Samsung is the only company who is going to be commercializing it.
Limiting access at the launch will create a “rush for flexible screen smartphones” in the next few months, as innovators and early adopters will buy the technology and will do the word of mouth marketing for the product.
S4
Total Revenue $ 21 600 000 000,00
Total Variable Cost f $ 6 245 000 000,00
Total Margin $ 15 355 000 000,00
Total units sold 57000000
S4 since flexible Screen Launch (July 2013)
Total Revenue $ 13 500 000 000,00
Total Variable Cost f $ 4 085 000 000,00
Total Margin $ 9 415 000 000,00
Total units sold 39000000
Flexible Sccreen Smartphone
Total Revenue $ 25 900 000 000,00
Total Variable Cost f $ 4 788 000 000,00
Total Margin $ 21 112 000 000,00
Total units sold 57000000
Total of both segments
Revenue $ 47 500 000 000,00
Variable Cost $ 11 033 000 000,00
Margin $ 47 500 000 000,00
Units 114000000
Exhibits
2013 2014
April Mai June July August Spetember October November December January February March
Samsung Galaxy S4 Expected Sales
Price $ 450,00
$ 450,00
$ 450,00
$ 400,00
$ 400,00
$ 400,00
$ 350,00
$ 350,00
$ 350,00
$ 300,00
$ 300,00
$ 300,00
Revenue $ 2 700 000 000,00
$ 2 700 000 000,00
$ 2 700 000 000,00
$ 1 600 000 000,00
$ 1 600 000 000,00
$ 1 600 000 000,00
$ 1 400 000 000,00
$ 1 400 000 000,00
$ 1 400 000 000,00 $ 1 500 000 000,00
$ 1 500 000 000,00
$ 1 500 000 000,00
Variable Cost $ 720 000 000,00
$ 720 000 000,00
$ 720 000 000,00
$ 480 000 000,00
$ 480 000 000,00
$ 480 000 000,00
$ 480 000 000,00
$ 480 000 000,00
$ 480 000 000,00 $ 5 000 000,00
$ 600 000 000,00
$ 600 000 000,00
Margin $ 1 980 000 000,00
$ 1 980 000 000,00
$ 1 980 000 000,00
$ 1 120 000 000,00
$ 1 120 000 000,00
$ 1 120 000 000,00
$ 920 000 000,00
$ 920 000 000,00
$ 920 000 000,00 $ 1 495 000 000,00
$ 900 000 000,00
$ 900 000 000,00
Expected Sales in units per month6000000 6000000 6000000 4000000 4000000 4000000 4000000 4000000 4000000 5000000 5000000 5000000
Samsung Flexible Screen Smartphones Sales
Price 0 0 0 $ 500,00
$ 500,00
$ 500,00
$ 450,00
$ 450,00
$ 450,00
$ 450,00
$ 400,00
$ 400,00
Revenue 0 0 0 $ 2 500 000 000,00
$ 3 000 000 000,00
$ 3 000 000 000,00
$ 3 150 000 000,00
$ 3 150 000 000,00
$ 3 150 000 000,00 $ 3 150 000 000,00
$ 2 400 000 000,00
$ 2 400 000 000,00
Variable Cost 0 0 0 $ 420 000 000,00
$ 504 000 000,00
$ 504 000 000,00
$ 588 000 000,00
$ 588 000 000,00
$ 588 000 000,00 $ 588 000 000,00
$ 504 000 000,00
$ 504 000 000,00
Margin 0 0 0 $ 2 080 000 000,00
$ 2 496 000 000,00
$ 2 496 000 000,00
$ 2 562 000 000,00
$ 2 562 000 000,00
$ 2 562 000 000,00 $ 2 562 000 000,00
$ 1 896 000 000,00
$ 1 896 000 000,00
Expected Sales in units per month0 0 0 5000000 6000000 6000000 7000000 7000000 7000000 7000000 6000000 6000000
Estimated Cannibalization
Regular S4 Purchasers opting for flexible smartphones 0 0 0 2000000 2000000 2000000 3000000 3000000 2000000 2000000 1000000 1000000
Cannibalization Rate 0% 0% 0% 40% 33% 33% 43% 43% 29% 29% 17% 17%
Cannibalized S4 contribution $ -
$ -
$ -
$ 448 000 000,00
$ 373 333 333,33
$ 373 333 333,33
$ 394 285 714,29
$ 394 285 714,29
$ 262 857 142,86 $ 427 142 857,14
$ 150 000 000,00
$ 150 000 000,00
Weighted Flexible Screen Smartphone Contribution $ 1 632 000 000,00
$ 2 122 666 666,67
$ 2 122 666 666,67
$ 2 167 714 285,71
$ 2 167 714 285,71
$ 2 299 142 857,14 $ 2 134 857 142,86
$ 1 746 000 000,00
$ 1 746 000 000,00
Thank You for your Attention
