The purpose of this paper is to achieve the practical skills, based on the theoretical knowledge from the course of marketing. The object of the study is the production of Samsung touch phones and smartphones. The main objectives of the research are:
- to consider the marketing environment of the selected product;
- to conduct the SWOT analysis of the investigational product;
- to conduct the PEST analysis;
- to conduct the analysis using 5 Porter`s forces;
- to conduct analysis of the extended Marketing Mix;
- to learn about the order to move the selected product to the market and its pricing;
- to make the recommendations on the marketing strategies.
According to the analytical agency Markets and Markets, the total mobile phone market will reach over 341.4 billion dollars by 2015. The Smartphone will have to share 76% of all the proceeds that in 2015 will be $ 258.9 billion. Today, Apple is a leader in the share and growth rate. In 2015, according to Markets and Markets, it will have 26% profit. The second place is taken by Nokia. Samsung is one of the fifth most profitable companies in the following industry. Throughout 2010, the Smartphone’s market has shown the steady growth, and amounted to 12% profit. Only in 2010 1.278 billion mobile phones were sold, the total cost of which was $ 172.2 billion.
Background of Company
Today, Samsung Group – is one of the largest industrial groups in South Korea. It was founded in Korea in 1938 during the Japanese colonial rule. In the world market, Samsung is known as a manufacturer of the high-tech components, the telecommunications equipment, the household appliances, and audio and video devices (Lero 2009). The company has its head office in South Korea, Seoul. It employs 344,000 people. Samsung has r?c?rd?d KRW 254, 561,500 million revenues during December 2010. If to compare it to the revenue of December 2009, it is 15.6% up. The n?t pr?fit in 2010 accounted KRW 24,497,900 million, which is 38.7% up from 2009. The state of Samsung Electronics is 150 000 people, who are working in 134 offices and in 62 countries around the world (McGrath 2011).
Micro Environment: SWOT Analysis
S - In the market of mobile phones the company fills a niche for the price and the quality.
S – The products of the company are characterized by the high quality.
S – It is ranked to be the first among all the "pillars" in the market.
S – Has wide range of products
O - Development of the new customers
O - Providing new benefits and advantages for customers, which are better than in competitor companies.
O – Output of the new premium products.
O - Increase in market share.
W - Inappropriate interaction between units.
W - Possible lack of information about the potential and existing customers.
W - Insufficient information to the consumers about the new products and innovations in the existing ones.
T - Tightening the competition.
T - Weak consumer demand for the premium food products due to increased unemployment and a slowdown in disposable income.
T –Influence of the fashion trends.
T - Adverse developments that could jeopardize the image and reputation of the company
If to analyze the strength of the company it can be said, that the company creates the great amount ?f pr?ducts: mobile ph?n?, c?m?r?, audio/TV/video, c?mc?rd?r, personal computers, h?m? appliance, printers, m?m?r? cards, accessories, and etc. It is most adept in technology and features design. ?t appeals the customers by proposing fresh and unique design due to the strategy of understanding the customers` needs. The company`s main focus is made on the new technologies and innovations. It w?s the first one t? release the mobiles with the dual screen, 65k TFT/LCD c?l?ur ph?n?, the first ph?n?s with the option of rotating l?ns, with the polychromic ringtones, with the lightest and the thinnest n?t? p?d and others. Samsung has the benefits from Asian ?c?n?m? (Economist 2009).
The company has lots of opportunities to grow. Thus, major steps have been already done. Samsung Incorporation has already created the project to implement the production line of the air-condition category, which will use the powerful technology ‘Triple protection proposition’. Another project that will increase the number of sales and brand awareness in that the company is going to be the official India`s Olympic Partner for the upcoming Olympic games, which will take place in London in 2012. The company has already launched their big Olympic Ratna Program. In the future, Samsung is going to launch customized products in India market. Due to this, the position in the rural mark?t will be improved. In addition, the company is very strong in terms of financial positions (McGrath 2011).
Even though the company focuses on the innovative technologies, it fails in introducing them. In addition, the weakness is in similarity of the production of the company. Secondly, Samsung is orientated on the mass market, thus, the prices of the products are not very expensive. This makes the customers doubt about the quality of the products, however, the quality of the products are high. Thirdly, even though Samsung is ? number one in the production of hardware; it is very dependant from the other companies, where Samsung buy the software. Finally, Nokia still has the leading position in the phone market (Park 2009).
The organization of the product line in the company is made in such a way, that the failure of the one type of product can influence the other. The consequences can be the dilution of the following brand. Furthermore, China’s products, which are made very fast, can have the great influence on the further development. Another threat can be from the companies, which are orientated only into the one type of products, for example, Nokia creates only the phones. Thus, the customers will trust more for those types of companies; furthermore, those companies focus on the improvement of the only line of production, which makes the improvement faster and better. Finally, the more lines of production the company has, the more competitors exist. Samsung releases mobile phones and has such competitors as Nokia; TV-sets and has such competitor as LG; washing machines and has such competitor and Miele; vacuum cleaners and has such competitor as Philips, and etc.
Macro Environment: PEST Analysis
In order to evaluate the macro environment of the company, the four areas should be taken into consideration: political, economic, social and technological.
Samsung encounters considerable political concerns in those countries with which it works, although in majority of them the political situation is conducive. In recent years, the policy environment in South Korea has become a very concerned factor, due to political imbalance in the country. However, Samsung works not only in this country. In South East the political problems are worse. In these countries, the business has lots of disadvantages due to unfriendly environmental conditions. Such countries as China and India have created a favorable political environment, due to which Samsung can operate business better.
The main economic strategy of the company is a target strategy. The major consumer of Samsung production is the middle class person, thus, the majority of products are middle class oriented. Samsung has different types of products; however, most of them are not very expensive and affordable for the people in the countries, where the company operates. In addition, Samsung starts to release its products in those countries, where the following products have not been released before. Thus, it helps to increase the market share, overcome the difficulties with the competitors and sell the whole lifecycle of the particular product. However, these strategies can’t be used in the economically developed countries, where the market is full of the different products, and in those countries, where the products can’t be accepted, due to the poor financial possibilities (Yu 1998).
Although Samsung has been founded in South Korea, the company has very good name in the countries, where it operates. The cross cultural differences were fought with the help of the social strategy of the company with the logo: “Think globally, act locally” (Park 2009). The company has found the balance between the cost of the product, the quality and the possibilities of the customer. Due to this, the customer from each country, where Samsung operates, finds himself as those, who can afford to buy Samsung products. This strategy increases popularity of the brands.
As it has been already mentioned, one of the main aspects of the company is its focus on the innovative technologies. Thus, Samsung tries both to find out new approaches to the existing phones and to establish the new ones. The touch screen phones such as Champ, Star, and Galaxy S are very complex products in terms of their technology. The competition for them can make, perhaps, only smartphones. Regarding BCG matrix, the line of touch screen phones is designated as follows: the market share is high, the growth is slowed, and peak of the production is near (Park, Gil 2006).
Industry Analysis – by Porter`s 5 Forces
According to M. Porter, the main activities are grouped into five areas: incoming supplies, power of buyers, market entry, rivalry, and threat of substitutes.
Samsung has lots of suppliers all over the world: Thinpax Corporation Limited, Wentronic Asia Pacific Limited , Jiangmen Lilong Hardware & Electrical Co. Ltd, Acuce Co., Ltd, and many others (Park, Gil 2006). Nevertheless, Samsung needs to buy the products from the other companies; they have limited power, because the company works with several of them. The only thing is that, sometimes, Samsung depends on the time delivery of the elements.
Power of buyers
The customers of the mobile phones can be divided into the following groups: with limited needs (students, senior citizens, whose need is a simple no-frills model), standard users (teenagers and young people, using the standard features of multimedia and the Internet), and users with additional needs (a middle-aged people, businessmen, entrepreneurs and ordinary workers, who pay attention, besides the usual components, to the design). Thus, almost each person is a potential customer.
Samsung has very high market entry. The reason for this is that the company has created an extended branch of divisions though the world. The great influence on the market value has made releasing the products in China and India (Thomas 2005).
The major manufacturers of mobile phones are Nokia, Samsung, Motorola, Sony Ericsson. All the companies have released touchscreen phones with the certain differences, which are in active demand. However, today, Samsung is a leader in touchscreen phone production (Park, Gil 2006).
Threat of substitutes
Samsung Incorporation has very high threat of substitutes, first of all because of the existing competition on this field of business. Secondly, the following business is not very stable. New products are creating and developing every day, thus, the company should keep track. However, one of the major advantages of the company is customers’ loyalty (Thomas 2005).
Analysis of the Extended Marketing Mix
In order to provide extended Marketing Mix analysis, 4Ps (Product, Pricing, Promotion and Placement) and 3Ps (People, Process, Physical evidence) should be taken into consideration.
Samsung touch phones and smartphones have three levels of product: core (they are communicational and fast computing devices), actual (they are stylish, have high quality, great packaging and features), and augmented (they are added with local repair and free upgrade services, the warranty). The following products have high quality phone features, accessories; including headphones, charger, manual, and a stylish package (Park 2009).
In relation to the prices, the company keeps the average prices. The prices above that level were set only by Nokia. Other competitors have lower prices. Samsung Incorporation uses the market-based method (the leader + psychological pricing), settling up the prices. Until recently, the market leader in touch devises was Nokia. The prices for all models with the odd numbers are a little less than a round ones (Park 2009).
The company has three types of promotion (Yu 1998):
- Selective. The company provides distribution of its products only through intermediaries, who own special skills that allow them to offer these products to market more effectively;
- Intensive. The priority is to achieve the largest possible presence of the products in retail outlets, so the company tries to sell the largest possible number of outlets;
- Exclusive. The company sells its products through a limited number of intermediaries. The most commonly used in the luxury segment, to emphasize the exclusivity of these products
The company has been founded in South Korea; however, it earns the majority of the profit in the China and India. In addition, due to the marketing strategy, Samsung releases the new types of phones into those markets, where the competitors haven’t any.
Samsung Electronics finds an approach to each group of clients. The human resource management is very developed in the company. Thus, the workers have individual trainings and practical lessons on how to communicate, work in the team, to be polite (Thomas 2005).
One of the priories of the company is to make the process of production the goods as fast as possible. Thus, it introduces the new model of the phone not less than twice per year.
Due to the technological progress the way of buying the products became very easy. Samsung has created the vast amount of different online shops that is available to the customers all over the world, and where they can find whole information about the phone.
After analyzing Samsung Incorporation production line of touch phones and smartphones, the following recommendations can be done:
Firstly, great contribution to the existing profit can be made by establishing a direct link of selling products. Today, Samsung Incorporation has a lot of indirect links and they allow having an access to greater amount of customers. However, it has its drawbacks: insufficient resources to create its own distribution network and the standard product, manufactured in bulk, which does not require an individual approach to client. The direct channels occur, when the manufacturer of the product does not use the services of intermediaries and markets supply. Using the following type of selling, the number of the sold goods will be relatively increased; there will be sufficient opportunity to organize own network of warehouses and retail outlets in the markets, where the firm sells its product; this type is based on a personal approach.
Secondly, from the history the company is known to be the one, which is oriented on the middle class customer, releasing cheap, but high quality products. However, if the company wants to make better profit, it should try to be oriented on the first class customer. Thus, the production the premium class cell phones for the better price will increase the profit.
Thirdly, the company should decrease the amount of money, spent on the advertisement. According to the Samsung global marketing director, Gregory Lee, the company spends 4-7% of the turnover (last year it was $ 56 billion) on marketing targets. In 2005, 9.4%, or $ 5.3 billion was invested in R & D. In addition, the cost price of the design of the Samsung products is about 20% of its profit. Thus, it turns out that every year Samsung takes $ 15-20 billion to fit the image of the high-tech company. The point is that the company has already gained the image and needs only to maintain it. It would be enough to spend only the half of this money on advertisement and image.
Fourthly, the great advantage to the company will make the change of the perception of the brand. The company should be accepted in the market not as the Korean but as an international one. Changing the perception of the company should lead to the fact that consumers will relate to Samsung as a high-tech company, which stands on a par with such companies as Sony and Philips.
Fifthly, the company should develop new services and strategies trough implementation the personal approach. As the corporation is very big, it is hard to make the customer believe that the company wants to create the products in particular for him or her. As a rule, the general manual, which is added to the phones, is sometimes very hard to understand. The customers can be confused and frustrated. The creation of the online service, which will be available for every customer, will increase the amount of customers. Thus, each confused client can receive the information about the exploitation of the phone. The implementation of such service will erase the distance between the corporation and the client, establish the personal approach and make the additional free promotion.
Sixthly, the weaknesses of the company are the lack of information about the potential and existing customers and insufficient information to the consumers about the new products and innovations in the existing ones. Out of these, another recommendation will be created: to organize better customer research methods. The implementation CRM system will effectively attract new and retain the most valuable existing customers, lower the costs, increase productivity and, as a result, increase the number of sales and profits. It will lead to the establishment of the clear and transparent processes of interaction with the customers and partners, and build the effective marketing and sales, the customer loyalty, and the monitoring the consistency of all employees in the company. The following system will also combine several aspects: contact management and client base, sales management, telemarketing, time management, support and customer service (hotline, after-sales service), marketing management (including questionnaires, surveys and newsletters), reporting to senior management, integration with other systems, data synchronization,
management of electronic commerce (integration with the site of the company, a portal for customers and partners), and management of mobile sales (with a PDA, laptop or remote access) .
Finally, the company should keep pace with the development of science, technology and modern technology; provide new opportunities for the consumers of already released products; and establish pricing, based on the prices of competitors, not exaggerating or understating them.
Following these recommendations Samsung Incorporation will improve its position on the electronic market and become very strong competitor for the existing companies.
Thus, the paper has examined the company Samsung Electronics, in general the line of touchscreen phones and smartphones. Carried out the SWOT analysis of micro environment, the PETS analysis of macro environment, having used the 5 Porter`s forces and Market Mix analysis and came to the conclusion that the main strength of the company is the accordance between the price and quality. The PETS analysis showed that the company has very good economic strategies, thus, the advantage is in releasing the new type of product in the country, where the similar ones have not been released.