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Samsung Electronics Company (sec)

Essay by   •  April 15, 2011  •  Case Study  •  1,806 Words (8 Pages)  •  2,311 Views

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1.

Samsung Electronics Company (SEC) became an increasingly popular brand during the 1980's. It was primarily known as a manufacturer of cheap home appliances and despite its success as a commodity producer one head of marketing described SEC's position in 1990 as a "third-tier commodity brand with very little product differentiation."

This is in stark contrast with SEC's position in the early 2000's. By 2002 SEC had received multiple awards for industrial design, was associated with state-of-the-art products, like LCD televisions and video phone, and was one of the top three brands (by market share) in all of its major product categories.

SEC Chairman Kun Hee Lee began this incredible corporate evolution over the space of a decade. He launched the "new management initiative." The fallout from the Asian financial crisis, which showed the weakness of the previous system, aided this new thinking. This initiative combined a number of strategies, including Vertical Integration, an emphasis on hardware, product diversity, and a headlong R&D rush into the digital age.

SEC has never abandoned its focus on manufacturing. This core competency has been outsourced and viewed as a liability by other technology companies but SEC views it as a strength. SEC even requires its own plants to compete with outside companies for internal orders. This pressure has prevented the manufacturing wing of the company from descending into the commoditization trap: as the rest of SEC, attempts to become a premier tech company manufacturing cannot fall behind.

SEC's focus upon hardware is also unusual for a tech company. Unlike Sony or Apple, SEC has not attempted to develop software and content. It has focused on producing high quality hardware that content providers wanted design products for. This is a differentiation that SEC lacked in the early 90's.

SEC's transformation to market leader is also thanks to the leadership's decision to focus upon digital technology. SEC's vast R&D complex (and nearly $2.5 billion) focused on creating premium products using all digital technology. This allowed SEC to leapfrog past its better known competitors who had carved out a market share of the digital world. Its vertical integration and focus upon manufacturing its own products allowed SEC to bring new concepts to commercialization faster than any competitor. This added flexibility and speed only became more important with the notion of digital convergence. This is the notion that digital technology allows for multiple services to be provided by one product; the end goal is for a single SEC product to control all of the electronic devices in a single household.

Marketing at SEC had to change dramatically as the company shifted from being a product-driven company that competed based upon price to a company that would compete based upon how much value a single product added to a customer's life. Simultaneously SEC realized that as its brand gained a reputation for quality it needed to emphasize the corporate origin of its products and establish a "global brand."

These changes met resistance, as all changes do, from existing management. Their mindset was that the products sold themselves and were not sure of how to encourage customers to see "value" in their increasingly sophisticated and expensive products. The chairs attempted to distil the new company image into the catchwords of "wow," "simple," and "inclusive." This focused the employees on the new company identity: it created amazing products that everyone could learn to use.

Most challenging for the existing marketing departments of SEC would be the new emphasis on international coordination. While SEC previously had disjointed campaigns where every regional office would act in a way that maximized its own sales the new image of SEC had to be global and consistent. This would mean a loss of freedom for regional offices- in many ways this was final step towards the "vertical integration" that was envisioned in 1993.

To ensure that this transformation occurred marketing was divided into three sections, a general strategy team, a regional strategy team, and a product strategy team. SEC also consolidated its use of advertising agencies and slogans to allow for message consistency throughout the world. Perhaps most importantly SEC stopped assigning marketing budgets based upon what product was selling in what region and started assigning marketing budgets based upon growth potential. These new strategies culminated in the acknowledgement that SEC had been ignoring market-driven change and needed to pay more attention to what its customers were willing to pay for.

2.

SEC has been attempting to build itself into a global brand over the last decade. It has accumulated a number of deserved positives from its efforts but has also acquired several negatives. Many of these can be attributed to SEC's relative youth compared to Sony, Apple, and other tech companies. Among SEC's strengths is its perception as being inventive, high tech, innovative, and friendly. Some of the converse weaknesses are SEC being arrogant and off putting, difficult to use, or even being a quiet loner.

SEC managed to gain the high ground on some competition as digital technology surpassed analog as the industry standard. By the 2000's digital technology was simply the price of entry into the electronic consumer goods market and the investments SEC had made into R&D prepared it well for this new reality.

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