Samsung Electronics - Report Example

Marketing Management II Introduction The purpose of the essay is to analyse the competitive position of Samsung Electronics in the consumer electronics industry. The position is analysed with the help of simple excel analytical tools which mainly highlights the profitability and market share of the companies. Among various consumer electronics product manufacturers and suppliers worldwide, Samsung Electronics is one of the largest electronic goods manufacturers headquartered in South Korea. The company mainly operates in Asia, America and Europe and competes with various global brands in this industry. Samsung Electronics ranked 8th among the World’s most valuable brands in 2014; furthermore, it ranked 22 in Global 2000 companies, 12 due its sales value and 9 for its profits in Forbes list as of May 2014 (Forbes LLC, 2015a). The phase of globalisation has shown severe competition in the consumer electronics industry. Furthermore, the ongoing economic slowdown has played a decisive role in judging the market feasibility of a product. Herein, the ongoing marketing strategies acted as an important tool that generated a control on the future expectation and helped to decide the exclusive market share and profit expectations of the market participants. While examining the present scenario of the consumer electronics giant, Samsung, specific factors are determined that has played a crucial role in its relative market share in terms of total revenue, net income, gross profit and growth rate in gross profit. In order to conduct a comprehensive competitive analysis of Samsung, its past performance is compared to a distinguished competitor, Apple, for the past three years. Industry profile The consumer electronics market has been evaluated with respect to the global industry. It was determined that in 2013, the industry accounted for $247.2 billion revenue represent a growth of only 0.6% between 2009 and 2013. However, further assessment revealed that the industry has contracted by around 1.8% in 2013. The consumer electronics industry has diversified significantly in past few decades and companies are competing heavily for maximising their market share. The industry offerings mainly comprise mobile communication device, portable and digital media player, television, peripheral devices, operating systems and other software, camera and others. Consumer electronics is essential an important part of global retail industry and consequently the industry is dominated by significant number of players by means of their marketing strategies. Presently the leading companies in the industry are Apple, Google, Sony, Samsung, Nokia, LG electronics, Microsoft, Dell and others. Samsung Electronics initiated its business in 1969 as television manufacturer and presently it is one of the market leaders undertaking horizontal and vertical business integration. The industry is competitive in the sense that the competitors sell similar yet moderately differentiated products, which provides the flexibility to sell at lower prices. However apart from huge investment in the infrastructure, it requires to sale products to mass population in order to have competitive profits. The industry report suggests that Samsung has dominated the major market of mobile phones and smart phones along with that of semi conductors. The market for personal computer was determined to be dominated by Lenovo, HP and Dell, to name a few (Statista, 2013; 2014a; 2014b). Competitive analysis Revenue growth One of the prominent competitors of Samsung in the consumer electronics industry is Apple. Apple sells relatively less number of products than Samsung in terms of variety but the company is one of the most valued brands in terms of innovation. The market capitalisation of Apple is $730.22 billion while that of Samsung is $193.99 billion. Apple witnessed a growth of 45% in 2012 with respect to its revenue in 2011 but the revenue increase from 2012 to 2013 was only 9% as a result of new product launch. The revenue growth of Samsung in 2012 was 33% more compared to 2011 but the robustness declined in 2013 as the growth was only 13% (Reuters, 2015; Apple, 2011; 2014; Samsung Electronics, 2011; 2014). From technical perspective, it can be argued that Apple is still the market leader irrespective of the stiff competition. Apple launched several new products in 2012 such as newer variants of iPhone and iPad and also the iCloud. In 12013, the company introduced MacBook Pro, iPad mini and iPod touch. In 2012, the revenue of Samsung improved as a result of several premium products that were introduced by the company in 2011. Unlike Apple, Samsung maintains greater diversity across its consumer electronic product range. In 2012 and 2013, it introduced several new products such as refrigerators, smartphones and others. It is argued that Samsung witnessed stronger growth in 2013 compared to Apple because Apple products are premium priced while Samsung sells products for mass as well as class consumption. However, Apple’s growth improved in 2014 while that of Samsung decline by certain margin in 2014and the reason that justifies this scenario is launch of iPhone 6 and its growing demand in BRIC countries (Apple, 2011; 2014; Samsung Electronics, 2011; 2014). Figure 1 (Source: Author’s creation) Figure 2 (Source: Author’s creation) Market share Market share implies the net percentage of total market sales which is earned by a specific company. Samsung initially started with manufacturing and selling of television, washing machine and other sizeable consumer electronics. It sold few low cost mobile phones and in 2010, the company has market share in smart phone industry as 4.3%. Samsung had a market share of 17.5% in the last quarter of 2010 and the same rose to 24.3% in fourth quarter of 2013. On the basis of shipment, it was determined that Apple was the second most popular smartphone brand in early 2012. With decline in the Apple’s shipment, the market share of Samsung improved dramatically between 2012 and 2013. Apple’s market share declined from 18.35 in 2012 to 15.3% in 2013. Another competitor of Samsung, Nokia, witnessed similar trend as its market share declined drastically from 36.4% in 2009 to 13.9% in 2013. The following pie charts represents market share of Samsung along with that of Apple and other companies operating in the smartphone industry. Only smartphone industry has been depicted herein because Apple and other corporations such as Nokia do not operate in the area of sizable consumer electronics. Market share of Samsung however declined by 9% in 2014 while that Apple improved by around 3%. From competitive perspective, Samsung was observed to have marginally higher market share than Apple (Apple, 2011; 2014; Samsung Electronics, 2011; 2014; IDC, 2015). Figure 3 (Source: Author’s Creation) Profit growth The growth in profit of Samsung has been compared with that of Apple for three years, that is, 2011 to 2013. The outcome has been indicated in the graph in figure 4. Apple’s profit in 2011 increased by 85% from that in 2010; the possible explanation for the same is improve in market share of Apple as a result of its innovative products. It has already discussed that Samsung was an amateur as portable device producer in the industry in 2011. As a result, it witnessed a decline of 14.9% in its profit in 2011 since 2010. In 2012, Samsung started launching high-end smartphones which were priced relatively less than its competitors. As a result, the product shipping and net income improved dramatically in 2012. 2012 was determined to be a growth year for Samsung, but growth declined for Apple. The review suggests that the gross profit of Samsung has improved but due to high operational costs, the net profit has declined. The growth rate declined for both companies in 2013 and Apple witnessed negative growth. On an average, it can be observed that Apple has relatively higher growth in these three years. However, Apple witnessed moderate growth in 2014 as a result of launch of iPhone 6 and iPhone 6 plus but Samsung’s revenue was observed to have declined in 2014 (Apple, 2011; 2014; Samsung Electronics, 2011; 2014). Figure 4 (Source: Author’s creation) Marketing strategy of Samsung Marketing strategies have undergone multiple layers of changes and presently all marketers are employing innovative and unconventional marketing communication techniques along with the traditional tools for establishing their superiority among other competitors. Samsung is no different in this regard; the company realised that if it did not respond to the market demand appropriately then the company will only be able to have access to meagre market share. Samsung has adopted an aggressive marketing strategy based on promotion mix of 4Ps of marketing mix so that they can establish customer leadership along with product and brand leadership. The marketing communication tools of Samsung comprise advertisement through digital and social media, print media, event marketing and sponsoring and promotional tools such as discounts and rebates. Samsung has also invested significantly in celebrity endorsement for better promotion of its technologies (Samsung, 2005; 2014; Wall Street Journal, 2014). Marketing trends of the industry The marketing trend of the consumer electronics industry can be explained in terms of the four Ps of marketing mix: Product: Market leaders as well as followers in the industry are increasingly focussing on producing high quality stylish products at a minimum cost. Cost advantage has become an essential trend in this regards and consequently most companies are producing hardware as well as associated software. The product category comprises both product and services associated thereof. The services include free delivery and installation (if any), product trial, free service and warranty (PWC, 2014). Price: The pricing strategy of the industry has shifted from premium price to market penetration strategy. Earlier the new launched products in the industry remained highly differentiated and thereby manufacturers had scope of charging premium prices. The scenario has changed significantly and presently, every competitor is launching one or more products in short intervals. Studies suggest that currently consumers have several choices regarding the price they want to pay. For instance, Consumer has the liberty of purchasing premium priced Apple iPhone as well as low cost Xiaomi android phone. Between the extremes, there are companies such as Samsung, Nokia, and LG, who are producing products of all prices (PWC, 2014). Place: Product selling is no more limited to physical stores and the revolution was primarily brought in by companies such as Apple, Microsoft and Google. Online selling has heavily gripped the electronics industry. Consumers place order by means of telephone or internet and the manufacturer either delivers it directly or gets it done by a third party. Additionally, physical stores have also improved significantly. Companies are not only selling by means of retailers and distributors by prominent market leaders such as Samsung are opening their own store for the purpose of direct marketing (Mulky, 2013). Promotion: Different companies in the industry are employing different promotional techniques besides the common tools such as social media, digital media and print media. Marketing measures such as direct marketing, personal selling, corporate partnership and event sponsoring have gained significant importance in this regard (PWC, 2014). In context of promotion and marketing communication, most organisations adopt one of the three strategies, namely, push, pull and profile strategies. In push communication strategy, companies deliberate force their products on consumers due to less brand loyalty. Pull strategy emphasises on attracting consumers on the basis of superior quality of marketing and promotional tools. Profile communication strategy is mainly developed for investors and shareholders and is not targeted to general consumers (Kotler, 2000). Marketing strategy of prime competitor, Apple Apple is renowned in the industry for its distinguished marketing strategy. The company has always been innovative about its every strategy including product development and marketing. The company not only produces outstanding products but their marketing strategy justifies the same as well. The company does not pursue common tools such as celebrity endorsing and digital media advertisement. Apple practically sells the brand and not just product through its marketing strategy. The make consumers believe that they are not buying a smartphone or mp3 player; instead, they are buying iPhone or iPod. The marketing strategy has been crafted in such a manner that it ensures that consumers can relate the products with their identity. Apple always creates an air of secrecy and speculation for creating buzz about its products. Being a luxury brand, Apple products’ demand is raised by creating temporary scarcity as scarcity only improves its desirability (Apple, 2013). Recommendations and conclusion Samsung was determined to be a market leader in the mass market but consumers prefer purchasing Apple and similar luxury brands when they consider making large investment. Samsung has not yet been successful in penetrating the luxury product sector. Luxury market penetration will enhance competitive position of Samsung and also revenue of the company. However, Samsung need to bring about variation in its marketing strategy. Over the years, Samsung has enhanced looks and features of its products but it needs to polish its promotional strategies as well. The company will have to include touch of exclusivity in its marketing strategy so that the product appeal enhances in the luxury sector. In this regard, pull strategy is proposed for the company. Samsung has developed several promising products and has no reason for pushing these products to consumers. Instead, tools of pull strategy such as customer relationship development, advertisement, social media marketing and sales promotion in order to increase brand visibility, should be adopted by the firm. The pull strategy will allow consumers to actively seek the product and thereby will improve its brand loyalty. Besides this recommendation, another recommendation can be made regarding looks of product of Samsung. Most of Samsung products look similar to each other and the same issue persists in Apple as well but Apple does add mild variation which again is absent in Samsung. On a conclusive note, Samsung is highly competitive and has made every possible effort to survive through stiff competition in the industry. Reference list Apple, 2011. Form 10-K. [online] Available at: [Accessed 17 March 2015]. Apple, 2014. Form 10-K. [online] Available at: [Accessed 17 March 2015]. Forbes LLC, 2015a. Target. [online] Available at: [Accessed 17 March 2015]. IDC, 2015. In a Near Tie, Apple Closes the Gap on Samsung in the Fourth Quarter as Worldwide Smartphone Shipments Top 1.3 Billion for 2014, According to IDC. [online] Available at: [Accessed 25 March 2015]. Kotler, P., 2000. Marketing management: The millennium edition. Upper Saddle River, NJ: Prentice-Hall. Mulky, A. G., 2013. Distribution challenges and workable solutions. IIMB Management Review, 25(3), pp. 179-195. PWC, 2014. Consumer electronics: Market analysis. [online] available at: [Accessed 18 March 2015]. Reuters, 2015. Samsung Electronics Co Ltd. [online] Available at: [Accessed 17 March 2015]. Samsung Electronics, 2011. Annual report 2013. [pdf] Samsung Electronics. Available at: [Accessed 17 March 2015]. Samsung Electronics, 2014. Annual report 2014. [pdf] Samsung Electronics. Available at: [Accessed 17 March 2015]. Samsung, 2005. 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