Group5_Industry Analysis of Samsung Smartphone

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10th September 2015.

Industry

Analysis of SamsungSmartphon

e MarketingManagement

Group 5

Alok Kumar Nanda 1501065

Ankith Passi. R 1501069

Mayank Mani 1501085

Rajat Kdia 150109!

Ritsh "rma 1501095

Ru#al $a%d 150109&

Group 5

Alok Kumar Nanda 1501065

Ankith Passi. R 1501069

Mayank Mani 1501085

Rajat Kdia 150109!

Ritsh "rma 1501095

Ru#al $a%d 150109&



Contents

Introduction...............................................................................................................2

Marketing Objective.................................................................................................... 2

Situation Analysis....................................................................................................... 3

Segmentation and Target Market.....................................................................................6

POSITIONIN..........................................................................................................7

Product.....................................................................................................................9

Premium Segment Pricing Strategy................................................................................10

Place !"istribution#................................................................................................... 11

P$OMOTION..........................................................................................................12

%onclusion..............................................................................................................13



'ntrodu(tion

Samsung &lectronics unveiled Samsung ala'y S( and S( &dge as the successors to the

ala'y S) at Mobile *orld %ongress on +

st

March, -.+)/ The ne0 models sold ( millionunits in the first month but failed to break the record set by the S1 model in the same time

period/ %onse2uently Samsung reported a 1/-3 decline in earnings for 4- -.+) as compared

to the same period the previous year/ This is the seventh consecutive decline in 2uarterly

profits for Samsung/ Also in the same period Samsung has seen diminishing market share as a

result of strong performance of Apple iPhone ( and also due to increased activity of

manufacturers like 5, Sony and Motorola in the premium segment/

The reason for the diminishing earnings has been attributed to the sales figure of the S(

series/ The price difference bet0een the S( model and the S( &dge model is roughly 6+../

The management had estimated a demand for the S( and S( &dge in the ratio of 17+/ 8ut after

the launch of the product it 0as ascertained that the actual demand is in the ratio of +7+/ It

resulted in a huge inventory pile up of the base S( model and a corresponding shortage in the

S( &dge/ There 0as huge demand for the S( &dge model but a shortage in the market/ As a

result many of the prospective buyers of S( &dge ended up purchasing the S( model as a

result causing a reduction of 6+.. in the earnings per unit sold/

Marktin% )#j(ti*

To deal 0ith the challenge of diminishing earnings, decreasing market share and rapid

technological changes/

The last real flagship from Samsung that had the potential to be a market leader 0as the S9/ It

0as both cutting edge and 0as full of innovation both on the hard0are and the soft0are front/

The subse2uent iterations of the flagship model in the form of the S1 and S) have not been

able to push the boundaries set by the S9 model/ The initial e'citement for the flagship

models of Samsung has been diminishing over time as the consumers have found the

products to only have some marginal incremental improvements as compared to the S9/ This

has resulted in both the diminishing earnings and decreasing market share for Samsung/

In comparison to the previous models the S( has a high degree of engineering and innovation/

It has a uni2ue design and is loaded 0ith features that make it leaps and bounds ahead of the

previous flagship S)/ There 0as high e'citement and demand for the ne0 product but still the



results in terms of revenue and market share have been far from satisfying/ The marketing

objective for Samsung shall revolve around addressing the above mentioned issues 0ith the

help of S(/

+ituation Analysis

Smartphone industry is a market driven by constant environment changes/ The profitability

and efficiency of a company depends on its operations and ability to bring ne0 products to

market earlier than their competitors/ Many consumers look for smartphones 0hich can

replace many other electronic devices that they carry !such as 0atch, pedometer, etc/#/ :ence

number of features in a smartphone becomes vital for consumers to make purchase decision/

,(onomi( -a(tors

"uring the recession, economy had tripped, leading to increase in unemployment and reduced

purchasing po0er of the customers/ The consumer became more and more cautious about

spending their disposable income and their spending on lu'ury items such as smartphones

declined rapidly/ As a result many of the smartphone manufacturers e'ited the premium

segment resulting in the domination of Samsung and Apple/ Post recession, as economy

recovered, consumer fear decreased 0hich stimulated consumer spending/ As a result, ne0

competitors emerged in market, 0hich lead to strong competition for Samsung;s premium

smartphone industry/ The increased purchasing po0er of the consumers and also the

availability of a variety of products is resulting in a decreasing trend in the market share of

Samsung 0orld0ide/

%al -a(tors

The smartphone industry is governed by number of product regulatory, consumer protection,

environmental < safety la0s/ :ence companies are re2uired to develop policies to abide by

such regulations/ Also, majority of industry;s leader hold patents on numerous part of their

smartphones !hard0are, soft0are, etc/#, 0hich creates potential for infringement la0suits/

"uring -.++, Samsung and Apple Inc/ 0ere involved in more than ). infringement la0suits

against each other across globe over product patent, 0ith billions of dollars in damages being

claimed bet0een both the companies/ *hile Apple Inc/ 0on a ruling in its favour in =SA,

Samsung 0on rulings in South >orea, ?apan and the =>/ :ence, it is imperative for a

company like Samsung@one of the leaders in smartphone industry, to comply 0ith product

regulations/



/(hnolo%i(al -a(tors

A smartphone industry is characteried by constant changes in technology/ Bor instance, a

0ireless e2uipment manufacturer 0ould like to invest in supplier 0ho is capable of providing

multiple technologies for use in end@products !e/g/ a phone 0hich can provide more features

than just handle calls < messages#/ Since consumers constantly s0itch to ne0 smartphones,

companies should focus on developing smartphones 0ith innovative features such as faster

net0ork speed handling capacity, 0aterproof smartphones, capability of recording ultra@high

definition video, noise@cancelling technology, and long battery life/ Such innovative devices

is key to a company;s market gro0th/

Portrs i* -or(s

Porter;s five forces present an analysis of strategies 0ith respect to the five essential

elements7@ Supplier Po0er, 8uyer Po0er, Threat of Substitution, %ompetitive $ivalry and

Threat of Ne0 &ntry/

• 2omptiti* Ri*alry 3 The competitive rivalry is hi%h 0ith lots of high end models

from big players like Apple, Sony, 5, :T%/

• /hrat o N4 ,ntry 3 Threat of ne0 entry is lo4 because of factors such as high

$<" costs for such products, setting up the distribution net0ork and the supply chain

in emerging market like India/

• $uyr Po4r 3 8uyer po0er is lo4 to mdium because the effort and money

involved in buying S( is significant as this is turning out to be a specialty product

0hereas on the other hand, the numerous choices to consumers give them leverage for

s0itching/

• +upplir Po4r 3 Supplier po0er is also lo4 to mdium as the t0o most important

parts, the processor and screen are supplied by Samsung itself < 0ith the presence of

a large number of suppliers to Samsung but the difficult to replace an established

supply chain in this market/

• /hrat o +u#stitution 3 Threat of substitution for S( is lo4 because of the

useability, various not so easily replaceable functionalities and dependency of

consumers on S(/

+)/ Analysis



+trn%ths 8eing such a 0idely accepted smartphone brand it has consolidated its

position in the market because of its follo0ing strengths7@

• Soft0areCtechnology@ Superior technology allo0s Samsung mobile to better meet the

needs of their customers in 0ays that competitors can;t imitate/ Smartphone has

hard0are integration 0ith many open source operating integration and soft0are/

• eographical reach@ Samsung has the geographical reach, i/e/, it has e'panded itself

in numerous cities and countries and can be easily available/

• 5o0 production costs@ Samsung has marginally lo0 production costs as compared to

other companies in the same range/

• :ighest market share@ Samsung has the highest market share in smartphones category

so it is easier for it to promote a ne0 product/

• Product portfolio@ Samsung has the most diverse product portfolio and provides

numerous options to the consumers/

aknsss Bollo0ing are the fe0 0eaknesses of Samsung 7@

• 5acks its o0n OS@ Samsung smartphones lack its o0n operating system and soft0are

so they have to depend upon others for ne0 soft0are/

• 5o0 profit margin@It has a lo0 profit margin as compared to other big players/

• "eclining $<"@ The $<" is constantly designing/ So recently it has failed to come

up 0ith any innovative features/

• Perception 0rt apple@ Some customers still perceive Samsung as a cheap substitute of

Apple 0hich affects its brand value/

)pportunitis Analysing the present situation, there are fe0 opportunities for Samsung

to capitalise on/ These are7@

• ro0ing smartphone market@ The smartphone market is increasing at a very high rate

and there is still great potential in India/• Ne0 market platform@ Samsung is still lacking in its online presence and can

efficiently use &@market platforms for its marketing/

• Strategic collaborations@ Samsung can go for strategic collaborations 0ith other

players and can also look to obtain patents through ac2uisitions/

• Tien Operating System7@ Samsung has been developing the Tien OS to replace

android and develop its o0n application environment

/hrats Bollo0ing are some threats that it is facing or can face in follo0ing years7@



• Price 0ars@ It faces an intense price 0ar 0ith other big players such as Sony, :T%,

Apple/

• Technological change@ There is a rapid change in technology going on 0ith respect to

smartphone industry/

• "eclining margin@ The margin on hard0are productions is declining at a constant rate

0hich poses serious threat of maintaining the profit margin/

• %ounterfeits@ There is a rise in counterfeit products 0hich is very cheap as compared

to the originals and affects the overall sale/

+%mntation and /ar%t Markt

The market for Samsung ala'y S( &dge can be segmented based on demographics/ The

segmentation done belo0 is based the amount that people are ready to spend on the purchaseof a smartphone/ 8y segmenting on these lines 0e also implicitly capture segmentation based

on income, economic situation lifestyle and social class as all of these are reflected on the

amount the customer 0ill be 0illing to pay/ The segmentation is gender neutral/

a. 7 Rs. 10000

This is a market segment that is populated 0ith a host of phones providing basic to

moderate features/ There is a presence of both keypad and touch based phones/ The consumer

is at a tight budget and is generally looking for options 0here it can get ma'imum benefits0ith minimum outlay/ This is generally the entry point for consumers in the smartphone

segment/ There is a lot of competition to0ards the end of the price band/ The products in

these categories are highly price sensitive/ Margins are very lo0/ &conomies of scale is

re2uired to be sustainable/ Dolume targets for a manufacturer are driven by sales in this

category/#. Rs. 10000 to Rs. :0000

There is a lot of competition in the lo0er band0idth of this segment/ The customers

get to choose from a variety of heavily feature rich smartphones priced competitively/ Ne0

products from Motorola, Asus, 5enovo, Eiaomi, :ua0ei are competing in this sector/ This

segment is already heavily populated/ This is a very bottom heavy segment 0ith competition

and also products thinning as 0e move up0ards of the band0idth/ This segment generally

represents the first purchase or first upgradation of the consumer/ Samsung has a good

presence in the mid and upper band0idth of this segment/(. Rs. :0000 to Rs. ;0000

As 0e move up this market segment 0e find that the number of competitors has

highly reduced/ In this segment the products are generally the medium range products of



companies like Samsung, 5, Sony, :T% etc/ or the older flagship models of these

companies available at a discounted price/ The consumers are generally late entrants/

Samsung has a very strong presence and dominates this sector/d. <Rs. ;5000

This segment is the profit driver for smartphone manufacturers/ There are limited

numbers of manufacturers in this segment and all sho0case their flagship products/ These

products have a high price tag because it is a sho0case of the research, development and

innovation done by the manufacturer/ Apple and Samsung dominate this segment/ Also the

consumers purchasing in this segment are early movers and innovators/ They are prepared to

pay e'tra money for a ne0 product/ The sales volume may be comparatively lo0er but the

profit margin is significantly higher/ The performance of flagship models is also taken as a

bell0ether indicator for the future performance of the products and the manufacturer/ Also itis evident that in case a customer is provided 0ith added features he is ready to pay e'tra and

move up0ards in the price band/ There is al0ays a demand for ne0 products and also brand

loyalty comes into significance/This is the segment that ala'y S( &dge 0as launched in and it should continue to

focus on this segment/ The customers in this segment are generally people 0ith high net

0orth, 0orking professionals and businessman/ They are a target customer base 0hich gets

covered by this larger segment/ Samsung already has a significant base of loyal customers/

Samsung should look at a concentrated marketing strategy and differentiate it from the

marketing strategy of its other products to create a niche and a novelty factor for this product/

P)+'/')N'NG

Positionin% +tatmnt To cater young professionals, businessmen and high net 0orth

individuals 0ho need to be updated 0ith ever changing technology, Samsung is the ultimate

solution that gives them user friendly, cost effective, stylish and innovative product to stay

connected 0ith the fast moving 0orld/ It makes life easy and more effective/

"alu proposition

• =si%n and 2onstru(tion The design is one of the best/ Aluminium cover provides

much more premium look and feel/ The sleek and curved edges look classy/

• =isplay It has a super AMO5&" smartphone display/ Independent testing sho0s

that they are no0 highly colour@accurate and have outstanding brightness and

contrast/



• Prorman( It provides plenty of po0er for both general processing and for heavy

multitasking 0hen and if re2uired/ Samsung has taken an unassailable lead over the

iPhone in multicore performance/

• 2amra It has been e2uipped 0ith high mega pi'el camera and is capable of

shooting images of very high resolution/ This is supplemented 0ith optical image

stabiliation, a fast autofocus system, and an 5&" flash/

• ,as o us The features like 0ireless charger and side0ays touch s0ipe has been

added 0hich has enhanced the ease of use/

2urrnt s(nario As sho0n in the perceptual map, right no0 Samsung is a high

priced, generic inclined smartphone 0here it faces intense competition 0ith other big players

like Apple, Sony and 5 due to 0hich it has got a very limited area to gro0/ So, the market

gro0th of Samsung has recently been stagnated/

-utur +trat%y The high priced, business oriented segment of the market can be a

better place for Samsung to enter into as there is almost no competition/ The decline in the

market share of blackberry and lo0 price of Microsoft phones has provided Samsung a great

segment to position itself into as a market leader/ The potential for future gro0th is also very

high/



Produ(t

The Samsung ala'y S( &dge comes under the category of a speciality product/ The

consumers are 0illing to make a special purchase offer/ It is evident from the fact that there

are huge number of pre@ orders and advance bookings/ The customers have strong brand

preference and there is lo0 price sensitivity/ As a result it re2uires a targeted promotion andalso 0idespread distribution/

S( edge scores highly in the core customer value provided and the augmented product

sectors/ There is an area of improvement in the Actual product sector/ There is a need for

improvement in the follo0ing areas7@a. Produ(t Attri#uts7@

The introduction of 0ireless charging is a good innovation but the addition of

0aterproof abilities is a must as it is becoming a standard feature in this segment/ The 2uality

of the product is top@notch but still there are some manufacturing issues 0ith the curved edge/

It is important to solve that problem/

Another development in the high end smartphone segment is that there is a plateau in

the hard0are innovation and development/ As a result almost all the products in this range

have very similar hard0are specifications/ So Samsung should look at innovations in the

soft0are sector for differentiation because generally android operating system dominates the

smartphones in this segment/ Samsung is going in the right direction in this regard by

investing in Tien operating system as its future platform/ Also the market research sho0s

that as high as )+3 of the respondents are prepared to s0itch to a ne0 OS if they get all their

desired features/

So until the time Tien attains its full potential Samsung should look at developing itso0n apps for android to give a uni2ue user e'perience to its customers/ Also the feature to

use the curved edge of the smartphone has not been fully e'ploited/ Samsung should look at

making the curved display more functional and also provide more controls and notifications/

If the curved edge feature is optimally utilied it can result as a big differentiator just like the

stylus acted for the Samsung ala'y Note series/#. $randin%7@8randing is one thing that acts as a big differentiator in this segment/ ala'y S series

is a very strong brand in itself but still it is seen by many as a cheaper alternative to Apple/ So

Samsung has to put in a lot of effort to change this perception/ The previous strategy to

introduce a number of products in various price bands and the decision to launch various

variants of the same product !mini, duos, grand, neo, &tc/# led to confusion in the mind of

customers and cannibaliation for Samsung/ So to increase the brand value Samsung should

look at reducing the products in the product line/ Samsung should project this smartphone as

one that is suitable for businessman/ Samsung can go for greater collaboration 0ith Microsoft

Outlook to provide an incentive to its customers/(. Pa(ka%in% and a#lin%

The packaging and labelling can be used to sho0 the seriousness of Samsung to0ards

the environment/ The packaging should stress upon recycling and also have information

about ho0 much of the material used in the smartphone is sourced from recycled products



and also it can have a value of the carbon footprint of the smartphone/ This 0ill send a

positive message to the customers and also help improve the brand perception/

Produ(t in =(ision

Samsung has launched the S( and S( &dge as t0o flagship models/ The S( &dge isaround 6+.. more e'pensive than the base version/ Samsung should do a0ay 0ith the S(

variant because it is again resulting in duplicity, cannibalisation and confusion in the mind of

the customers/ Also Samsung should look at phasing out the previous ala'y S series

smartphones because that 0ould result in greater visibility and faster market penetration for

the S( &dge/

Prmium +%mnt Pri(in% +trat%y

Samsung faces tough competition 0hen it comes to premium segment from companies like

Apple and :T%/ Samsung has about 1(3 market share !latest 2uarter ?une -.+)# follo0ed

aggressively by Apple at about 1-3/ :o0ever these market shares keep on changing as per

the ne0 launches as 0ell as Aggressive Promotion/ :ence 0e suggest a Skimming Pricing

Strategy and a value based approach for the Premium Segment Smartphones

+kimmin% Pri(in% +trat%y and "alu $asd Approa(h

In this segment 0e 0ill al0ays follo0 a value based approach in pricing/ This

segment contributes ma'imum to the bottom line of the Samsung mobiles and hence the

perceived value of the Product is high as Samsung invests heavily on marketing every ne0

launch in this segment/ The idea is to increase the bu and boost initial sales of the product/The follo0ing are the key takea0ays

Price the Product up0ards of $s ).... for the base version and stretches upto $s

(.... for the top end/

Pre 8ook Prices and $etail Prices remain the same for almost 1 months/ This 0ill

ensure huge volume as 0ell as e'clusivity for the consumers/ Also the initial buyers

0ill have the premium category advantage if the Prices are not dropped during that

time/ The company;s Profitability is increased as 0ell/

As competition increases from rival launches and the ultra@premium market is

saturated the skimming model comes to play in the form of cashback, discounts and

special payment options like emi, ero do0n payment and bundled offers

As competition intensifies and the product cycle is about to get over the company

slashes the price to around sub $s 9),... levels to cash in aspirant buyers/

$uy$a(k Modl

In order to help high end consumers to s0itch from one smartphone to another 0e

0ill have to launch a buyback scheme for old smartphones and offer them prices higher than

0hat they 0ould usually estimate/ This strategy is to be used after the product has reached the

maturity stage// 8y offering them cash back of $s/+-, ... 0e 0ould essentially be giving



a0ay the Ne0 S( series phone in the range of 91k@9(k/ This 0ill have a t0o fold effect on

the consumer as 0ell as on the %ompany

$nits o this additional Pri(in% +trat%y

Birstly 0e 0ould have an entire ne0 target S&M&NT opening up if the effective prices are around 9(k/ A lot of consumers 0ould be shifting to the ne0 smartphone/

The company 0ould still be keeping the sticker price same, thus the premium

branding is untouched/

The resale value of the old smartphone 0ill result in effective discounts of around

9... for the company, hence impacting minimum in their profitability/

Pla( >=istri#ution?

/ar%t =istri#ution Markt 3 The target market for Samsung ala'y S( &dge is gender

neutral higher income group 0ith affluent lifestyle in tier I, II, III and ID cities/

2hannl Marktin% 2on(pt Modifying the traditional %hannel Marketing %oncept, 0e

see that Samsung ala'y S( &dge;s distribution is mainly concentrated on three fronts F

Sales < Service "ealers !&'clusive Stores#, Modern $etail and "istribution < &@retailing/

=istri#ution +trat%y 3 According to our market research, 0e conclude that Samsung

should not limit S( &dge to one marketing channel or distribution intensity, rather should

indulge in different strategies for different types of retailing/ Out of the -+1 respondents to

our survey, 0e found that GH preferred online purchase, &'clusive stores and only 9G from

$etailers or "istributors/

+/ ,@(lusi* +tors 3 *ith about 9(/-3 of respondents opting for e'clusive stores, this

is a major area that Samsung should look into/ The e'clusive stores should use an

Intermediary market channel 0ith an e'clusive distribution intensity, limiting the

Samsung *orld stores only to highly densely populated areas in metros and very fe0

in tier III < ID cities/ It 0ill give the customers a feel of uni2ueness and 0ill allo0

Samsung to concentrate its efforts in the form of offers and trained resources in these

stores/-/ Modrn Rtail and =istri#ution 3 The modern retail concept has been on the

decline 0ith only about +H/93 respondents 0illing to go to third party retailers/ The

marketing channel used should again be Intermediary and very diluted form of

intensive distribution concentrating mainly on modern retail like %roma, reliance

digital and Dijay sales/ T0o reasons, first in Indian market, mass distribution is the



long term strategy for a company 0hich has more than + type of target markets and

second, having phones like S( edge in public display makes an impression of highly

engineered product in people;s minds about Samsung and creates a future potential

consumer 0hen heCshe moves into the target segment/9/ ,rtailin% 3 The initial banning and subse2uent losses and market capture by other

brands has forced Samsung to enter into an agreement 0ith Amaon and Snapdeal by

providing e'clusive portals for its mobiles/ Our research clearly suggests the changing

trends and preferences of the target market to s0itch to convenient shopping 0ith e@

retailers 0ith 1)/)3 respondents preferring e@retailing as buying option/ This gives

Samsung the opportunity to indulge in "irect use of marketing channel 0ith Selective

distribution to allo0 its presence on ma'imum 9 0ebsites/ This saves the interests of

its 0ide distribution channel and maintains their presence/

PR)M)/')N

The promotion techni2ues used by Samsung play a vital role to achieve the market

domination/ Presently, market share of Samsung in smart phone sector is -+/13 by the end of

2uarter - of -.+)/ It has decreased from -1/H3 to -+/13 0hen compared to -.+1 2uarter -/

The marketing communication for the S( should be based on the P strategy/ The

promotion strategy should be focused on the innovations and ne0 features of the S( edge that

0ill make it more useful for the users/ It should also reinforce the image of the S( &dge as asmartphone meant business purpose dur to its multitasking abilities, features and premium

looks/

The market survey sho0s that 9G3 of the respondents have recollection of the recent

advertising campaign of Samsung/ Also from the survey 0e see that 1H/(3 and 9G/-3 of

respondents have a recall of ads seen in television and internet/ So rene0ed efforts should be

given to increase advertisement in these mediums/ &'tensive promotion in print and media is

also re2uired but its recall is very less/ The use of celebrities like Amir >han also has a

positive impact on the sales and market penetration of the product//

'ndir(t Marktin% Samsung can also set up charging stations and free internet at

the airports to increase a0areness about the brand and its products amongst the consumer/

Test drive of the ala'y S( &dge for 9. days for just +6, is one of the techni2ues to create

a0areness about the brand/

All the above marketing communication tools come together and 0ork for as the Integrated

Marketing %ommunication for the 8rand thus building brand e2uity/



2on(lusion

Brom the analysis done above one thing becomes very clear and it is that Samsung has to

discontinue the S( model and focus only on the S( &dge model/ Also Samsung has to reduce

its product line and product offerings to create differentiation and to reduce cannibaliation/

The S( &dge is a huge leap for Samsung in the technology front and hard0are front but if itdoes not concentrate on positioning the smartphone for the business segment the product may

end up not fulfilling its potential/ Also to create a differentiation from other products running

on android OS Samsung has to invest on creating its o0n app store and also introduce Tien

in a phased manner/ Samsung can regain its market position 0ith the help of S( &dge but it

re2uires Samsung to make some tough decisions in the pricing and place and promotion

section/ If Samsung is able to make these changes the S( &dge 0ill end up beating the

records set by the S9 model and help Samsung regain its position and also hopefully surge

beyond Apple/



J

-i%urs and ,@hi#its

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http://www.forbes.com/sites/antonyleather/2015/09/08/biest!iphone!6s!lea"!

massi#e!screen!resol$tion!boost!comin/

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http://www.idc.com/prodserv/smartphone-market-share.jsp

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https://en.wikipedia.org/wiki/Apple_Inc._v._Samsung_Electronics_Co

http://www.idc.com/prodserv/smartphone-market-share.jsp

http://promo.samsungpromotions.com/



Date post:	07-Jul-2018
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Group5_Industry Analysis of Samsung Smartphone

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