How Samsung Electronics Creates, Captures and Delivers Value in the Smartphone Industry

8/13/2019 How Samsung Electronics Creates, Captures and Delivers Value in the Smartphone Industry

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Samsung Electronics:

Creating, Capturing &

Delivering Value in the

Smartphone Industry

KICHUL JUNG, MUNA AL KAABI, OMAR SAIF

ESM 611


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Introduction

Samsung Electronics is a leading technology company part of the large Samsung Group.

The larger company was established in 1938 by Chairman Byung-Chul Lee along with Hong-jai

Cho who joined in 1948 to help expand the firm through creating another business unit, SamsungTrading Corporation (now known as Samsung C&T Corporation). In the late 1960s Samsung

entered the electronics market forming several electronics divisions, such as Samsung

Electronics Devices, Samsung Electro-Mechanics, Samsung Corning, and Samsung

Semiconductor & Telecommunications. In 1998, the company grew to become the largest

company in South Korea comprising 17% of Koreas GNP. Samsungs rapid and impressive

growth was primarily due to their ability to effectively create, capture and deliver value, which

will be explored in this report.

Although several notable Samsung subsidiaries exist, for the purpose of this paper the

main subsidiary of focus will be Samsung Electronics - the world's largest information

technology company by 2012 revenues, and 4th by market value. The report will also focus

specifically on Samsung Electronicsstrategy within the smartphone industry.

1.1. History of Samsung ElectronicsSamsung Electronics was founded in 1969 by providing black-and-white televisions,

followed by a move towards semiconductors in the early 1970s. Samsung Electronics noticed the

high potential of growth and profitability in the semiconductor industry and consequently started

manufacturing DRAMs in the 1980s. In order to design and create its first 64 K DRAMs,

Samsung Electronics searched globally for a company willing to license its DRAM technology.

The company approached a number of financially-distressed small semiconductor companies in

the US, finally settling on Micron for chip designs and process technology [2]. In order to

develop the company with its first frontier technology, Samsung Electronics externalized its

research to two task forces in the US and Korea by employing Korean and American Ph.D

students in the field of electrical engineering. These two task forces interacted both cooperatively

and competitively actively and finally succeeded in developing a 64 K DRAM [2]. This strategy

created the synergies in developing products as an internal process in Samsung Electronics. As a

result, the firm obtained the best market position and the leadership position with respect to the


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DRAM industry [3]. However, by 1995 Samsung Electronics total ROI was only 60% of what it

was in 1995primarily due to market saturation in the DRAM industry. Nevertheless, Samsung

Electronics continued to invest in facilities and R&D, establishing joint ventures in many

countries.

Resultant of the continued investment in the R&D of next-generation DRAM chips,

Samsung Electronics cracked the 1 G DRAM in 1996 [4]. However, by 1997 the Asian Financial

Crisis began to afflict the DRAM market. Consequently, Samsung Electronics stocks plummeted

to their lowest value since 1994. Over this period, Samsung Electronics had to go through

substantial corporate restructuring to overcome difficulties. Despite the weakened Korean

currency, the corporation surmounted adversities and hardships from a strong rebound in market

demand and price for DRAM in the late 1990s. Even though Samsung Electronics surpassed

rival companies in the DRAM market owing to its commitment to DRAM improvement, it

realized that the company needed to adopt an ambidextrous approach and innovate beyond

existing products. This was achieved by devising a new strategy of product diversification to

reduce dependence on DRAM for company revenue. Therefore, the firm made a major move

towards non-memory chips. By providing chips to various manufacturers (including Apple for its

iPhone), Samsung Electronics acquired vast knowledge on the manufacturing and development

of high end consumer electronics including mobile phones and later smartphones. In the 2000s,

Samsung Electronic had defined its strategy as digital convergence. This involved the creation

of diverse and mixed products to provide a full-range of products from memory chips to high-

end state of the art consumer products [5].

1.2. Samsung ElectronicsOrganizational StrategySamsung Electronics rise into becoming a top-tier manufacturer of semiconductors and

consumer electronics is owed to a great degree to the companys organizational strategy and

architecture which is summarized in Figure 1.


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Figure 1: Organization Chart of Samsung Electronics [8]

The company is split in to two core divisions, Digital Media & Communications and

Device Solutions. In the divisions, it focused on mobile communications, digital media,

semiconductor etc. while dominating the market with its products. In addition, Samsung

Electronics adopted entrepreneurial incentives to battle rivals in mobile and smartphone markets.

The company investigates the way to optimize its products and technological innovation

processes by forming Pro-Teams which aim to integrate employees with their opinions in the

mobile phone manufacturing process and to connect them. This strategy successfully built a

balanced bottom-up along with horizontal communication culture for encouraging employees to

be creative and flexible as well as to work innovatively [6].

With the organizational system in place, Samsung Electronics was able to systematically

improve its technology and core products under a centralized and well communicated company

vision. In 2005, the total net sales of the Samsung reached $140.9 billion with a net income of

$9.4 billion. The firm had total assets worth $233.8 billion, and its market capitalization

amounted to $80.8 billion. In 2007, Samsung Electronics became the world's second-largest

mobile-phone maker by overcoming Motorola. In 2009, the corporation achieved total revenues

of US$117.4 billion, overtaking Hewlett-Packard to become the world's largest technology

company measured by sales [7]. During this time, Samsung Electronics utilized Googles free

Android operating system in a move that would benefit both companies, and while Smasung and
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Google are separate businesses entirely, they were able to have a symbiotic relationship of

coevolution.

For Samsung Electronics to create a value and improve their market leadership, they need

to organize the firm more effectively. So, Samsung Electronics began in 2013 reorganizing their

firm structure by focusing on three sections: Consumer Electronics, IT & Mobile

communications and Devise Solutions [8][9]. The new firm structure will allow the three units to

be more effective in their decisions making and dealing with world market change. Moreover,

Samsung Electronics can continue to develop and improve their Pro-Teams as to better capture

internal talent and innovation inside the company, and between business units [6]. Samsung may

also want to look into the potential acquisition of technology startups to increase their patents

and decrease internal R&D costs. Although Samsungs traditional R&D structure has served the

company well, looking into distributive R&D could be beneficial given the ever changing market

trends and technologies.

1.3. SamsungsMobile Industry EvolutionThe mobile phone market has recently witnessed tremendous growth and increased

competition among different firms. Although Samsung Electronics was initially better known for

semiconductors and home appliances they remarkably succeeded in setting their name as one of

the top mobile phone manufactures in the world with their products highly advertised by the

media [10]. Samsung Electronics was a relative late comer to the emerging smartphone industry,

as better established firms such as Nokia, Motorola, Sony-Ericsson, BlackBerry and Apple were

already in the market. Despite

their late entry into the

smartphone industry, Samsung

Electronics technological

capacity was more than ready, asthey had a strong foundation in

the mobile phone and periphery

markets through several product

lines shown in Figure 2.

Fi ure 2: S-curves or Samsun mobile hone


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The initial start of Samsung in mobile telecommunications began in 1983 [10]. They did

so by initially disassembling and reassembling Japanese car-phones repeatedly in order to come

up with the first Samsung car phone, the SC-100 in 1986 [10][11]. However, the developed car

phone was of low quality and they consequently considered exiting the mobile industry

completely. In 1988, Samsung decided to delve into new technology by releasing their first

mobile handset, the SH-100. However, once again the phone was of poor quality and could not

compete with Motorolas higher quality and the worlds first ever mobile phone, the DynaTAC

8000X released earlier in 1983 [20]. Furthermore, Motorola had a much stronger customer base

for mobile phones. Despite another market failure, Samsung continued their intensive R&D to

overcome their technological impediment and stay in the business [10].

Samsung Electronics were determined to produce mobile phones at par with Motorola

phones. Hence, they developed a team focused on connection quality as a key differentiator from

Motorola. By the early 1990sSamsung developed a new model, the SH-700 with better quality

than the previous SH-100 and it was upgraded later to the SH-770. The company initiated

aggressive marketing campaigns to condition their brand name with quality and credibility.

Samsung also utilized their Korean base to imbed a sense of patriotism among Korean users [10].

To keep up in the business, Samsung entered the CDMA (Code Division Multiple Access)

and PCS (Personal Communication Services) market and had a huge success in both. By the end

of 1990s, Samsung Electronics decided it was time to expand in to the global market. They tried

to enter the GSM (Global System for Mobile Communications) in the European market, but with

the strong competition from big firms like Nokia, Motorola and Ericsson it was difficult to

succeed. Consequently, Samsung adjusted their products to more suitably meet the taste of

European (and other markets) by following a localization strategy. By 2002, Samsung efforts had

paid off as the company ranked in 4th place globally among mobile phone manufacturers for

sales in both CDMA and GSM markets [10].

To remain competitive, Samsungs R&D is focusing on improving new technology

standards for 4G communications and the mobile internet [10]. Moreover, from 2003 to 2011 the

total number of personnel R&D increased from 21,000 to more than 60,000 [9]. In alignment

with its product diversification strategy, Samsung continues to produce convergent technologies

and products in order to compete with other manufacturing firms [10]. Furthermore, industry


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change from analog to digital technology has led to a narrowing in the technological gap of

manufacturing firms. Technology commoditization and modularization is the new form of

disruption, suiting Samsungs strategy of speed and aggressive investment in product lines,

producing new products in short periods of time [13]. Samsungs lateentry in to the smartphone

industry put them in direct competition with Apple and their iPhone products. However,

Samsung was able to penetrate the market with the success of their Galaxy phone line that ran

the relatively new Android OS. Since then they have managed to maintain remarkably steady

growth in the industry, overtaking Nokia in 2011 [14].

Currently, Samsung is leading the market and not likely to be majorly disrupted by other

firms at the technology level as the industry nears its natural technology limit. In other words,

technology innovation between various OEMs in the industry narrowing, though other forms of

innovation remain possible. There is some talk of the possibility that tablets or phablets

(referring to devices such as the Samsung Galaxy Note) will disrupt the smartphone industry and

take over [15]. However, even if this was the case, it would not present a technological

innovation or disruption given that tablets utilize much of the same technology and operating

systems as current smartphones.

To compensate for the diminishing returns in technological investment, Samsung, along

with other OEMs, are focusing on managing their existing technologies and penetrating new

markets. Apples ability to license its new iPhone on of the worlds larges t carriers, China

Mobile highlights this move in to new markets. Similarly, Samsung is making a similar move in

to new markets including China and India, as the smartphone market remains largely unsaturated

at the global level, particularly in

developing economies [16]. In fact,

Samsung is already ahead of Apple

when it comes to the Chinese market

with 19.4% penetration, compared

with Apples 4.3% in Q2 2013 [17].

The various regional penetrations of

smartphones is illustrated in Figure 3.

Figure 3: Smartphone Market Share World Map: March 2013 [18]


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1.4. Smartphone Industry History & Evolution:In 1983, Motorola unveiled the very first portable phone the DynaTAC 8000x [20].

Compared with todays available smartphones, it was significantly bulkier in size, weight and

came at a starting price of $3,995 USD equivalent to $9,130 in 2012 USD [20]. Since thentechnological progress has enabled cell phones to become smaller, cheaper and more reliable

leading to accelerated adoption in the 90s and 2000s at the global leve l. It was during this time

period that PDAs (Personal Digital Assistance) developed largely by IBM, Palm and Nokia

emerged in the market; often considered the predecessors of todays smartphones.

Though there is no established definition to what exactly constitutes a smartphone, they

are often characterized by running an operating system that allows for the use of various

applications or apps[20]. With time they also came to include touch screens, built in cameras,

GPS, Wifi/Bluetooth amongst other features [21]. During the early 2000s, Nokia with its

Symbian OS platform, played an instrumental role in paving the way for future smartphones;

licensing its OS to other manufacturers including Sony Ericsson and Motorola [20]. However,

the Symbian OS lost much of its popularity following the market entrance of RIMs Blackberry

OS, Microsofts Windows Mobile OS and Palms OS in the mid 2000s [20]. These OS

platforms further expanded the smartphone market allowing for greater multi-tasking and

business oriented tasks including emails, contact management and web browsing. The next wave

of smartphone market penetration would take place in 2007 with the launch of the Apple iPhone,

and its iOS, going head to head with BlackBerry [21]. In developed economies, Apple and

Blackberry deserve much of the credit for taking the smartphone adoption curve past the great

chasm and into the early majority as shown in Figure 4. Handset devices running on Googles

open source Android OS emerged in 2008, gaining adoption by customers fairly rapidly [20].

Apple and Google differentiated themselves through their supplementary app markets, the Mac

App Store and the Google Play Store respectively. In partnership with developers, Apple and

Google were able to provide well above 500,000 apps each through their respective app markets

- a significant added value to customers that helped increase the global uptake of smartphones.

This step by Apple and Google helped further capture the early majority and even move in to late

majority customer segments also shown in Figure 4.


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Figure 4: Smartphone S-curve and adoption in developed markets

1.5. Smartphone Industry Market: Penetration and Current OutlookDespite increases in global uptake of smartphones, global penetration remains low,

hovering around 12% of the total population, or 27% of all phones sold [20]. The main reason

for the relatively low penetration rates comes down to cost. Penetration exists at levels of 50-60%

in Europe and North America while other markets are only at 10-20% as shown previously in

Figure 3. This can be attributed to not only lower wages, but also the popularity of pre-paid plans

in many developing markets, which exclude the possibility of carriers subsidizing phones as the

case in North America and other developed economies [20].

1.6. OEM & OS Platform Competition:The smartphone industry is highly competitive in manufacturing and OS platforms. In the

past decade alone, numerous OEMs and OS platforms have risen and fallen [19]. Figure 5 below

illustrates the smartphone market share by OS at the global level. Android, an open source

platform taking over 70% of the OS market share within the span of only 3 years at the primary

expense of Nokias Symbian OS and RIMs Blackberry OS. Conversely, Figure 6 shows global

smartphone market share by OEM, Samsung showing a 30% market share takeover since 2008 at

the expense of BlackBerry and Nokia.


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Figure 5: Global smartphone market share by OS platform [19]

Figure 6: Global smartphone market share by OEM [23]

Table 1 highlights the different strategies that the major OS platforms employ in terms of

manufacturer licensing. iOS and BlackBerry OS are both developed in house by the parent

companies and the OS platforms are exclusive to them alone [19]. Google, Nokia and Microsoft

on the other hand utilize a strategy of licensing to proliferate their respective OS platforms in the

market. Microsoft charges a licensing fee to OEMs for the use of its Windows Mobile OS whileGoogle and Nokia do not charge OEMs for the use of Android or Symbian. This licensing

structure explains OS market shares seen in Figure 5 to a large degree. Androids widespread

adoption and Windows Mobile stagnant market share reflect the licensing costs associated with

the OS platforms. Symbian lost significant market share over the years, primarily due to Nokias


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decision to partner with Microsoft and adopt the Windows Mobile OS platform, effectively

killing the Symbian [20].

Table 1: Strategies in OS Licensing

OS Platform Developer Licensed OEMs Licensing Cost (USD/unit)

iOS Apple Apple only N/A

Android Google Multiple Open source

BlackBerry OS BlackBerry BlackBerry only N/A

Symbian Nokia (with other

contributors)

Nokia, Ericsson,

Motorola

Open source

(with some license restrictions)

Windows Mobile OS Microsoft Multiple $8-$15

Adapted from Ogunsanwo, 2012

1.7. Future Outlook of Smart Phone Industry:The future of the Smart Phone industry seems to be one marked by greater market share

consolidation by fewer OS platforms. With the exception of the iOS, OS platforms limited to one

OEM are unlikely to capture any significant market share [25]. The recent announcement of

BlackBerrys agreement to be purchase by Fairfax Financial is likely to add another major blow

to both BlackBerrys smart phones and OS platform. Table 2 illustrates a forecast of OS market

share, showing current OS market shares along with a 2017 projection. Under this globalscenario, Android and iOS will remain the dominant platforms for the coming years while

Windows Mobile will gain more market share, becoming another key player. While various

forecasts exist with varying market share margins, the future dominance of these three players is

forecasted by most analysts [20]. When combined they will continue to represent well over 96%

of global market share.

Table 2: Top Smartphone Operating Systems and Forecast Market Share, 20132017

Smartphone OS 2013 Market Share 2017 Market Share

Android 75.3% 68.3%

iOS 16.9% 17.9%Windows Mobile 3.9% 10.2%

BlackBerry OS 2.7% 1.7%

Others 1.2% 1.9%

Totals 100.0% 100.0%

Source: IDC Worldwide Mobile Phone Tracker, September 4, 2013


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In terms of OEMs, Samsung and

Apple are expected to continue to dominate in

global market shares. However, market share

drop by former power houses including Nokia,

Sony-Ericsson and BlackBerry coupled with

more open OS platforms such as Android and

Windows Mobile has opened the floor for

smaller OEMs to enter the market; Lenovo,

LG, ZTE and Huawei being such examples.

Figure 7 exemplifies this trend. Samsung and

Apple in 2013 Q2 had a combined market

share of around 43%, the rest being divided between other OEMs.

The way firms and/or OEMs also

capture value has varied significantly

and will continue to do so. Firms such as

Nokia rely heavily on handset sales

while others like Apple rely on their app-

store. Google and Microsoft on the other

hand capture value mostly through their

online services. Figure 8 summarizes the

financial strategy of the top OS platform

providers excluding BlackBerry.

1.8. Customer Segments and Growth Opportunities for Smart Phone Industry:The smartphone industry can be broken down into numerous customer segments based on

various criterias including: geographic, psychographic, demographic, and behavioral [22].

Figure 9 illustrates one study performed on a sample population segmented into four

psychographic groups Traditionalists, Career-makers, Socially-concerned and Yuppies.

Simmons has created a similar consumer psychographic segmentation, with the consumer

profiles summarized below in Table 3.

Figure 8: Where OS Firms Capture Value [19]

Figure 7: 2013 Q2 Market Share by OEM [23]


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Table 3: Psychographic customer segment profiles [24]

Mobirati (Yuppies):Mobirati represent the mobile generation. They grew up with cell phones and cannotimagine life without them. Cell phone devices are a central part of their everyday lives.

Social Connectors (Socially-concerned): Communication is central in the lives of Social Connectors.Their cell phone allows them to keep up-to-date with friends and social events. The cell phone device is the

bridge to their social world.Mobile Professionals (Career-makers):Mobile Professionals are multiple feature users. Their cell phonehelps them keep up with their professional life in addition to their personal life. Members of this segmentare more likely to own a smart phone. Their cell phone has become their all-in-one device for theircommunication and information needs.

Pragmatic Adopters:Cell phones came to life for Pragmatic Adopters in their adult years. They are the

ones who are still learning there are other things to do with your phone beyond just saying Hello. Cellphones are more a part of their everyday life than before but still more functional than entertaining to them.

Basic Planners (Traditionalists):Basic Planners are not into cell phones or the world of technology. Theyuse their cell phone just for the basics. The cell phone is just another communication device for this group.

Figure 7: Psychographic Characteristics of Various Customer Segments [22]

According to the methodology involved customer segments can vary, however demographic and

psychographic are more important to consider at national or more localized scales. At the global

level, segmentation has become largely a function of handset prices [20][25]. Smart phone

penetration in the global mobile market is reflective of this, standing currently at 27% [20]. This

penetration is mostly in developed countries where disposable income is higher, and handset

subsidization by carriers is more widespread [20][25]. Consequently, developed countries are


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seeing a saturation in smartphone uptake while developing countries remain a largely untapped

market (referring to Figure 4, developing markets would have an adoption curve shifted much

greater to the right).

Consequently, many OEMs, including Samsung are investing in cheaper smartphone and tablet

devices that would capture the remaining late majority and laggard segments in developed

countries while also breaking in to more price sensitive developing economies [20][25]. The

tradeoff between the traditionally pricier smartphones and tables and the cheaper more affordable

ones being summarized in Figure 10.

Figure 8: Tradeoff between higher-end & price-affordable devices

1.9. Customer Need Evolution:Customer needs in the smartphone industry have been fast evolving and changing. Thetechnology developed by OEMs has in part defined customer needs while customer needs have

also fueled OEM R&D into product design, performance, usability etc. In a response to customer

needs, the industry is also becoming more commoditized[25][26]. Due to diminishing returns,

OEMs are managing their technology by focusing on niche and peripheral markets. This is done

by tweaking phones for various customer lifestyles, for example the ruggedCasio G'zOne

smartphone, which is built and marketed towards outdoor users and wilderness survival or

alternatively the Sony Xperia Play, which is marketed towards gamers [26]. Such products are a

direct response to customer needs in niche markets.

2.0. Conclusion:In summary, Samsung Electronics has come a long way since its inception. Historically it created

value by utilizing its strong R&D towards DRAMs and memory chips which later helped it enter

Non-Price sensitive customers

Higher-end Devices

Higher profit margins

Lower market capture of late adopters,

laggards and developing economies

Price sensitive customers

Price-affordable Devices

Lower profit margins

Higher market capture of late adopters,

laggards and developing economies


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the mobile and smartphone industry. Through a strategy of convergent technology and alignment

with industry trends, Samsung was able to make key moves that would propel it as a leader in the

industry. One notable move was its partnership with Googles Android OS, allowing it to

penetrate developed markets across the globe. As it now sits as the worlds largest smartphone

manufacturer, Samsung Electronics is attempting to capture the remaining customer segments by

managing its current technology through a commoditization strategy, as well as entering new

developing markets through more affordable handset devices.


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http://www.slideshare.net/vvikaschauhan/marketing-strategy-of-samsung-in-indiahttp://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://www.geekchamp.com/news/smartphone-market-share-world-map-march-2013http://www.geekchamp.com/news/smartphone-market-share-world-map-march-2013http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://www.slideshare.net/vvikaschauhan/marketing-strategy-of-samsung-in-india


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ESM 611


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How has the industry captured the value that it has created historically?

Five Force Analysis:

The way in which the smartphone industry has historically captured value is best represented through

Porters Five Force Analysis, which is illustrated in Figure 1.

Competitive rivalry [HIGH]:

Within the smartphone industry, competitive rivalry

exists on two main fronts, hardware and software (OS

platform).

In terms of OS rivalry, the main current players are

Apples iOS, Googles Android and Microsofts

Windows Mobile. Collectively, the three operating

systems represent over 96% of 2013 smartphone OS

market share as shown in Figure 1. Historically, OS

rivalry has been low in terms of the number of competitors in the market, however fairly high between

them. The radical drop in market share by RIMs Blackberry OS and Nokias Symbian OS in such a short

time period demonstrate how competitive the OS market is [3].

At the hardware levels, the number of competitors is much higher, with OEM market share being less

oligopolistic in comparison with OS market share. Figure 2 demonstrates market share breakdown

according to smartphone manufacturers.

Figure 1: Porters Five Force Analysis

Figure 2: Top Smartphone Operating Systems by Market Share


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Figure 3: 2013 Market Share by OEM

Figure 4: Market Share by OEM

Similar to competition at the OS

level, smartphone manufacturers

have also seen rapid rise and fall

over the last decade. Powerhouses

like Nokia have seen a 40% market

share loss in just five years, mainly to

Samsung as shown in Figure 4 [1].

Threat of new entrants: [LOW]

The threat of new entrants to the

smartphone industry is quite low for

multiple reasons. Firstly, whether at

the OS or manufacturing end, the

number of patents along with

proprietary knowledge needed to

enter the market is often too great

of a barrier for new entrants [2].

Even existing companies fight tooth

and nail in the smartphone industry

over patents, such as the litigation

war between Apple & Samsung

[21]. Furthermore, significant

investment, resources and

partnerships are needed for research, product development and marketing [2]. Lastly, brand loyalty is

another major barrier to entry for new companies [2]. However, some relatively new entrants to the

smartphone industry such as ZTE and Huawei have succeeded in entering North American markets

through price differentiation [3].

Google is already heavily involved in the smartphone industry through the Android OS and some Google

phone partnerships with existing manufacturers. However, its recent acquisition of Motorola could spell

a possible entry into smartphone manufacturing, if so, this would be a major threat to existing OEMs as


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the traditional barriers to entry would not apply to Google given its appropriation of Motorola patents

and large resource/investment base [4].

Threat of substitute products: [LOW]

The threat of substitute products for smartphones is particularly low given that smartphones are already

multi-functional, and have substituted many other products in the market such as Mp3 players, PDAs,

Cameras, GPS systems and even computers/laptops to a lesser degree [2]. Consequently, it is highly

unlikely that smartphones will be substituted by a competing product in the near future. Some analysts

have suggested that services such as Skype or other VoIP services could potentially substitute phones as

access to internet increases. However, this is unlikely to be the case as even VoIP services are now being

used more greatly on smartphones opposed to laptops or desktop computers [2].

Bargaining power of customers: [MEDIUM]

Customers have multiple smartphone manufacturers and operating systems to choose from, giving

them some bargaining power [2]. However, customer bargaining power, particularly in developed

economies where handsets are often subsidized by carriers through plans is lower, as customers have a

less direct link with smartphone manufacturers and direct retailers [3].

Bargaining power of suppliers: [HIGH]

The bargaining power of suppliers depends on whether it is the hardware or the software being

supplied. In terms of software, the bargaining power is relatively high unless the smartphone

manufacturer also owns its own software such as Apple or BlackBerry. Samsungs method of capturing

value differs from other industry players such as Apple, BlackBerry and Nokia in that, it did not develop

its own operating system. It has rather utilized Googles existing Android OS[5]. Controlling your own OS

is a double edged sword, with the case of Apple, it has been highly beneficial as it allowed for greater

market penetration and higher profit margins. On the other hand, poor management of an OS such as

the case with BlackBerry OS and Symbian has resulted in BlackBerrys and Nokias fallas was shown in

Figure 4.

At the hardware level, bargaining power of suppliers also relies heavily on how vertically integrated the

company is. In the case of Samsung, it benefits from having low supplier bargaining power as it

manufactures all of its needed components internally [7]. This is somewhat unique in the industry,

where most OEMs such as Apple purchase chips and other electronic components from external

manufacturers such as Samsung [8].


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Does your firm capture value in a different way from firms in your

industry? Will this change in the future?

Samsung Electronics captures value in similar ways to other industry competitors. However, it does

focus on different aspects of its value chain in comparison to arch-rivals such as Apple. Samsung has

traditionally captured value through utilizing its tightly held manufacturing assets, however this is likely

change as Samsung advances forward in its value chain (shown in Figure 3) and attempts to capture

value in its historically weaker areas like software and services.

Business value chain:

Figure 5: Samsung Electronics Value Chain

Samsung was able to capture value through some key supply chain transformations.

1) Firstly, they made significant attempts to listen to customer needs. One such method that wasemployed was to send Samsung staff to different countries and communities to attend MBA

programs there. While there, they were to identify customer preferences and integrate them into

the product design process, through quality function deployment[6].

2)

Secondly, they adopted a Six-Sigma strategy that was adapted from GEs approach. Samsungcalled this approach DMAEV, short for define, measure, analyze, enable and verify. This

approach allowed Samsung to drastically improve their internal operations, and hence capture

value more effectively [6].

3) Thirdly, Samsung utilizes an Advanced Planning & Scheduling system (APS) to help them betteroptimize raw materials and production capacity with product demand [6]. Such a system is


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especially important in the electronics industry given how quickly the market changes, therefore

demanding flexible and resilient production.

4) Fourthly, to further capture value within the company, Samsung Electronics uses a StreamlinePerformance evaluation system that allows high performers within the company to advance

faster in their respective career paths [6].

5) Fifthly, Samsung uses Standardized Process and Parts to achieve both economies of scale, andmanage quality more effectively, in doing so better capturing the value they create [6].

6) Lastly, Samsung has established a strong Risk Management System to reduce risk in their highlycompetitive and fast-changing industry [6]. Some risk management strategies undertaken

include: maintaining lower inventory, having flexible production capacity, and building in

redundancies within their supply chain to minimize risk [6].

Vertical & Horizontal Integration:

Samsung Electronics, like Apple, is known largely as a vertically integrated company rather than a

horizontally integrated one like Intel [7]. Consequently, in an attempt to better capture value, Samsung

has made key moves at vertically integrating its value chain. Part of Samsungs risk management

strategy is to reduce the number of transactions with multiple parties through vertical integration [7, 8].

Samsung Electronics has done a great deal to tightly manage its

value chain, a trend seen elsewhere in the electronics industry

[7]. Samsung Electronics vertically integrates practically all of

its manufacturing, from raw materials to electronic

components, and finally to fully assembled devices as shown in

Figure 4 [8]. Acquisition of companies developing key hardware

components is another strategy Samsung employs [9]. One

such example being Samsungs acquisition of the German

company Novaled for its OLED screen technology [12]. In doing

so, Samsung is able to achieve economies of scale through is

high volume manufacturing efficiency [8]. Consequently, it

stands as one of the worlds largest suppliers of electronic

components to OEMs including Sony, Apple, Dell, and Hewlett

Packard [8]. Samsungs vertical integration however is fairly

different from others in the industry such as Apple, who integrates more forward in the value chain

compared with Samsung [11]. Apple develops its own software, services its users through iTunes and

Figure 6: Samsung's Vertical Integration


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iCloud and also does its own retailing through its Apple stores [11]. Though Samsung is unlikely to

venture into retailing like Apple, it has been making greater efforts to strengthen its comparitvely weak

software division through a number of acquisitions [9, 14].

Partnerships:

Samsung Electronics has developed some key partnerships to help it better capture value. Among the

most famous is its partnership with Google through the Open Handset Alliance which included other

OEMs such as Sony, HTC, LG, and Motorola [13]. By adopting the Android OS, Samsung was able to

benefit greatly as it historically lagged in software and could not produce an OS of its own that would

rival existing rivals such as Apple, Microsoft or BlackBerry. Google benefits greatly from the partnership

as well through the proliferation of its Android OS uptake resultant of Samsung handset sales.

Another key partnership that Samsung Electronics has undertaken is with Intel through the Tizen OS.

Recognizing its software vulnerability and overreliance on external operating systems such as Android,

Samsung partnered with Intel in 2011 to develop Tizen, a Linux based open source OS that will compete

with Googles Android(16). Tizen is expected to not all be used on handsets, but even Samsung TVs and

tablets [15]. Tizen reflects Samsungs overall vertical integration strategy and entrance into software and

services.

Aside from company partnerships, Samsung Electronics is also trying to make strategic geographic

partnerships that will allow it to capture value in new markets. This is highlighted through Samsungs

push for partnerships on the African continent [17]. Partners include:

1) Multichoice Africa (Africas leading pay TV operator): Samsung is partnering with them to delivercontent, technology products and services to African markets [17].

2) Universal Music Group: Samsung has partnered with them and African record labels to provide amobile music streaming service called Kleek [17].

3) Learnthings Africa: Samsung has partnered with Intel to co-develop technology products andsolutions to deliver quality education through Learnthings Africas existing interactive learning

material [17].

What has been the relative role of uniqueness (IP, Speed) and

complementary assets in you firm/industry?


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Uniqueness

In rapidly and dramatically changes of smart phone markets where we obtain the benefits of high

technologies, companies which provide mobile phones are required to develop and enhance a strategy

which represents its brand name and captures the value after creating the value from innovation.

Among firms offering smart phones, Samsung Electronics achieves success in capturing the values based

on an understanding of uniqueness regarding Intellectual Property Protection (IP), Speed, and Secrecy as

a crucial scheme to earn a tremendous amount of profits.

The uniqueness of vital points has a significant role in capturing and seizing the value for Samsung

Electronics in the global market. After creating the value, Samsung Electronics has sought to capture the

value by holding a large number of patents for the uniqueness for products with each markets

characteristics. For example, in Germany, the firm registered patents for digital devices while using the

localization strategy by launching an online community of Funclub which brings in customers

attachment for the Samsung phones as well as strengthens the relationship between the company and

its service providers. In France, Samsung created the concept of culture marketing while connecting

technology and culture, and made the slogan of Samsung, going together with culture which appealed

the customers for the Samsung phones with acquisition of patents for the phones in 2001. Owing to the

strategy of uniqueness, Samsung ranked 4th for the phone sale in the global market in 2002, and the

corporation firmly held the 3rdrank for the sales and 2ndfor the revenues in 2003 (Figure 7) [18].

Figure 7: The world Mobile Phone Sale by Manufacturer (1000 units)

Moreover, research and development (R&D) enhances technologies for phones of Samsung Electronics

and produces a large number of patents in the phone industry with high quality functionalities. The

company has approximately 19,700 researchers who account for 34% of total employees for R&D. They


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improved 100 new technologies every year and achieved 1,313 US patents with the 11th rank of the

world in 2003 presented by Figure 8 [18]. In phone markets, Samsung has applied for 12,000 patents in

South Korea and 25,000 patents oversea, and holds about 100 patents which are related to 3G and 4G

technologies.

Figure 8: Samsung Electronics R&D Expenditures (2001 2003)

Samsung Electronics is consistently investing R&D and patent capabilities to reinforce competitiveness

by collaborating with a number of research centers and partners. This firm registered 5,801 patents in

the USA (2012), acquired four awards from the European Imaging and Sound Association (EISA 2012),

and earned twenty seven innovation awards in the Worlds Largest Consumer Electronics Show (CES

2013). Due to such efforts for its uniqueness of Samsung Electronics, it obtained the 9th rank on

Interbrands Best 100 Global Brands 2012 list which represents the brand value of USD 32.9 billion [19].

In addition, the company captures the value of the Samsung smart phone by continuously and rapidly

upgrading the models for customers preferences with a number of services such as blogging, news,finance, shopping, and new applications which make customers buy its products. For example, the

recent Galaxy series in Samsung Electronics are innovatively characterized by a curve screen for the first

smart phone and waterproof with the luxury design and functionality. The high speed of innovation for

improving smart phones applications has led Samsung Smart phones to where it is now (we will discuss

more details because it is related to the business strategy in Question 4). The high speed of production

has also helped the Samsung smart phones to become the best company of smart phones with the high

phone sales in the global market. Lastly, the secrecy for the process with its technologies to make

products (ex. smart phones) supports the uniqueness of Samsung Electronics. Sharing and exchanging

technologies of Samsung Electronics with other firms is strictly prohibited by laws in South Korea.

Therefore, the corporation produces its own digital devices in the global market.


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Complementary Assets

The complementary assets of a company are important to capture the value which is derived from

innovation to create its value. Samsung Electronics also has the complementary assets such as global

marketing and customer services for its products to seize the value.

First of all, Samsung Electronics marketing strategy has a significant role in capturing the value of

Samsung digital devices as the global digital technology leader [18]. To maximize its brand name in the

world, Samsung Electronics decided on Olympic sponsorship with the new structure to effectively

organize the global marketing. In the Atlanta 1996 Olympics, although the company was an unofficial

sponsor, it gained an opportunity to participate in The Olympic Partners (TOP) by emphasizing the high

technology communication company. In the Nagano Winter Olympics 1998, Samsung was presented by

an official sponsor while providing the mobile technologies for the Olympics. Also, the firm has involved

several Olympics games (the Sydney 2000 Olympics, the Salt Lake 2002 Olympic Winter Games, the

Athens 2004 Olympics, the Torino 2006 Winter Olympics, and the Beijing 2008 Olympics).

Samsungs sponsorships are not limited only for the Olympics games. It also sponsored a number of

equestrian games (the Federal Equestrian International Samsung Nations Cup and the Samsung Super

League) and golf games as an official sponsor for the Samsung Ladies Professional Golfer Association

World Championship. These strategies enhance the brand value with the reputation of the sponsor and

capture the value of the firm. The corporation has also taken its value in movie markets by placing its

products such as TVs, monitors, and mobile phones. For examples, it developed the Matrix Phone

shown in the Matrix movie. In Korean movies, Samsung also runs the advertising campaign before

showing movies to contribute Samsungs brand value.

Furthermore, the customer services play an important role in capturing the value of the company with

the high quality brand value by actively communicating with current customers and potential customers

[20]. Samsung Electronics always opens to all customers with complaint and inconvenience by forming

deep relationships to develop and provide better products. The company has sought to differentiate its

services from other companies while completely understanding the customers voices and suggestions.

For example, the company carried out survey on 2,400 users of digital devices to ensure consumers

needs for batteries in 2011. The firm analyzed the collected data in the survey to improve products that

meet customers expectation by listening directly to the voice of customers on their priorities. Then, the


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corporation produces the better digital devices and captures the value for the products by rapidly

responding its customers, reviewing their user conditions, and improving its products with the high

quality services. Due to this strategy of the customer services, the company maximizes customer

satisfaction via a more responsible and active communication and becomes the best technology firm in

the Korean market and even in the global market.

Based on what we discussed for uniqueness and complementary assets of Samsung Electronics, we can

identify the following figure 9:

Figure 9: Complementary Assets versus Uniqueness

This figure indicates that Samsung Electronics obtains The Big Win because of its strong strategy for

uniqueness and complementary assets to capture the value of the company. In other word, Samsung

Electronics has complementary assets of tightly held with its marketing and service strategies and

uniqueness of easy to maintain which is based on a number of patents, the very high speed of

innovation, and the secrecy of high technologies.

What roles do standards 10% (Access & Control), platforms/ecosystem

10%, and network effects 10% (Tipping & WinnerTakeAll) play in how

value is captured in your firm/industry?

Standards (Access & Control):

Now a days there is what we called standards war in the electronics market. Firms try to compete

between each other by being innovative, building their brand name, etc. There are different category of

standard wars depending on how different competitive firms proposed new technology, as shown in

Figure (10).


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Figure 10: Type of standard wars [21]

Samsung Electronics it falls in the Rival Evolutions and the Evolution versus Revolution quadrant.

This is due to the fact that all Samsung competitors are using touch screens when it comes for smart

phones and TRIZ methodology for systematic problem solving. However, Samsung projected in the

Evolution versus Revolution when it comes to Apple, because Apple use their own operating system

iOS while Samsung used Android Operating system that developed bygoogle. Both operating system

use touch interfaces that have a lot in common - swiping, tapping and pinch-and-zoom. However, iOS

home screen contains only rows of applications icons, while Android give the opportunity to use of

widgets that shows an auto-updating information, for instance weather and email [22].

The ability of the firms to be successful in standards war depend on some key assets that defined by the

Art of the war [21], such as : intellectual property rights, ability to innovate, first mover advantage,

manufacturing capabilities , brand name and reputation. Samsung Electronics, has what it take when it

comes to the brand name and reputation, Samsung now is a global leader in screen technology, TVs,

batteries, and chip design. In addition, Samsung does not do innovation, but they do have an innovation

culture founded on extensive training, repeatable methodology and creative elite construction,

supported by the highest level of management [23]. Moreover, Samsung Electronics holds

approximately 100,000 patents which are used for developing technology in different aspects such as

flash memory, mobile phones and other core products [24].Furthermore, Samsung manufacturing

capabilities are very strong since they are the leaders on the semiconductor manufacturing which help

in developing a lot of their products.


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Currently, Samsung Electronics are the leaders in screen technology, TVs, batteries, and chip design. This

current position of Samsung Electronics is due to combination between the key assets they have and

their dynamics of the strategic space of access and control, as shown in Figure (11).

Figure 11: Dynamics of the strategic space [25]

Samsung Electronics projected in the closed, private and the open, private quadrant. For the

closed, private it was clear when they developed their own Super AMOLED panel brand that is the

staple signature of their Galaxy flagship smartphone line [26]. Moreover, when it comes for the

semiconductor manufacturing, Samsung Electronics follows the open, private strategy. For instant,

Apple's latest flagship iPhone 5s includes 64-bit A7 microprocessor built by arch-rival Samsung [27]. So

when Samsung Electronics follows the open, private strategy this may help to strength the position of

the firm in the industry and could cause a lock-in scenario.

Platforms/Ecosystem:

Currently, number of knowledge-based technology applications trying to start a business ecosystem.

Where a group of complex products and services made by different firms collaborate together in which

no firm is dominant [28]. The ecosystem productivity and efficiency could be increased when there is an

effective keystones strategy. This keystones instead of being a small part of their ecosystems mass can

try being a system wide role and be in advantage position. They can be effective by creating value within

the ecosystem which will help to attract or retain members in the business ecosystem. Also, sharing the

value with other participants in the ecosystem so they will not become permanently enriched and


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eventually abounded by the ecosystem. Keystones can create a value for their ecosystems in different

ways, but the most important thing is through creation a platform. This platform could be an asset in the

form of services, tools, or technologies that offers solutions to others in the ecosystem. This platforms

can be a physical asset such as manufacturing capabilities, intellectual asset, etc [29].

In case of Samsung Electronics, they are trying now to strength their position in the mobile

innovativeness through establishing an ecosystem of business applications. So the company will start a

new innovation strategy called Samsung Solutions Exchange, which includes working directly with line

of business owners, carriers, independent software sellers and developers to create customized mobile

enterprise solutions. So Samsung Solutions Exchange, is an online site where corporate customers can

find apps and third-party developers with experience in developing mobile applications for Samsung

smartphones and tablets. Moreover, to help some initiative customers such as American Airlines to

develop custom business applications for Samsung devices, the developers have been given wide-

ranging tools to accomplish the coal. In addition, when it comes to the platforms Samsung Mobiles

enterprise business unit success over the past view years to become one of the biggest areas of growth

for Samsung in the U.S. and globally. For instant, they launch some of the products such as Samsung for

Enterprise (SAFE) in 2011, a description to let businesses and consumers know which devices have

enterprise-grade security and Samsung Knox, which is a feature for security and management that can

help in creating a secure zone on employee-owned Samsung devices for corporate applications and

data. So, Samsung Electronics can effectively increase the productivity of their ecosystem through

offering over 1,000 application programming interfaces in its software development kit to help

developers to create customized applications [30]. Which mean, if Samsung Electronics success in being

an effective keystone in it is ecosystem this will guarantee for the firm an advantage position within the

industry.

Network effects (Tipping& winner- take-all):

Generally, Network is based on creating a cluster of connections and associates and maintain the

network active through communication for common benefit [31]. Network business is key value for

firms to expand their knowledge learn from the success and failure of others and gain new clients and

customers. However, in order to dominate the global market and create a technology or product that

accomplish Tipping& winner take-all, the firm should create strong global network. Usually, these

global networks are flexible in a way that make firms and their suppliers as independent organization

that compete, cooperate, shift and recombine networks from one product generation to the next.


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Networks are kind of supplying chain and activities that add a value to the final product of the firm, as

shown in Figure (12) [32].

Figure 12: Generic Electronics Supply Chain [32].

In 2012, Samsung Electronics Tipped in the market of the LCD TVs and ranked as number 1, as shown in

Table. 1 [33].

Table.1: Preliminary Global Q2 LCD-TV Ranking (Percentage Market Share Based on Unit Shipments):

Samsung Electronics manage to dominate (Winner- Take-all) the market and win because of its Global

distribution, efficient Production and smart marketing. In addition, by signing cross-patent contracts

Samsung Electronics proved the enormous strength of its patent protection portfolio, this contracts

allow a broader cross-use of patents with other global IT companies. This makes a network between

Samsung Electronics and different firms such as Qualcomm (mobile phones), Kodak (camera

technology), Rambus (entire semiconductor products), and Sharp (LCD panel module), followed by

contracts with IBM and Microsoft (MS) for the cross-license of technologies of the mobile phone

operation system. Establish such a network enhanced the position of Samsung in the market and make

it the leader when it comes to smartphones, TVs, semiconductors, etc [24]. Moreover, when it comes to

customer services, Samsung tipped over other companies and ranked as the top of original equipment

manufacturer (OEM) with 25.7 percent of U.S. mobile subscribers (up 0.1 percentage points), followed

by LG with 19.1 percent share. Using an OEM allows the selling company to acquire needed components


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or products without owning and operating a factory, Samsung achieve that through its network with

firms such as IBM. Furthermore, in 2012 Google Android tipped over other operating systems and

become in the 1st place as the best smart phones platform. Since Samsung smartphones use Android

Operating system this also is a win-win situation because of the advantage thats customers get from

using Samsung Android phones the Samsung market share will increase [34].

What is your firms Technology Strategy versus Business Strategy?

In achieving success of capturing the value of the companys product, a technology strategy and a

business strategy are crucial while effectively identifying and organizing every segments of the value

chain.

Innovative design and functionality in the mobile phones industry play a vital role in making a profit as

the technology strategy with a number of patents. Samsung Electronics has always sought to create

unique and innovative products with user-friendly design and functionality. Due to the importance of

the technology strategy, the firm built the organization structure, the design management center, which

is related to the entire development process with R&D for features of mobile phones [18].

Based on the center with customer research and lifestyle segmentation, the company improves and

enhances its products with a number of unique design features that distinguished between other

phones. For instance, in the beginning model of the mobile phone, the arrangement of the SEND and

END buttons was inconvenient. However, by changing the location of the buttons, it became easier for

users to push the SEND and END. Samsung Electronics also developed a clamshell or dual-folder phone

which was designed for the first time with an external display window. In addition, the corporation

introduced the Intenna phone that consists of an antenna embedded with touch-screen and a remote-

control function. Owing to such efforts, Samsung Electronics won the iF Deign Award 2004, Europes

most prestigious design award for eight products. Recently, the firm releases the smart phone of the

Galaxy S4 filed 150 patents and equipped with attractive functions such as Dual Shot (see both sides of

the story), Sound & Shot (listen to your photos), Group Play Share Music (share the enjoyment with

friends), Samsung Hub (one stop shop for any content you want), S Translator (no more language

barriers), and Samsung Watch ON (the ultimate TV remote) [35].

In fierce competitions of the mobile phone market, Samsung Electronics makes the core business

strategy to cater to the customers needs. The corporation becomes the technology leader in the phone

market which becomes saturated with a shorter lifecycle using competitive business strategies by


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introducing new phones and communicating with customers to provoke the replacement demand [18].

One of the main business strategies is that Samsung Electronics has become the ultimate fast follower

which means that it is faster than any company to learn from its competitors [36]. The firm develops the

products and meets customers expectation by adjusting what competitors are doing and analyzing

what other companies are bringing to the market first. Then, the firm produces rapidly coming out with

a variety of devices and very quickly releasing its own version of the products with innovation.

Moreover, Samsung Electronics is willing to spend the money of 5.7 percent of its revenue for R&D by

investing in development of its digital devices whereas Apple spends its cash for research of 2.4 percent

of its revenue [36]. Samsung smart phone can therefore have and offer diverse features that Apple has

not gotten to. Whenever the corporation decides to get into any business, it does not hesitate to make

decisions and to commit to its goal until the firm achieves it. In addition, as the phone market gets

saturated by becoming standardized and modularized, the company targets emerging markets such as

China, India, Brazil, and Eastern Europe for future revenue sources. As a result, Samsung Electronics

becomes the worlds largest technology company being the dominant player in the smart phone market

based on the technology and business strategies with its products.


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11) Nisen, Max. Samsung Has A Totally Different Strategy From Apple, And Its Working Great.2013.Retrieved (http://www.businessinsider.com/samsung-corporate-strategy-2013-3).

12) Kersey, Ian. Samsung Invests In OLED Production With Acquisition of Novaled. 2013. Retrieved(http://www.intomobile.com/2013/08/09/samsung-invests-oled-production-acquisition-novaled/).

13) http://www.openhandsetalliance.com/oha_members.html14) Wall Street Journal. Samsung Plays Catchup on Software.2012. Retrieved

(http://online.wsj.com/news/articles/SB10001424052702304906704579115464161019726).

15) Johnston, Casey. Samsung to put open-source Tizen OS on TVs? Retrieved(http://arstechnica.com/gadgets/2013/09/samsung-to-put-open-source-tizen-os-on-tvs/).
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16) Iyer, Sandhya. Samsung, Intels Tizen 2.0 OS officially announced at MWC. 2013. Retrieved(http://gadgets.ndtv.com/mobiles/news/samsung-intels-tizen-20-os-officially-announced-at-mwc-

336464).

17) BizzTechAfrica. Synergistic partnerships key to successful growth and sustainability.2013. Retrieved(http://www.biztechafrica.com/press/samsung-electronics/article/synergistic-partnerships-key-

successful-growth-and/6023/).

18) Case Study of Samsungs Mobile Phone Business, 2004, Boon-Young Lee, Seung-Joo Lee19) 2012 Samsung Electronics Annual Report20) http://www.samsungsdi.com/main.jsp21) Carl, S., & R., V. H. (1999). The Art of Standards Wars, 41.22) Android vs iOS. (n.d.). Retrieved from http://www.diffen.com/difference/Android_vs_iOS23) Haydn, S. (2013). What Makes Samsung Such An Innovative Company? Retrieved from

http://www.forbes.com/sites/haydnshaughnessy/2013/03/07/why-is-samsung-such-an-innovative-

company/

24) Building, P. C. (2012). 450 2011, 20102011.25) Day 12 Network Effects and Standards. (n.d.).class notes26) Samsung to buy Novaled for longer-lasting, more efficient Super AMOLED displays. (n.d.). Retrieved

from http://www.phonearena.com/news/Samsung-to-buy-Novaled-for-longer-lasting-more-efficient-

Super-AMOLED-displays_id45841

27) Apple uses Samsung-built A7 processor in iPhone 5s. (n.d.). Retrieved fromhttp://www.cbronline.com/news/mobile-and-tablets/apple-uses-samsung-built-a7-processor-in-

iphone-5s-230913

28) Who Joins the Platform? The Case of the RFID Business Ecosystem. (n.d.). Retrieved fromhttp://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=1385792&url=http%3A%2F%2Fieeexplore.ie

ee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D1385792

29) Creating Value in Your Business Ecosystem. (n.d.). Retrieved fromhttp://hbswk.hbs.edu/item/3967.html

30) Samsung Targets Mobile Enterprise with Partner Ecosystem. (n.d.). Retrieved fromhttp://blogs.wsj.com/cio/2013/09/25/samsung-targets-mobile-enterprise-with-partner-ecosystem/

31) Networking. (n.d.). Retrieved fromhttp://www.businessdictionary.com/definition/networking.html32) Dedrick, J., Kraemer, K. L., Linden, G., & North, B. P. (2007). Capturing Value in a Global Innovation

Network : A Comparison of Radical and Incremental Innovation, (September).

33) MORROD, T. (2012). Global Flat-Panel TV Shipments Return to Growth in Q2; Samsung Stays on Topof LCD Market. Retrieved from HTTP://www.isuppli.com/DISPLAY-MATERIALS-AND-
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SYSTEMS/NEWS/PAGES/GLOBAL-FLAT-PANEL-TV-SHIPMENTS-RETURN-TO-GROWTH-IN-Q2-

SAMSUNG-STAYS-ON-TOP-OF-LCD-MARKET.ASPX

34) Apples Market Share Approaches 1 In Every 3 Smartphones. (2012). Retrieved fromhttp://www.floatingpath.com/2012/07/02/apples-market-share-approaches-1-3-smartphones/

35) http://www.samsung.com/latin_en/#latest-home36) http://www.businessinsider.com/samsung-corporate-strategy-2013-3


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Q. What are your firms current business strategy as simple rules, short-term, and long-

term growth strategy? Whats the rhythm of growth in your firm?

1. Simple Rules

In order to deliver the value, a company should consider and adapt simple rules based on itsefforts for creating value and capturing value. A number of companies such as Intel, Oticon,

and Cisco relied on simple rules as strategy to capture the best opportunities while extending

the power brand and investing in promising fields. Given simples rules for delivering the value,

one can identify five broad categories including how to rules, boundary rules, priority rules,

timing rules and exit rules [1]. Each category has its objective as shown in Table (1).

Table 1 Five Categories for Simple Rules with the Purpose [1]

Type Purpose

How-to rules They spell out key features of how a process is executed What

makes our process unique?

Boundary rules They focus managers on which opportunities can be pursued and

which are outside the pale.

Priority rules They help managers rank the accepted opportunities.

Timing rules They synchronize managers with the space of emerging

opportunities and other parts of the company.

Exit rules They help managers decide when to pull out of yesterdays

opportunities.

Samsung Electronics is also dedicated to conducting five rules as strategy to deliver the value

of products by controlling systems and structures of the company.

How-to Rules: Samsung Electronics has a simple rule (strategy) based on its philosophy of

creating innovation, strong values, and high ethical standards [2]. The corporation makes

efforts to provide innovative technologies and efficient processes of rapid reorganization. It

attempts to identify the brightest talent from the world and offer the resources to them in a

best way while focusing on Research and Development (R&D). Samsung Electronics

significantly invests in Research and Development (R&D) with the collaborative global

research networks to produce innovative products and make peoples lives better. The

organization of R&D consists of three parts such as The Samsung Advanced Institute of

Technology to secure and manage technologies, R&D Centers to deliver the most

promising long term with its technologies, and Division Product Development Teams tocommercialize products by hitting the market.


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Boundary Rules: Samsung Electronics does not only focus on the Korean market but expands

its market to Asia or even the world. For the beginning model of Samsung mobile phone, the

company targeted the Korean and Japan markets while producing the phone with innovative

design and functionalities. However, in 2002, the firm turns its attention to the US, Africa, and

Europe with its products to extend the Samsung brand and philosophy [3]. While SamsungElectronics expands its market, it constructs the global research networks in the US, Russia,

UK, India, and China etc. [2]. Based on the markets and the networks, it strengths and offers

the latest technology trends and the greatest benefits for its customers. Figure 1 (a) illustrates

the global smartphone market for Samsung with other companies and (b) shows the five

smartphone firms with shipments and market share.

(a)

(b)

Figure 1 (a) Smartphone Market in the world (source: www.techcrunch.com) (b) Five vendors,

shipment, and market share (source:www.idownloadblog.com)

Priority Rules: Priority rules are clearly shown in Samsung Electronics for Service, R&D, and

Protecting Global Environment. For example, Samsung Electronics made Priority Service

Agreement (PSA) to provide optimal performance of service while deriving maximum benefit
http://www.techcrunch.com/http://www.techcrunch.com/http://www.techcrunch.com/http://www.idownloadblog.com/http://www.idownloadblog.com/http://www.idownloadblog.com/http://www.idownloadblog.com/2012/07/27/samsung-q212/http://techcrunch.com/2013/09/09/apple-falls-behind-samsung-in-global-internet-usage-on-smartphones-pointing-to-a-low-cost-iphone-opportunity-or-challenge/http://www.idownloadblog.com/http://www.techcrunch.com/


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[4]. According to PSA, if there

would be a problem with a

Samsung telephone system, its

technician call out free to fix

the issue and it ensures thatthe clients are always

considered to be at the top of

the call out list by offering the

help desk and free remote

programming updates. The

firm also focuses on R&D to

produce innovative devices,

make profits, and satisfy

customers. It encouragesSamsung Engineers to work

abroad to obtain skills and

technologies and invites to return the company to catch up with other competitors [5]. Based

on R&D, Samsung Electronics keeps maintaining the leader in the global smart phone market

and leads to innovation with its products. The corporation is also dedicated to reducing

greenhouse gases with eco-friendly electronic devices. It creates Eco-innovation and green

management so that the greenhouse gases decreases as shown in Figure 2 and improves

energy efficiency by an average of 30% over 2008 [6].

Timing Rules: A number of companies have their timing rules which can be regarded as the

rhythm and the key strategic process (we will descr

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How Samsung Electronics Creates, Captures and Delivers Value in the Smartphone Industry

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