SAMSUNG ELECTRONICS: ENTERING INDIA

SAMSUNG ELECTRONICS: ENTERING INDIA / IN INDIA

Case overviewIntroduction to SamsungChallenges faced by Samsung in koreaSamsungs position in indian marketStrategiesFuture strategy

CASE OVER VIEWTo develop and market superior products and services for a better global society.Quality, globalizationReorganizing and integrating their resources1994 landmark year of prosperityGlobal strategy explore new opportunities in order to serve major marketExpansion for global business india, vietnam, brazil and Spain.South-korean multinational electronics company Headquarters- Suwon, South Korea.Founder- Lee Byung-ChulInitial- Dried fish, vegetables & fruits to Manchuria & Beijing.Manufacturing & sales activities by setting up flour mills & confectionary mills.Korean war 1950Samsung electronics- 1969

HISTORY1938 - Samsung is founded by Lee Byung-Chull as a trading company1953: After the Korean War, Lee forms profitable Cheil Sugar, which is followed by textile, banking and insurance enterprises.1961: Despite a political coup, charges against Lee of illegal profiteering and a 1966 family scandal of smuggling, the company grows by diversifying into paper products, department stores and publishing.1969: Lee, with the help of Sanyo, establishes Samsung Electronics. It produces inexpensive TVs, microwave ovens and other consumer products for Western companies such as Sears and General Electric.

1970s: Under a government policy of rapid industrialization, Samsung launches a number of enterprises in ship building, petrochemicals and aircraft engines.1980s: The company is exporting electronics under its own name.1983: Samsung begins production of personal computers.1987: Lee's son, Lee Kun-hee, assumes control of Samsung.1988: Samsung Semiconductor and Telecommunications merges with Samsung Electronics. Its core business focus is home appliances, telecommunications and semiconductors.1990: Samsung becomes a world leader in chip production.

1994: Samsung Motors is formed.1996: Lee Kun-hee is involved in a corruption scandal and gets a suspended sentence for bribery.1998: Samsung completes the development of flat-screen televisions and begins the first mass production of digital TVs. Samsung Motors delivers its first cars.2005: Samsung develops the first speech-recognition phone.2007: Samsung Group is accused of political bribery and influence-peddling throughout the South Korean government, judicial branch and the media.2012: Samsung Electronics becomes world's largest mobile phone-maker by unit sales, overtaking Nokia, the market leader. U.S. jurors rule Samsung must payApple(AAPL) $1.05 billion in damages for violating six Apple patents on smart phone technology.

To devote talent & technology to create superior products & services that contribute to a better global society

PHILOSOPHYVALUESVALUESMaintain a clean organizational climateCare for the environment, health & safetyComply with laws & ethical standardsRespect customers, shareholders & employeesA socially responsible corporate citizen

Challenges 1950 Korean war Samsung lost all its assetsKorean economy unstable, political and social unrest Intense competition in both domestic and global marketHigh rate of increase in labor cost COGS, S&A expensesPoor record of intellectual property rights protectionFundamental restructuring Cut back on subsidies, export creditsMarket penetration of korean goods was falling in US/chinese

Challenges contd:

Entry of foreing players Market barriers deregulated (Sony, Philips, GE, Siemens, whirlpool)

Market share trend due to huge competitionIndian Market - 1990July 1991 GOI initiated Economic liberalization policyNo of policy, administrative reforms deli censing of industrial investmentTrade reforms Reduction in import duties/promotion of exportsEncouragement of FDI, FII investmentsCapital market reforms Raising funds from D&G marketsEstablishment of Private banksThe ban against using foreign brand names/trade marks was liftedEconomic Trends

Political EnvironmentMultiethnic, multireligious 25 states, 7UTIndividual states competing for Foreign InvestmentOngoing tension between India and PakTerrorism and various forms of Social tensionsPolitically motivated attacks on Foreign projectsPolitical uncertainty upcoming parliamentary elections Investment ClimatePositive attitude towards FDIFII was permitted to Invest in shares/debentures 10%FII - invest in UTI and Mutual fundsSpecial incentives for plants located in SEZThird largest pool of scientific and technological workforce Foreign equity participation from 40 to 51%Hire foreign technicians without prior government approvalForeign investors loans from all commercial banks

Consumer market

Entry strategy ConcernsHigh political risk?Outcome of parliament election not certain?Industrial policy of next govt concern?Foreign exchange risk?Too many players( LG, panasonic etc) planning to enter india?What should be an appropriate mode of entry?Which segments to target?What wud be right positioning and marketing mix?Do we need some expert advice?Should samsung enter india? Was it a right time?

POSITION IN INDIALeading provider of high-tech Consumer electronics and home appliances company- Samsung India Electronics Ltd. In 1995.R&D- Bangalore,1996SISO, SEIIT- may 2000TV & video, home appliances, telecom products and IT products.Started exports to western european market-2000Export base for CTVs to neighbouring countries.

PRODUCT PORTFOLIO The Air conditioner segment.The Microwave oven segment.The Washing machine segment.The Refrigerator segment.Telecom and information technology products.

Marketing StrategyProduct Design : according to customer need-gapBrand DifferentiationProduct Positioning: High Technology Brand in medium & premium price segmentsExchange offersProduct Differentiation: Excellent Technology Distribution & After Sales ServicesRealized Value Consciousness

HR STRTEGYHarness Potential of Employees to full extent & have Quality Performance:Employees treated as the most important assets.Respectable company image via Social & Cultural activitiesRecruitmentTraining & DevelopmentRecognitionRewardsWorking ConditionsAdministrationSalary StructureR&DGlobal Manufacturing NetworkGlobal R&D NetworkGathering Information on New TechnologiesDeveloping ProductsUtilizing Best Brain & resourcesR&D Centre of Color T.V. at Noida(U.S.Dollar 5 Million)

Customized Models: Local Customers(Design & Features)Metallic CTVs & TV Net ApplianceColor T.V. Design to meet requirement of: IndiaSouth-East Asian Countries Middle East Asian CountriesIT & Supply Chain Management68% of components sourced from local vendorsSAP R3 :From GermanyIntegration of Sales, Manufacturing, Procurement & Financial FunctionsSix modules: Production planning, materials management, controlling, Financial Accounts, Sales& DistributionNetworking System to have fighting edge to its Marketing Strategies

B2B initiative with the launch of:Glonets linking key vendors through global network logistics systemto facilitate efficient purchase from international procurement offices & vendors in IndiaAscnet linking its authorized service centers(ASCs) with the head officeAutomation of Supply ChainInformation about Stock position& order status of spares at any timeHello SamsungLinking dealers to Samsungs Supply Chain via Internet

Supply chain Management FactoryWeb MIS SeverHQDistributorDealerBranchCompleted loop for communication with real time business partnershipFeedback on Product Quality, Delivery & related IssuesE-Business Site: Samsung e-Mart in Feb, 2000Two Price online purchasing Strategy:Club various regions for standardized PriceB2C : Service NeedsOnline Call logging for customer complaintsFollow up by regional service centre

In Feb.2000,iaunched e-business site:-Samsung e-mart. B2C application for business need.Digital e-Company InitiativeDigital range of ProductsE-Management ProcessesDistribution & Customer ServiceExtensive Network with 18branch offices,3900 Dealers & 400 Service CentersTwo-tier Distribution StructureSEITL operating 4 Distributors:Tech Pacific India LtdRadington IndiaIngram MicroSavex C computersStrong PR with key Channel partnersProvided sales training to staff, extended support on corporate mailingsValue ++ Program: free bundled products to customersFocus 21 Program: objectivesBetter Service ManagementOnline Connectivity between FSCs, National Spares Warehouse & HeadofficeBetter spares Inventory Management

Promotion &Advertising2nd Largest Emerging MarketAggressive Marketing campaignAdvertising & Promotion Budget :increased by 15% to Rs.85CroresNew Advertising Campaigns:Print Adds (Plano CTVs & Direct Cool Refrigerator)TV Commercials (Metallica CTVs & Air Conditioners)

Brand Positioning:Plano Brand (true life-like images)Bio Fresh Fridges ( freshness plank)Star Endorser for Home Appliances: TabuGround Promotion: to target Mass ConsumersOnline Advertising: direct traffic to Samsung e-mart siteBanner advertising: Portals of Women, Sports & YouthDigital Technology

Sponsorship of channels: Samsung Adventure One National Geographic Channel Channel V & Roads Show featuring : SukhbirEuphoriaShaanMehnaaz

Blueprint to expand penetration in Rural IndiaMore than 10 % of total sales Low pricing of products:Economic versions of CTVs , Semi automatic Washing Machine & Direct Cool RefrigeratorPriced below Rs. 10,000Manufacturing FacilitiesCTV Greater NoidaInvestment : Rs. 90 CroresCapacity: 600, 000 units p.a.Fully geared for high speed ,high volume & high quality productionNew Production Line : Projection TV (screen size 43-53 inches)Microwave Oven:Noida (March 1999)Capacity: 100, 000 units p.a.(20-30 *1000 Litres)Air ConditionersInvestment : Rs. 20 CroresCapacity: 100, 000 units p.a.Window & Split ACs

PRODUCTION STRATEGYTwo Auto insertion machinesInvestment : Rs. 14 Crores95% of 600 old componentsSave 33% of its cost over 10 years220 workersReduce Manufacturing CostsReduce Tact time(9.6 seconds) for CTVsProduction quadrupled in 3 years

Challenge 3000 Campaign44 sets /person/dayChallenge 4000 TGV(Tez Gati Vali Productivity)800,000 CTV units p.a.ISO 9002 CertificationBSI, UK & STQC, DoEWithin 11 monthsQuality Circle : September 1997Six Sigma Improve Efficiency, Quality , Cost & Savings60% reduction Operation Loss & Balancing Loss80% reduction in the defect rate of Auto insertion machinesFuture strategyIn order to survive in the market their future startegy is to launch new models in the market with innovative features at regular intervals.

Samsung wanted to shift its focus to become a leader in digital revolution.Become an export base for supplying consumer electronics and home appliance products to neighboring countries like SL, thailand,Gulf, European etc

3S:3E Campaign 3S Speed Simplicity and Self confidence and 3E - Engagement, Empowerment and Encouragement.

Performance