A

PROJECT REPORT
ON
“SALES STRUCTURE OF TWO CONSUMER DURABLE
COMPANIES: LG & SAMSUNG”

SUBMITTED IN THE FINAL FULFILLMENT OF

POST GRADUATION DIPLOMA IN MANAGEMENT

2008-10

UNDER THE GUIDANCE OF:

PROF. ______________

SUBMITTED BY:
______________
____________

______________ INSTITUTE OF MANAGEMENT

____________________________________________
NEW DELHI

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 Certificate
This is to certify that Mr. ________________, student of Post Graduation
Diploma In Management (PGDM), batch 2008-10 has completed the project
“SALES STRUCTURE OF TWO CONSUMER DURABLE
COMPANIES: LG & SAMSUNG”

With authenticity and accuracy, under my guidance and supervision

PROJECT GUIDE:
Prof. ______________
FACULTY _________
NEW DELHI

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 DECLARATION

I hereby declare that this project report prepared in lieu of a compulsory paper for the partial fulfillment of
Master of Business Administration (Marketing and Finance) is my original work which I have submitted in
__________ Institute of Management to my guide ______________. No part of it has been submitted to
any other university or organization.

All the information and data in my project are authentic to the best of my knowledge and taken from
reliable sources.

___________________

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 Acknowledgement

Project work is never the work of an individual. It is more a combination of views, ideas, suggestions,
contribution and work involving many individuals.

I wish to express my deepest gratitude to ______________ Institute of management for giving me an

opportunity to be a part of their esteem organization and enhance my knowledge by granting permission to
do my final project under their guidance.

I am grateful to __________________, my guide, for her invaluable guidance and cooperation during the
course of the project. He provided me with her assistance and support whenever needed that has been
instrumental in completion of this project.

Last but not the least my project work is a result of guidance and cooperation of many respectable persons
and many of my friends to whom I cannot express their help in words.

________________

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 Table of content

Contents Page No.

Certificate 2
Declaration 3
Acknowledgement 4
Ch-1 Executive Summary 6
Ch-2 Introduction 7
Ch-3 Industry Profile 8
Market Analysis 10
Some Facts 10
Market Value 11
Sector Outlook 12
Scope 12
Ch-4 Objective 14
Research Methodology 15
Hypothesis 15
Ch-5 Introduction to the topic 16
Ch-6 Company Profile 18
Sales Promotion 30
Benefits 30
Types 31
Advantages and Disadvantages 31-32
Ch-7 Key Findings 42
Ch-8 Conclusion 43
Ch-9 Recommendations 44
Ch-10 Bibliography 49
Curriculum vitae 50

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Chapter 1: EXECUTIVE SUMMARY

Indian Consumer durables market used to be dominated by few domestic players like Godrej, Voltas,
Allwyn and Kalvinator. But post liberalization much foreign company have entered into Indian market
dethroning the Indian player and dominating Indian market the major categories in the market CTV,
REFRIGRATOR, AIR CONDTIONERS AND WASHING MACHINE
India being the second largest growing economy with huge consumer class has resulted in
consumer durables as the fastest growing industries in India LG, SAMSUNG the two Korean companies
has been maintaining the lead in the industries with LG being leader in almost all the categories.
The rural market is growing faster than the urban market, although the penetration level is much lower .The
CTV segment is expected to the largest contributing segment to the overall growth the industry. The rising
income levels double-income families and consumer awareness are the main growth drivers of the
industries.

Consumer durables major LG Electronics India Pvt Ltd (LGEIL) will invest nearly Rs 500 crore in India
this year in research and development, brand-building and other marketing initiatives.

The company, having a turnover of Rs 9,500 crore and market share of 26 per cent, is investing Rs 360
crore on brand-building and other marketing initiatives and around Rs 140 crore on research and
development, besides launching new platforms in information technology and related areas,

LG’s innovative ‘211 campaign’ to provide quality after-sales service, will also be expanded from the
existing 22 to 40 cities by next month, The campaign, for which IT infrastructure has been set up, includes
the company’s response to customer complaint within two hours. The fixing time for complaints varies
from one hour to a maximum of 24 hours.

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Ch-2 INTRODUCTION

Every company has some product to sell because sales is a basic requirement to run any business as it is the
only component which provides revenue. It is the prime concern of every business to design a perfect sales
structure for sales on which they are dependent. In this tough market scenario of today’s global competitive
world it is most important to capture the market share along with fulfilling the customer needs and wants.

I have chosen consumer durable industry because there are only a few companies in the competition in
Indian market and they are not only facing and fighting to competition by just fulfilling the needs and wants
of their customer but also there are trying to generate new needs and wants to increase the demand of their
product. Ten years back who thought there could be any LCD screens, mobile phones with GPS (Global
Positioning System), plasmas etc. but it was possible only because of the advanced technological support
through their continuous research and development. These companies have in some way revolutionized the
world.

The main focus of these companies is in the research and development where innovation is worshiped.
They are in some way responsible for the look of the world that we see today.

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Ch-3 INDUSTRY PROFILE

The Consumer Durables industry consists of durable goods and appliances for domestic use such as

televisions, refrigerators, air conditioners and washing machines. Instruments such as cell phones and

kitchen appliances like microwave ovens were also included in this category. The sector has been

witnessing significant growth in recent years, helped by several drivers such as the emerging retail boom,

real estate and housing demand, greater disposable income and an overall increase in the level of affluence

of a significant section of the population. The industry is represented by major international and local

players such as BPL, Videocon, Voltas, Blue Star, MIRC Electronics, Titan, Whirlpool, etc.

The consumer durables industry can be broadly classified into two segments: Consumer Electronics and

Consumer Appliances. Consumer Appliances can be further categorized into Brown Goods and White

Goods. The key product lines under each segment were as follows.

Industry Size, Growth, Trends

The consumer durables market in India was estimated to be around US$ 5 billion in 2007-08. More than 7

million units of consumer durable appliances have been sold in the year 2006-07 with colour televisions

(CTV) forming the bulk of the sales with 30 per cent share of volumes. CTV, refrigerators and Air-

conditioners together constitute more than 60 per cent of the sales in terms of the number of units sold.

In the refrigerators market, the frost-free category has grown by 8.3 per cent while direct cool segment has

grown by 9 per cent. Companies like LG, Whirlpool and Samsung have registered double-digit growth in

the direct cool refrigerator market.

In the case of washing machines, the semi-automatic category with a higher base and fully-automatic

categories have grown by 4 per cent to 526,000 units and by 8 per cent to 229,000 units, respectively. In the

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air-conditioners segment, the sales of window ACs have grown by 32 per cent and that of split ACs by 97

per cent.

Since the penetration in the urban areas for these products is already quite high, the markets for both C-TV

and refrigerators were shifting to the semi-urban and rural areas. The growth across product categories in

different segments is assessed in the following sections.

Consumer Electronics

The CTV production was 15.10 million units in 2007-08 and is expected to grow by at least 25 per cent. At

the disaggregated level, conventional CTV volumes have been falling while flat TVs have grown strongly.

Market sources indicate that most CTV majors have phased out conventional TVs and have been instead

focusing more on flat TVs. The flat segment of CTVs now account for over60 per cent of the total domestic

TV production and is likely to be around 65 per cent in 2007-08.High-end products such as liquid crystal

display (LCD)and plasma display CTV grew by 400 per cent and 150 per

Cent respectively in 2009–10 following a sharp decline in prices of these products and this trend is expected

to continue. The audio/video player market has seen significant growth rates in the domestic market as

prices have dropped. This trend is expected to continue through 2009- 2010, as competition is likely to

intensify to scale and capture the mass market.

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MARKET ANALYSIS

The Indian Consumer Electronics market generated total revenues of $3.8 billion in 2006, this representing
a compound annual growth rate (CAGR) of 11.1% for the period spanning 2002-2006. In comparison, the
Chinese and Japanese markets grew with CAGRs of 11.8% and 15.7% over the same period, to reach
respective values of $17.6 billion and $20.5 billion in 2006.

Video equipment sales proved the most lucrative for the Indian Consumer Electronics market in 2006,
generating total revenues of $3 billion, equivalent to 80.8% of the market's overall value. In comparison,
sales of audio equipment generated revenues of $0.6 billion in 2006, equating to 14.9% of the market's
aggregate revenues. The performance of the market is forecast to accelerate, with an anticipated CAGR of
5.4% for the 2006-2011 period expected to drive the market to a value of $4.9 billion by the end of 2011.
Comparatively, the Chinese and Japanese markets will grow with CAGRs of 9.2% and 7% respectively
over the same period, to reach respective values of $27.4 billion and $28.6 billion in 2011.

With the increase in income levels, easy availability of finance, increase in consumer awareness, and
introduction of new models, the demand for consumer durables has increased significantly. Products like
washing machines, air conditioners, microwave ovens, color televisions (CTVs) are no longer considered
luxury items. However, there are still very few players in categories like vacuum cleaners, and dishwashers.
Consumer durables sector is characterized by the emergence of MNCs, exchange offers, discounts, and
intense competition. The market share of MNCs in consumer durables sector is 65%. MNC's major target is
the growing middle class of India. MNC’s offer superior technology to the consumers, whereas the Indian
companies compete on the basis of firm grasp of the local market, their well-acknowledged brands, and
hold over wide distribution network. However, the penetration level of the consumer durables is still low in
India. An important factor behind low penetration is poor government spending on infrastructure. For
example, the government spending is very less on electrification programs in rural areas. This factor
discourages the consumer durables companies to market their products in rural areas.

Some Facts

1. Bargaining power of suppliers in consumer durables sector is

limited due to threat of imports and intense competition.

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2. Some of the entry barriers in consumer durables sector are

distribution network, capital, and ability to hire purchases.

3. Demand is seasonal and cyclical.

4. Competition among players is on the basis of difference in prices

and well-acknowledged brands.

MARKET VALUE

The Indian consumer electronics market grew by 7.6% in 2006 to reach a value of$3.8 billion. The
compound annual growth rate of the market in the period 2002-2006 was 11.1%.

Table 1: India Consumer Electronics Market Value: $ billion, 2004-2008

Year $ billion INR billion % Growth

2002 2.5 109.2

2003 2.9 126.8 16.10%

2004 3.2 141.7 11.80%

2005 3.5 154.7 9.20%

2006 3.8 166.5 7.60%

CAGR, 2002-2006: 11.1%

Sector Outlook

There has been strong competition between the major MNCs like Samsung, LG, and Sony.

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According to Isuppli Corporation (Applied Market Intelligence), country's fiscal policy has encouraged
Indian consumer electronic industry. The reduction on import duty in the year 2005-06 has benefited many
companies, such as Samsung, LG, and Sony. These companies import their premium end products from
manufacturing facilities that are located outside India.
Indian consumers are now replacing their existing appliances with frost-free refrigerators, split air
conditioners, fully automatic washing machines, and color televisions (CTVs), which are boosting the sales
in these categories.

Some companies like. LG Electronics India Ltd. & Samsung Electronics Co. Ltd is now focusing on rural
areas also. These companies are introducing gift schemes and providing easy finance to capture the
consumer base in rural areas.

Scope

In terms of Purchasing Power Parity (PPP), India is the 4th largest economy in the world and is expected to
overtake Japan in the near future to become the 3rd largest. Indian consumer goods market is expected to
reach $400 billion by 2010. India has the youngest population amongst the major countries. There are a lot
of young people in India in different income categories. Nearly two- thirds of its population is below the age
of 35, and nearly 50 % is below 25. There are 56 million people in middle class, who are earning US$
4,400- US$ 21,800 a year. And there are 6 million rich households in India. The upper-middle and high-
income households in urban areas are expected to grow to 38.2 million in 2007 as against 14.6 million in
2000.

- Current Scenario
- Future Scenario

Rural sector offers huge scope for consumer durables industry, as it accounts for 70% of the Indian
population. Rural areas have the penetration level of only 2% and 0.5% for refrigerators and washing
machines respectively. The urban market and the rural market are growing at the annual rates of 7%-
10%and 25% respectively. The rural market is growing faster than the urban market. The urban market has
now largely become a product replacement market.
The bottom line is that Indian market is changing rapidly and is showing unprecedented business
opportunity.

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Ch-4 OBJECTIVES

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To enquire about:

1. Sales structure of LG and Samsung.

2. Identify chief characteristics of sales structure for each of the companies.

3. Highlight salient features of a viable sales structure in Indian context

RESEARCH METHODOLOGY

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There was hardly any need of collection of primary data neither there was any scope for it.

The data collected for the purpose of the study was secondary data. The secondary data was collected
mainly through:

• Websites like
http://www.canwestmediaworks.com/television/nontraditional/opportunities/virtual_advertising/

• Magazines like

Global Entertainment and Media Outlook, 4Ps

• Newspapers like

Economic Times, Times of India

HYPOTHESIS

Going by the decent market share as well as the display share, distribution channel and better sales figure of
LG in comparison to Samsung, we can assume that among the two consumer durable Titans in India, sales
structure of LG scores better.

Chapter 5: INTRODUCTION TO THE TOPIC

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I have undertaken this project to compare the sales structure of two companies in the consumer durable
industry i.e. LG and Samsung including the efforts they put in sales promotion and other activities related to
it. In the current market scenario dealers play important role to create the image of the company and the
product.
This project may prove to be of immense use to the Marketing section as well as Customer Care
Department as it will help them to know the problems of customers, reasons for their dissatisfaction and
ways to increase the sales.
This will also help the company to know how far they have been successful in their brand building process.
Sales promotion includes several communications activities that attempt to provide added value or
incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate
sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in
sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates,
and sweepstakes.
A push strategy involves convincing trade intermediary channel members to "push" the product through
the distribution channels to the ultimate consumer via promotions and personal selling efforts. The
company promotes the product through a reseller who in turn promotes it to yet another reseller or the final
consumer. Trade-promotion objectives are to persuade retailers or wholesalers to carry a brand, give a brand
shelf space, promote a brand in advertising, and/or push a brand to final consumers. Typical tactics
employed in push strategy are: allowances, buy-back guarantees, free trials, contests, specialty advertising
items, discounts, displays, and premiums.

A pull strategy attempts to get consumers to "pull" the product from the manufacturer through the
marketing channel. The company focuses its marketing communications efforts on consumers in the hope
that it stimulates interest and demand for the product at the end-user level. This strategy is often employed if
distributors are reluctant to carry a product because it gets as many consumers as possible to go to retail
outlets and request the product, thus pulling it through the channel. Consumer-promotion objectives are to

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entice consumers to try a new product, lure customers away from competitors’ products, get consumers to
"load up" on a mature product, hold & reward loyal customers, and build consumer relationships. Typical
tactics employed in pull strategy are: samples, coupons, cash refunds and rebates, premiums, advertising
specialties, loyalty programs/patronage rewards, contests, sweepstakes, games, and point-of-purchase
(POP) displays.

Ch-6 COMPANY PROFILE

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About LG Electronics

LG Electronics pursues its 21st century vision of becoming a true global digital leader who can make its
customers worldwide happy through its innovative digital products and services. LG Electronics sets its
mid-term and long-term vision anew to rank among the top 3 electronics, information, and
telecommunication firms in the world by 2010.

As such, we embrace the philosophy of "Great Company, Great People," whereby only great people can
create a great company, and pursue two growth strategies involving "fast innovation" and "fast growth."
Likewise, we seek to secure three core capabilities: product leadership, market leadership, and people-
centered leadership.

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Growth Strategy

Fast Growth:

Fast growth is the result of strategies designed to expand the market size and earnings quickly, in the
process improving the growth rate in terms of monetary value rather than quantity.

Fast Innovation:

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Fast innovation involves setting extremely high innovation goals and securing a competitive edge, aiming
for a target of 30% more than what our competitors can do. Fast innovation also means 30% more sales and
improvement in our market share, new product development and unveiling these 30% faster, technology
development and establishment of corporate value three years ahead of competitors.

Core Capabilities

Product Leadership:

Refers to the ability to develop creative, premium products through specialized new technologies.

Market Leadership:

Refers to the ability to achieve the "LG brand is No. 1" goal backed by its formidable market presence
worldwide.

People Leadership:

Refers to talented people who perform excellently by internalizing and practicing innovations.

Corporate Culture

Though a company implements perfect management strategies and boasts of outstanding and talented
people, it should have an appropriate corporate culture to unleash the power of these capabilities.

No 'No'- Challenge: We foster a corporate culture whereby we suggest an alternative before saying "no"
and aggressively work towards fulfilling our goal.

'We' not ‘I’: We pursue a corporate culture whereby we embrace a strong teamwork.

Fun to work: We create a workplace where individuals' creativity and freedom are respected and working
is made fun.

LG’s Mission

LG Digital Design makes Customer's Dream True

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Overview

LG Electronics, Inc. (Korea Stock Exchange: 6657.KS) was established in 1958 as the pioneer in the
Korean consumer electronics market. The company is a major global force in electronics and information
and communications products with more than 64,000 employees working in 76 overseas subsidiaries and
marketing units around the world. With annual total revenues of more than US $16.9 billion (non-
consolidated), LG Electronics comprises three main business companies : Digital Display & Media, Digital
Appliance, Telecommunication Equipment & Handset.

LG Electronics' goal is to enable the intelligent networking of digital products that will make consumers'
lives better than ever.

Corporate Name LG Electronics Inc.

Established October 1, 1958 (As a private Company)

Corporate Office LG Twin Towers 20,Yoido-dong, Youngdungpo-gu Seoul, Korea 150-721

Tel: 82-2-3777-1114
URL: http://www.LGE.com

Chairman & CEO Mr. S.S.Kim

Business Area and Digital Display & Media Company

Main Product Digital TV, PDP, Monitor, CD-ROM Drives, DVD-ROM Drives, CD
Rewritable Recorder, VCR, DVD Player, Audio, Security System,
Recording Media, Video Phone, PC Camera, Banking Automatic System,
PCB
Digital Appliance Company

Air Conditioner, Refrigerator, Microwave Oven, Washing Machine,

Vacuum Cleaner, Compressor for Air Conditioner, Compressor for
Refrigerator

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 Telecommunication Equipment & Handset Company

TDX, STAREX, optical switching systems, Implementation of advanced

IBS (Information Building System), System Integration (SI) service, etc.
Implementation of advanced IBS (Information Building System), System
Integration (SI) service, Handsets for satellite, mobile multimedia and IMT-
2000 services, etc.

Number of 64,082(27,814 in Korea/ 36,268 overseas)

Employees

LG Electronics India Pvt. Ltd. A wholly owned subsidiary of LG Electronics, South Korea was
established in January, 1997 after clearance from the Foreign Investment Promotion Board (FIPB). The
trend of beating industry norms started with the fastest ever-nationwide launch by LG in a period of 4 years
with the commencement of operations in May 1997. LG set up a state-of-the art manufacturing facility at
Greater Noida, near Delhi, in 1998, with an investment of Rs 500 Crores. This facility manufactured Color
Televisions, Washing Machines, Air-Conditioners and Microwave Ovens. During the year 2001, LG also
commenced the home production for its eco-friendly Refrigerators and established its assembly line for its
PC Monitors at its Greater Noida manufacturing unit. The beginning of 2003 saw the rolling out of the first
locally manufactured Direct Cool Refrigerator from the plant at Greater Noida.

The Greater Noida manufacturing unit line has been designed with the latest technologies at par with
international standards at Korea and is one of the most Eco-friendly units amongst all LG manufacturing
plants in the world. LG has been able to craft out in five years, a premium brand positioning in the Indian
market and is today the most preferred brand in the segment

Various studies have shown that the consumer is well informed on the health awareness front. LG was one
of the first companies who recognized the emerging change in consumer needs and decided to differentiate
their products on the basis of technology, which appealed to the consumer on the basis of health benefits. Its
vision was to become a 'Health Partner' for its consumers worldwide and therefore formulated its corporate
philosophy to make peoples' lives better, convenient and healthier.

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For example: The CTV range offered by LG has 'Golden Eye' technology, which senses the light levels in
the room and adjusts the picture to make it more comfortable for the eyes. The entire range of LG air-
conditioners have 'Health Air System', which not just cools, but keeps pollution out. Similarly, microwave
ovens have the 'Health Wave System', refrigerators have the 'PN System', which preserve the nutrition in
food and washing machines have 'Fabricare System', which takes the health factor down to ones clothes.
All the products offered by the company have unique technologies, developed by its R&D departments that
give customers a healthier environment to live-in.

The year 2001 witnessed LG becoming the fastest growing company in the consumer electronics, home
appliances and computer peripherals industry. The company had till the month of October 2001 achieved a
cumulative turnover of Rs 5000 Crores in India since its inception in 1997, making it the fastest ever Rs
5000 Crores clocked by any company in the Indian consumer electronics and home appliances industry.
Having achieved this milestone, LG achieved another benchmark with the first ever sales of One Lakh ACs
(Windows and Splits) in a calendar year. LG is poised to surpass its turnover target of Rs. 2700 Crores this
year and clock a turnover of Rs. 3000 Crores.

This year, LG has emerged as the leader in Color Televisions, Semi Automatic Washing Machines, Air
Conditioners, Frost-Free Refrigerators and Microwaves Ovens. In Color Televisions having set the sales
target of one million units of Color Televisions for 2002, LG has already achieved the one million mark in
the month ahead of its target.

LG Electronics India is the fastest growing company in the consumer electronics, home appliances and
computer peripherals industry today.

LG Electronics is continually providing superior technology products & value for money to over 50 Lakh
households in India. LG Electronics already have various ranges of products & Planning to more with all
their variants and deviants.

LG’s Marketing Network is also big as enough, company is planning to increase it more. LG Electronics
currently has 65 Regional Area Offices, 60 Central Area Offices with 40 branches all over India.

So, the future prospect of LG Electronics in India seems to be very bright. As mentioned earlier, Samsung
has positioned themselves as wide variety products, good quality-affordable priced company. There are
many companies competing in the same industry like Apple with its mp3 and computer products, Canon
with its camera systems and Sony with music entertainment and HD TV. Samsung is one of the largest

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 electronics and IT companies. According to Fortune, they have made themselves noticeable by being
ranked second company in their industry (Electronics, electrical equipment) with a fortune 500 rank of 46
(Fortune, 2007). We have chosen to position Samsung's products in 5 different categories, because they
have different position in each category.
Products & Market Positioning Diagram

High Prices
• Mobile
• HD TV/DVD
• LCD
• Digital Appliance High Perceive
Low Perceive Value
Value
• Semi Conductor

Low Prices
LG Electronics (Business Divisions)

DISPLAY DIVISION MULTIMEDIA HOME APPLIANCE

• TV DIVISION DIVISION
• Digital TV • CD-ROM Drive • Air conditioners
• Monitor • DVD-ROM Drive • Refrigerator
• CPT • CD-RW Drive • Microwave oven
• CDT • VCR • Washing machine
• PDP • DVD Player • Dish washer
• Components (DY, • Notebook PC • Vacuum cleaner
FBT, MGT) • PC camera • Compressor
• Audio
• Security system
• Banking automatic

About Samsung

Samsung’s Vision
Samsung is guided by a singular vision: to lead the digital convergence movement. We believe that through
technology innovation today, we will find the solutions we need to address the challenges of tomorrow.
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From technology comes opportunity for businesses to grow, for citizens in emerging markets to prosper by
tapping into the digital economy, and for people to invent new possibilities.

It’s our aim to develop innovative technologies and efficient processes that create new markets, enrich
people’s lives and continue to make Samsung a trusted market leader

Samsung’s Mission
Everything we do at Samsung is guided by our mission: to be the best “digital-
Company”.

Samsung India aims to be the ‘Best Company’ in India by the Year 2012. ‘Best Company’ in terms of both
the internal workplace environment as well as the external context in which the Company operates.
Samsung aims to grow in India by contributing to the Indian economy and making the lives of its
consumers simpler, easier and richer through its superior quality products.

“Our aim is to gain technological leadership in the Indian marketplace even as our goal is to earn the love
and respect of more and more of our Indian consumers.” Mr. S.H. Oh, President & CEO Samsung South-
West Asia Regional Headquarters.

Samsung in India
Samsung India is the hub for Samsung’s South West Asia Regional operations. The South West Asia
Regional Headquarters looks after the Samsung business in Nepal, Sri Lanka, Bangladesh, Maldives and
Bhutan besides India. Samsung India, which commenced its operations in India in December 1995, today
enjoys a sales turnover of over US$ 1Bn in just a decade of operations in the country.

Headquartered in New Delhi, Samsung India has a network of 19 Branch Offices located all over the
country. The Samsung manufacturing complex housing manufacturing facilities for Color Televisions,
Color Monitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung ‘Made in
India’ products like Color Televisions, Color Monitors and Refrigerators were being
exported to Middle East, CIS and SAARC countries from its Noida manufacturing
complex. Samsung India currently employs over 1600 employees, with around 18% of its employees
working in Research & Development.

SAMSUNG’S V.R.I.O FRAMEWORK

Resources Valuable Rare Costly to Exploited by Competitive Economic Strength
Imitate Organization Implication Implication or
Weaknes

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 s

Competitive
Technology Yes No Yes No Normal Strength
Parity
Human Competitive
Yes No No Yes Normal Strength
Resource Parity
Corporate Competitive
Yes No No Yes Normal Strength
Strategy Parity

Value
Since 1969 through 2005, Samsung has become a large consumer electronic company that produces
semiconductors, digital media, telecom, LCD and digital appliance products. Samsung achieved success
from five different categories from their resources which it can divide into three parts; technology, human
resource and corporate strategy.
First, Samsung has innovative technology in R&D market. Samsung did not have technology to produce
DRAM in 1980s; they bought technology from another company to manufacture DRAM. However,
Samsung can produce DRAM based on that technology and established two teams for design DRAM
(Barney, 2008:PC2-8).
Second, Samsung has great human resource and policies. Samsung does not care about employees’
background; they only hire employees who have abilities. Therefore, Samsung can have employees from
many other countries and talents people. Also, they tried to develop employees’ skills through place
program. Samsung tried to hire and develop quality employees and rewarded those employees.
Third, Samsung’s corporate strategies bring success in their business. In 1980s, Samsung had to make
important decision of DRAM style. There were two different DRAM styles and Samsung’s Chairman
decided to produce DRAM with stacking style which brings success to Samsung (Barney, 2008: PC2-8).
Samsung could lose DRAM market depending on that decision, because both DRAM style were popular
and it is hard to choose which style is better than the other. Another strategic challenge for Samsung was
having partnership with Chinese DRAM Company in 2005. This Chinese company followed what
Samsung did in 1980s, they expend their market and this was threat for Samsung. Became partner with
Chinese company, Samsung would have access to China DRAM market in the future (Barney, 2008:PC2-
20).

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Rarity
Each company has their own resources, it can be something that other companies already have or are
unique. Samsung’s resources are valuable but many other companies have technology, human resource
and corporate strategy. A company can acquire technology if they have enough investment, also a company
can have good employees depend on their flexibility. Once a company have quality employees, those
people will lead the company to success way and provide strategic decisions.

Imitability
Except technology, human resource and strategy does not costly to imitate; also, Samsung bought the
technology from other company at the beginning. Therefore, all of resources are imitable for competitors.
Currently, Samsung is facing Chinese DRAM Company because of imitability of their resource.

Organization
Samsung has developed DRAM technology in better ways but they brought technology from another
company, but Samsung has built own human resources and polices that supports corporate strategy.

Competitive and Economic Implication

From Table 1-1, two valuable resources that were exploited by the organization represent that Samsung is a
strong company. Overall, Samsung has a competitive parity and normal economic scale; all of resources
work as competitive advantage for Samsung.

Cost leadership
Since Samsung bought DRAM technology from other company, they has develop and come up with better
technology. Samsung has introduced many products with low price and high technology products. High
technology requires high cost; Samsung tried to reduce cost by having main R&D facility and fab line in
South Korean instead of having many branches in other countries (Barney, 2008:PC2-17). These cost
leadership came from Samsung policy, which is “We will devote out human resources and technologies to
create superior products and services thereby contributing to a better global society” (Samsung, N/A).
Products differentiation

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Samsung has tried to differentiate their products from other companies based on three categories, which are
product attributes, firm-customer relationships and firm linkages. There are many competitors that produce
similar products as Samsung; Samsung has to deal with competitors in five different industries.
Samsung add different features into their products to differentiate from others. For example, adding pod cast
feature into headset in order to provide more function fro customers (Samsung to put podcast feature on
handsets, 2007). Feature difference attracts more customers and Samsung trying to differentiate their
products by present new features.
Samsung was not popular brand, but they became No.1 TV market in 2007 (Moon, 2008). Currently,
Samsung is a well known brand, they have reputation from customers and provide quality products to
customers. Also, Samsung opened showroom in the New York City to create loyalty with customers.
Samsung differentiate their products by acquiring other companies. Samsung Electronics has acquired
Phoenix SecureCore in 2007, in order to produce firmware for their electronic devices (SAMSUNG
LICENSES PHOENIX SECURECORE, 2007). Also, use their supply chain management system to
forecast trends and sales, therefore, Samsung can prepare for next strategies (Moon, 2008).

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Samsung Electronics Company was established in Taegu, Korea in 1969 by Byung-Chull Lee. During that
time the company only manufactured black-and-white TV sets. Since 1969, the company has enjoyed
steady growth. At the end of 2004, Samsung had around $80 billion in net sales, $60 billion in assets and
had 113 thousand employees worldwide. Also, in 2004 Samsung stood up ahead of many their competitors
such as Phillips, Kodak, and Panasonic (Barney & Hesterly, 2008, PC 2-1). By that time the company
produced TVs, AV equipment, and computers; the Telecommunication Business, which manufactured
mobile phones and networking equipment; the LCD Business, which made LCD panels for notebook
computers, desktop monitors, and HDTV; and the Digital Appliances Business, which produced and sold
refrigerators, air conditioners, and washing machines (Barney & Hesterly, 2008, PC 2-6).

Samsung believes that the success of their contributions to society and to the mutual prosperity of people
across national boundaries truly depends on how they manage their company. (Samsung, 2008) Kun Hee
Lee, current chairman of the Samsung Group always teaches his employees: always demand superiority in
product design and process efficiency. Under Lee’s leadership, Samsung Corporation has become one of
the world’s leading memory producers in all types of PCs, digital cameras, game players, and other
electronics products (Barney & Hesterly, 2008, PC 2-1).

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SALES PROMOTION

Sales promotion is a variety of short-term incentives to encourage trial or purchase of a product or service
by the consumers or the trade (retailers).
There has been increase in the sales promotion budgets of all organizations. Even smaller firms and retail
outlets like Shopper’s Stops have had sales promotion campaigns. This growing significance can be
attributed to the following:
a) Growing consumerism in India and an upwardly Denim Indian market.
b) Heightened inter-firm rivalry within the industry and in fact, in all sectors of the
economy.
c) Trade’s resistance to invest additional resources in the product mix of different
companies. This resistance is mainly because of most consumer companies enlarging
their product mix to pre-empt competition and also to satisfy different consumer
needs. Since the trade has limited sources they find it difficult to invest in all

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 companies’ products. Hence, the trade also demands more incentives for any
additional investment.
d) Fragmentation of viewers and readers arising out of multiple television channels,
newspaper and magazines.
e) The mass media cost has been on the rise and most companies find sales promotion a
more cost effective alternative.
f) With technologies and products getting standardized, differentiation between firms
has got blunted and price wars have now become a reality in most consumer goods.

Benefits offered by sales promotions

• It helps in securing trial and defending shelf space against competition.

• Smoothens out the manufacturing capacities of firms in such a way that the peaks and the valleys are
minimized.
• Provides opportunities to manufacturers to reach out market segments with differing price sensitivity
• Adds excitement to the in-store merchandizing of consumer goods
• Motivates the trade to keep more and push more of those brands that are on promotion

Types of sales promotion

Sales promotion can be grouped into the following:
A. Consumer sales promotions (Pull Strategy)
B. Trade sales promotions (Push strategy)
Consumer sales promotion methods encourage or stimulate consumers to patronize specific retail stores
or try particular products.

Trade sales promotion methods stimulate wholesalers and retailers to carry a producer’s products and to
market these products more aggressively.

Consumer Sales Promotion Methods

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Consumer sales promotion methods used by retailers are often aimed at attracting customers to specific
locations, whereas those used by manufacturers are generally directed at introducing new products or
promoting established brands. Various sales promotion like coupons, demonstration, frequent-user
incentives, point-of-purchase displays, free samples, money refunds, premiums, consumer contest and
sweepstakes have been discussed with advantages and disadvantages of each.

Coupons
A coupon is a written price reduction used to encourage consumers to buy a specific product. Coupons
reduce a product’s price and are used to prompt customers to try new or established products, to increase
sales volume quickly, to attract repeat purchasers, or to introduce new packages sizes or features.
Coupons are distributed on and in packages, trough freestanding inserts (FSIs), print advertising, direct mail,
and in stores through shelf dispensers, electronic dispensers, and at checkout counters. According to a
survey, consumers’ preferred methods of receiving coupons are through colour leaflets in Sunday
newspaper (67%) and by mail (59%)
Advantages
1. Print advertisement with coupons are often more effective than non-promotional
advertising for generating brand awareness. The larger the coupon’s cash offer, the
better the recognition generated.
2. Coupons reward present product users, win back formers users, and encourage
purchases in larger quantities.
3. As they are returned, coupons also let a manufacturer determine whether it reaches the
intended target market.

Disadvantages
1. Fraud and Misredemption, which can be expensive for manufacturers. The approximate
redemption rate is 2.3%, with 25% of coupons accepted being misredemptions.
2. Coupons are losing their value because so many manufacturers offer them, consumers
have learned not buy without some incentive, whether it be a coupon, rebate or refund.
3. Brand loyalty among heavy coupon users has diminished, and many consumers only
redeem coupons for products they normally buy. It is believed that about three-fourths of
coupons are redeemed by people already using the brand on the coupon. Thus coupons

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 have questionable success as an incentive for consumers to try a new brand or product
and then continue using it.
4. Stores often do not have enough of the coupon item in stock which generates ill will
towards both the store and the product.

Demonstrations
Demonstrations are excellent attention getters. Manufacturers offer them temporarily to encourage trial use
and purchase of the product or to show how the product works. They can be highly effective for promoting
certain types of products, such as appliances, cosmetics, and cleaning supplies. As the labour costs can be
high, demonstration are not used widely.

Frequent-User Incentives
Many firms develop incentive programs to reward customers who engage in repeat (frequent) purchases.
For example, most major airlines offer frequent-flyer programs through which customers that have flown a
specified number of miles are rewarded with free tickets for additional travel. Frequent-user foster customer
loyalty to a specific Alankit or group of cooperating companies that provide extra incentive for patronage.
They are favoured by service businesses, such as auto rental agencies, hotels and credit card companies as
well as by consumer goods market.

Point-of-Purchase Displays
Point-of-purchase (P-O-P) materials include outside signs, window displays, counter pieces, display
racks, and self-service cartons. These items, often supplied by products, attract attention, inform customers
and encourage retailers to carry particular products. A retailer is likely is to use point-of-purchase materials
if they are attractive, informative, well-constructed, and in harmony with the store.

Free samples
Marketers use free samples for several reasons: to stimulate trial of a product, to increase sales volume in
the early stages of a product’s life cycle, or to obtain desirable distribution. Sampling is the most expensive
of all sales promotion methods because production and distribution – at local events, by mail or door-to-
door delivery, in stores, and on packages—entail very high costs. Free samples are generally not

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appropriate for slow-turnover products. Despite high costs, use of free samples is increasing. In a given
year, it is not unusual for three-fourths of all consumer product companies to use sampling.

Money refunds and rebates

With money refunds, consumers submit proof of purchase and are mailed a specific amount of money.
Usually, manufacturers demand multiple product purchases before consumers qualify for refunds. With
rebates, the customer is sent a specified amount of money for making a single purchase. These methods
used primarily to promote trail use of a product, are relatively low in cost.
One of the problems with money refunds and rebates is that many people perceive the redemption process
as too complicated. Consumers also have negative perceptions of manufacturers’ reasons for offering
rebate. They may believe that these are new, untested products or products that haven’t sold well. If these
perceptions are not changed, rebate offers may degrade the image and desirability of the products being
promoted.

Premiums
Premiums are items offered free or at minimum cost as a bonus for purchasing a product. They are used to
attract competitors’ customers, introduce different sizes of established products, add variety to other
promotional efforts, and stimulate consumer loyalty. Inventiveness is necessary, however; if an offer is to
stand out and achieve a significant number of redemptions, the premium must match both the target
audience and the brand’s image. To be effective, premiums must be easily recognizable and desirable.
Premiums are placed on or in packages and can also be distributed by retailers or through the mail.

Consumer Contests and Sweepstakes

In consumer contests, individual compete for prizes based on analytical or creative skills. This method
generates retail traffic. Marketers should exercise care in setting up a contest. Problems or errors may anger
consumers or result in lawsuits. Contestants are usually involved in consumer contests than in sweep stakes,
even though total participation may be lower. Contests may be used in conjunction with other sales
promotion methods, such as coupons
Entrants in consumer sweepstakes submit their names for inclusion in a drawing for prizes. Sweepstakes
are used to stimulate sales and, as with contests, are sometimes teamed with other sales promotion methods.
Sweepstakes are used more often than consumer contests and tend to attract a greater number of

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participants. Sweepstakes cost considerably less than contests. Successful sweepstakes can generate
widespread interest and short-term increases in sales or market share.

Consumer promotion objectives Vehicles used

a) Generate Trial: Coupons

i) New products Discount sales
ii) Related products Free samples
iii) Brand switchers Contests demonstration

b) Enquiries Gifts
Mail in coupons
Catalogue offers

c) Repurchase On-pack coupons

Mail in coupons
Continuity promotions

d) Traffic building Special events

Annual sales
Festival sales
Retailer coupons

Objectives of Consumer-oriented sales promotion

The broad objective of any sales promotion programme is to induce trial and purchase of the product. As
we consider the different sales promotion programmmes, we can conclude that their objectives are any one
or all of the following:

1) Generate consumer interest, which should lead to trial

This is one of the most vital objective in marketing, particularly in the case of new products and those
products which are mature and hence do not excite the interest of the consumer. Sales promotions designed
to create excitement in the target market should help in generating trial purchases. Free samples and
coupons are some of the consumer promotion schemes commonly used by firms. Offering gifts is another
alternate way.

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Free trials are very common in industry, particularly in cosmetics and the premium range of toilet soaps
and shampoos. Dove, a premium brand of toilet soap from Hindustan Levers urges consumers to try the 7-
Day test to convince themselves of the claims being made by the Alankit .
Free samples and coupons have generally been found useful in stimulating trial for low involvement
products because they generate a low cost usage experience that may create favourable attitudes much
faster than advertising. For, more complex and high involvement products, in-store demonstrations seem to
deliver better results. This may be attributed to the customer’s search for expert advice and information.
And in most high involvement products, generally it is the dealer or store sales person who is looked up to
as an expert.
In the context of multi-product firms like men’s toiletries firm, an Alankit may use vehicles like cross
couponing to build trial for these products. In cross couponing the firm’s objective is also to piggy ride a
new product on its existing products, which already command loyalty and market leadership.

2) Generate inquires from the target customer group

Another method of consumer promotion is to generate inquires from the target consumers. This is done
through mail-in coupons, free catalogues and prizes. Since the incentive offered is generally in the context
of an advertising message designed to introduce product benefits, these vehicles should be developed in
coordination with the advertising programmes. This method is particularly useful in the following
situations:
a) When the firm has to identify and attract prospective customers, who are difficult to be
identified because of the product concept
b) When the customers have to be frequently replenished, like in the context of educational
institutions whose stationery stocks have to be periodically replenished; here the supplier
may offer mail-in coupons or even special prices or gifts on festivals
c) When a new model or another version of a product or service has been planned/introduced.

3) Build consumer traffic

Shoppers Stop, a leading garment and accessories store in the western suburbs of Mumbai, recently had a
tie festival. Earlier it had several similar events either all by itself or in collaboration with leading brands.

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Such special sales, festival sales, or even entertainment events like Filmfare Awards are designed to build
consumer traffic at retail outlets or for a brand.

4) Motivate customers to repeat their purchase

Several companies use promotion like first citizen’s club (Shopper’s Stop) which promises the customer a
free shirt or any garment on the purchase of a specific number of garments. Likewise, Citibank with master
card offers its members JPMiles for every purchase made on the Citibank master credit card and by earning
JPMiles one can fly free through Jet Airways. These tools are aimed at creating brand loyalty. Likewise, a
firm may offer continuity promotions like contests that run over several days and weeks or gifts distributed
in increments over time. Frequent flyer programmes of airlines are another form of continuity promotion.

5) Increasing rates of purchase

Strategically the firm’s motivation here is to retain the customer or to generate primary demand. Tactically,
for the former motivation, the firm may offer a multipack or a large pack at a lower price than the
competition and its own smaller units. The net effect of this strategy is to make the consumer stock the
Alankit ’s products brand above the normal level. Any consumer who does that will not have the
motivation to buy the competing brand.
Sales promotion tools – coupons, contests, premiums, and the like—offer three distinctive benefits:
1) Communication: they gain attention and may lead the consumer to the product.
2) Incentive: they incorporate some concession, inducement, or contribution that gives
value to the consumer.
3) Invitation: they include a distinct invitation to engage in the transaction now.

Trade Sales Promotion Methods

• With the influx of so many brands and variants in the market, there is a huge clutter and low
consumer involvement leading to commoditisation of brands.
• Consumers are fatigued by the choices they have to make between nearly similar brands lacking a
clear Rational or Emotional differentiator
• This makes the Retailer’s ‘Push’ or recommendation essential. He is becoming an essential part of
the Marketing Mix. He can choose not to sell/stock a brand.

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 • No matter how much advertising is done- if the product is not available on the retail shelf- it will
not be bought.
To encourage resellers, especially retailers, to carry their products and promote them effectively, producers
use sales promotion methods. These include buy-back allowances, buying allowances, scan-back
allowances, count and recount, free merchandise, merchandise allowances, cooperative advertising, dealer
listings, premium or push money, sales contests, and dealer loaders. Discussed below is the analysis of each
of these trade sales promotion schemes with advantages and disadvantages of each of them.

Buy-Back Allowances
A buy-back allowance is a sum of money given to a reseller for each unit bought after an initial deal is over.
This method is a secondary incentive in which the total amount of money that resellers receive is
proportional to their purchases during an initial trade deal, such as coupon offer. Buy-back allowance foster
cooperation during an initial sales promotion effort and stimulate repurchase afterwards. The main
drawback of this method is expense.
Buying Allowances
A buying allowance is a temporary price reduction to resellers for purchasing specified quantities. A soap
producer, for example, might give retailers Re 1 for each case of soap purchased. Such offers may be an
incentive to handle new products, achieve temporary price reductions, or stimulate purchase of items in
larger than normal quantities. The buying allowance, which takes the form of money, yields profits to
resellers and is simple and straightforward. One hazard of buying allowances is that customers will buy
forward, meaning that they buy large amounts that keep supplied for many months. Another problem is that
competition can beat the reduced price, which can lower profits for all sellers.

Scan-Back Allowances
A scan-back allowance is a manufacturer’s reward to retailers based on the number of pieces moved
through their scanners during a specific time period. To participate in scan-back programs, retailers usually
are expected to pass along savings to consumers through special pricing. Scan-back are becoming widely
used by manufacturers because they directly link trade spending to product movement at the retail level.

Count and Recount

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The count-and-recount promotion method is based on payment of a specific amount of money for each
product unit moved from a reseller’s warehouse in a given time period. Units of a product at the start of the
promotion and again at the end to determine how many units have moved through the warehouses and can
also clear distribution channels of obsolete products or packages and reduce warehouse inventories. The
count-and-recount method might benefit a producer by decreasing resellers’ inventories, making resellers
method might benefit a producer by decreasing resellers’ inventories, making resellers more likely to place
new orders. However, this method is often difficult to administer and may not appeal to resellers with small
warehouses.

Free Merchandise
Free merchandise is sometimes offered at resellers who purchase stated quantities of the same or different
products. Occasionally, free merchandise is used as payment for allowances provided through other sales
promotion methods. To avoid handling and book-keeping problems, the giving of free merchandise is
usually accomplished by reducing the invoice.

Merchandise Allowances
A merchandise allowance is a manufacturer’s agreement to pay resellers certain amounts of money for
providing promotional efforts, such as advertising or displays. This method is best suited to high-volume,
high-profit, easily handled products. Its major drawback is that some retailers perform activities at a
minimally acceptable level simply to obtain allowances. Before paying retailers, manufacturers usually
verify their performance. Manufacturers hope that retailers’ additional promotional efforts will yield
substantial sales increases.

Cooperative Advertising
Cooperative advertising is an arrangement whereby a manufacturers agrees to pay a certain amount of a
retailer’s media costs for advertising the manufacturer’s products. The amount allowed is usually based on
the quantities purchased. Before payment is made, a retailer must show proof that advertisement did appear.
These payments give retailers additional funds for advertising. Some retailers exploit cooperative
advertising programs by crowding too many products into one advertisement. Surprisingly, not all available
cooperative advertising amounts are used. A large proportion of all cooperative advertising amount are
spent on newspaper advertisements.

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Dealer Listing
Dealer listing are advertisements promoting a product and identifying participating retailers that sell the
product. Dealer listings can influence retailers to carry the product, build traffic at the retail level, and
encourage consumers to buy the product at participating dealers.

Premium, or Push Money

Premium, or Push money is additional compensation provided to salespeople by the manufacturers in order
to push a line of goods. This promotion method is appropriate when personal selling through self-service.
The method often helps manufacturers obtain commitment from the sales force, but it can be very
expensive.

Sales contests
A sales contest is designed to motivate distributors, retailers, and sales personnel by recognizing outstanding
achievements. To be effective, this method must be equitable for all salespersons involved. One advantage
of the method is that it can achieve participation at all distribution levels. However, positive effects may be
temporary, and prizes are usually expensive.

Dealer loaders
A dealer loader is a gift to a retailer who purchases a specified quantity of merchandise. Often dealer loaders
are used to obtain special display efforts from retailers by offering essential parts as premiums. For example,
a manufacturer might design a display that includes a sterling silver tray as a major component and give the
tray to the retailer. Marketers use dealer loaders to obtain new distributions and push larger quantities of
goods.

Objectives Vehicles

a) Inventory building Higher margins

Allowances for shelf space
Return allowance

b) Promotional support Joint promotions

Sales contents
Objectives of Trade Promotions

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The prime objective of trade promotion is to push the product through marketing intermediaries and also to
get them to market the product aggressively. As inter-firm rivalry intensifies, more and more manufacturers
will seek support of traders to aggressively market their product. The trader, too, has become selective and
wiser and hence demands substantial incentives from manufacturers to push their brands in the market.

If we were to scan various promotional tools like shelf display contest, merchandize allowance, returns
allowance, joint promotions, we will find that there are two objectives that explain their use:

Encouraging trade to build inventory

Any promotional tool designed to motivate trade to invest and build inventory of a particular brand at the
expense of a competing brand is a good tactical weapon to preempt competition. This is also useful when
marketers develop consumer-oriented promotions to boost their sales, as they do during the festive season.
During such occasions it is necessary to prevent any stockouts in the retail market. Thus, manufacturers
may offer special margins or extra merchandise at no additional cost or even offer allowances for additional
shelf and space or pay rent for additional godown space for a limited time period. The manufacturers may
even offer to promote specific retail outlets for those who join his trade promotion programme.
In the case of new products, manufacturers may offer the trader additional margins, pay for promotions, part
pay the wholesaler/retailer’s salesmen salaries or may offer cash incentives.

Getting trade’s cooperation in promotions

Often the manufacturer wants the distributor/wholesaler to participate in his promotional activities. One
reason for this is because it can help lower promotion costs of the manufacturer. Another reason is, it helps
heighten the interest and motivation of the distributor in the Alankit ’s brand/products. It also helps get a
commitment form the distributor. Here Joint advertising, joint consumer promotions and joint sales contexts
among retailers in the territory are some of the commonly used vehicles. Generally, in such situations, a
major proportion of the promotional expenditure is borne by the manufacturers.
Companies use sales-promotion tools to draw a stronger and quicker buyer response. Sales promotion can
be used for short-run effects such as to dramatize product offers and boost sagging sales.

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Ch- 7 KEY FINDINGS

1. The display share that was found in most of store of LG was 50% almost in all categories.

2. The actual monthly sale of stores gives an idea about the selling capacity of stores.

3. It helps to know that weather dealer is capable of being a direct dealer of LG or not and it also helps
to find out the new dealer who are capable of being the dealer of LG.

4. Persisting problems with after sales service of LG.

5. No proper follow up at Samsung.

6. After sales service is good only for some products like AC for samsung.

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 7. Demo calls also not done properly in samsung.

8. Sales training is given most focus for the sales team in LG.

9. Study shows that quality is most important parameter for more sale of colour television and then

price is considered by consumers, and LG scores better here.

10. Quality of the product is most important parameter for Refrigerator, here also LG has the upper

hand.

11. Territory designing is the most important activity before putting sales efforts, and contrary to above

findings Samsung has better territory design.

12. Sales team is taken care well for their continuous development and growth in both the companies.

13. Both the companies practice good motivational and incentive schemes.

Ch – 8 CONCLUSION

With respect to the above findings the display share of LG is 50% almost in all categories in stores, though
it lacks in the quality of after sales services, it has promising sales figures.

Sales training for the sales team is given a special attention and focus at LG. The price and quality of color
TVs and Refrigerators are well suited according to the Indian consumers. Whereas at Samsung there is no
proper follow up but it has a good command over the after sales services of ACs. At Samsung one may find
the company lacking in demo calls, however it has well organized territory design and plan. Samsung also
lacks proper pricing of its products as its products are a bit over priced in the context of Indian consumer
when compared to LG.

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After all these findings it was realized that both the companies have very good motivational as well as
incentive schemes for their sales force for their proper growth and development in the organization.

Hence the hypothesis holds good.

Ch- 9 RECOMMENDATIONS

The Industry type for Samsung is consumer electronics and entertainment. The market type is monopolistic
competition because there are many producers and many consumers in the given market. Furthermore,
when it comes to monopolistic competition, it involves a great deal of non-price competition which is based
on product differentiation. Also, the producers have a certain degree of control over price. The electronics
industry is a very wide category and it contains many types of products. Samsung competes with other
companies in providing customers with a wide array of products that are good quality and affordable price.
What they don't do is specialize in a certain product and thus they can't make an expensive superior product.

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With intense rivalry and competition in the industry, Samsung is satisfying consumers who want modern
reliable products ranging from cell phones to home electronics.

The threat of entry

The threat of entry to this industry depends on what part of the industry the company is trying to enter. If
they enter a specific category of products such as mp3 players or cameras, Samsung will have a low threat
level of entry from new companies. If a company decides to enter the same wide variety of product offering
as Samsung then there will be a high threat level of entry. Therefore, for Samsung, the threat of entry is
high. This is due to the fact that the Samsung Company is very widespread in terms of product offerings
and service. Samsung offers a wide variety of products such as; mobile phones, television, mp3/audio,
cameras, computers and home appliances. There are already many companies that are offering similar
products and it is hard for the company to focus on a specific products. Technology is very important
because the company has to keep up with latest trends and technology in all of its sections. It is difficult for
new companies to enter the industry and compete with the larger companies specifying in an section
because of already existing outstanding products in the electronic industry e.g. Apple's music entertainment
products, or Sony's audio entertainment systems, or Canon's camera products. The new entrants of the
electronic entertainment industry have to focus on whether to specialize in one area like music, TV, camera
etc, or whether to have a wide variety of products for a affordable price. If they choose the latter, they will
lost likely have to enter a price war. Samsung focuses on providing quality affordable price products for a
wide group of people. Although with the rise of technology and high consumer interest in electronics, the
industry is very popular and profitable for companies who have access to technology and capital. High
capital is required to enter into electronic industry due to requirements of large investments on technology,
distribution and marketing. New entrants in the industry have to spend a lot of money and time on branding
and customer knowledge. The barriers to entry are high but are declining because of new technology and
lower costs of production. The impact of new technology means that for content creation, the cost of digital
cameras and video editing software is declining. The content storage is not limited by physical shelf space
and server costs are declining. For product distribution, the growing number of distribution channels and the
internet provides global distribution. Furthermore, bandwidth costs are declining. This makes it more
attractable for new companies to enter the electronics and entertainment industry market. According to
Airborn electronics, a realistic development path for a startup company will usually involve designing a low

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volume high price version of their product first, and then moving to high volume designs as the market
matures. This is only possible where the economic demand for the product is "elastic" - in other words there
is some demand even when the price is high. Fortunately, high technology products usually exhibit elastic
demand (Airborn E. 2008). The consumer product market on the other hand can be a little bit less elastic -
This means that the demand goes down drastically when price is more than the consumer is willing to pay
for. This means that it may be very difficult for a startup company to produce a new consumer product.
Thus, the barriers to entry may be high in the industry depending on the economy. If the economy is good
and people have more money to spend on electronics, it is better for the company, if not, there is a high
barrier. In terms of product differentiation, there is a lot of specialization and increased value by companies
to make their products stand out and gain competitive advantage. According to Chaffin, Apple has around
82% of the market share for mp3 players because they differentiate and specialize their mp3 products
(Chaffin, 2008). A way for a new company to compete right now in the mp3 market is by price and ‘lower
quality’ alternative products or try to come up with new technology and features. For new companies to
compete with Samsung they have to differentiate and specialize their products which can be very costly.

The threat of Rivalry

The threat of rivalry in the consumer electronic market is very high. Not only does a company have to
compete on a level of technology and price, but they also have to keep track of what the competition is
doing. There is a high intensity and constant competition in the electronics industry and usually the main
competitors come up with new products very often. If a company does not keep up with trends and new
products, they will lose their customers and profits. According to Barney and Hesterly, high levels of rivalry
are indicated by such actions as frequent introduction of new products by firms in an industry (Barney,
Hesterly, 2008: pg 46). In the mp3 industry, Apple introduces new 'I' products very often. In TV/DVD
markets there are fewer introductions of new products because they are more expensive. The mobile phone
market comes out with new products very often. There is a huge competition and rivalry amongst these
markets. According to Barney and Hesterly, rivalry tends to be high where there are numerous of firms in
an industry and these firms tend to be roughly the same size. Such is the case with the laptop personal
computer industry. Worldwide, over 120 firms have entered the laptop computer market and no one firm
dominates in market share (Barney, Hesterly, 2008: pg 46). Furthermore, rivalry tends to be high when
firms are unable to differentiate their products from competitors in an industry. This can be seen in the
personal computer and DVD industry. In the PC laptop industry, companies are focusing more on services
that accompany the laptops and the designs of the computers. In the DVD industry the products are very
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similar and perform the same functions, thus it is hard to compete with existing companies. If a company
decided to compete in this industry, they have to compete with intense price rivalry. Dell focuses their
strategy on selling their computers online and providing excellent customer service. They save money on
not having a physical store and focus on online distribution instead. This saves them money and they can
compete on other levels. With the popular trend of the internet, companies are now competing with
providing more services online and expanding their online advertisement.

The threat of Substitutes

Substitutes in the consumer electronics industry are many and the different companies competing in this
industry must apply many strategies in order to compete and make profits. The substitutes in the electronics
market can be divided in to 4 categories. As will be mentioned the important factors in every industry of the
general electronics market.

Telecom - The substitutes in the telecom industry are landline phones and email. At the moment, landline
phones are losing popularity because of lower prices and popularity of cell phones and internet calling
programs. In the cell phone industry, Apple's I phone has the latest technology with its Touch screen, but
companies are following and introducing new phones. Technology is very important in this market.
Samsung has just introduced new line of innovative cell phones for 2008. Cell phones and PDA's have
standard features and the only product differentiation lies with adding services such as Bluetooth, gaps and
other communication applications and tools that are important for customers in the cell phone industry. it is
important to know that there are several companies who compete based on price in the cell phone industry
because it is a product that all kind of customers want. Samsung provides an affordable PDA with the
modern features to satisfy the average telecom user. Apple and Nokia are selling mobile phones with new
technology for a high price for customers who are willing to pay more. There are not many substitutes for
PDA's. The main one is using a cell phone or computer, laptop to call someone using e.g. Skype.

Laptops / PC - In the PC industry, the threat of substitutes is not very high because there are not many
products that can do what a computer or laptop can provide. The only substitutes are portable and handheld
devices. They are competing on price and trying to increase value based on service and customization. The
major substitutes for computers are PDA's and cell phones for contacting other people. In terms of writing
documents, portable devices are substitutes.

Digital Cameras - In the digital camera industry, there are two major substitutes. The first one is the film
camera, and the other one is the cell phone camera. Unfortunately, there is not much interest in film cameras

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because of outdates technology and cell phone cameras don't provide the same quality and storage as digital
cameras.

HD TV - Television have recently become very popular with the new HD technology. The substitutes for
TV's are computers and laptops. For people who travel a lot, prefer to watch movies and favorite shows on
their laptops because they can download or stream popular tv shows and movies from online sites.
Furthermore, another substitute for TV’s are going to the movies or watching videos on your Ipod. Because
of the limited availability and space on Ipods and the smaller size of a laptop screen, TV’s will still stay
popular and be high in demand.

The threat of Suppliers

For companies, the threat of suppliers can be high depending on how many products they are selling and
how differentiated they are. For example, in the HD and Blue ray competition, HD lost because the
suppliers determined that they would go with blue ray instead of HD because of partnerships. Creating
good supply chain management and a long term personal relationship with suppliers is very important for
electronics companies. If they buy in bulks and have long lasting partnerships, they will reduce their costs
by being more efficient in their SCM. Many suppliers work on integration and material-substitution projects
to drive down costs. Technology has a very important factor in suppliers. By creating partnerships, suppliers
can choose who they want to supply and what price to take. If they create a good that is very new and
trendy, they can chose to supply to companies that will provide them with easier SCM and better price.
Suppliers also want companies who they know will buy a lot in the long term, they want to create
partnerships with companies to earn profits in the long run. Although because of price wars, suppliers are
more and more forced to cut their prices as their customers can go to other suppliers who may offer better
components at a lower cost. Suppliers are also starting to lose power because more and more firms are
starting to produce their own products and components in-house.

The threat of Buyers

The threat of buyers is very huge. The customer is the most important factor in the buying process. They
decide where to buy the product and how much they want to pay for it. Most of the electronic entertainment
products are created from wants, not needs, therefore the customer does not have to buy the product to
survive. They can chose what to buy and from which company. Therefore it is important for the companies
to create value and set a price that the customer is willing to pay for. In the consumer electronic industry,
there are many products with different prices and different features. It is up to the customer to decide what

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features they need. Since there are a lot of buyers in the industry, there is not a large threat, but companies
have to keep the buyer in mind and listen to what they want. Since the products are not very standard and
differentiated, there is a lower threat of buyers. Furthermore, when the buyers are not earning significant
economic profits, buyers may be very sensitive to costs and look for the lowest possible cost and highest
possible quality of a product.

Secondary supports play an important role in the customers mind and create awareness among the
customers. The secondary support includes Demonstration, Exhibition & Even Sponsors.

Ch- 10 BIBLIOGRAPHY

• Global Entertainment and Media Outlook: 2006–2010, a report issued by global accounting firm
PricewaterhouseCoopers

• Bhatia (2000). Advertising in Rural India: Language, Marketing Communication, and

Consumerism, 62+68

• Eskilson, Stephen J. (2007). Graphic Design: A New History. New Haven, Connecticut: Yale
University Press. pp. 58. ISBN 978-0-300-12011-0.

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• Advertising Slogans, Woodbury Soap Company, "The skin you love to touch", J. Walter
Thompson Co., 1911

• McChesney, Robert, Educators and the Battle for Control of U.S. Broadcasting, 1928-35, Rich
Media, Poor Democracy, ISBN 0-252-02448-6 (1999)

• http://www.canwestmediaworks.com/television/nontraditional/opportunities/virtual_advertising/

• Advertising's Twilight Zone: That Signpost Up Ahead May Be a Virtual Product - New York
Times

• Lasch, Christopher. The Culture of Narcissism: American Life in an Age of Diminishing

Expectations. pp. 302. ISBN 978-0393307382.

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