Professional Documents
Culture Documents
Samsung has its roots also in other types of businesses rather than electronics. This corporation
is comprised of many companies that are setting new life standards from electronics up to
petrochemicals.
The company is focused exclusively on the consumer electronics segment and given its
competitive edge it has managed to garner the maximum market share for itself. As mentioned
above, Samsung Corporation manufactures a wide range of products which include different
industries such as electronics, machinery & heavy industries, chemical industries, financial
services and the like (2011 Sustainability Report, p.7). All these share a commitment to
creating high quality products which will create better life conditions for people and
businesses. Samsung still remains at the forefront of the digital revolution in which they
1
contributed by continually developing new products that not only meet the customers demand,
but also anticipate it.
Fig .3
Because of the wide range of products that Samsung manufactures, our main focus will be in
these products, specifically on Mobile Phones and TVs as they represent the main source for
the firm profits (2011 Sustainability Report, p.12). The chart below summarizes that the two
most profitable sections of Samsung Corporate are Digital Media and Telecommunications.
2.2 Competition/Market
Samsung provides a product range that is marked by a high quality and high responsiveness to
consumer needs and preferences. This advantage puts the company at forefront when
compared to its competitors. With the initiation of innovative and unique products, Samsung
took the market by storm and managed to gather the maximum market share. The table below
summarizes the global market share of Samsung in comparison with its competitors
representing the success of the firm.
Products
Samsung's
Global Market Competitors
Share
Market
Share
Year
DRAM
34.3%
Hynix
21.6%
Q1 2009
NAND Flash
40.4%
Toshiba
28.1%
2008
26.2%
LG Display
25.8%
2009
February
PDP panel
30.5%
LG Display
34.8%
Q1 2008
Active-Matrix OLED
90.0%
LG Display
Q2 2008
Lithium-ion battery
19%
Sanyo
20%
Q2, 2009
LCD Monitor
16.1%
Dell
14.6%
2008
9.5%
Seagate Technology
34.9%
2007
Multifunction printers
16.4%
HP
19.2%
Q1 2009
LG Electronics
13.7 %
Q3'09
Revenue
Share
French
door refrigerator (U.S.
18.79%
market only)
Whirlpool
23.83%
2009 January
Mobile phone
21%
Nokia
37.8%
Q3 2009
Digital camera
9.1%
Canon
19.2%
2007
Drillship
80%
2000~2007
2.3 Customers
Customers are what make a company function and therefore are very much valued by all the
companies. Samsung pays a special attention to its relationship with customers. Its aims are to
be respected and admired by customers. In order to strengthen the ties with their customers,
Samsung has developed several presumes activities and social network services.
Through these activities tailored for customers, the company won numerous awards for
customer satisfaction. Keeping the customer satisfied is very crucial to consistent success and
profits that Samsung holds. The company aims to provide products that will fulfill the
customer needs. In order to create a better communication chain, they have created different
packages which are composed of different groups of people in TV products or Mobile Phones
products.
Figure- 1
The circular flow of income follows a specific pattern: Production Income Expenditure
Production. This circular flow is ongoing between households and firms.
The circular flow of income can also be analyzed using the production possibility frontier
(PPF). The PPF is a graph that shows the various combinations of amounts of
two commodities that could be produced using the same fixed total amount of each of the
factors of production. The graph shows the maximum possible production level of one
commodity for any production level of the other, based on the state of technology . The PPF
defines production efficiency. A point of the frontier line indicates the efficient use of
available inputs, while a point beneath the curve shows inefficiency. A PPF graphs
shows opportunity cost, actual output, potential output, and economic growth.
3.1 Utility
A representation of preferences that consumers have over some set of goods and
services in economics is called utility in economics. Because preferences are transitive,
complete and continuous they have a long utility of representation. Every customer expects to
be satisfied by the purchase, and the products or services that result higher satisfaction
received by a customer have higher utility. The mentioned, factor makes managers be more
aware of the competition since customers will thoroughly asses the product and buy the one
that gives more utility. Talking about utility, one should mention three different types of utility
which are form, time and place. To add, manufacturers should try to deliver a product that will
satisfy the mentioned types of utilities and constantly improve them as the overall product
quality will change respectively. ("Investopedia")
altered in order to satisfy different consumer needs, such as furniture, building and
construction, paper.
The utility of form has a great significance for Samsung. Using mobile phone phones
consumers can satisfy various human needs such as the ability to access internet and gather
information, to take high quality photos. Samsung enables its users to alter the product from a
monitor to a projector. So, customer using Samsung monitors can present different types of
materials on big screen monitors.
Total Utility
60
50
40
Utility
Total Utility
30
20
10
0
10
11
12
10
11
Quantity
Figure-2
Marginal Utility
10
8
6
Utility
Marginal Utility
2
0
-2
-4
Quantity
Figure 3
the law of diminishing marginal utility, since a consumer while purchasing the commodity
compares the utility perceived from the commodity with the price he would pay.
Suitable quantity We assume that the commodity units are not so small. Instead of
decreasing, the marginal utility may increase to a few units if the units are so small.
No change in the price of commodity If more units are being consumed then a price of
the commodity should change.
Constant customs, taste and fashion There will be a sudden change in taste, custom, or
fashion if the law wouldnt hold true.
4.1 Demand
Demand is the quantity of a good or service that customers are willing and able (i.e. money) to
purchase during a specified period under a given set of economic conditions. Conditions to be
considered include the price of the good in question, prices and availability of related goods,
expectations of price changes, consumer incomes, consumer tastes and preferences,
advertising and expenditures (Hirschey, pg. 77).
Samsungs phones and TVs are considered as consumer goods. Therefore in electronic
industry, the main purpose for purchasing electronic devices is to satisfy some sort of a need.
Samsung products are used by the business people in firms as well as by individuals for
individual purposes. People often use the TV for entertainment and informal purposes but they
are also used in business settings, while the Samsung phone customers use it for business or
individual purposes. Whether they are used for business or individual purposes, the goal is to
acquire some sort of information and therefore the ultimate need that drives the entire industry
is the need and ability to communicate ideas and thoughts via TV or phone. These items are
also considered as durable products, they can be used for a long period if used properly and
cautiously. However the demand for goods such as these depends on the features, design,
fashion, trend, and preferences of the product, advertisement, income levels and the price
itself. In the end, there are several factors that determine the intensity with which buyers wish
to purchase goods, these factors that influence the demand for Samsungs TVs and mobile
phones will be examined below.
10
Figure 4
Price of the goods: Samsung also offer mobile phones and the price range is between
$25 for Samsung A117 Dual Band GSM and $1200 for Samsung i9300 Galaxy S III
64GB S3 (Samsung Galaxy SIII S3 I9300 Mobile Phone). Although Galaxy model of
Samsungs brand is the most expensive one, Samsungs global sales of Galaxy S and
Galaxy S II devices were more than 30 million. As a result, the Galaxy S is the highestselling mobile device in Samsungs history up to date. Therefore, even though the price
of Galaxy model is high, Samsung has seen incredible sales success and collected
enthusiastic reviews from consumers and mobile industry watchers across the globe.
Although there is an inverse relationship between the price of good and the quality
demanded, based on the satisfaction from consumers and mobile industry watchers,
Samsung has offered maximum value for the money consumers were willing to pay.
Complementary & Subsidiary Goods: Samsung customers may use the TV for
entertainment to watch news, music, sports, and/or movies at home. Therefore, these
specific customers will be influenced by price and availability of computer monitors,
Ipads, TVs, and projectors as they may be used at home for personal purposes as well
as for watching entertainment. Even though computer monitors and TVs occupy larger
space and have smaller screens compared to projectors, ordinary people still choose
TVs rather than projectors for home entertainment. However, there is a variety of
different computer monitors and Ipads designed by different companies on the market,
and as a result of competition, their prices tend to be either in the same range as TVs or
lower than TVs prices. Customers would not have a hard time getting accustomed from
TVs to computer monitors or Ipads if the size is not important. Therefore, for
individual purposes and/or home entertainment, customers would not have a hard time
adjusting and switching/substituting from their TV to a computer monitor or an Ipad if
the size is not important. However, in a business environment people tend to have
different needs and desires. In this case, Ipads, computer monitors and even TVs would
not be able to satisfy the need. In a business setting, projectors are most commonly
used to show a presentation on a large screen. Therefore, in really large meetings rooms
11
the latest models of Samsung TVs and mobile phones. On the other hand, people in countries
with higher per capita income would be more willing to spend a part of their income for a
mobile phone or a TV simply because the percentage that he/she would lose from his/her
income would be much smaller than in poorer areas of the world. If a person is from these
poorer areas and decides to purchase a TV or a mobile phone for approximately $100 then that
would take up almost an entire amount of income from many of those people ("Ranking of
Countries with Highest Per Capita Income (2010)")
Fashion, Trends & Preferences Samsung has become one of the most fashionable
companies in the electronics industry. Public opinion shows that Samsung has for the
first time edged past Iphone in consumer perception. This was measured by using a
metric known as Buzz score, which is determined by asking respondents if they have
heard anything about the company and the brand in the last two weeks, through
advertising, news or word of mouth, was it positive or negative? Samsungs rise in
popularity and perception is commonly associated to the successful launch of the
Galaxy S II as well as the Focus S. Since November last year, iPhones buzz score has
dropped from 3 to 25, while Samsung went front 19 to 26 (Popularity Contest:
Samsungs Brand Perception Surpasses Apple as IPhone Scores Drop")
Moreover, Samsung s upward rise from 42 in 2001 to 34 in 2002 to its present position
at 25, this illustrates that the brand has gathered momentum against its competitors. Samsung
was seen as a low-quality brand in a consumer electronic industry, but it has managed to
reinvent itself as a brand of quality despite decades of consumer perception that it
manufactured low-end, cheap knockoffs. Therefore, today, consumers appear to take Samsung
seriously as a quality brand of TVs, and even consider it a superior brand when it comes to
mobiles phones. As a result, the brand is perceived positively. Samsung used to produce
middle of the range mobile phones, now in many markets around the world they focus on the
premium high-end phones. Samsung tries to fit and adjust to customers needs. It creates
electronic devices that will be suitable and appealing for different purposes and this can shape
consumers taste because consumers like choices and options when purchasing a product
(Rusch, Robin).
Future ExpectationsSamsung has launched the newest innovation which is the
AMOLED (active-matrix organic light-emitting diode) technology. AMOLED
technology is used in Samsung TVS and mobile phones. Therefore, future expectations
of Samsung are significant factors for the demand of their electronic products. It is
expected that the AMOLED technology will be soon implemented in all Samsung TVs
and mobile phones because it provides better picture quality and requires less power to
run these devices compared to the LCD technology. Thus, the introduction of
AMOLED technology to provide better screen quality will attract customers to
purchase TVs and phones with the latest technology. Although AMOLED TVs and
mobile phones tend to be much more expensive compared to LCDs, people will
demand more of it in the future and the prices should drop eventually. Even now, it is
common that companies use AMOLED technology in smart-phones to offer better
13
screen quality; however, the prices of these gadgets are very high even though they
have smaller screens. It is expected that AMOLED technology will ensure an increase
in sales to reach approximately 20 billion by 2018, due to a higher demand (Whittaker,
Zack).
Advertising
Advertising and marketing are designed to inform consumers of companys presence in the
market and its uniqueness. Advertising may increase brand loyalty and demand for the
products sold by that particular firm. Therefore, companies develop advertising to inform the
consumers about their products and services and thus how these merchandises may satisfy
consumers needs. Additionally, advertising can increase demand for products by persuading,
encouraging and motivating consumers to recognize that they actually should possess that
product. As a result, as the supplier is capable of changing the customers perception of the
product, it is also capable of creating a unique value to merchandises and eventually locking
the consumer into purchasing it.
Samsung was one of the largest sponsorships of the Olympics in Athens 2004; it still continues
the global association with popular events. The attention to entertainment marketing is a way
to enhance brand familiarity. Therefore, by increasing its brand awareness, Samsung attracts
potential customers. As a result, Samsung has marketed itself much more efficiently in the
recent years than when it started, all those things help to push the brand forward (Rusch,
Robin).
really need it. Here, the owner of the gas station may technically benefit if price can be
increased without losing sales. Therefore, when prices increase, percent decrease in quantity
demanded is less than the percent increase in price; as a result, total revenue will increase.
Lastly, there is also another category of price elasticity which is called unit elasticity. In
unit elasticity there is a direct relationship between quantity demanded and price and a
percentage change in one of these will be precisely coordinated by a percentage change in the
other. In the case of unit elasticity, the changes in price will not have an impact on total
revenue of the firm (Riley, Geoff).
increase. Naturally, when demand for a certain product shoots up, competitors will seek to
enter the market. That is exactly what occurred when Android came onto the scene in 2008.
Androids entry was natural and necessary. The Samsung has obviously progressed
significantly, as have Androids devices.
What this means is that the production and sale of the businesss product reach a point
that if the business were to sell one more unit, it would begin to lose money because
the costs of producing that unit would exceed the units price on the market. Achieving
this goal with precision in the real world is difficult, but it illustrates the overall
strategy of maximizing the owners annual return, even if that means not making sales
that could have been made if the business produced.
Financial Position is given below:
Year
Samsung
iOS (Apple)
2011
219.52
89.26
Windows
(Microsoft)
8.77
2012
451.62
130.13
16.94
2013
758.72
150.79
30.84
2014Q1
229
43.7
6.2
2014Q2
255
16
7.4
102 q*/50 = q*
q* =100
17
The profit maximizing price is that which generates q* =100 in sales or, substituting into the
inverse demand function calculated in (a),
P(100)=102(100/100)=101
When selling 100 units, Samsung generates Total revenues equal to
TR (100) = (102) (100) (100)2/100 =$ 101
Its total cost is; TC = (100)2 /2 =5000
Therefore its total profit when it sells 100 units is 101100 5000= $5100
Size of Market: As stated in the company overview, Samsung operates in over 100
countries across the world. That being said, the company does business globally and
has 206 offices and facilities in 68 countries around the world. As the population of the
world increases, the number of Samsung customers will increase, and thus demand will
increase as well. Hence, it implies that the number of buyers is an important factor of
demand. Therefore, as the market grows, Samsung will have to expand its production
and employ more workers to take care of customers who are willing and able to buy
products.
Market Segmentation: There are different types of mobiles for different needs of an
individual. Samsung targets the entire segment with his variety.
18
Trend in market
Hardware Trend
Software Trend
Utility
LTE 2G 3G 4G
Price
At the end of the 2013 year, 1.4 billion smartphones will be in use: 798 million of them
will run Android, 294 million will run Apple's iOS, and 45 million will run Windows
Phone, according to a new study by ABI Research.
4.55 Billion Mobile phones means = 63.5% of world Population have phones
While the economic recession adversely affected the global markets; the global
smartphones market was one of the very few markets that did not have impact of the
global meltdown. The smartphones market with an annual growth rate of 12.8% from
2008 to 2009 is expected to grow by 26% over 2009 to become a $69.8 billion market
in 2010.
The Asia-Pacific smartphones market stood at $17.1 billion in 2009 which is expected
to become a $45.2 billion market in 2014 growing at a CAGR of 18.6% during 2009
2014.
Major Companies
19
20
Figure 6
21
Figure 7
22
Availability of Inputs
As is known, the main factors of manufacturing are. labor, land, raw material and
entrepreneurship Price and availability of inputs theory states that the availability and price of
factors of production of the goods or service, such as raw material or labor have a major impact
on supply. As the cost of the input goes up, the cost of production will increase too and
consequently supply will decline. Likewise, a decrease in the price of inputs leads to an increase
in supply.
Looking at our company, Samsung we can see that it is precisely sells and markets
mobile phones. Thus, its supply would be affected if there is a change in the production costs of
Samsung as well. Should the price of raw materials, determined for consumer phones, change,
Samsung Group will be the first to feel the difference. Samsung Group would have to buy more
costly parts for assembling its products and it will have to provide the same amount for a higher
price.
Samsung utilizes numerous raw materials for producing mobile phones. Another
determinant of the production cost could also be taxes and thus a determinant of the supply. The
higher the taxes the higher the production costs. Labor is a sufficient part of Samsung costs.
People in more 100 countries around the world are employed by the company. Packaging
materials for products has to meet a lot of requirements, such as light weight, easy operability
and resistance. For example, if the price of paper soars, this would impact Samsung costs, as all
the mobile phones are packaged by the company with its logo. This will undoubtedly affect
Samsung costs. Packages are also designed in a way to not only help minimize the costs and
weight of the package, but also the design is important to help minimize storing space and
minimize transportation costs by sending more products.
Stabilize market or stabilize market price: an objective to stabilize price means that the
marketing manager attempts to keep prices stable in the marketplace and to compete on
nonprime considerations. Stabilization of margin is basically a cost-plus approach in
which the manager attempts to maintain the same margin regardless of changes in cost.
Company growth
Maintain price leadership
Desensitize customers to price
Discourage new entrants into the industry
Match competitors prices
Encourage the exit of marginal firms from the industry
Survival
Avoid government investigation or intervention
Obtain or maintain the loyalty and enthusiasm of distributors and other sales personnel
Enhance the image of the firm, brand, or product
Be perceived as fair by customers and potential customers
Create interest and excitement about a product
Discourage competitors from cutting prices
Use price to make the product visible"
Build store traffic
Help prepare for the sale of the business (harvesting)
Social, ethical, or ideological objectives
Get competitive advantage
Some companies want to maximize their market share. They believe that a higher sales volume
will lead to lower cost and higher long run profit they set the lowest price assuming the market is
price sensitive.
It often happens that companies unwilling a new technology favor setting high prices
to skim the market. Sony is a frequent practitioner of market skimming pricing.
Any price change can provoke a response from customers, competitors, distributors, suppliers
and even government.
CUSTOMER REACTION:
Customer often question the motivation behind price changes, a price cut can be
interpreted in different ways : The item is about to be replaced by a new model ; the item is
faulty and is not selling well ; the firm is in financial trouble ; the price will come down even
further ; the quality has been reduced. The price increase, which could normally deter sales, may
carry some positive meaning to customers: the item is hot and represents and usually good
values.
COMPETITORS REACTION:
Competitors are most likely to react with the number of firms are few, the product is
homo-genius and buyers are highly informed.
Data collection
Data was collected from the people who had used both the companies phone.
Sampling Techniques:
we have putted the questionnaire in the internet and selected interviews randomly in the
sheet.
Questionnaire of Samsung &IPhone
Name:
Age:
Occupation:
Current mobile you are using:
Sr
No.
Questions
Appearance/design
Sound quality
Battery life
6
7
10
Samsung
I phone
Rate all the 2 brands from 1-5 for the 10 questions stated below:
1-Poor
2-Average
3-Good
4-Very Good
5-Excellent
Data Analysis
"mean".MEAN
Samsung
I-phone
13
18
20
17
12
Particulars
Samsung
I-phone
MEAN
3.78
3.16
N +1
th observation
2
2. Appearance/design
Particulars
Samsung
I-phone
10
15
17
18
18
14
Particulars
Samsung
I-phone
Median
14
10
Samsung
I-phone
17
16
15
25
13
13
Particulars
Samsung
I-phone
Mode
17
25
4. Sound Quality
Particulars
Samsung
I-phone
17
21
19
24
Particulars
Samsung
I-phone
Standard Deviation
1.01
1.04
The Standard deviation of IPhone is higher which means that the Sound Quality is less/
Bad.
Coefficient of Variation: Coefficient of Variation: The standard deviation of data divided by its
mean. It is usually expressed in percent.
Coefficient of Variation=
Variables
100
x
Samsung
I-phone
1.01
100
3.54
Sound Quality
1.04
100
4 .22
= 28.53%
= 24.64%
Skewness:Is a measure of the probability distribution of a real valued random variable. The
skewness value can be positive or negative or even undefined.
SKEWNESS=
(Mean-Mode)
Standard deviation
5. Battery life
Particulars
Samsung
I-phone
12
14
17
17
15
12
PARTICULARS
SAMSUNG
IPhone
MEAN
3.78
3.16
MODE
17
25
S.D
1.01
1.04
SKEWNESS
-13.089
-21
Range: Range is the difference between largest value and the smallest value.
RANGE= L - S
L+S
Particulars
Samsung
I-phone
11
21
26
18
10
Particulars
Samsung
I-phone
Range
0.9259
0.8261
Result: After sampling 50 people for our survey we conclude that SAMSUNG is a more
preferred brand over Iphone.
service without modifying the amount of resources, or producing the same goods or services
with fewer resources. As s result the productivity affects production cost per unit and capacity
level. A lower production cost per unit or increase in the capacity level would encourage the
manufacturer to boost supply on the market. In contrast, a high production cost per unit or a low
capacity level would reduce the supply. Samsung is not only selling and marketing monitors
mobile phones, but it also is producing them. It denotes that the level of technology would
influence Samsung quality and quantity of mobile phones provided.
From the beginning of 2012 AMOLED is used for mobile phones. Manufacturers have
researched and developed in-cell touch panels, compounding the production of capacitive sensor
arrays in the AMOLED module fabrication process. In case of in-cell sensor AMOLED
fabricators are AU Optronics and Samsung. Samsung has produced their version of this
technology as Super AMOLED. All of these technological advances in Samsung reflect on the
products that Samsung sells. If Samsung is able to respond faster to any change in price or
demand Samsung would be able to supply their products faster in the market.
Moreover, Samsung is a mix of different companies each of which focuses in different
areas then uses all these experiences and R and D researches to manufacture different products.
On top of that, Samsung uses a very modern information system resembling the just on time
system. Samsung, first of all, decides on how many mobile phones the company should supply in
the market. Samsung sends this information to the Samsung which in return decides on what
parts it needs and orders them from its suppliers. These parts could include the parts required to
produce the panels or circuits or any major components needed in making the final product. This
system helps to decide on the timing these items should be sent since the location of the factory
is very close to many other competitor factories and suppliers. In the case of shortage, some of
its production could always be outsourced.
6.1 Recommendations
Samsung: To compare with Apple, Samsung should be focus on increasing its value proposition
in the smart phone market. Samsung could be develop new products having stylish and modern
design, in order to attract buyers who except stylish, trendy and fashionable smart phones. On the
other hand, Samsung should be keep on producing the existing models of smart phones which
are relatively less costly to tap the Middle class and Lower Upper Class of population.
As a result, the market share of Samsung would increase and has more strength in the
competition with Apple.
Apple: from the results of questionnaire, Apple users are trendy and some of them are short-term
users. In order to keep those customers, Apple should produce new products to avoid losing
them. As a result Apple could increase its market share, even attract the users.
6.2 Conclusion
Samsung has a unique history as it was presented throughout our analysis in the paper. In a short
period of time, it managed to enter successfully the market and surpass its huge and competitive
rivals in many markets, especially that of United States and Japan. This success is also shown in
the field of technology requiring the company not only to adapt acquired technologies but also to
innovate and create its own. Samsung is nowadays considered as a company which should be observed as
its developing history makes it so. To observe the successes and flaws of a company that
progressed from a simple television production to state-of-the-art semiconductors, provides
important benchmarks and recommendations for the study of new-entrants and also steps to
follow in the path of success.
As we are witnessing the ongoing global economic crisis and the sluggish recovery, it may
be prudent for Samsung to go back to the basics to search for the right strategy for both, the
entrance on the new undeveloped markets and to survive the crisis and overcome conflicts.
Recently, the company had faced several conflicts and scandals and therefore today more than
ever, it should be very careful in every step undertaken in order to maintain its current position
and keep its customers. It may be time for the new management to re-invent Samsung and what
better time to do this than now with a paradigm shifts and trends that are happening in the
business and economic worlds
7.0 References
About Samsung-History. Samsung
.Samsung, n.d. Web. 2012
June2012.<http://www.samsung.com/us/aboutsamsung/corporateprofile/history.html>."Business
Area."
Different%20industry%20structures%20and%20CR4.pdf>."Law of Diminishing Marginal
Returns."
Economicae