Samsungs Brand Architecture

Samsung Electronics high ranking at number 25 on the list doesnt mean it has the
competition beat. Sony came in at 20, a position it has basically owned for the last three
years (21 in 2002, 20 in 2001). But Samsungs upward rise from 42 in 2001 to 34 in 2002
to its present position at 25 indicates that the brand has gathered momentum against its
competition. The whole possibility would have seemed unlikely to many observers just
five or six years ago. At that time, Samsung was seen as a low-quality brand in a tough
consumer electronic industry (Korean companies in general were associated with
corporate scandal and Asia was in a financial Today the brands parent company,
Samsung Group, is the number one business group in South Korea edging out Hyundai
Group. Total sales for 2002 were reported at won 146,052 billion (US$ 116.8B; 110.4B).
Founded in 1938, the chaebol now comprises 14 listed companies, including divisions in
credit cards, chemicals and securities.
But it is Samsung's electronics' arm that is perhaps most visible to the public with
consumer products like flat-screen TVs, mobile phones and microwave ovens. Less
visible to the public, but comprising a large part of Samsungs revenue, is its manufacture
of semiconductor chips, a highly cyclical industry. As the worlds top memory chip
maker, Samsung hit a bump when chip prices fell in the second quarter of this year, down
41 percent from the first half of last year. However, analysts expect profits to increase as
sales of computers rise in the second half of 2003. (Memory chips are used to store data
in equipment such as computers, digital TVs, digital cameras, and MPR3 players;
Samsungs dominance in this field is not to be confused with Intel Corporation's success
as the worlds largest producer of microprocessors.)
As South Koreas top electronics company, Samsung Electronics is the third largest
electronics maker in the world behind number one Sony and number two Matsushita
which counts Panasonic, Quasar, Technics, and JVC in its brand portfolio. Both Sony and
Matsushita are Japanese behemoths with over 50 years of experience in the global
market.
In spite of its strong position globally, whats extraordinary about Samsung Electronics is
the way it has managed to reinvent itself as a brand of quality despite decades of
consumer perception that it manufactured low-end, cheap knockoffs. Today, consumers
appear to take Samsung seriously as a quality brand of VCRs and TVs, and even consider
it a superior brand in areas like mobile phones where it competes with Nokia, Motorola
and Sony-Ericsson.

Director of Brand Valuation at Interbrand Jan Lindemann observes that Samsung is

changing popular perceptions: In different markets, Samsung is moving up more on the
premium side. For instance, they used to produce -- a couple of years ago -- middle of the
range [mobile phones], now in many markets around the world [they] focus on the
premium high-end phones. They tend to be among the most expensive ones you can buy
in most cases.
Samsungs real estate is improving as well. By moving its product from budget stores like
Wal-Mart to more specialized retailers like Best Buy, the brand is better showcased as a
quality brand.
Certainly making a more appealing quality product is one way to change perception, but
Samsung has coupled this with a consistent and highly visible marketing and PR effort
across many channels of communication. Kyung Suh, a manager at Samsung, cites what
he refers to as a holistic brand campaign strategy to reposition the brand in consumers
minds.
Corresponding by email, Suh cites Samsungs commitment to a single global advertising
agency, which allows it to control consistency and continuity in its communications
across all markets. The brand owners have also made good use of Internet advertising on
heavily visited sites, sponsorship and product placement in movies such as the The
Matrix: Reloaded, and sponsorship of popular sporting events such as the Olympics. The
attention to entertainment marketing is seen as a way to enhance brand familiarity.
Lindemann thinks its working. [Samsung] has marketed itself much more efficiently.
They are reaping the benefits of having set up a proper global marketing organization,
he says. All those years theyve spent much more and the visibility of Samsung is much
bigger now. Two years ago they sponsored the Sydney Olympics; they are in the movies.
All those things help to push the brand forward. Samsung intends to concentrate on
maximizing sponsorship of the Olympics in Athens 2004 to continue the global
association with popular quality events.
On the brand management end, Samsung took the now standard approach for any
successful global company of mapping out a platform to determine what the Samsung
brand stands for; this information is used to arrive at target segments, positioning, and
brand architecture. Suh suggests that the primary reliance of the Samsung masterbrand
will come under scrutiny in the next year while the company looks at the feasibility of
introducing sub-brands.

Perceptions do not change overnight and consumer electronics products are easily copied
and quickly commoditized. But it is the combination of these factors that makes Samsung
a formidable opponent. Just five years ago, it would have been laughable to suggest that
Samsung might pose a threat to huge brands like Sony. Even now, although Samsung
may be a stronger name in certain product ranges or regions of the world, it still faces
strong competition (which differs depending on business area).
Sony, for instance, has done an extraordinary job of image management overall. Even
though some analysts wonder if Sony is not overstretching its brand, the size and scope of
its brand management work is extremely strong by any standard. The company, however,
sees its broad range of businesses as a competitive factor in its edge over its equally
broad range of competitors.
A spokesperson for Sony, commenting by email, says that Sonys unique position as a
global media and technology company is that it can create new product categories
through the convergence of our different businesses. PSX, which has yet to be released,
was used as an example. This souped-up version of the PlayStation 2 offers games, DVD,
TIVO, and CD/DVD burning capabilities as well as the ability to download media from
the Web and access content from Sony's memory sticks. In this manner, Sony aims to
integrate its game and electronics technology to compete at a different level than the
competition.
Sony can also throw its weight around by creating unique products and accessories that
are not interchangeable with non-Sony equipment. For instance, connectors for DC
power or signal transfers are created as proprietary plug types forcing the consumer to
buy Sony cables. Aftermarket AC adapters are difficult to locate for Sony products
because the company creates its own standard rather than merely manufacturing
equipment that could use any of the five universal tip sizes available. Strategic brilliance?
Perhaps if there is no competition, but with other reliable brands offering alternatives, the
practice could turn risky if consumers get fed up with being forced to buy overpriced
Sony accessories that are generally considered commodity components. Sony will have to
work harder as reliable alternatives like Samsung become more prevalent.
Samsung clearly has its eyes on Sonys top position. According to Suh, the goal for the
next five years is to position Samsung as a company that is leading the digital
convergence revolution and to fortify leadership position in key business areas such as
flat panel TVs, monitors, mobile phones and semi conductors.