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RUNNING HEAD: SAMSUNG’S MARKETING MIX Merino, G.

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Samsung’s Marketing Mix

To what extent has Samsung’s marketing mix strategy led them


to global success in the smartphone industry?

Date: July 20th, 2015


Exam Session: November, 2015
Supervisor: Alex Arancibia
Word Count: 3925
Name: Gabriel Merino
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Abstract
Samsung is a multinational company well known for being a major supplier of components for

smartphones and the world’s largest information technology company with almost $189.5 billion

revenues in 2014. Samsung is the largest manufacturer of smartphones, owning its success to the

popularity of their Galaxy product line. This essay answers the research question: “To what

extent has Samsung’s marketing mix strategy led them to global success in the smartphone

industry?” In answering this question the topics “Business Organization, Environment, and

Marketing” from the Business and Management syllabus were deeply considered when

analyzing the researched data. The data, in its entirety, was obtained from secondary sources and

it showed how Samsung grew over time until it became the greatest market share owner in the

aforementioned industry. The Boston Matrix, Tom Peter’s Sources of Value Added, alongside

with the theory of marketing mix, were used to achieve a deeper insight on the company’s

success. The analysis concluded that product research and development, in unison with a good

pricing strategy, is important for growth and that the use of different retailers along with

promotional strategies, yield in people’s awareness of newly introduced products. In sum,

Samsung’s marketing mix is responsible for most of the company’s success, as it combines the

affordable price and quality of its products with an effective supply chain management, valuable

distribution channels, and promotional mix.

Word Count: 227 words.

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Table of Contents:

Abstract .......................................................................................................................................... 2

Introduction ................................................................................................................................... 4

Product ........................................................................................................................................ 6

Price........................................................................................................................................... 13

Promotion .................................................................................................................................. 17

Place .......................................................................................................................................... 20

Conclusion ................................................................................................................................... 23

References: .................................................................................................................................... 24

Appendix ....................................................................................................................................... 27

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Introduction
Through the following essay, the question “To what extent Samsung’s marketing mix

strategy has led them to global success in the smartphone industry?” will be answered.

The smartphone industry was born in 2007 with the introduction of the iPhone, a cutting-

edge phone with a renewed user interface and unseen features. The new iPhone was cost

prohibitive and prevented the American company from dominating the market. Swiftly,

companies such as Samsung, LG, and others followed suit in reaction to the consumers’

attraction to technological advances. Samsung decided to invest on research and development in

order to release new devices that would be able to compete with Apple’s iPhone.

In a short period of time, from 2008 to 2011, Samsung made a leap in terms of its market

share in the smartphone industry. Samsung began this period owning 3.6% of the market and by

the end of it the company became one of the biggest market share owners. This trend continued

and as of the first trimester of 2015, Samsung remained as the market leader in this industry by

owning 24.6% of the market [Appendix 1].

These results are a consequence of applying a series of marketing strategies that

increased the profitability and popularity of their products in a short period of time. As such, this

research question is valuable for businesses as it explores Samsung’s roadmap to success.

Analyzing Samsung’s combination of marketing strategies serves as a guideline for others

wishing to obtain similar achievements in their own industries.

This study will address the research question through a detailed examination of the

marketing mix variables: Product, Price, Place, and Promotion. The research data will be

scrutinized under analysis tool such as the Boston Matrix, Peter’ Sources of Value Added, and

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position maps to focus on how a properly balanced marketing mix is able to optimize resources,

create a reputable brand name, and attract consumers.

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Product
In marketing, the product is the good or service that will be offered for sale and targets a

specific segment of the market. The importance of the product lies on its position in the market.

Product positioning is important in the marketing planning of any businesses as it allows a

business to “determine how to best communicate their products' attributes to their target

customers based on customer needs, competitive pressures, available communication channels

and carefully crafted key messages” (Richards, n.d.). For Samsung, their product line, known as

the Samsung Galaxy series, plays a key role when analyzing their marketing mix.

Samsung expanded their market share by building a brand name that people relate with

quality and innovation. The Samsung Galaxy brand name is known for new, innovative and

efficient products such as smartphones, phablets, and tablets. The importance and advantage of

their brand name is that consumers will easily identify new products, making them easier to

launch as all are released under the same well-known brand. As shown in Figure 1, Samsung

smartphones are recognized for their vast amount of features.

Figure 1: Smartphone Industry, Market Map. 1

1
Brand Positioning Strategies of the Rising Chinese Smartphone Brands. (n.d.). Retrieved April 6, 2015, from
http://www.labbrand.com/knowledge/labreport/brand-positioning-strategies-rising-chinese-smartphone-brands

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On the high-end, Samsung devices, such as Galaxy S and Galaxy Note, are known for

improved cameras and displays, heart rate monitors, pedometer, and water resistant features that

other sellers, like Apple, do not include in their devices. Consequently, consumers feel attracted

to these features and are stimulated to purchase since Samsung’s devices are cheaper than those

of their competitors. On the other hand, mid-range and low-end devices simply fulfill

consumers’ needs. Mid-range and low-end users aim to be able to use their devices in their daily

life, not necessarily a trendy phone, but a useful one. Therefore, the Galaxy S-mini and Galaxy Y

are devices that share some important features with the high-end smartphones but still retain the

low price factor. The Galaxy brand name plays a key role, as consumers are aware of how

Samsung is continuously improving and making high-quality products.

Samsung grew over time because they knew how to differentiate themselves from the

competition. The companies’ unique selling proposition (USP) is based on giving buyers an

innovative product with new design and features. When people are choosing a smartphone, they

compare different features among them. Samsung’s USP includes smartphones with big screens,

a trend established by them in 2011 with the introduction of the 5-inch screen Galaxy Note

[Figure 2]. Since then, big screens have become a trend that has been followed by competitors

for allowing full HD content to be viewed comfortably and providing more room for

information. Apple was the latest manufacturer to follow this trend with their new iPhone 6.

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Figure 2: Smartphones Screen Size Increase over Time 2

Furthermore, Samsung’s USP includes a wide range of features related to connectivity

and productivity that aim to target business people. Among connectivity features are the latest

Wi-Fi, Bluetooth, and 4G LTE connectivity standards. Productivity features allow consumers to

write and edit documents within their smartphones. Additionally, their products have an

improved battery life with battery saving features. Figure 3 shows how Samsung’s smartphones

outlast rivals’ battery life. This is a key selling point as it allows the user to get the most of their

applications without needing to constantly charge the battery.

More add-ons include water and dust resistant capabilities, showcased in the Samsung

Galaxy S5. These are both remarkable features considering that consumers tend to accidentally

drop their phones. It is important to highlight that competitors do not include some of these

2
A comprehensive look at smartphone screen size statistics and trends — Medium. (n.d.). Retrieved April 8, 2015,
from https://medium.com/@somospostpc/a-comprehensive-look-at-smartphone-screen-size-statistics-and-trends-
e61d77001ebe

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features, which is one more reason for consumers to buy a Samsung smartphone.

Figure 3: Battery Life Comparison Chart3

Samsung also benefits from using the Android operating system. This strategy spares

them from developing their own operating system and provides the user with a wide application

selection. In some cases, features and applications may be released for Android first. As an

example, WhatsApp’s latest update included a new feature that, in the beginning, allowed users

to make free calls between WhatsApp’s Android users for free; the update was available for

iPhone a month later.

According to Ang (2014), having a USP is important because it helps brand

differentiation and avoids substitution. As a leader, Samsung takes advantage of this as they

implement many features on their products that other brands do not. The amounts of features that

are unique to their product line differentiate the company from their competitors. A continuous

process of innovation, a task that is of utmost importance nowadays, became the company’s

major influence in 2014, when they spent almost $13.8 billion in research and development in

3
Which Smartphone Has the Best Battery Life | TECHNOGIST. (n.d.). Retrieved April 17, 2015, from
http://www.technogist.com/2013/07/which-smartphone-has-best-battery-life.html

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order to fulfill consumers’ needs and expectations (Reed, 2015). In contrast, Samsung’s biggest

competitor, Apple, invested $6 billion.

Another reason for Samsung’s success within the smartphone business is their expertise

in handling products’ life cycles. They understood that innovation requires releasing products

every year as technology is in constant change. Samsung updates their device line yearly by

pushing hardware and software updates while it keeps expanding on its product portfolio. By

doing this, the company benefits from benchmarking, as they are able to identify all weaknesses

from previous releases and find ways to provide fixes and satisfy customers.

As a part of Samsung’s innovation strategy, they are committed to targeting all segments

of the market with a wide product portfolio that includes high-end, mid-range and low-end

devices that suit all kinds of consumers. The Boston matrix [Figure 4] allows categorizing the

most important and recent products from their portfolio to comprehend the role that those, in

regards to their market share and market growth, play within Samsung. Therefore, the main

categories that will be analyzed would be the Star and Cash Cow products as those best represent

Samsung.

Figure 4: Boston Matrix4

4
Product Marketing Plan. (n.d.). Retrieved April 6, 2015, from
http://healeylibrary.wikispaces.com/Product+Marketing+Plan?responseToken=050a95d35bf335c90c20b17b7e140b
c8b

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The company’s star product is the Samsung Galaxy S. This product has a high market

share and market growth. Therefore, it needs to innovate in order to keep its position in the

market. The Galaxy S series is Samsung’s most-grossing and best-known product line, which has

sold up to 200 million units before the Galaxy S5 release. The company has focused on adding

new features to this product with every release such as being water resistant, having a heart rate

monitor among others.

Samsung’s Cash Cow product would be the Galaxy Note. This product has a high market

share and a low market growth. Due to its low market growth little investment is done to this

high-end product line. Cash Cows represent a considerable source of profit, which is mostly used

to finance the company’s star product investments. Samsung’s Galaxy Note product line has sold

40 million units before the Galaxy Note 3 release.

Moreover, Tom Peters’ sources of value added method [Figure 5] is useful in exploring

the company’s product design. Peters suggested four different methods which a business can

apply in order to increase the value added of their products and consequently their sales. The

raise method involves the analysis of the existing features of a product to improve them. As an

example, Samsung implemented Gorilla Glass 4 for their Galaxy S6 screens, which is more

resistant than the previous generation. Additionally, reduce consists of downgrading some

features that are not vital and might lead to an increase in the cost of production. In terms of

Samsung’s products, this is shown in the downgrade to USB 2.0 in the Galaxy S6, from USB 3.0

in the S5. Moreover, the eliminate method pursues to cut off features that are no longer useful or

criticized by public opinion. The company decided to take away the ability to easily replace the

battery, which also allowed them to change the plastic frame for a metallic one in order to satisfy

public opinion. Lastly, create refers to making a positive change in a product by adding a unique

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feature. As an example, the new Galaxy S6 brings wireless charging, a unique feature that helps

the company to surpass rivals’ smartphones.

Figure 5: Tom Peters Sources of Value Added5

Samsung clearly understood the significance of their products in the market, which is

why their innovation policy plays a key role on their USP, leading the company to release

competitive and differentiated devices.

5
Ib Biz Class - Product. (n.d.). Retrieved June 22, 2015, from
https://ibbizclassof2013.wikispaces.com/file/view/Screen_shot_2012-03-
08_at_4.23.18_PM.png/308953190/374x273/Screen_shot_2012-03-08_at_4.23.18_PM.png

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Price
Setting a product’s price is a key factor with marketing consequences. Being the most

flexible variable of the marketing mix, it has a direct influence in the product’s demand.

Therefore, the price is an important source of revenue, which causes a firm to succeed or fail

(Jain, 2009). Finding a key price is important as profits are built upon sales and price increases or

decreases people’s interest in a product. Samsung’s pricing has played a key role in their

marketing mix. The company cleverly applied a skimming pricing strategy along with a

competitive pricing strategy.

The market skimming pricing strategy refers to the practice of setting a high price for

new high-end products in order to take advantage of the market before substitute products

appear. A company like Samsung is able to apply this strategy when their products innovate and

are perceived by the target market as having unique advantages (Lamb, Hair, & McDaniel,

2011). Each time Samsung releases new smartphones, prices are set at their highest to benefit

from speculation and increase profits. Constant innovation is crucial because people are willing

to pay higher prices as long as new products bring new unseen features. Over time, these

products’ prices drop to target mid-range and low-end consumers who are still willing to buy a

product that is not trendy anymore.

Figure 6 showcases two scenarios. In the first one, smartphones are sold within mobile

contracts. In this case, Samsung smartphones were set at $200 for less than a month. Over time,

the price dropped until the smartphone was offered for free when signing a contract with the

carrier. The second scenario shows unlocked smartphones. Unlocked phones were set at $700

and above for nearly one month. After that, and during the span of a year, the company

decreased the price by almost 50% to maintain sales before the product’s life cycle ends. In this

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strategy, Samsung managed to get the most profit from the first month when speculation caused

consumers to instantly buy their new product.

Figure 6: Samsung Galaxy SIII and S4, Price History6

The competitive pricing strategy is applied by Samsung once their products have been in

the market for a long time. This strategy focuses on setting a price based on competitors’

products’ prices. After a period of time, products need to reduce their prices to maintain sales.

Once Samsung’s products have been out in the market, the company sets prices based on

competitors’ prices. For instance, Figure 7 shows a price comparison chart between well-known

smartphones. As seen, Samsung set a price that was below Apple’s main smartphone, the iPhone.

Even though Motorola set a lower price, the G4 is a low-end smartphone, which is why it is

cheaper than the Galaxy S4.

6
Want the Samsung Galaxy S5? Wait two months; you could save up to 40%. (n.d.). Retrieved April 6, 2015, from
http://bensbargains.com/thecheckout/guides/want-samsung-galaxy-s5-wait-two-months-save-40/

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Figure 7: Smartphones Price Comparison7

These prices follow the company’s strategy to give a high quality and affordable product

to consumers. While Samsung sets a price that is attractive by constantly reducing their products’

prices over time, Apple does it whenever they launch a new product. In fact, Apple tends to

reduce almost $100 from old models once a new model is out. However, iPhones are still more

expensive than the Galaxy flagships, giving Samsung a competitive advantage. Furthermore, it is

important to notice that Samsung aims to keep a lower price for their smartphones due to

people’s perception of their devices being substitute products for iPhones. This affects their Price

Elasticity of Demand giving Samsung another reason to keep high prices for few months and

afterward establishing cheaper prices than Apple. Otherwise, demand would decrease.

Samsung intends to get the most profit from their products at the beginning of their life

cycle. Once products are out, Samsung focuses on keeping strong sales by reducing prices.

Although this pricing strategy will not bring as much profit as in the beginning, it will work

towards the company’s goal of conserving their market share. Reducing prices is also an

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Apple vs. Samsung vs. Motorola’s Global Marketing Strategy: Pricing | Twinkle voice. (n.d.). Retrieved April 6,
2015, from http://jaeyoonnam.com/2014/04/17/apple-vs-samsung-vs-motorolas-global-marketing-strategy-pricing/

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extension strategy for their products as it pushes sales up, keeping products in the market for a

longer period of time. By doing this Samsung aims to maintain their old models’ sales until new

models arrive. It appears that Samsung is willing to find a balance between profits and market

share.

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Promotion
Promotion is the means businesses employ to communicate with their consumers.

According To Philip Kotler: “Promotion compasses all the tools in the marketing mix whose

major role is persuasive communication” Through an appropriate promotional mix, product

information is given to the masses in order to persuade them that a product is good for them.

Promoting a product aids to increase its awareness in the market which results in increased sales.

Samsung is constantly releasing new products and promotion is one of their main assets.

Samsung’s promotion technique relies on the through-the-line-promotion technique (TTL),

which is a mix, with a 1:1 ratio, of above (ATL) and below (BTL) -the-line-promotion

techniques. ATL helps the company to keep a brand name through very broad reach media while

BTL targets specific groups of people who could be possible consumers in the future.

Above-the-line-promotion advertisements are suitable when launching new products.

They help to disseminate the product’s information massively. Samsung has released many ads

of their Galaxy series. Through these advertisements, namely TV commercials, magazine or

Internet posts, the company is able to highlight some of the products’ main features and bolstered

the brand’s public opinion on innovation.

Figure 8: ATL Promotion. Galaxy S5 ad8

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You'll Love These Funny New Galaxy S5 Ads | TechnoBuffalo. (n.d.). Retrieved April 7, 2015, from
http://www.technobuffalo.com/2014/05/27/galaxy-s5-ads/

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Below-the-line-promotion technique is a convenient strategy to increase sales in the

short-term. In 2013, Samsung invested more than $4.6 billion in sale promotions with coupons,

rebates, and other incentives that would cause sales to boost for a short period of time (Reed,

2013). Furthermore, BTL aims to target specific cliques and reinforce their brand awareness by

considering the consumers’ preferences. Samsung’s sponsorship of soccer clubs, such as Chelsea

F.C., is part of their BTL promotion strategy that aims to increase the soccer fans’ awareness of

the brand.

Figure 9: BTL Promotion. Galaxy S Coupon9

Marketing economies of scale are also significant in the promotional mix. Samsung

operates on an international scale. Broadcasting a TV advertisement during international events

like the FIFA World Cup represents a worldwide approach to consumers. Such is the case of

their world cup advertisement, which was viewed over 130 million times, representing a mass-

scale audience. Due to its economies of scale, Samsung is able to spend great amounts of money

on sales promotion because mass producing reduces costs, saving money that could be used on

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Straight Talk Promo Code for Samsung Galaxy Precedent - The Fone-Review.com TracFone and Straight Talk
Blog. (n.d.). Retrieved April 7, 2015, from http://tracfone-blog.fone-review.com/2011/10/straight-talk-promo-code-
for-samsung-galaxy-precedent.html

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other promotional strategies. Therefore, economies of scale play a key role in Samsung’s

promotional mix, as it helps the company to build a good reputation and have a bigger approach.

Another promotional strategy used by Samsung within their promotional mix is the word

of mouth (WOM). This depends on the level of satisfaction consumers get from the product, and

the reviews they might share with their peers about it. WOM represents a significant promotion

when influential people are making reviews about products; therefore keeping a positive WOM

is essential as public opinion spreads rapidly through social networks. Samsung’s products are

known for their quality and performance which brings positive comments about their

smartphones, leading consumers towards buying them.

As part of Samsung’s WOM, the company sponsored the 2014 Oscar Awards. Samsung

gave ABC their devices to be used during the telecast, as part of a product-placement strategy.

By doing this, Samsung’s smartphones were shown throughout the telecast. Furthermore, the

main host, Ellen DeGeneres, used a Galaxy Note during the show. Samsung’s WOM increased

when a selfie taken by DeGeneres alongside with other famous actors was uploaded to Twitter

and received over 2 million retweets. This picture had an important effect on Samsung’s WOM

because it went viral; it brought the company a lot of exposure in a short time without any

additional cost. People were aware that Ellen had used a Samsung Galaxy Note 3, and positive

comments about the product arose. Kontera, a media content tracker, revealed that just 8% of the

comments were negative. According to Allen Adamson, a managing director, the selfie had a

bigger marketing impact than other strategies by going viral. This helped Samsung to fulfill its

marketing objectives such as reinforced their brand image, developed a better public image, and

increased consumer awareness of their products.

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Place
In the marketing mix, this refers to placing a product within reach of the consumer

(Young & Pagoso, 2008). A significant portion of the product’s placement comprises the

selection of an appropriate distribution method. Its relevance lies in the fact that a product needs

to be in the right place and time to target customers. Hence, if poorly planned, other marketing

efforts will have no avail due to logistic and distribution issues (Withney, 2013). The

distribution method depends on the company’s chosen channel. Distribution channels are

intermediaries the product goes through before reaching the consumer.

Samsung’s distribution channel method is mostly based on a single-intermediary channel

as Samsung Stores are not available in every country. By using this distribution channel, the

product gets to the consumer through a retailer. The benefits of using a single-intermediary

includes that Samsung does not have to pay storage for the stock, which reduces expenses for

them as producers, and the consumer gets after-sales retailer’s services such as maintenance and

warranty. Additionally, retailers are located in places familiar to the customer, which eases the

sale of a product and promotes it.

Figure 10: Types of Distribution Channels10

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9.4. Placing a Product. (n.d.). Retrieved April 7, 2015, from http://www.web-
books.com/eLibrary/NC/B0/B66/074MB66.html

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By selling through different retailers, the company is able to spread the awareness of their

products worldwide, as most of them are mobile carriers offering Samsung smartphones with a

contract. In addition, carriers sell the smartphone with a mobile contract, which allows Samsung

to design exclusive models of smartphones for different retailers. Moreover, Samsung is able to

exhibit their devices within retailers’ stores. In this way, consumers are able to try Samsung’s

products before buying them. Furthermore, e-commerce also influences in Samsung’s placing

strategy. By selling through online retailers, such as Amazon, the company is able to sell their

products worldwide, without the need of a physical store. Online shopping is becoming a new

trend to society, which allows Samsung to sell through new retailers.

When using retailers as distribution channels, Samsung increases their supply chain size.

A proper supply chain management (SCM) is essential as any part of the process involved in

provisioning the product to the final consumers should work and interact among each other as a

team. Samsung is known for having a good SCM because of their backward vertical integration,

which benefits them as they have control over quality, innovation, costs, and delivery times of

supplies needed to complete the production process.

The backward vertical integration means that Samsung is not only part of the

manufacturing process, but also a part of the supplying process. Due to vertical integration, the

company gains access to more production inputs and distribution resources. For instance,

Samsung “designs and manufactures four of the most valuable components in handsets:

application processors, DRAM, NAND flash and displays – which together constitute about two-

thirds of a phone’s bill of materials” (Harbert, 2013).

As part of their supply chain, Samsung applies an in-house SCM. Their supply chain

starts with the raw material being processed by foundries, which is sent to component suppliers

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and then to mobile device manufacturers [Figure 11]. The importance of their in-house SCM is

that they are part of most of the producing process, as they are suppliers and manufacturers

which let them keep better control over the SCM. Unlike any other smartphone company,

Samsung is involved in almost the whole process. If related to economies of scale, then their

vertical integration advantages increase. Samsung supplies vast amount of resources and

manufactures lots of devices. This allows the company to save money as mass producing

benefits them not just in the manufacturing process, but in the supplying process. The ability to

apply a vertical integration alongside with economies of scale influences the company’s ability

to set competitive prices.

Figure 11: Samsung Supply Chain11

11
Billions Served (In Secret): How their mobile supply chains give Apple and Samsung an edge. (n.d.).
Retrieved April 7, 2015, from http://endeavourpartners.net/billions-served-in-secret-how-their-mobile-supply-
chains-give-apple-and-samsung-an-edge/

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Conclusion
In answering the question: “To what extent Samsung’s marketing mix strategy has led

them to global success in the smartphone industry?” this paper concludes that Samsung owes its

success to its well-managed marketing mix.

To achieve this success, the company established an innovation policy based on the

research and development of unique features that differentiates it from competitors and gives a

competitive advantage to their products. The policy relies on the benefits that vertical integration

brings by using economies of scale to mass supply and produce, thus reducing the cost of

production. As a result Samsung sets affordable prices to their consumers that will still generate

profits for the company. On the other hand, Samsung’s promotional mix consists of broad reach

media and sales promotions that effectively stimulate consumers to purchase their products.

Through the marketing mix, Samsung fulfilled all its marketing objectives such as increasing

their market share, brand awareness, reputation, and sales levels while remaining ductile for any

eventual change in the market’s conditions due to constant innovation.

Overall, the combination of innovative, high quality, fairly priced products, and an

outstanding corporate image alongside a well-planned distribution chain yielded the success that

Samsung currently enjoys as the market leader in the smartphone business.

A well-balanced marketing mix, therefore, is a tool of uttermost significance for any

company wishing to experience a boost in market share, brand name reputation, and profitability.

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Samsung’s Marketing Mix Merino, G.
004348-0060

Appendices
Appendix A

Smartphone Industry Market Share by Vendor12.

12
IDC: Smartphone Market Share 2015, 2014, 2013, and 2012. (n.d.). Retrieved from
http://www.idc.com/prodserv/smartphone-market-share.jsp

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