SAMSUNG ELECTRONICS: ENTERING INDIA / IN INDIA

Case overview Introduction to Samsung Challenges faced by Samsung in korea Samsungs position in indian market Strategies Future strategy

CASE OVER VIEW

To develop and market superior products and services for a better global society. Quality, globalization Reorganizing and integrating their resources 1994 landmark year of prosperity Global strategy explore new opportunities in order to serve major market Expansion for global business india, vietnam, brazil and Spain.

South-korean multinational electronics company Headquarters- Suwon, South Korea. Founder- Lee Byung-Chul Initial- Dried fish, vegetables & fruits to Manchuria & Beijing. Manufacturing & sales activities by setting up flour mills & confectionary mills. Korean war 1950 Samsung electronics- 1969

HISTORY
1938 - Samsung is founded by Lee Byung-Chull as a trading company 1953: After the Korean War, Lee forms profitable Cheil Sugar, which is followed by textile, banking and insurance enterprises. 1961: Despite a political coup, charges against Lee of illegal profiteering and a 1966 family scandal of smuggling, the company grows by diversifying into paper products, department stores and publishing. 1969: Lee, with the help of Sanyo, establishes Samsung Electronics. It produces inexpensive TVs, microwave ovens and other consumer products for Western companies such as Sears and General Electric.

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

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

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

VALUES

Maintain a clean organizational climate Care for the environment, health & safety Comply with laws & ethical standards Respect customers, shareholders & employees A socially responsible corporate citizen

CHALLENGES
1950 Korean war Samsung lost all its assets

Korean economy unstable, political and social unrest

Intense competition in both domestic and global market High rate of increase in labor cost COGS, S&A expenses Poor record of intellectual property rights protection

Fundamental restructuring Cut back on subsidies, export credits

Market penetration of korean goods was falling in US/chinese

CHALLENGES CONTD:
Entry of foreing players Market barriers deregulated (Sony, Philips, GE, Siemens, whirlpool)
Market share trend due to huge competition

INDIAN MARKET - 1990

July 1991 GOI initiated Economic liberalization policy No of policy, administrative reforms deli censing of industrial investment Trade reforms Reduction in import duties/promotion of exports

Encouragement of FDI, FII investments

Capital market reforms Raising funds from D&G markets Establishment of Private banks The ban against using foreign brand names/trade marks was lifted

ECONOMIC TRENDS

POLITICAL ENVIRONMENT
Multiethnic, multireligious 25 states, 7UT
Individual states competing for Foreign Investment Ongoing tension between India and Pak Terrorism and various forms of Social tensions Politically motivated attacks on Foreign projects

Political uncertainty upcoming parliamentary elections

INVESTMENT CLIMATE
Positive attitude towards FDI

FII was permitted to Invest in shares/debentures 10%

FII - invest in UTI and Mutual funds Special incentives for plants located in SEZ Third largest pool of scientific and technological workforce Foreign equity participation from 40 to 51%

Hire foreign technicians without prior government approval Foreign investors loans from all commercial banks

CONSUMER MARKET

ENTRY STRATEGY CONCERNS

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

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

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

Marketing Strategy
Product Design : according to customer needgap Brand Differentiation Product Positioning: High Technology Brand in medium & premium price segments Exchange offers Product Differentiation: Excellent Technology Distribution & After Sales Services Realized Value Consciousness

 Harness Potential of Employees to full extent & have Quality Performance: Employees treated as the most important assets.
Respectable company image via Social & Cultural activities Recruitment Training & Development Recognition Rewards Working Conditions Administration Salary Structure

HR STRTEGY

R&D
Global Manufacturing Network Global R&D Network Gathering Information on New Technologies Developing Products Utilizing Best Brain & resources R&D Centre of Color T.V. at Noida(U.S.Dollar 5 Million)

 Customized Models: Local Customers(Design & Features) Metallic CTVs & TV Net Appliance Color T.V. Design to meet requirement of:
India South-East Asian Countries Middle East Asian Countries

IT & Supply Chain Management

68% of components sourced from local vendors SAP R3 :From Germany
Integration of Sales, Manufacturing, Procurement & Financial Functions Six modules: Production planning, materials management, controlling, Financial Accounts, Sales& Distribution

Networking System to have fighting edge to its Marketing Strategies

 B2B initiative with the launch of:

Glonets
linking key vendors through global network logistics system to facilitate efficient purchase from international procurement offices & vendors in India

Ascnet
linking its authorized service centers(ASCs) with the head office Automation of Supply Chain Information about Stock position& order status of spares at any time

Hello Samsung
Linking dealers to Samsungs Supply Chain via Internet

Supply chain Management

Factory

Web MIS Sever

HQ

Distributor
Branch

Dealer

 Completed loop for communication with real time business partnership Feedback on Product Quality, Delivery & related Issues E-Business Site: Samsung e-Mart in Feb, 2000 Two Price online purchasing Strategy:
Club various regions for standardized Price

B2C :
Service Needs Online Call logging for customer complaints Follow up by regional service centre

 In Feb.2000,iaunched e-business site:Samsung e-mart. B2C application for business need. Digital e-Company Initiative
Digital range of Products E-Management Processes

Distribution & Customer Service

Extensive Network with 18branch offices,3900 Dealers & 400 Service Centers Two-tier Distribution Structure SEITL operating 4 Distributors:
Tech Pacific India Ltd Radington India Ingram Micro Savex C computers

 Strong PR with key Channel partners Provided sales training to staff, extended support on corporate mailings Value ++ Program:
free bundled products to customers

Focus 21 Program: objectives

Better Service Management Online Connectivity between FSCs, National Spares Warehouse & Headoffice Better spares Inventory Management

Promotion &Advertising
2nd Largest Emerging Market Aggressive Marketing campaign Advertising & Promotion Budget :increased by 15% to Rs.85Crores New Advertising Campaigns:
Print Adds (Plano CTVs & Direct Cool Refrigerator) TV Commercials (Metallica CTVs & Air Conditioners)

 Brand Positioning:
Plano Brand (true life-like images) Bio Fresh Fridges ( freshness plank)

Star Endorser for Home Appliances: Tabu Ground Promotion: to target Mass Consumers Online Advertising: direct traffic to Samsung emart site Banner advertising: Portals of Women, Sports & Youth Digital Technology

 Sponsorship of channels:
Samsung Adventure One National Geographic Channel Channel V & Roads Show featuring :
Sukhbir Euphoria Shaan Mehnaaz

 Blueprint to expand penetration in Rural India

More than 10 % of total sales Low pricing of products: Economic versions of CTVs , Semi automatic Washing Machine & Direct Cool Refrigerator Priced below Rs. 10,000

Manufacturing Facilities
CTV
Greater Noida Investment : Rs. 90 Crores Capacity: 600, 000 units p.a. Fully geared for high speed ,high volume & high quality production New Production Line : Projection TV (screen size 43-53 inches)

 Microwave Oven:
Noida (March 1999) Capacity: 100, 000 units p.a.(20-30 *1000 Litres)

Air Conditioners
Investment : Rs. 20 Crores Capacity: 100, 000 units p.a. Window & Split ACs

PRODUCTION STRATEGY
Two Auto insertion machines
Investment : Rs. 14 Crores 95% of 600 old components Save 33% of its cost over 10 years

220 workers Reduce Manufacturing Costs Reduce Tact time(9.6 seconds) for CTVs Production quadrupled in 3 years

 Challenge 3000 Campaign

44 sets /person/day

Challenge 4000 TGV

(Tez Gati Vali Productivity) 800,000 CTV units p.a.

ISO 9002 Certification

BSI, UK & STQC, DoE Within 11 months

Quality Circle : September 1997

 Six Sigma
Improve Efficiency, Quality , Cost & Savings 60% reduction Operation Loss & Balancing Loss 80% reduction in the defect rate of Auto insertion machines

FUTURE STRATEGY
In order to survive in the market their future startegy is to launch new models in

the market with innovative features at regular intervals.

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

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

PERFORMANCE