By: Gautham Vamshi Podila
The case study by Boon-Young Lee and Seung- Joo Lee on Samsung Electronics examines their successful growth strategy in the mobile phone business. It examines its early efforts at developing a competitive product in the domestic market, globalization strategies, and some of the key challenges it faces today.
In 1983, Samsung initiated its mobile telecommunications business, which it hoped would become the company’s future growth engine. In 1986, Samsung was able to release its first built-in car phone, the SC-100. But the result was disastrous. The quality was so poor that many customers filed complaints, and the company ended manufacturing.
By the early 1990s, the worldwide mobile telecom market was growing rapidly, and many new players were entering the market. In Korea, Motorola accounted for 60-70% of the market, and Samsung accounted for only 10%. In November 1993, the Samsung development team finally unveiled a new model, the SH-700, and this model was quite remarkable. Each product manufactured was tested piece-by-piece to assure perfect quality. Phones with any kind of defect were burned openly for all employees to see, and the products that had been burned were worth $188 million. The burning ceremony ingrained the motto ‘Quality is Pride,’ in every employee’s mind.
Samsung developed the slogan, “Strong in Korea’s unique topography.” This slogan helped persuade customers that Samsung’s mobile phone was best fitted for Korea and its mountainous topography. It emphasized the fact that foreign products had been tested more in flat areas rather than in mountainous ones. In addition, the company launched a marketing campaign known as “Cheon-wang-bong (Mt. Cheon-wang) Project.” As part of the campaign, the company held free-trial events in famous mountain areas and on islands. On holidays, the events were held at highway rest areas. Many celebrities participated in the events.
The company also focused on building good relationship with distributors, since consumer choice was largely influenced by the sales agent’s product recommendations. Samsung employees visited about 3,000 distributors in the country and held new product-launching sessions. Some employees gave the distributors gifts of oriental health supplements to let them feel that they were being taken care of. Samsung also began an agent referral program, in which distributors tested the quality of Samsung mobile phones and permitted their names and pictures to be used in Samsung’s newspaper advertisements.
By casting some of the most famous and respected actors in Korea in its ads, Samsung was able to create a strong association between the Samsung brand and quality, credibility, and patriotic feelings. Customer testimonials also worked in a positive way. Many customers called Samsung to provide their opinions of the Samsung mobile phone. One customer reported that the phone was still working even after a car ran over it. Another said the phone saved his life because he was still able to call the fire department even after his mobile phone had been half-burned. These stories were used in a series of television commercials, thus strengthening the connection between Samsung and quality in consumer’s minds. As a result of all the extensive marketing efforts, the market share of Samsung mobile phones soared from 25.8 percent in October 1994, to 51.5 percent in August 1995. In the same period, Motorola’s market share dropped from 52.5 percent to 42.1 percent. Samsung acquired 50% worldwide market share. However, the worldwide CDMA market was far smaller than the GSM market, which accounted for 70% of the total worldwide mobile communications market.
Samsung’s clever marketing strategies played an important role in lifting Samsung’s image from that of a low-end manufacturer to that of a global digital technology leader for effective global marketing and branding. One of its most important decisions was to cease all existing contracts with 55 advertising agencies and to sign a $400 million contract with one ad agency, FCB Worldwide. Since then, Samsung has unveiled a series of corporate branding campaigns and the slogan, “Samsung DIGITall: Everyone’s invited.”
One of Samsung’s major global branding strategies is Olympic sponsorship. To win the sponsorship negotiations, Samsung concentrated its marketing resources on the mobile phone business. Samsung also participated in the mobile telecommunication equipment category in the Sydney 2000 Olympics, and Beijing (2008), and many more.
In addition to its Olympic sponsorship, Samsung has been very active in sports marketing through the support of sporting events and athletes worldwide. It sponsored several equestrian games—for instance, the FEI (Federal Equestrian International) Samsung Nation’s Cup and the SSL (Samsung Super League) in France.
Movies have also taken on a significant role in Samsung’s marketing, and for the popular movie, ‘Matrix: Reloaded,’ Samsung actively participated in developing the “Matrix Phone.” The Samsung phone appeared in the Matrix sequel and 500 units were produced for sales. Samsung’s Matrix Phone received a great deal of attention and acclaim. In Korea, Samsung ran an advertising campaign that included scenes from the movie. In this way, Samsung’s co-marketing effort with the most hyped movie of the year contributed significantly to Samsung’s brand value. In evidence, Samsung won the “Super Reggie Award” for its successful Matrix marketing in 2004.
The worldwide mobile phone industry achieved 57.3% average annual growth from 1996 to 2002. In 2002, however, the growth rate dropped to a 6%, due to several factors—recession in the US economy, sluggishness in the global IT industry, and delay in the rollout of the 3G services.
But the industry experienced increased activity again in 2003, showing 20.5% annual growth. The forces contributing to the growth included increased demand from first-time buyers in emerging markets (China, Brazil, India, Eastern Europe, etc.), the introduction of function-rich phones such as camera phones, and replacement demand in mature markets (US, Western Europe, and some parts of Asia/Pacific). Total mobile phone unit sales reached about 520 million units in 2003, and are expected to exceed 600 million units in 2004.
At present, Nokia, Motorola, and Samsung are in the first-tier group, and Siemens, Sony-Ericsson, and LG Electronics in the second-tier. However, the top three players have a hold on more than half of the total market, totalling 55.2% and 60% market shares in 2002 and 2003 respectively. Now Samsung is a leading brand in the world. It ranks in the 7th position, according to Forbes 2015 ranking, with a brand value of $37.9 Billion.
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