how samsung electronics creates, captures and delivers value in the smartphone industry
TRANSCRIPT
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Samsung Electronics:
Creating, Capturing &
Delivering Value in the
Smartphone Industry
KICHUL JUNG, MUNA AL KAABI, OMAR SAIF
ESM 611
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Introduction
Samsung Electronics is a leading technology company part of the large Samsung Group.
The larger company was established in 1938 by Chairman Byung-Chul Lee along with Hong-jai
Cho who joined in 1948 to help expand the firm through creating another business unit, SamsungTrading Corporation (now known as Samsung C&T Corporation). In the late 1960s Samsung
entered the electronics market forming several electronics divisions, such as Samsung
Electronics Devices, Samsung Electro-Mechanics, Samsung Corning, and Samsung
Semiconductor & Telecommunications. In 1998, the company grew to become the largest
company in South Korea comprising 17% of Koreas GNP. Samsungs rapid and impressive
growth was primarily due to their ability to effectively create, capture and deliver value, which
will be explored in this report.
Although several notable Samsung subsidiaries exist, for the purpose of this paper the
main subsidiary of focus will be Samsung Electronics - the world's largest information
technology company by 2012 revenues, and 4th by market value. The report will also focus
specifically on Samsung Electronicsstrategy within the smartphone industry.
1.1. History of Samsung ElectronicsSamsung Electronics was founded in 1969 by providing black-and-white televisions,
followed by a move towards semiconductors in the early 1970s. Samsung Electronics noticed the
high potential of growth and profitability in the semiconductor industry and consequently started
manufacturing DRAMs in the 1980s. In order to design and create its first 64 K DRAMs,
Samsung Electronics searched globally for a company willing to license its DRAM technology.
The company approached a number of financially-distressed small semiconductor companies in
the US, finally settling on Micron for chip designs and process technology [2]. In order to
develop the company with its first frontier technology, Samsung Electronics externalized its
research to two task forces in the US and Korea by employing Korean and American Ph.D
students in the field of electrical engineering. These two task forces interacted both cooperatively
and competitively actively and finally succeeded in developing a 64 K DRAM [2]. This strategy
created the synergies in developing products as an internal process in Samsung Electronics. As a
result, the firm obtained the best market position and the leadership position with respect to the
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DRAM industry [3]. However, by 1995 Samsung Electronics total ROI was only 60% of what it
was in 1995primarily due to market saturation in the DRAM industry. Nevertheless, Samsung
Electronics continued to invest in facilities and R&D, establishing joint ventures in many
countries.
Resultant of the continued investment in the R&D of next-generation DRAM chips,
Samsung Electronics cracked the 1 G DRAM in 1996 [4]. However, by 1997 the Asian Financial
Crisis began to afflict the DRAM market. Consequently, Samsung Electronics stocks plummeted
to their lowest value since 1994. Over this period, Samsung Electronics had to go through
substantial corporate restructuring to overcome difficulties. Despite the weakened Korean
currency, the corporation surmounted adversities and hardships from a strong rebound in market
demand and price for DRAM in the late 1990s. Even though Samsung Electronics surpassed
rival companies in the DRAM market owing to its commitment to DRAM improvement, it
realized that the company needed to adopt an ambidextrous approach and innovate beyond
existing products. This was achieved by devising a new strategy of product diversification to
reduce dependence on DRAM for company revenue. Therefore, the firm made a major move
towards non-memory chips. By providing chips to various manufacturers (including Apple for its
iPhone), Samsung Electronics acquired vast knowledge on the manufacturing and development
of high end consumer electronics including mobile phones and later smartphones. In the 2000s,
Samsung Electronic had defined its strategy as digital convergence. This involved the creation
of diverse and mixed products to provide a full-range of products from memory chips to high-
end state of the art consumer products [5].
1.2. Samsung ElectronicsOrganizational StrategySamsung Electronics rise into becoming a top-tier manufacturer of semiconductors and
consumer electronics is owed to a great degree to the companys organizational strategy and
architecture which is summarized in Figure 1.
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Figure 1: Organization Chart of Samsung Electronics [8]
The company is split in to two core divisions, Digital Media & Communications and
Device Solutions. In the divisions, it focused on mobile communications, digital media,
semiconductor etc. while dominating the market with its products. In addition, Samsung
Electronics adopted entrepreneurial incentives to battle rivals in mobile and smartphone markets.
The company investigates the way to optimize its products and technological innovation
processes by forming Pro-Teams which aim to integrate employees with their opinions in the
mobile phone manufacturing process and to connect them. This strategy successfully built a
balanced bottom-up along with horizontal communication culture for encouraging employees to
be creative and flexible as well as to work innovatively [6].
With the organizational system in place, Samsung Electronics was able to systematically
improve its technology and core products under a centralized and well communicated company
vision. In 2005, the total net sales of the Samsung reached $140.9 billion with a net income of
$9.4 billion. The firm had total assets worth $233.8 billion, and its market capitalization
amounted to $80.8 billion. In 2007, Samsung Electronics became the world's second-largest
mobile-phone maker by overcoming Motorola. In 2009, the corporation achieved total revenues
of US$117.4 billion, overtaking Hewlett-Packard to become the world's largest technology
company measured by sales [7]. During this time, Samsung Electronics utilized Googles free
Android operating system in a move that would benefit both companies, and while Smasung and
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Google are separate businesses entirely, they were able to have a symbiotic relationship of
coevolution.
For Samsung Electronics to create a value and improve their market leadership, they need
to organize the firm more effectively. So, Samsung Electronics began in 2013 reorganizing their
firm structure by focusing on three sections: Consumer Electronics, IT & Mobile
communications and Devise Solutions [8][9]. The new firm structure will allow the three units to
be more effective in their decisions making and dealing with world market change. Moreover,
Samsung Electronics can continue to develop and improve their Pro-Teams as to better capture
internal talent and innovation inside the company, and between business units [6]. Samsung may
also want to look into the potential acquisition of technology startups to increase their patents
and decrease internal R&D costs. Although Samsungs traditional R&D structure has served the
company well, looking into distributive R&D could be beneficial given the ever changing market
trends and technologies.
1.3. SamsungsMobile Industry EvolutionThe mobile phone market has recently witnessed tremendous growth and increased
competition among different firms. Although Samsung Electronics was initially better known for
semiconductors and home appliances they remarkably succeeded in setting their name as one of
the top mobile phone manufactures in the world with their products highly advertised by the
media [10]. Samsung Electronics was a relative late comer to the emerging smartphone industry,
as better established firms such as Nokia, Motorola, Sony-Ericsson, BlackBerry and Apple were
already in the market. Despite
their late entry into the
smartphone industry, Samsung
Electronics technological
capacity was more than ready, asthey had a strong foundation in
the mobile phone and periphery
markets through several product
lines shown in Figure 2.
Fi ure 2: S-curves or Samsun mobile hone
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The initial start of Samsung in mobile telecommunications began in 1983 [10]. They did
so by initially disassembling and reassembling Japanese car-phones repeatedly in order to come
up with the first Samsung car phone, the SC-100 in 1986 [10][11]. However, the developed car
phone was of low quality and they consequently considered exiting the mobile industry
completely. In 1988, Samsung decided to delve into new technology by releasing their first
mobile handset, the SH-100. However, once again the phone was of poor quality and could not
compete with Motorolas higher quality and the worlds first ever mobile phone, the DynaTAC
8000X released earlier in 1983 [20]. Furthermore, Motorola had a much stronger customer base
for mobile phones. Despite another market failure, Samsung continued their intensive R&D to
overcome their technological impediment and stay in the business [10].
Samsung Electronics were determined to produce mobile phones at par with Motorola
phones. Hence, they developed a team focused on connection quality as a key differentiator from
Motorola. By the early 1990sSamsung developed a new model, the SH-700 with better quality
than the previous SH-100 and it was upgraded later to the SH-770. The company initiated
aggressive marketing campaigns to condition their brand name with quality and credibility.
Samsung also utilized their Korean base to imbed a sense of patriotism among Korean users [10].
To keep up in the business, Samsung entered the CDMA (Code Division Multiple Access)
and PCS (Personal Communication Services) market and had a huge success in both. By the end
of 1990s, Samsung Electronics decided it was time to expand in to the global market. They tried
to enter the GSM (Global System for Mobile Communications) in the European market, but with
the strong competition from big firms like Nokia, Motorola and Ericsson it was difficult to
succeed. Consequently, Samsung adjusted their products to more suitably meet the taste of
European (and other markets) by following a localization strategy. By 2002, Samsung efforts had
paid off as the company ranked in 4th place globally among mobile phone manufacturers for
sales in both CDMA and GSM markets [10].
To remain competitive, Samsungs R&D is focusing on improving new technology
standards for 4G communications and the mobile internet [10]. Moreover, from 2003 to 2011 the
total number of personnel R&D increased from 21,000 to more than 60,000 [9]. In alignment
with its product diversification strategy, Samsung continues to produce convergent technologies
and products in order to compete with other manufacturing firms [10]. Furthermore, industry
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change from analog to digital technology has led to a narrowing in the technological gap of
manufacturing firms. Technology commoditization and modularization is the new form of
disruption, suiting Samsungs strategy of speed and aggressive investment in product lines,
producing new products in short periods of time [13]. Samsungs lateentry in to the smartphone
industry put them in direct competition with Apple and their iPhone products. However,
Samsung was able to penetrate the market with the success of their Galaxy phone line that ran
the relatively new Android OS. Since then they have managed to maintain remarkably steady
growth in the industry, overtaking Nokia in 2011 [14].
Currently, Samsung is leading the market and not likely to be majorly disrupted by other
firms at the technology level as the industry nears its natural technology limit. In other words,
technology innovation between various OEMs in the industry narrowing, though other forms of
innovation remain possible. There is some talk of the possibility that tablets or phablets
(referring to devices such as the Samsung Galaxy Note) will disrupt the smartphone industry and
take over [15]. However, even if this was the case, it would not present a technological
innovation or disruption given that tablets utilize much of the same technology and operating
systems as current smartphones.
To compensate for the diminishing returns in technological investment, Samsung, along
with other OEMs, are focusing on managing their existing technologies and penetrating new
markets. Apples ability to license its new iPhone on of the worlds larges t carriers, China
Mobile highlights this move in to new markets. Similarly, Samsung is making a similar move in
to new markets including China and India, as the smartphone market remains largely unsaturated
at the global level, particularly in
developing economies [16]. In fact,
Samsung is already ahead of Apple
when it comes to the Chinese market
with 19.4% penetration, compared
with Apples 4.3% in Q2 2013 [17].
The various regional penetrations of
smartphones is illustrated in Figure 3.
Figure 3: Smartphone Market Share World Map: March 2013 [18]
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1.4. Smartphone Industry History & Evolution:In 1983, Motorola unveiled the very first portable phone the DynaTAC 8000x [20].
Compared with todays available smartphones, it was significantly bulkier in size, weight and
came at a starting price of $3,995 USD equivalent to $9,130 in 2012 USD [20]. Since thentechnological progress has enabled cell phones to become smaller, cheaper and more reliable
leading to accelerated adoption in the 90s and 2000s at the global leve l. It was during this time
period that PDAs (Personal Digital Assistance) developed largely by IBM, Palm and Nokia
emerged in the market; often considered the predecessors of todays smartphones.
Though there is no established definition to what exactly constitutes a smartphone, they
are often characterized by running an operating system that allows for the use of various
applications or apps[20]. With time they also came to include touch screens, built in cameras,
GPS, Wifi/Bluetooth amongst other features [21]. During the early 2000s, Nokia with its
Symbian OS platform, played an instrumental role in paving the way for future smartphones;
licensing its OS to other manufacturers including Sony Ericsson and Motorola [20]. However,
the Symbian OS lost much of its popularity following the market entrance of RIMs Blackberry
OS, Microsofts Windows Mobile OS and Palms OS in the mid 2000s [20]. These OS
platforms further expanded the smartphone market allowing for greater multi-tasking and
business oriented tasks including emails, contact management and web browsing. The next wave
of smartphone market penetration would take place in 2007 with the launch of the Apple iPhone,
and its iOS, going head to head with BlackBerry [21]. In developed economies, Apple and
Blackberry deserve much of the credit for taking the smartphone adoption curve past the great
chasm and into the early majority as shown in Figure 4. Handset devices running on Googles
open source Android OS emerged in 2008, gaining adoption by customers fairly rapidly [20].
Apple and Google differentiated themselves through their supplementary app markets, the Mac
App Store and the Google Play Store respectively. In partnership with developers, Apple and
Google were able to provide well above 500,000 apps each through their respective app markets
- a significant added value to customers that helped increase the global uptake of smartphones.
This step by Apple and Google helped further capture the early majority and even move in to late
majority customer segments also shown in Figure 4.
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Figure 4: Smartphone S-curve and adoption in developed markets
1.5. Smartphone Industry Market: Penetration and Current OutlookDespite increases in global uptake of smartphones, global penetration remains low,
hovering around 12% of the total population, or 27% of all phones sold [20]. The main reason
for the relatively low penetration rates comes down to cost. Penetration exists at levels of 50-60%
in Europe and North America while other markets are only at 10-20% as shown previously in
Figure 3. This can be attributed to not only lower wages, but also the popularity of pre-paid plans
in many developing markets, which exclude the possibility of carriers subsidizing phones as the
case in North America and other developed economies [20].
1.6. OEM & OS Platform Competition:The smartphone industry is highly competitive in manufacturing and OS platforms. In the
past decade alone, numerous OEMs and OS platforms have risen and fallen [19]. Figure 5 below
illustrates the smartphone market share by OS at the global level. Android, an open source
platform taking over 70% of the OS market share within the span of only 3 years at the primary
expense of Nokias Symbian OS and RIMs Blackberry OS. Conversely, Figure 6 shows global
smartphone market share by OEM, Samsung showing a 30% market share takeover since 2008 at
the expense of BlackBerry and Nokia.
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Figure 5: Global smartphone market share by OS platform [19]
Figure 6: Global smartphone market share by OEM [23]
Table 1 highlights the different strategies that the major OS platforms employ in terms of
manufacturer licensing. iOS and BlackBerry OS are both developed in house by the parent
companies and the OS platforms are exclusive to them alone [19]. Google, Nokia and Microsoft
on the other hand utilize a strategy of licensing to proliferate their respective OS platforms in the
market. Microsoft charges a licensing fee to OEMs for the use of its Windows Mobile OS whileGoogle and Nokia do not charge OEMs for the use of Android or Symbian. This licensing
structure explains OS market shares seen in Figure 5 to a large degree. Androids widespread
adoption and Windows Mobile stagnant market share reflect the licensing costs associated with
the OS platforms. Symbian lost significant market share over the years, primarily due to Nokias
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decision to partner with Microsoft and adopt the Windows Mobile OS platform, effectively
killing the Symbian [20].
Table 1: Strategies in OS Licensing
OS Platform Developer Licensed OEMs Licensing Cost (USD/unit)
iOS Apple Apple only N/A
Android Google Multiple Open source
BlackBerry OS BlackBerry BlackBerry only N/A
Symbian Nokia (with other
contributors)
Nokia, Ericsson,
Motorola
Open source
(with some license restrictions)
Windows Mobile OS Microsoft Multiple $8-$15
Adapted from Ogunsanwo, 2012
1.7. Future Outlook of Smart Phone Industry:The future of the Smart Phone industry seems to be one marked by greater market share
consolidation by fewer OS platforms. With the exception of the iOS, OS platforms limited to one
OEM are unlikely to capture any significant market share [25]. The recent announcement of
BlackBerrys agreement to be purchase by Fairfax Financial is likely to add another major blow
to both BlackBerrys smart phones and OS platform. Table 2 illustrates a forecast of OS market
share, showing current OS market shares along with a 2017 projection. Under this globalscenario, Android and iOS will remain the dominant platforms for the coming years while
Windows Mobile will gain more market share, becoming another key player. While various
forecasts exist with varying market share margins, the future dominance of these three players is
forecasted by most analysts [20]. When combined they will continue to represent well over 96%
of global market share.
Table 2: Top Smartphone Operating Systems and Forecast Market Share, 20132017
Smartphone OS 2013 Market Share 2017 Market Share
Android 75.3% 68.3%
iOS 16.9% 17.9%Windows Mobile 3.9% 10.2%
BlackBerry OS 2.7% 1.7%
Others 1.2% 1.9%
Totals 100.0% 100.0%
Source: IDC Worldwide Mobile Phone Tracker, September 4, 2013
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In terms of OEMs, Samsung and
Apple are expected to continue to dominate in
global market shares. However, market share
drop by former power houses including Nokia,
Sony-Ericsson and BlackBerry coupled with
more open OS platforms such as Android and
Windows Mobile has opened the floor for
smaller OEMs to enter the market; Lenovo,
LG, ZTE and Huawei being such examples.
Figure 7 exemplifies this trend. Samsung and
Apple in 2013 Q2 had a combined market
share of around 43%, the rest being divided between other OEMs.
The way firms and/or OEMs also
capture value has varied significantly
and will continue to do so. Firms such as
Nokia rely heavily on handset sales
while others like Apple rely on their app-
store. Google and Microsoft on the other
hand capture value mostly through their
online services. Figure 8 summarizes the
financial strategy of the top OS platform
providers excluding BlackBerry.
1.8. Customer Segments and Growth Opportunities for Smart Phone Industry:The smartphone industry can be broken down into numerous customer segments based on
various criterias including: geographic, psychographic, demographic, and behavioral [22].
Figure 9 illustrates one study performed on a sample population segmented into four
psychographic groups Traditionalists, Career-makers, Socially-concerned and Yuppies.
Simmons has created a similar consumer psychographic segmentation, with the consumer
profiles summarized below in Table 3.
Figure 8: Where OS Firms Capture Value [19]
Figure 7: 2013 Q2 Market Share by OEM [23]
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Table 3: Psychographic customer segment profiles [24]
Mobirati (Yuppies):Mobirati represent the mobile generation. They grew up with cell phones and cannotimagine life without them. Cell phone devices are a central part of their everyday lives.
Social Connectors (Socially-concerned): Communication is central in the lives of Social Connectors.Their cell phone allows them to keep up-to-date with friends and social events. The cell phone device is the
bridge to their social world.Mobile Professionals (Career-makers):Mobile Professionals are multiple feature users. Their cell phonehelps them keep up with their professional life in addition to their personal life. Members of this segmentare more likely to own a smart phone. Their cell phone has become their all-in-one device for theircommunication and information needs.
Pragmatic Adopters:Cell phones came to life for Pragmatic Adopters in their adult years. They are the
ones who are still learning there are other things to do with your phone beyond just saying Hello. Cellphones are more a part of their everyday life than before but still more functional than entertaining to them.
Basic Planners (Traditionalists):Basic Planners are not into cell phones or the world of technology. Theyuse their cell phone just for the basics. The cell phone is just another communication device for this group.
Figure 7: Psychographic Characteristics of Various Customer Segments [22]
According to the methodology involved customer segments can vary, however demographic and
psychographic are more important to consider at national or more localized scales. At the global
level, segmentation has become largely a function of handset prices [20][25]. Smart phone
penetration in the global mobile market is reflective of this, standing currently at 27% [20]. This
penetration is mostly in developed countries where disposable income is higher, and handset
subsidization by carriers is more widespread [20][25]. Consequently, developed countries are
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seeing a saturation in smartphone uptake while developing countries remain a largely untapped
market (referring to Figure 4, developing markets would have an adoption curve shifted much
greater to the right).
Consequently, many OEMs, including Samsung are investing in cheaper smartphone and tablet
devices that would capture the remaining late majority and laggard segments in developed
countries while also breaking in to more price sensitive developing economies [20][25]. The
tradeoff between the traditionally pricier smartphones and tables and the cheaper more affordable
ones being summarized in Figure 10.
Figure 8: Tradeoff between higher-end & price-affordable devices
1.9. Customer Need Evolution:Customer needs in the smartphone industry have been fast evolving and changing. Thetechnology developed by OEMs has in part defined customer needs while customer needs have
also fueled OEM R&D into product design, performance, usability etc. In a response to customer
needs, the industry is also becoming more commoditized[25][26]. Due to diminishing returns,
OEMs are managing their technology by focusing on niche and peripheral markets. This is done
by tweaking phones for various customer lifestyles, for example the ruggedCasio G'zOne
smartphone, which is built and marketed towards outdoor users and wilderness survival or
alternatively the Sony Xperia Play, which is marketed towards gamers [26]. Such products are a
direct response to customer needs in niche markets.
2.0. Conclusion:In summary, Samsung Electronics has come a long way since its inception. Historically it created
value by utilizing its strong R&D towards DRAMs and memory chips which later helped it enter
Non-Price sensitive customers
Higher-end Devices
Higher profit margins
Lower market capture of late adopters,
laggards and developing economies
Price sensitive customers
Price-affordable Devices
Lower profit margins
Higher market capture of late adopters,
laggards and developing economies
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the mobile and smartphone industry. Through a strategy of convergent technology and alignment
with industry trends, Samsung was able to make key moves that would propel it as a leader in the
industry. One notable move was its partnership with Googles Android OS, allowing it to
penetrate developed markets across the globe. As it now sits as the worlds largest smartphone
manufacturer, Samsung Electronics is attempting to capture the remaining customer segments by
managing its current technology through a commoditization strategy, as well as entering new
developing markets through more affordable handset devices.
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Consumer-Aug2013/#.Ukf-EoZpknY.
[26] A. Mouton, Nokias Camera Phone, Samsung's Outdoor Handset Point to a Fragmented Market,2013. [Online]. Available: http://www.minyanville.com/sectors/technology/articles/Nokia2527s-
Camera-Phone-Samsung2527s-OutdoorHandset/9/16/2013/id/51757#ixzz2f3oNCPOC?refresh=1.
http://www.slideshare.net/vvikaschauhan/marketing-strategy-of-samsung-in-indiahttp://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://www.geekchamp.com/news/smartphone-market-share-world-map-march-2013http://www.geekchamp.com/news/smartphone-market-share-world-map-march-2013http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://thenextweb.com/asia/2013/09/12/in-response-to-apples-latest-iphone-samsung-says-its-next-smartphones-will-have-64-bit-processing/http://www.slideshare.net/vvikaschauhan/marketing-strategy-of-samsung-in-india -
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ESM 611
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How has the industry captured the value that it has created historically?
Five Force Analysis:
The way in which the smartphone industry has historically captured value is best represented through
Porters Five Force Analysis, which is illustrated in Figure 1.
Competitive rivalry [HIGH]:
Within the smartphone industry, competitive rivalry
exists on two main fronts, hardware and software (OS
platform).
In terms of OS rivalry, the main current players are
Apples iOS, Googles Android and Microsofts
Windows Mobile. Collectively, the three operating
systems represent over 96% of 2013 smartphone OS
market share as shown in Figure 1. Historically, OS
rivalry has been low in terms of the number of competitors in the market, however fairly high between
them. The radical drop in market share by RIMs Blackberry OS and Nokias Symbian OS in such a short
time period demonstrate how competitive the OS market is [3].
At the hardware levels, the number of competitors is much higher, with OEM market share being less
oligopolistic in comparison with OS market share. Figure 2 demonstrates market share breakdown
according to smartphone manufacturers.
Figure 1: Porters Five Force Analysis
Figure 2: Top Smartphone Operating Systems by Market Share
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Figure 3: 2013 Market Share by OEM
Figure 4: Market Share by OEM
Similar to competition at the OS
level, smartphone manufacturers
have also seen rapid rise and fall
over the last decade. Powerhouses
like Nokia have seen a 40% market
share loss in just five years, mainly to
Samsung as shown in Figure 4 [1].
Threat of new entrants: [LOW]
The threat of new entrants to the
smartphone industry is quite low for
multiple reasons. Firstly, whether at
the OS or manufacturing end, the
number of patents along with
proprietary knowledge needed to
enter the market is often too great
of a barrier for new entrants [2].
Even existing companies fight tooth
and nail in the smartphone industry
over patents, such as the litigation
war between Apple & Samsung
[21]. Furthermore, significant
investment, resources and
partnerships are needed for research, product development and marketing [2]. Lastly, brand loyalty is
another major barrier to entry for new companies [2]. However, some relatively new entrants to the
smartphone industry such as ZTE and Huawei have succeeded in entering North American markets
through price differentiation [3].
Google is already heavily involved in the smartphone industry through the Android OS and some Google
phone partnerships with existing manufacturers. However, its recent acquisition of Motorola could spell
a possible entry into smartphone manufacturing, if so, this would be a major threat to existing OEMs as
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the traditional barriers to entry would not apply to Google given its appropriation of Motorola patents
and large resource/investment base [4].
Threat of substitute products: [LOW]
The threat of substitute products for smartphones is particularly low given that smartphones are already
multi-functional, and have substituted many other products in the market such as Mp3 players, PDAs,
Cameras, GPS systems and even computers/laptops to a lesser degree [2]. Consequently, it is highly
unlikely that smartphones will be substituted by a competing product in the near future. Some analysts
have suggested that services such as Skype or other VoIP services could potentially substitute phones as
access to internet increases. However, this is unlikely to be the case as even VoIP services are now being
used more greatly on smartphones opposed to laptops or desktop computers [2].
Bargaining power of customers: [MEDIUM]
Customers have multiple smartphone manufacturers and operating systems to choose from, giving
them some bargaining power [2]. However, customer bargaining power, particularly in developed
economies where handsets are often subsidized by carriers through plans is lower, as customers have a
less direct link with smartphone manufacturers and direct retailers [3].
Bargaining power of suppliers: [HIGH]
The bargaining power of suppliers depends on whether it is the hardware or the software being
supplied. In terms of software, the bargaining power is relatively high unless the smartphone
manufacturer also owns its own software such as Apple or BlackBerry. Samsungs method of capturing
value differs from other industry players such as Apple, BlackBerry and Nokia in that, it did not develop
its own operating system. It has rather utilized Googles existing Android OS[5]. Controlling your own OS
is a double edged sword, with the case of Apple, it has been highly beneficial as it allowed for greater
market penetration and higher profit margins. On the other hand, poor management of an OS such as
the case with BlackBerry OS and Symbian has resulted in BlackBerrys and Nokias fallas was shown in
Figure 4.
At the hardware level, bargaining power of suppliers also relies heavily on how vertically integrated the
company is. In the case of Samsung, it benefits from having low supplier bargaining power as it
manufactures all of its needed components internally [7]. This is somewhat unique in the industry,
where most OEMs such as Apple purchase chips and other electronic components from external
manufacturers such as Samsung [8].
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Does your firm capture value in a different way from firms in your
industry? Will this change in the future?
Samsung Electronics captures value in similar ways to other industry competitors. However, it does
focus on different aspects of its value chain in comparison to arch-rivals such as Apple. Samsung has
traditionally captured value through utilizing its tightly held manufacturing assets, however this is likely
change as Samsung advances forward in its value chain (shown in Figure 3) and attempts to capture
value in its historically weaker areas like software and services.
Business value chain:
Figure 5: Samsung Electronics Value Chain
Samsung was able to capture value through some key supply chain transformations.
1) Firstly, they made significant attempts to listen to customer needs. One such method that wasemployed was to send Samsung staff to different countries and communities to attend MBA
programs there. While there, they were to identify customer preferences and integrate them into
the product design process, through quality function deployment[6].
2)
Secondly, they adopted a Six-Sigma strategy that was adapted from GEs approach. Samsungcalled this approach DMAEV, short for define, measure, analyze, enable and verify. This
approach allowed Samsung to drastically improve their internal operations, and hence capture
value more effectively [6].
3) Thirdly, Samsung utilizes an Advanced Planning & Scheduling system (APS) to help them betteroptimize raw materials and production capacity with product demand [6]. Such a system is
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especially important in the electronics industry given how quickly the market changes, therefore
demanding flexible and resilient production.
4) Fourthly, to further capture value within the company, Samsung Electronics uses a StreamlinePerformance evaluation system that allows high performers within the company to advance
faster in their respective career paths [6].
5) Fifthly, Samsung uses Standardized Process and Parts to achieve both economies of scale, andmanage quality more effectively, in doing so better capturing the value they create [6].
6) Lastly, Samsung has established a strong Risk Management System to reduce risk in their highlycompetitive and fast-changing industry [6]. Some risk management strategies undertaken
include: maintaining lower inventory, having flexible production capacity, and building in
redundancies within their supply chain to minimize risk [6].
Vertical & Horizontal Integration:
Samsung Electronics, like Apple, is known largely as a vertically integrated company rather than a
horizontally integrated one like Intel [7]. Consequently, in an attempt to better capture value, Samsung
has made key moves at vertically integrating its value chain. Part of Samsungs risk management
strategy is to reduce the number of transactions with multiple parties through vertical integration [7, 8].
Samsung Electronics has done a great deal to tightly manage its
value chain, a trend seen elsewhere in the electronics industry
[7]. Samsung Electronics vertically integrates practically all of
its manufacturing, from raw materials to electronic
components, and finally to fully assembled devices as shown in
Figure 4 [8]. Acquisition of companies developing key hardware
components is another strategy Samsung employs [9]. One
such example being Samsungs acquisition of the German
company Novaled for its OLED screen technology [12]. In doing
so, Samsung is able to achieve economies of scale through is
high volume manufacturing efficiency [8]. Consequently, it
stands as one of the worlds largest suppliers of electronic
components to OEMs including Sony, Apple, Dell, and Hewlett
Packard [8]. Samsungs vertical integration however is fairly
different from others in the industry such as Apple, who integrates more forward in the value chain
compared with Samsung [11]. Apple develops its own software, services its users through iTunes and
Figure 6: Samsung's Vertical Integration
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iCloud and also does its own retailing through its Apple stores [11]. Though Samsung is unlikely to
venture into retailing like Apple, it has been making greater efforts to strengthen its comparitvely weak
software division through a number of acquisitions [9, 14].
Partnerships:
Samsung Electronics has developed some key partnerships to help it better capture value. Among the
most famous is its partnership with Google through the Open Handset Alliance which included other
OEMs such as Sony, HTC, LG, and Motorola [13]. By adopting the Android OS, Samsung was able to
benefit greatly as it historically lagged in software and could not produce an OS of its own that would
rival existing rivals such as Apple, Microsoft or BlackBerry. Google benefits greatly from the partnership
as well through the proliferation of its Android OS uptake resultant of Samsung handset sales.
Another key partnership that Samsung Electronics has undertaken is with Intel through the Tizen OS.
Recognizing its software vulnerability and overreliance on external operating systems such as Android,
Samsung partnered with Intel in 2011 to develop Tizen, a Linux based open source OS that will compete
with Googles Android(16). Tizen is expected to not all be used on handsets, but even Samsung TVs and
tablets [15]. Tizen reflects Samsungs overall vertical integration strategy and entrance into software and
services.
Aside from company partnerships, Samsung Electronics is also trying to make strategic geographic
partnerships that will allow it to capture value in new markets. This is highlighted through Samsungs
push for partnerships on the African continent [17]. Partners include:
1) Multichoice Africa (Africas leading pay TV operator): Samsung is partnering with them to delivercontent, technology products and services to African markets [17].
2) Universal Music Group: Samsung has partnered with them and African record labels to provide amobile music streaming service called Kleek [17].
3) Learnthings Africa: Samsung has partnered with Intel to co-develop technology products andsolutions to deliver quality education through Learnthings Africas existing interactive learning
material [17].
What has been the relative role of uniqueness (IP, Speed) and
complementary assets in you firm/industry?
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Uniqueness
In rapidly and dramatically changes of smart phone markets where we obtain the benefits of high
technologies, companies which provide mobile phones are required to develop and enhance a strategy
which represents its brand name and captures the value after creating the value from innovation.
Among firms offering smart phones, Samsung Electronics achieves success in capturing the values based
on an understanding of uniqueness regarding Intellectual Property Protection (IP), Speed, and Secrecy as
a crucial scheme to earn a tremendous amount of profits.
The uniqueness of vital points has a significant role in capturing and seizing the value for Samsung
Electronics in the global market. After creating the value, Samsung Electronics has sought to capture the
value by holding a large number of patents for the uniqueness for products with each markets
characteristics. For example, in Germany, the firm registered patents for digital devices while using the
localization strategy by launching an online community of Funclub which brings in customers
attachment for the Samsung phones as well as strengthens the relationship between the company and
its service providers. In France, Samsung created the concept of culture marketing while connecting
technology and culture, and made the slogan of Samsung, going together with culture which appealed
the customers for the Samsung phones with acquisition of patents for the phones in 2001. Owing to the
strategy of uniqueness, Samsung ranked 4th for the phone sale in the global market in 2002, and the
corporation firmly held the 3rdrank for the sales and 2ndfor the revenues in 2003 (Figure 7) [18].
Figure 7: The world Mobile Phone Sale by Manufacturer (1000 units)
Moreover, research and development (R&D) enhances technologies for phones of Samsung Electronics
and produces a large number of patents in the phone industry with high quality functionalities. The
company has approximately 19,700 researchers who account for 34% of total employees for R&D. They
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improved 100 new technologies every year and achieved 1,313 US patents with the 11th rank of the
world in 2003 presented by Figure 8 [18]. In phone markets, Samsung has applied for 12,000 patents in
South Korea and 25,000 patents oversea, and holds about 100 patents which are related to 3G and 4G
technologies.
Figure 8: Samsung Electronics R&D Expenditures (2001 2003)
Samsung Electronics is consistently investing R&D and patent capabilities to reinforce competitiveness
by collaborating with a number of research centers and partners. This firm registered 5,801 patents in
the USA (2012), acquired four awards from the European Imaging and Sound Association (EISA 2012),
and earned twenty seven innovation awards in the Worlds Largest Consumer Electronics Show (CES
2013). Due to such efforts for its uniqueness of Samsung Electronics, it obtained the 9th rank on
Interbrands Best 100 Global Brands 2012 list which represents the brand value of USD 32.9 billion [19].
In addition, the company captures the value of the Samsung smart phone by continuously and rapidly
upgrading the models for customers preferences with a number of services such as blogging, news,finance, shopping, and new applications which make customers buy its products. For example, the
recent Galaxy series in Samsung Electronics are innovatively characterized by a curve screen for the first
smart phone and waterproof with the luxury design and functionality. The high speed of innovation for
improving smart phones applications has led Samsung Smart phones to where it is now (we will discuss
more details because it is related to the business strategy in Question 4). The high speed of production
has also helped the Samsung smart phones to become the best company of smart phones with the high
phone sales in the global market. Lastly, the secrecy for the process with its technologies to make
products (ex. smart phones) supports the uniqueness of Samsung Electronics. Sharing and exchanging
technologies of Samsung Electronics with other firms is strictly prohibited by laws in South Korea.
Therefore, the corporation produces its own digital devices in the global market.
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Complementary Assets
The complementary assets of a company are important to capture the value which is derived from
innovation to create its value. Samsung Electronics also has the complementary assets such as global
marketing and customer services for its products to seize the value.
First of all, Samsung Electronics marketing strategy has a significant role in capturing the value of
Samsung digital devices as the global digital technology leader [18]. To maximize its brand name in the
world, Samsung Electronics decided on Olympic sponsorship with the new structure to effectively
organize the global marketing. In the Atlanta 1996 Olympics, although the company was an unofficial
sponsor, it gained an opportunity to participate in The Olympic Partners (TOP) by emphasizing the high
technology communication company. In the Nagano Winter Olympics 1998, Samsung was presented by
an official sponsor while providing the mobile technologies for the Olympics. Also, the firm has involved
several Olympics games (the Sydney 2000 Olympics, the Salt Lake 2002 Olympic Winter Games, the
Athens 2004 Olympics, the Torino 2006 Winter Olympics, and the Beijing 2008 Olympics).
Samsungs sponsorships are not limited only for the Olympics games. It also sponsored a number of
equestrian games (the Federal Equestrian International Samsung Nations Cup and the Samsung Super
League) and golf games as an official sponsor for the Samsung Ladies Professional Golfer Association
World Championship. These strategies enhance the brand value with the reputation of the sponsor and
capture the value of the firm. The corporation has also taken its value in movie markets by placing its
products such as TVs, monitors, and mobile phones. For examples, it developed the Matrix Phone
shown in the Matrix movie. In Korean movies, Samsung also runs the advertising campaign before
showing movies to contribute Samsungs brand value.
Furthermore, the customer services play an important role in capturing the value of the company with
the high quality brand value by actively communicating with current customers and potential customers
[20]. Samsung Electronics always opens to all customers with complaint and inconvenience by forming
deep relationships to develop and provide better products. The company has sought to differentiate its
services from other companies while completely understanding the customers voices and suggestions.
For example, the company carried out survey on 2,400 users of digital devices to ensure consumers
needs for batteries in 2011. The firm analyzed the collected data in the survey to improve products that
meet customers expectation by listening directly to the voice of customers on their priorities. Then, the
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corporation produces the better digital devices and captures the value for the products by rapidly
responding its customers, reviewing their user conditions, and improving its products with the high
quality services. Due to this strategy of the customer services, the company maximizes customer
satisfaction via a more responsible and active communication and becomes the best technology firm in
the Korean market and even in the global market.
Based on what we discussed for uniqueness and complementary assets of Samsung Electronics, we can
identify the following figure 9:
Figure 9: Complementary Assets versus Uniqueness
This figure indicates that Samsung Electronics obtains The Big Win because of its strong strategy for
uniqueness and complementary assets to capture the value of the company. In other word, Samsung
Electronics has complementary assets of tightly held with its marketing and service strategies and
uniqueness of easy to maintain which is based on a number of patents, the very high speed of
innovation, and the secrecy of high technologies.
What roles do standards 10% (Access & Control), platforms/ecosystem
10%, and network effects 10% (Tipping & WinnerTakeAll) play in how
value is captured in your firm/industry?
Standards (Access & Control):
Now a days there is what we called standards war in the electronics market. Firms try to compete
between each other by being innovative, building their brand name, etc. There are different category of
standard wars depending on how different competitive firms proposed new technology, as shown in
Figure (10).
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Figure 10: Type of standard wars [21]
Samsung Electronics it falls in the Rival Evolutions and the Evolution versus Revolution quadrant.
This is due to the fact that all Samsung competitors are using touch screens when it comes for smart
phones and TRIZ methodology for systematic problem solving. However, Samsung projected in the
Evolution versus Revolution when it comes to Apple, because Apple use their own operating system
iOS while Samsung used Android Operating system that developed bygoogle. Both operating system
use touch interfaces that have a lot in common - swiping, tapping and pinch-and-zoom. However, iOS
home screen contains only rows of applications icons, while Android give the opportunity to use of
widgets that shows an auto-updating information, for instance weather and email [22].
The ability of the firms to be successful in standards war depend on some key assets that defined by the
Art of the war [21], such as : intellectual property rights, ability to innovate, first mover advantage,
manufacturing capabilities , brand name and reputation. Samsung Electronics, has what it take when it
comes to the brand name and reputation, Samsung now is a global leader in screen technology, TVs,
batteries, and chip design. In addition, Samsung does not do innovation, but they do have an innovation
culture founded on extensive training, repeatable methodology and creative elite construction,
supported by the highest level of management [23]. Moreover, Samsung Electronics holds
approximately 100,000 patents which are used for developing technology in different aspects such as
flash memory, mobile phones and other core products [24].Furthermore, Samsung manufacturing
capabilities are very strong since they are the leaders on the semiconductor manufacturing which help
in developing a lot of their products.
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Currently, Samsung Electronics are the leaders in screen technology, TVs, batteries, and chip design. This
current position of Samsung Electronics is due to combination between the key assets they have and
their dynamics of the strategic space of access and control, as shown in Figure (11).
Figure 11: Dynamics of the strategic space [25]
Samsung Electronics projected in the closed, private and the open, private quadrant. For the
closed, private it was clear when they developed their own Super AMOLED panel brand that is the
staple signature of their Galaxy flagship smartphone line [26]. Moreover, when it comes for the
semiconductor manufacturing, Samsung Electronics follows the open, private strategy. For instant,
Apple's latest flagship iPhone 5s includes 64-bit A7 microprocessor built by arch-rival Samsung [27]. So
when Samsung Electronics follows the open, private strategy this may help to strength the position of
the firm in the industry and could cause a lock-in scenario.
Platforms/Ecosystem:
Currently, number of knowledge-based technology applications trying to start a business ecosystem.
Where a group of complex products and services made by different firms collaborate together in which
no firm is dominant [28]. The ecosystem productivity and efficiency could be increased when there is an
effective keystones strategy. This keystones instead of being a small part of their ecosystems mass can
try being a system wide role and be in advantage position. They can be effective by creating value within
the ecosystem which will help to attract or retain members in the business ecosystem. Also, sharing the
value with other participants in the ecosystem so they will not become permanently enriched and
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eventually abounded by the ecosystem. Keystones can create a value for their ecosystems in different
ways, but the most important thing is through creation a platform. This platform could be an asset in the
form of services, tools, or technologies that offers solutions to others in the ecosystem. This platforms
can be a physical asset such as manufacturing capabilities, intellectual asset, etc [29].
In case of Samsung Electronics, they are trying now to strength their position in the mobile
innovativeness through establishing an ecosystem of business applications. So the company will start a
new innovation strategy called Samsung Solutions Exchange, which includes working directly with line
of business owners, carriers, independent software sellers and developers to create customized mobile
enterprise solutions. So Samsung Solutions Exchange, is an online site where corporate customers can
find apps and third-party developers with experience in developing mobile applications for Samsung
smartphones and tablets. Moreover, to help some initiative customers such as American Airlines to
develop custom business applications for Samsung devices, the developers have been given wide-
ranging tools to accomplish the coal. In addition, when it comes to the platforms Samsung Mobiles
enterprise business unit success over the past view years to become one of the biggest areas of growth
for Samsung in the U.S. and globally. For instant, they launch some of the products such as Samsung for
Enterprise (SAFE) in 2011, a description to let businesses and consumers know which devices have
enterprise-grade security and Samsung Knox, which is a feature for security and management that can
help in creating a secure zone on employee-owned Samsung devices for corporate applications and
data. So, Samsung Electronics can effectively increase the productivity of their ecosystem through
offering over 1,000 application programming interfaces in its software development kit to help
developers to create customized applications [30]. Which mean, if Samsung Electronics success in being
an effective keystone in it is ecosystem this will guarantee for the firm an advantage position within the
industry.
Network effects (Tipping& winner- take-all):
Generally, Network is based on creating a cluster of connections and associates and maintain the
network active through communication for common benefit [31]. Network business is key value for
firms to expand their knowledge learn from the success and failure of others and gain new clients and
customers. However, in order to dominate the global market and create a technology or product that
accomplish Tipping& winner take-all, the firm should create strong global network. Usually, these
global networks are flexible in a way that make firms and their suppliers as independent organization
that compete, cooperate, shift and recombine networks from one product generation to the next.
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Networks are kind of supplying chain and activities that add a value to the final product of the firm, as
shown in Figure (12) [32].
Figure 12: Generic Electronics Supply Chain [32].
In 2012, Samsung Electronics Tipped in the market of the LCD TVs and ranked as number 1, as shown in
Table. 1 [33].
Table.1: Preliminary Global Q2 LCD-TV Ranking (Percentage Market Share Based on Unit Shipments):
Samsung Electronics manage to dominate (Winner- Take-all) the market and win because of its Global
distribution, efficient Production and smart marketing. In addition, by signing cross-patent contracts
Samsung Electronics proved the enormous strength of its patent protection portfolio, this contracts
allow a broader cross-use of patents with other global IT companies. This makes a network between
Samsung Electronics and different firms such as Qualcomm (mobile phones), Kodak (camera
technology), Rambus (entire semiconductor products), and Sharp (LCD panel module), followed by
contracts with IBM and Microsoft (MS) for the cross-license of technologies of the mobile phone
operation system. Establish such a network enhanced the position of Samsung in the market and make
it the leader when it comes to smartphones, TVs, semiconductors, etc [24]. Moreover, when it comes to
customer services, Samsung tipped over other companies and ranked as the top of original equipment
manufacturer (OEM) with 25.7 percent of U.S. mobile subscribers (up 0.1 percentage points), followed
by LG with 19.1 percent share. Using an OEM allows the selling company to acquire needed components
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or products without owning and operating a factory, Samsung achieve that through its network with
firms such as IBM. Furthermore, in 2012 Google Android tipped over other operating systems and
become in the 1st place as the best smart phones platform. Since Samsung smartphones use Android
Operating system this also is a win-win situation because of the advantage thats customers get from
using Samsung Android phones the Samsung market share will increase [34].
What is your firms Technology Strategy versus Business Strategy?
In achieving success of capturing the value of the companys product, a technology strategy and a
business strategy are crucial while effectively identifying and organizing every segments of the value
chain.
Innovative design and functionality in the mobile phones industry play a vital role in making a profit as
the technology strategy with a number of patents. Samsung Electronics has always sought to create
unique and innovative products with user-friendly design and functionality. Due to the importance of
the technology strategy, the firm built the organization structure, the design management center, which
is related to the entire development process with R&D for features of mobile phones [18].
Based on the center with customer research and lifestyle segmentation, the company improves and
enhances its products with a number of unique design features that distinguished between other
phones. For instance, in the beginning model of the mobile phone, the arrangement of the SEND and
END buttons was inconvenient. However, by changing the location of the buttons, it became easier for
users to push the SEND and END. Samsung Electronics also developed a clamshell or dual-folder phone
which was designed for the first time with an external display window. In addition, the corporation
introduced the Intenna phone that consists of an antenna embedded with touch-screen and a remote-
control function. Owing to such efforts, Samsung Electronics won the iF Deign Award 2004, Europes
most prestigious design award for eight products. Recently, the firm releases the smart phone of the
Galaxy S4 filed 150 patents and equipped with attractive functions such as Dual Shot (see both sides of
the story), Sound & Shot (listen to your photos), Group Play Share Music (share the enjoyment with
friends), Samsung Hub (one stop shop for any content you want), S Translator (no more language
barriers), and Samsung Watch ON (the ultimate TV remote) [35].
In fierce competitions of the mobile phone market, Samsung Electronics makes the core business
strategy to cater to the customers needs. The corporation becomes the technology leader in the phone
market which becomes saturated with a shorter lifecycle using competitive business strategies by
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introducing new phones and communicating with customers to provoke the replacement demand [18].
One of the main business strategies is that Samsung Electronics has become the ultimate fast follower
which means that it is faster than any company to learn from its competitors [36]. The firm develops the
products and meets customers expectation by adjusting what competitors are doing and analyzing
what other companies are bringing to the market first. Then, the firm produces rapidly coming out with
a variety of devices and very quickly releasing its own version of the products with innovation.
Moreover, Samsung Electronics is willing to spend the money of 5.7 percent of its revenue for R&D by
investing in development of its digital devices whereas Apple spends its cash for research of 2.4 percent
of its revenue [36]. Samsung smart phone can therefore have and offer diverse features that Apple has
not gotten to. Whenever the corporation decides to get into any business, it does not hesitate to make
decisions and to commit to its goal until the firm achieves it. In addition, as the phone market gets
saturated by becoming standardized and modularized, the company targets emerging markets such as
China, India, Brazil, and Eastern Europe for future revenue sources. As a result, Samsung Electronics
becomes the worlds largest technology company being the dominant player in the smart phone market
based on the technology and business strategies with its products.
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References
1) Morgan, analyzing the worlds 14 biggest handset makers in Q2 2013. [Online]. Available:http://www.fiercewireless.com/europe/special-reports/analyzing-worlds-14-biggest-handset-
makers-q2-2013.
2) Gu, Yang. 2011. Porters Five Forces on the Smartphone Industry. Retrieved(http://blogs.ubc.ca/yanggu/2011/11/02/porters-five-forces-on-the-smartphone-industry/).
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12) Kersey, Ian. Samsung Invests In OLED Production With Acquisition of Novaled. 2013. Retrieved(http://www.intomobile.com/2013/08/09/samsung-invests-oled-production-acquisition-novaled/).
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336464).
17) BizzTechAfrica. Synergistic partnerships key to successful growth and sustainability.2013. Retrieved(http://www.biztechafrica.com/press/samsung-electronics/article/synergistic-partnerships-key-
successful-growth-and/6023/).
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24) Building, P. C. (2012). 450 2011, 20102011.25) Day 12 Network Effects and Standards. (n.d.).class notes26) Samsung to buy Novaled for longer-lasting, more efficient Super AMOLED displays. (n.d.). Retrieved
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Super-AMOLED-displays_id45841
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iphone-5s-230913
28) Who Joins the Platform? The Case of the RFID Business Ecosystem. (n.d.). Retrieved fromhttp://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=1385792&url=http%3A%2F%2Fieeexplore.ie
ee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D1385792
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31) Networking. (n.d.). Retrieved fromhttp://www.businessdictionary.com/definition/networking.html32) Dedrick, J., Kraemer, K. L., Linden, G., & North, B. P. (2007). Capturing Value in a Global Innovation
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SYSTEMS/NEWS/PAGES/GLOBAL-FLAT-PANEL-TV-SHIPMENTS-RETURN-TO-GROWTH-IN-Q2-
SAMSUNG-STAYS-ON-TOP-OF-LCD-MARKET.ASPX
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35) http://www.samsung.com/latin_en/#latest-home36) http://www.businessinsider.com/samsung-corporate-strategy-2013-3
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Q. What are your firms current business strategy as simple rules, short-term, and long-
term growth strategy? Whats the rhythm of growth in your firm?
1. Simple Rules
In order to deliver the value, a company should consider and adapt simple rules based on itsefforts for creating value and capturing value. A number of companies such as Intel, Oticon,
and Cisco relied on simple rules as strategy to capture the best opportunities while extending
the power brand and investing in promising fields. Given simples rules for delivering the value,
one can identify five broad categories including how to rules, boundary rules, priority rules,
timing rules and exit rules [1]. Each category has its objective as shown in Table (1).
Table 1 Five Categories for Simple Rules with the Purpose [1]
Type Purpose
How-to rules They spell out key features of how a process is executed What
makes our process unique?
Boundary rules They focus managers on which opportunities can be pursued and
which are outside the pale.
Priority rules They help managers rank the accepted opportunities.
Timing rules They synchronize managers with the space of emerging
opportunities and other parts of the company.
Exit rules They help managers decide when to pull out of yesterdays
opportunities.
Samsung Electronics is also dedicated to conducting five rules as strategy to deliver the value
of products by controlling systems and structures of the company.
How-to Rules: Samsung Electronics has a simple rule (strategy) based on its philosophy of
creating innovation, strong values, and high ethical standards [2]. The corporation makes
efforts to provide innovative technologies and efficient processes of rapid reorganization. It
attempts to identify the brightest talent from the world and offer the resources to them in a
best way while focusing on Research and Development (R&D). Samsung Electronics
significantly invests in Research and Development (R&D) with the collaborative global
research networks to produce innovative products and make peoples lives better. The
organization of R&D consists of three parts such as The Samsung Advanced Institute of
Technology to secure and manage technologies, R&D Centers to deliver the most
promising long term with its technologies, and Division Product Development Teams tocommercialize products by hitting the market.
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Boundary Rules: Samsung Electronics does not only focus on the Korean market but expands
its market to Asia or even the world. For the beginning model of Samsung mobile phone, the
company targeted the Korean and Japan markets while producing the phone with innovative
design and functionalities. However, in 2002, the firm turns its attention to the US, Africa, and
Europe with its products to extend the Samsung brand and philosophy [3]. While SamsungElectronics expands its market, it constructs the global research networks in the US, Russia,
UK, India, and China etc. [2]. Based on the markets and the networks, it strengths and offers
the latest technology trends and the greatest benefits for its customers. Figure 1 (a) illustrates
the global smartphone market for Samsung with other companies and (b) shows the five
smartphone firms with shipments and market share.
(a)
(b)
Figure 1 (a) Smartphone Market in the world (source: www.techcrunch.com) (b) Five vendors,
shipment, and market share (source:www.idownloadblog.com)
Priority Rules: Priority rules are clearly shown in Samsung Electronics for Service, R&D, and
Protecting Global Environment. For example, Samsung Electronics made Priority Service
Agreement (PSA) to provide optimal performance of service while deriving maximum benefit
http://www.techcrunch.com/http://www.techcrunch.com/http://www.techcrunch.com/http://www.idownloadblog.com/http://www.idownloadblog.com/http://www.idownloadblog.com/http://www.idownloadblog.com/2012/07/27/samsung-q212/http://techcrunch.com/2013/09/09/apple-falls-behind-samsung-in-global-internet-usage-on-smartphones-pointing-to-a-low-cost-iphone-opportunity-or-challenge/http://www.idownloadblog.com/http://www.techcrunch.com/ -
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[4]. According to PSA, if there
would be a problem with a
Samsung telephone system, its
technician call out free to fix
the issue and it ensures thatthe clients are always
considered to be at the top of
the call out list by offering the
help desk and free remote
programming updates. The
firm also focuses on R&D to
produce innovative devices,
make profits, and satisfy
customers. It encouragesSamsung Engineers to work
abroad to obtain skills and
technologies and invites to return the company to catch up with other competitors [5]. Based
on R&D, Samsung Electronics keeps maintaining the leader in the global smart phone market
and leads to innovation with its products. The corporation is also dedicated to reducing
greenhouse gases with eco-friendly electronic devices. It creates Eco-innovation and green
management so that the greenhouse gases decreases as shown in Figure 2 and improves
energy efficiency by an average of 30% over 2008 [6].
Timing Rules: A number of companies have their timing rules which can be regarded as the
rhythm and the key strategic process (we will descr