ByOct. 2011Samsung becameNo. 1 global smartphone manufacturer

case study: Samsung Mobile

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Learn more about how Samsung take advantage of the market opportunity beating Apple and Blackberry, and becoming the world’s smartphone best seller.

Words: Juan Mejia / Jen Hsu

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Ten years ago, the mobile phone industry was leaded by Nokia and Motorola. They were the two leading brands, and had been for a long time. But things were not to remain like this forever. The story of Samsung in the mobile phones industry was almost the one of a low profile company with very discrete products and a low cost product portfolio. But in less than a decade, they managed to become the market leader in the smartphone industry. So, how did they do it?

According to their website, ´during the past decade, the Samsung Mobile Group engaged the Global Strategy group to develop a short to mid-term strategic plan for the smartphone category. Four Global Strategists worked with twelve Korean colleagues in a task force environment to develop recommendations that covered strategic areas such as the operating system, the user interface, and the ecosystem around the smartphone. The team flew to major markets to meet with external partners and conducted internal interviews to identify key success factors in the segment and to help form their recommendations. The results of the project were presented to the head of Samsung Mobile and 65 of his Senior Managers. As a result of this

project, Samsung became a key player in the smartphone market, with the launches of several products in this category.´ In 2008, due to a series of innovative product launches, Samsung became the world leader in LCD sales and introduced the successful LED TV, launched its applications store, and launched his first strategic smartphone called Omnia. In 2009, Samsung entered the top 10 list in the world’s top 100 global brands, sold more than 20 million full touch phones in shortest time ever, sold more than 5 million of its STAR full touch phones in 4 months, released the ´Corby´ full touch phone targeted at younger users, released the ´JET´, its new concept full touch screen phone and announced the launch Samsung’s own platform Bada. Also, they opened the application store seller site, released the world’s first solar -powered mobile phone in India, and launched its first Android Platform phone: the Samsung Galaxy. In 2010, launched WAVE (the first smartphone based on Bada platform) and the subsequent version of the Galaxy family: the Samsung Galaxy S. Later in the year, and capitalizing on the opportunity before the launch of Apple’s new phone, Samsung released the Samsung Galaxy S II, with enhancements and improvements over the model just released 6 months before.

According to different authors, the Samsung Galaxy S was the ultimate product to compete in the smartphone market with the Apple IPhone. Capitalizing on the flaws of its major competitor, this model had a wider touch screen and with the best quality resolution, a faster processor, and it was the thinnest smartphone available in the market, and it allowed the user to incorporate an external micro SD memory. This phone also supported a lot of multimedia formats that its competitors did not, including different kinds of videos and flash. The phone was also able to upgrade its software ´over the air´ through the 3G network, and allowed users to insert media through the micro SD card. Samsung not only introduced the phone based on its characteristics, but also took an advantage capitalizing on the flaw of Apple strategy: exclusivity to some network providers. With an open distribution strategy to all network providers around the world at the same time (110 providers in 100 countries in the world), and a heavy investment in the major emerging markets, Samsung Galaxy became the most sold phone in India. The advertising and marketing campaign around the Samsung Galaxy has also focused on taking advantage of some of the competitor’s flaws. In 2010, after Apple launched IPhone 4,

Samsung capitalized in some of its flaws with advertisements about having better signal, better speed of reaction, and the possibility of integrating external appliances through USB, the availability of a large number of applications from the Android store, a larger screen size and the possibility to use applications such as Flash player. The other great difference in terms of marketing that really helped Samsung achieve leadership was a lower pricing strategy, the distribution through all network operators (as opposed to Apple who had an exclusive distributor in each market) and the availability of different Galaxy models, that allowed the user to choose between the features they wanted.

The product received very good reviews from the technology editors around the world, with better performance than its competitors: Iphone, Experia and HTC. By January 2011, according to Bloomberg, ´Samsung Electronics Co., the world’s second-largest mobile phone maker, met a target to sell 10 million units of the Galaxy S model last year as it competes with Apple Inc. in the market

for smartphones […], and is the company’s most successful smartphone, devices that can play music, videos and surf the web. Samsung is using Google Inc.’s Android software to compete with Apple’s iPhone and narrow the gap with leader Nokia OYJ. […] Apple sold 14.1 million iPhones in the quarter ended in September[2009] . Its latest model, the iPhone 4, was also introduced in June.´ According to IDC, ´Samsung's ascendancy to the leadership position is the direct result of its broad and deep product portfolio. Ever since the first Galaxy device launched last year, the company has aggressively expanded and refreshed its selection to include the latest innovations and most popular features. At the same time, its line-up of bada-branded smartphones has earned a welcome reception within key markets.´ In this way, Samsung started to close the gap with the main competitor in the smartphone category. ´On the same day that Apple announced that it sold more 4 million iPhone 4S smartphones, Samsung said global sales of its Galaxy S and Galaxy S II devices have hit more than 30 million´ and according to Gartner, ´by October 2011, Samsung became the No. 1 smartphone manufacturer worldwide as sales to end users tripled year over year to reach 24 million; sell in was high as the channel built inventory. […] Gartner attributes this to the strong performance of Samsung's Galaxy smartphones, which now cover a broad range of prices, and a weaker competitive market. Analysts expect more competition in the fourth quarter of 2011, not least because sales of the iPhone 4S, 4 and 3GS will capture share from Android manufacturers.´ According to The Guardian, ´The company [Samsung] said its telecommunications business hit a record in quarterly sales of 14.9 trillion won (£8.37bn), a 37% increase from last year, with growth mainly due to strong Galaxy smartphone

sales. Operating profit hit 2.52tn won, a new record for the division.´ Profits of Samsung are the second best to Apple’s (see chart), but with a much larger market penetration. According to an industry analyst ´This success was undoubtedly due to high-margin handsets like the Samsung Galaxy S II selling in droves. Unique propositions like the Super AMOLED Plus display and the Exynos chip, both made in-house, keep production costs in check. The final result is over $2 billion in profits from the mobile business, which is more than a third improvement compared to the previous quarter, and second only to Apple.´

The future of the global war for the smartphone market leadership is still to be written, as Nokia sets to come back with its new line of products with the Windows 7 Platform, and both brands inject millions of dollars in marketing over the next few years to regain their market share in this segment. Blackberry and IPhone will also continue to innovate and further develop, and Samsung must watch out in its strategy to be able to remain as the global king.

The brief The execution The outcomeAnalysis

The strategy

Samsung capitalized in iPhone4’s antenna flaw with advertisement about having better signal