SAMSUNG MOBILE?

I N T H E P O S T N O T E 7 L A N D S C A P E ,

W H A T L I E S A H E A D F O R

B U S I N E S S S T R A T E G Y ( W 5 0 1 )

A BUSINESS STRATEGY (W501) PRESENTATION

PREPARED FOR

SHEIKH MORSHED JAHAN

ASSSOCIATE PROFESSORINSTITUTE OF BUSINESS ADMINISTRATION,

UNIVERSITY OF DHAKA

PREPARED BY

MARUF HASAN, ZR-13MD. DANIAL RAFI, ZR-27

SHARMILI ROWSHON KABIR, RH-30MUHTASIM SAROWAT RAYED, ZR-61

BBA 21st, SECTION AA2 SUBGROUP 1

OUTLINE

01 02 03 04 05

PROBLEM IDENTIFICATION

CASE ANALYSIS

IDENTIFICATION AND EVALUATION OF ALTERNATIVES

IMPLEMENTATION PLAN

RISKS

PROBLEM IDENTIFICATION

CORE ISSUE

How can Samsung Mobile turnaround after a massive drop in profits and damage to brand equity after the Note 7 disaster?

UNDERLYING ISSUES

LOSS IN BRAND EQUITY DUE TO NOTE 7 DISASTER

Ineffective PR responseMassive coverage online DECLINE IN PROFITS AND

OPERATING MARGINSProfits down by 96% after Note 7 recallOperating margins lower than Apple and shrinking over time

THREATS TO MARKET DOMINANCE

Google in the US market; Chinese smartphone

manufacturers in global markets

CASE ANALYSIS

SMARTPHONE INDUSTRY OVERVIEW

Forecasted Global Market Size, 2016

$425.9 BILLIONSLOWDOWN IN INDUSTRY

GROWTH2015 was last year of double

digit growthMature markets highly

saturatedGrowth in emerging markets

also slowing down

MARKET CONSOLIDATIONNumber of key players have

declined significantlyApple and Samsung market

share far outstrip other players

SHRINKING MARGINSOnly Apple (38%) and Samsung (17%) have positive profit marginsPremium pricing is key to maintaining margins

GLOBAL VS DEVELOPED MARKETSSamsung is the global market leader (22.7%)Apple is leader in developed markets like US (40%)

STRATEGIC GROUP MAPPING

QUALITY AND SPECIFICATIONS

PR

ICE

Samsung Galaxy S

Samsung Galaxy J Series

iPhoneLG

Google Pixel

Samsung Galaxy Note

Samsung Galaxy A

Series

Xiaomi

Google Nexus

Oppo

One Plus

Local (Walton,

Symphony)

Chinese (Asus, Meizu)

STIFF COMPETITION IN ALL MARKET

SEGMENTSHigh end segment very overcrowded

SAMSUNG HAS GOOD PRODUCT LINE WIDTHPresent in all three major segments

APPLE VS SAMSUNG

PATENT WAROngoing legal battles since 2011Recent Court of Appeals verdict

favored Samsung over Apple

SAMSUNG PRODUCTS HISTORICALLY SEEN AS INFERIOR

Poor build quality, poor software integration (Android) and support

APPLE ATTACK ON SAMSUNG’S PHABLET NICHEThe iPhone 6 Plus, Apple’s first big phone, lead to 73.9% drop in Samsung profits in Q3 2014

APPLE’S TRANSITIONFROM INNOVATOR TO LEADER

HEALTHY GROWTH IN REVENUES AND PROFITRevenue has doubled to

$200 billion in the five years since Tim Cook became CEO

STABILITY OVER CREATIVITY

Cook pushed out creativity-focused executives; only one big design

change in iPhone in 5 years

VULNERABILITY TO DISRUPTIVE INNOVATION

Microsoft, Google and Amazon investing heavily in

mobile AI

THE NOTE 7 DISASTERANATOMY OF

New mobile chief, DJ Koh, pushed hard for more

innovative features

Large increase in marketing budget (S6 was

biggest smartphone launch ever)

STRONG PUSH TO BUILD PREMIUM

BRAND AFTER IPHONE 6

Note 7 deadline was pushed up to compete

with upcoming iPhone 7

Several features were added which put pressure

on suppliers to meet deadlines

RUSH TO TAKE ADVANTAGE OF DULL IPHONE

First reported explosion on Aug 24; recall announced on

Sept 1

Multiple recalls announced

Customer representative tried to suppress customer

complaint

INEFFECTIVE RESPONSE TO

PHONE EXPLOSIONS

Samsung engineers still unable to determine cause

of explosions

Explosions of S7 phones and washing machines also

being reported

INABILITY TO PINPOINT CAUSE

OF DEFECT

POST NOTE 7 LANDSCAPE

SEVERE DAMAGE TO SAMSUNG’S PROFITS

30% fall in Q3 2016 profits16.8% fall in overall profits (96% fall in mobile profits)

GOOGLE PIXEL: POTENTIAL GAMECHANGER?High end phone with solid specifications and strong software integration (similar to iPhone)

SLOWDOWN IN APPLE SALES

5% fall in iPhone sales even after iPhone 7 launch

First decline in iPhone profits in 15 years

OTHER COMPETITORS STEPPING UPChinese manufacturers like Xiaomi are focusing on innovation (Mi Mix concept phone)

IDENTIFICATION AND EVALUATION

OFALTERNATIVES

RESTORING BRAND EQUITYALTERNATIVES FOR

SHUT DOWN NOTE LINE AND FOCUS ON GALAXY S

AS SOLE FLAGSHIP

SHUT DOWN NOTE LINE AND CREATE NEW PREMIUM BRAND

ATTEMPT TO SALVAGE NOTE LINE WITH NEW

MODEL

RESTORING BRAND EQUITYEVALUATION OF ALTERNATIVES FOR

SHUT DOWN NOTE LINE AND FOCUS ON GALAXY S AS SOLE FLAGSHIP

Will leave premium end vulnerable to competitionMargins will decrease

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

6/10

7/10

6/10

6.5

SHUT DOWN NOTE LINE AND CREATE NEW PREMIUM BRAND

Strong marketing push required, which will increase costs. Will take time for revenues to pick up

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

7/10

6.5/10

7/10

6.75

ATTEMPT TO SALVAGE NOTE LINE WITH NEW MODEL

Before disaster, Note line had high brand equityDifficult to pull off in next year

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

8/10

7.5/10

7/10

7.5

OUR RECOMMENDATIONRetain and relaunch Note line after 2 years. For now focus on Galaxy S

RESTORING PROFITS AND MAINTAINING HIGH MARGINSALTERNATIVES FOR

STREAMLINE AND IMPROVE HARDWARE

SUPPLY CHAIN

ADD/REINFORCE NEED FOR PERIPHERALS (ADAPTERS,

DONGLES, BATTERY PACKS)

INTEGRATE SUPPLY CHAIN WITH RIVALS LIKE GOOGLE,

HTC, MOTOROLA

EVALUATION OF ALTERNATIVES FOR

STREAMLINE AND IMPROVE HARDWARE SUPPLY CHAIN

Solving hardware defects will increase brand equity in long run

High margins key to maintaining dominance

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

8/10

8/10

8/10

8

ADD/REINFORCE NEED FOR PERIPHERALS Boosting peripheral sales will increase margin but it

will also decrease brand equity as users don’t like too much additional accessories

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

6/10

7/10

6,5/10

6.5

INTEGRATE HARDWARE SUPPLY CHAIN WITH RIVALS LIKE GOOGLE, HTC, LG, MOTOROLA

Motorola and LG are reliable for their hardware and have focused on innovation in recent years

Will be difficult to pull off a win-win result

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

7.5/10

7.5/10

7/10

7.33

OUR RECOMMENDATIONStreamline and improve hardware supply chain

RESTORING PROFITS AND MAINTAINING HIGH MARGINS

MAINTAINING MARKET DOMINANCEALTERNATIVES FOR

INVEST IN DISRUPTIVE TECHNOLOGIES

DEVELOP INDEPENDENT OS

GREATER FOCUS ON LOW AND MID END SEGMENTS AND EMERGING MARKETS

EVALUATION OF ALTERNATIVES FOR

INVEST IN DISRUPTIVE TECHNOLOGIES

Technologies like conversational AI will be instrumental in near future

Already has good stakes in VR (Gear VR)

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

9/10

7/10

8/10

8

DEVELOP INDEPENDENT OSA strong independent OS will be able to compete

with Google and Apple on terms of integrationSo far, any OS other than Android and iOS has

failed

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

5/10

7/10

7/10

6.33

GREATER FOCUS ON LOW AND MID END SEGMENTS AND EMERGING MARKETS

Will be able to check emerging competitors like Xiaomi

Lower margins in low and mid end segments

BRAND EQUITY

PROFITS AND MARGINS

DEFENSE AGAINST COMPETITION

7.5/10

6/10

8/10

7.17

OUR RECOMMENDATIONInvest in disruptive technologies and focus on emerging markets, especially mid end

RESTORING PROFITS AND MAINTAINING HIGH MARGINS

IMPLEMENTATION PLAN

IMPLEMENTATION PLAN

FOCUS ON REGAINING CONSUMER TRUSTIssue public apology (newspaper, email)

Sow seeds for building Galaxy community (similar to Apple

community)

RESOLVE LEADERSHIP CRISISEither give Lee Jay-yong full

control or appoint steward to assume control until the death

of the former chairman

STREAMLINE AND IMPROVE HARDWARE SUPPLY CHAINIncrease quality control for

third party suppliersMust not rush deadlines or face losing consumer trust

againFocus on decreasing build costs to increase margin

FOCUS ON S8 AND S8 EDGE FOR 2017

Build on goodwill of S7 phonesFor premium end also release a

better version called S8 Edge+ mid 2017

2 YEAR DEVELOPMENT CYCLE FOR NOTE 8

More focus on innovationStrong quality control

Greater integration with disruptive tech like AI, VR

and AR

GREATER IOT FOCUS ON GALAXY S AND NOTE BRANDS

Emphasis on AR and VR and other IOT tech to showcase Samsung smartphones as

lifestyle accessories

01 02 03 04 05 06

IMPLEMENTATION PLAN

START BUILDUP FOR NOTE 8 LAUNCH NEAR END OF 2017

Teaser trailerIn following months steadily

‘leak’ details of Note 8

STRONG FOCUS ON PR OVER ATLEmulate Apple which focuses on

strong Word of MouthCollaborate closely with tech blogs and online media to generate positive buzz

HOLD LAUNCH EVENT FOR NOTE 8

KEEP 2 YEAR DEVELOPMENT CYCLES

FOR FUTURE NOTESA new Note launch should be sought after and be like

a special event

SHIFT TO MID RANGE IN EMERGING MARKETS

As number of first-time buyers decreases more and more

purchases will be to trade up to better models

07 08 09 10 11

RISKS

RISKS

DISSATISFACTION FROM LOYAL CONSUMERS

FOCUS DILUTION

DRASTIC CUT IN PROFIT MARGIN

HIGHER CUSTOMER ATTRITION

THANK YOU!