(B.O.S.S.)
Placing you so far ahead of the competition…
you will see nothing but clear waters.
Associating Korea with High-Tech Engineering
Proposal prepared for: Samsung Electronics
Prepared by:
Chris Catania
Jennifer Cheeks
Chris Kasavich
Jessica Lyons
Lea Ruka
Amy Zhang
December 3, 2008
TABLE OF CONTENTS
I. Executive Summary 3
II. Background 5
III. Situational Analysis 8
IV. Objective 10
V. Methodology 11
VI. Timeline and Budget 16
VII. Breakeven Analysis 17
VIII. Samsung: The Seoul of Innovation 18
IX. The B.O.S.S. Advantage 22
X. Qualifications 23
I. Executive Summary
“Buy American.” The statement evokes feelings of patriotism: of doing the right thing for your country by buying from a local shopkeeper, or the Ford dealer down the road. But it is often juxtaposed with “Buy Japanese” out of a sincere belief that Japanese products – especially in technology and electronics – are better made, provide superior quality, and represent a better value to the consumer. The “Buy American” philosophy unfortunately has not made it to Japan: for example, a recent survey showed 91% of Japanese respondents had no intention of ever purchasing an iPhone (designed/originating in California, manufactured primarily in China).[1]
As a leader in nearly all of its market segments, Samsung Electronics is already associated with high-value, high-performance home entertainment components, computers, audio devices, and home appliances. As the #1 rated electronics brand worldwide, Samsung is recognizable and associated with excellence.[2] However, Samsung’s closest competitor – Sony (the previous #1 Interbrand-ranked brand, and current #1 with BrandBarometer) – has a differential advantage beyond product quality. Worldwide, customers have come to associate products of Japanese manufacturing with excellent engineering and high-tech pioneering. “Buy Japanese” means you get advanced technology you can be proud to show your friends. But, what does it mean to buy Korean? More importantly, how can Samsung help create the same perception of Korea and enjoy the benefits of an enhanced Korean brand?
Blue Ocean Strategic Solutions (B.O.S.S.) proposes to conduct a research study to determine:
· current perceptions of Korea in selected target markets
· why people buy/don’t buy Samsung, including their awareness of Korean manufacture
· what “excellent engineering” means to the target markets, and how customers learn a product or brand has “excellent engineering”
This web-based survey will be conducted in partnership with vendors selling Samsung
products, such as Best Buy and Amazon.com. Respondents will be purchasers of Samsung products as well as customers purchasing Sony, Mitsubishi, LG, and other competing brands. Upon completion of data collection the results will be scrubbed and analyzed to identify prevailing trends. Our firm will present a summary of findings as well as recommendations on how best to proceed with a marketing plan to:
· enhance the perception of Korea as an originator of high-tech engineering
· link that perception to Samsung to elevate the Samsung brand
· leverage existing strategic partnerships to share benefits and diffuse the costs of enhancing the brand of a country
Our prediction is that we will need 12 weeks to finish the initial recommendation report
and summary of research, and this portion of the project will cost approximately $88,000.
II. Background
Developing a marketing plan to enhance the image of Korea in Samsung’s target market requires a solid background on Korea, Samsung, and the electronics industry.
Korea
As one of the oldest continuing civilizations in the world, Korea is one of the wealthiest countries in Asia and a source of both promise and concern in the international community.[3] The democratic South Korea was established in 1948 and is a major economic power in Asia, having the fourth-largest economy in the East and the 13th in the world.[4] Called the “Miracle on the Han River,” South Korea’s economic explosion was fueled by the export of high-tech goods. As a world leader in information technology systems, South Korea has contributed to the world economy through exports of semiconductors, LCD displays, computers, and mobile phones, led by Samsung and their competitor LG.[5] This tech boom was concurrent with the computerization of the car, leading to the success of Hyundai as a high-quality, low cost automaker. South Korea also aims to be the global leader in broadband access (currently 2nd behind the United States). As a first-world country centered on technology and exports to fuel the GDP, South Korea is affected by the same economic concerns as the United States.
While the economy has boomed in South Korea, such profits have not been realized in Communist North Korea. Its strong isolationist policy restricts trade, and concerns about nuclear proliferation have further hampered building a stake in the worldwide economy. A full 25% of the North Korean GDP is spent on the military, compared to less than two percent of its counterpart south of the Demilitarized Zone. [6]
Samsung
South Korea’s largest company and the best known South Korean brand in the world,[7] Samsung Group is composed of numerous international businesses united under a common brand. The three stars (the word “Samsung” is Korean for “three stars”) of the brand are Samsung Electronics, Samsung Engineering, and the shipbuilding arm Samsung Heavy Industries. The company is also involved in financial services, investments, and chemical production. It is a leader in many Korean domestic industries and owns both a mall and a state-of-the-art medical center. Founded in 1938 and incorporated in 1951, Samsung has risen quickly as a leader in technology.[8]
Samsung Electronics is the world’s largest consumer electronics company, and in 2005 passed Sony as the most popular consumer electronics brand in the world. [9] As a global market leader in more than 60 product categories, Samsung is an innovator in the areas of semiconducting chips, personal computer components, digital displays, HDTVs, laptops, and personal entertainment devices, to name a few. Samsung Electronics also manufactures refrigerators and other home appliances under the same brand.
It is difficult to overstate the value of the Samsung Electronics brand. Interbrand found the Samsung Electronics brand doubled in value between 2001 and 2004, rising to $12.5B in brand equity, and currently values the brand at $16.8B.[10] Already strong in its core competencies, Samsung has stated it will continue to focus on high-value products related to their semiconductor, flat-panel, and telecommunications arms. The company has also stated its marketing intentions are to preserve a holistic approach to strengthen the brand, instead of individual marketing plans.[11]
The Electronics Industry
The electronics industry boom was concurrent with the boost in consumer spending that coincided with the 1990s and early part of this decade. Discretionary income made it possible for consumers to purchase the latest MP3 player or plasma screens. With the dot-com bust and now the mortgage crisis, it is feared the electronics industry will feel the hit as consumer spending declines. Electronics retailer Best Buy saw a 10% drop in sales in September 2008, mirroring an industry-wide drop of 13.8% for the month. Holiday spending is expected to remain flat compared to last year, in an industry predicated on 4-5% annual holiday season increases. [12]
With an increasingly narrow margin of quality in the electronics industry due to improvements in manufacturing and miniaturization, it is believed that as we progress through the digital era, products will be primarily distinguished less by quality and function, and more by brand.[13] Despite the current economic crisis, Samsung is continuing to funnel company resources into R&D, assuring it can effectively maintain a differential advantage and honestly promote a brand focused on innovation and design. Samsung is, therefore, well-positioned to remain market leader, with its strong and valued brand name coupled with a healthy cash flow and low debt.
Samsung’s competitors are Nokia and Apple in the telecommunications market, Hynix in the semiconductor market, and Sony, Panasonic, and LG in the digital media/flat panel market. [14]
III. Situational Analysis
As stated in the background, the advancements of the digital age mean consumers are increasingly making purchasing decisions based on brand, rather than function. This is good news for Samsung in pursuing a strategy to enhance the brand of South Korea: tying the already-strong Samsung brand to an enhanced South Korean brand is a sound strategy for increased success.
Market competitor Sony already enjoys the benefits of this strategy. Consumers purchase Sony products because of both the excellence and quality of the Sony brand, and the belief that Japanese products are inherently superior to similar products made elsewhere. Samsung is no longer in the position of having to overtake Sony as either a leading brand (depending on which ranking is reviewed) or sales leader. As a reference, a current bellwether of consumer electronics sales performance is a company’s share of the 42” flat panel market, owing to their product’s availability from nearly all electronics brands, cheapness ofto manufacture, and relatively narrow quality range (i.e. there is much less difference between a Sanyo 42” and a Sony 42” as compared to an RCA and a Bose radio). According to market research in this area, Samsung has 18.9% of unit share and growth, with Sony having 10.4%.[15]
While there are many product lines to consider across the electronics market, it is safe to say that Samsung’s chief goal is to remain at the top, rather than struggle to gain market share. And, as Samsung is already a market leader without the assistance of a strong South Korean tie-in, building this perception of Korea and tying it to Samsung should prove valuable in securing Samsung’s place atop the electronics market.
There are multiple issues to address before a marketing plan may be implemented, such as:
· Which market? As an international leader, it is advisable to focus efforts where they will be most effective. 48% of Samsung Electronics sales occur in either the US or Europe, with an additional 21% in Korea itself.[16] Selling Korean excellence to Koreans is not an effective use of marketing dollars, at least in the short term. Our firm recommends Samsung focus on the US and European markets for this effort.
· What does the market already believe? When the target market sees “Made in Korea,” will they think of the tech-boom South Korea, focused on broadband access and information for all…or communist North Korea and nuclear test launches? Do they know Samsung is Korean? And what do “excellent engineering” and “high-tech pioneering” mean to the members of the target market? Our proposed research plan will address these issues.
· What is the best strategy for creating this association? This is a proposal to enhance the brand of Korea in the eyes of target markets in the US and Europe. It will require significant resources and a commitment at all levels of Samsung to the process. But, how does a company enhance the brand of a country? Interestingly, it has been done before: Sony, with a concentrated initiative beginning in 1963. Our company has examined the best practices that Sony and its founder Akio Morita implemented that took the perception of Japan from post-WWII shambles to the international home of technology, and we have created a flexible, ambitious plan that utilizes some of these aspects, improves upon others, and leverages the positives that already differentiate Samsung (and Korea) from Sony.
· What will this cost? Section VI shows a detailed breakdown of estimated research and related costs that will enable our firm to deliver a report on how best to move forward, along with tailored suggestions and ideas on specific next steps. Post-research, our firm will be happy to coordinate with Samsung on implementation of the recommended action items.
IV. Objective
The objectives of this project are twofold:
1. Enhance the perception of Korea as a high-tech country.
2. Link that perception to Samsung.
Accomplishing one goal without the other is meaningless, and accomplishing either will require an initial period of information gathering. A thorough research process is advisable to determine baselines on current perception of Korea, buyer motivations, and related information. This information will be used to inform a marketing plan and will also provide metrics that can be evaluated through the implementation of a marketing plan to determine the ongoing success of the initiatives.
At B.O.S.S., our initial objective is to conduct this research and information gathering initiative and present our findings to Samsung. Upon the conclusion of the initiative, we look forward to customizing a marketing plan using the information gathered to enhance the perception of Korea as a high-tech country.
V. Methodology
Big goals require big solutions…and at Blue Ocean Strategic Solutions we believe such solutions require detailed and exhaustive research as the first step on the road to success. Our initiative will consist of eight steps:
1. Gather general information –target market demography, industry information, competitor research.
2. Segmentation – pinpointing who will receive the survey.
3. Survey creation and programming – It is crucial to create a survey that asks the right questions succinctly to maximize completion. Correct coding is also essential.
4. Partner selection - Determining what to ask will be as important as choosing our partners in presenting the survey to the market.
5. Survey implementation – in concert with our chosen partners, we will roll out the survey to the target market
6. Data review – an analysis of trends in the target market related to the issues at hand.
7. Presentation of recommendations – while our firm may have a broad concept of how to proceed, we will utilize the data to refine our recommendations on moving forward.
8. Ongoing support – our firm will remain on-hand to work closely with Samsung to integrate the research and implement a multiphase plan to elevate the brand of Korea.
1. Gather General Information
Owing to careful review of publicly-available Samsung resources our firm has determined which geographic target markets are most advisable to pursue. As Samsung Electronics offers products ranging from semiconductors to refrigerators, however, our firm looks forward to receiving guidance from our client regarding more specific target market demography. There is much anecdotal and pre-existing survey information concerning the average age and related demography for consumer electronics purchases…but we at B.O.S.S. believe in asking the client what they want (or in this case, who they want), rather than providing what is not wanted. Furthermore, our firm will review Samsung’s chief competitors and the industry at large, to build on our base of knowledge and add to the quality of the survey. We will also review existing literature and surveys regarding the current perception of Korea in the target markets, such as Gallup poll information.