Chapter 3. Samsung Electronics
3.1 Company History
3.2.3 Development of Samsung’s Marketing Strategy
display driver chips and camera sensors, foundry team and support team.10
Samsung Electronics has lead the global memory semiconductor industry for 24
consecutive years; According to IHS research report, the company accounted 45.3% of market share in DRAM market and 39.1% market share in NAND Flash market in 2016.
3.2.2 Financial Snapshot
In recent years, the world economy showed constant uncertainties, such as changes in U.S.
monetary policy, increased volatility in emerging market stock markets, fluctuating exchange rates, and a radical drop in international oil prices, and so on. At the same time, Korea’s economy also had continuous difficulties such as increased household debts and the business restructuring of the shipbuilding and steel industries.
Despite such uncertain economic conditions, Samsung Electronics delivered sales of KRW 201.9 trillion and earned KRW 29.2 trillion in operating profits on a consolidated basis in 2016.
(refer to figure 3.3) From the financial perspective, Samsung maintained a financial structure by recording a debt ratio of 35.87 percent, a return on asset ratio of 9.0 percent, and a return on equity ratio of 12.2 percent on a consolidated basis in 2016. (refer to figure 3.4)
3.2.3 Development of Samsung’s Marketing Strategy 1990s
Samsung electronics went into the cellular phone business in 1988 – Samsung launched its first mobile phone in 1988 in South Korea.11 Even though the company took full advantage of its strong manufacturing capacities, the technology was still undeveloped at that time.
The branding of Samsung was extremely fragmented. During the early 1990s, Samsung had developed numerous sub-brands to the U.S market such as Planp, Tantus and Yepp.12
10 Cho Jin-young , “System Semiconductor Business: Will Samsung Electronics Create Fabless, Foundry Business Divisions?”, BusinessKorea, Nov 23th, 2016, accessed May 5th, 2017
http://www.businesskorea.co.kr/english/news/ict/16557-system-semiconductor-business-will-samsung-electronic s-create-fabless-foundry
11 Michell, Tony. Samsung Electronics: And the struggle For Leadership of the Electronics Industry. Hoboken: John Wiley & Sons, 2010.
12 Michell, Tony op. cit., pp93-94.
‧
When Samsung became the leading manufacturer of mobile phones in the Korean domestic market in 199613, the chairman of the company, Gun Hee Lee, started to pay more attention to the expansion of its business into the overseas market. It was during this year that Samsung moved away from sub-brands to a single-brand strategy.
According to the press interview by Samsung’s former chief marketing officer, Greg Lee, the change was made by the chairman of Samsung, because he wanted to build a brand, not just a product.14
This was the start of the Samsung making a shift to a single master brand strategy.
The company understood that the master-brand strategy was the only way to reach present day consumers and to be competitive in the global market. At that time, BMW, which was and still is a high-end, prestigious car brand, was regarded as an excellent example of a solid brand identity for Samsung Electronics to imitate.15
When Eric B.Kim joined Samsung Electronics in 1999, he was responsible for executing the master-brand strategy. In 2001, the chairman of Samsung agreed to run a test campaign in the U. S market, and based on those results, the company would decide whether to go global or not.
The marketing campaign was very successful, –resulting in doubled sales, so Samsung Electronics launched its new global advertising campaign to position it as a leader in
digital-convergence applications. The name of campaign was “DigitAll-Everyone’s Invited”.16 The marketing campaign focused on appealing to the emotions of consumers and changing to a premium brand strategy.
During Eric Kim’s leadership, the company also promoted the concept of “The Journey to be a Global Brand” which mean its transformation into a global leader in the consumer electronics
13 Lee Dongyoup, “samsung Electronics – the Global Inc.”, YSM, 2006.
14 Michell, Tony, op. cit., p94.
15 Bloomberg BusinessWeek,“ Online Extra: Samsung's Goal: Be Like BMW”, August 1st, 2005, accessed May 3th, 2017. https://www.bloomberg.com/news/articles/2005-07-31/online-extra-samsungs-goal-be-like-bmw
16 Harvard Business Review. Samsung Electronics Company: Global marketing Operations, Brighton, MA: Harvard Business Review. Fab, 2005.
‧
business. To actualize this goal, Samsung Electronics also invested heavily in the innovative design and technology.
The success of the single brand strategy was also a result of massive investment.
In 2002, Samsung’s overall marketing expenses exceeded 900 million U.S dollars, of which the company spent about 20 percent of the budget on the advertisement of Samsung brand. This company spending represented an increase of more than 21 percent over the previous year.
By the end of 2004, market valuation of Samsung had risen to USD $62 billion, and after-tax profits reached USD $10 billion; which was the highest among electronics and hardware companies in South Korea and second globally.
Although Samsung Electronics improved its brand image as an innovative technology, high-end design, and new sensation, people still thought of the company brand as “cold”.
2005-2008
In 2005, Samsung Electronics was on their way to success, indicated by the company stealing market share from Sony.
However, promotion of the company’s brand in customer’s mind had not run enough and as a result didn’t close much of the gap between Samsung Electronics’ target brand image and its status at that time.
The successor of Eric B.Kim, Gregory Lee, tried to make some changes during his tenure which included sport marketing and Entertainment marketing strategies.
In 2006, Samsung Electronics began to unveil its new storyboard “The Journey to be a Global Brand”; in which the company highlighted its transformation from market follower to global leader. Samsung Electronics used the Olympics as a great lever to establish itself as a premium global brand. Gregory Lee and top executive believed that the Olympics were a great way to be recognized as a global brand. Therefore, Samsung became sponsor of the 1988 Seoul Olympic Games, the company later on became part of TOP–The Olympic Partners– for every Olympic Games. Samsung’s Olympic sponsorship and other local sports sponsorships, for sure,
‧
could increase brand awareness by highlighting the company’s name at international and local sporting competitions. However, within sport marketing it is very challenging to convey the concept of Samsung’s design, technology and desire or innovation.
The entertainment marketing strategy was a concept that promoted Samsung products in collaboration with key Hollywood filmmakers. Successful examples of movie marketing were seen in “The Matrix Reloaded” in 2003 and “The Fantastic Four” in 2005.17 Award-winning marketing contributed to an increase in brand awareness and raises market position; however it didn’t correspond with the goal of building brand value of Samsung Electronics.
To build a company image as one of the world’s leading producers of lifestyle enhancing products; Samsung Electronics launched the first phase of a new worldwide advertising campaign, called “Imagine”. It showed examples of the many ways that innovative products from Samsung Electronics could brighten lives wherever and whenever people lived, worked, or played. Each advertisement asked consumers to imagine how their world could be more fun, exciting, and productive with the creative design and technology of Samsung Electronics.18 Gregory Lee, chief marketing officer for Samsung Electronics, commented,
"With this new campaign, our aim is to expand on this recognition to build a warmer, more emotional connection with our customers. The only limit is their imagination."
2009-Present
2009 was a monumental year for Samsung Electronics’ marketing strategy. The company’s new vision “Vision 2020: Inspire the World, Create the Future” — emphasized new technology, innovative products and creative solutions—served as guidance for marketing strategy. At the same time, the first Samsung Galaxy (GT-I7500), flagship smartphone of Samsung electronics, was launched on June, 2009.
17 Lee Dongyoup, Op. cit., pp.63-64.
18 Businesswire, “Samsung Electronics Introduces First Phase of New Global Brand Marketing Ad Campaign”, Businesswire, June 9th , 2005, accessed May 15th, 2017
http://www.businesswire.com/news/home/20050609005432/en/Samsung-Electronics-Introduces-Phase-Global- Brand-Marketing
‧
The company identified a clear direction and goal with tech and innovative products, the role of Younghee Lee was to shine. Younghee Lee, who used to work for cosmetic brands L’Oreal and Lancome before joining Samsung Electronics in 2007, has led the next wave of change until now. With her previous experience as an executive at a cosmetics company, she tried to reshape Samsung Electronics brand image from one of engineering based technology brand into fine and fashionable brand. She wanted consumers to start feeling something about Samsung Electronics and its products instead of just thinking about the company.19
Younghee Lee also introduced consumer-oriented strategies, understanding and conveying the story to consumers in meaningful ways; the company started to understand the needs of customers and all technologies of the company were translated into consumer language.
For instance, “A Fighting Chance” was a documentary of Samsung Electronics directed by Morgan Neville, an Academy Award-winning documentary director. The film was about having big dreams and the challenges, and converting those dreams into reality. The campaign featured the company’s philosophy of ‘inspiring the world’, by inspiring people to ‘never give up
regardless of what their circumstances are, because that is the only way we progress as humans’.
The "unboxing" advertisement took viewers on a journey through Samsung Electronics' history of impacting technology and culture. The story included the first phone ever launched, the world's first commercially available watch phone, and the world's first 3G call made from Everest and so on. The featured devices were showcased for their respective contributions to everyday life and culture.
According to recent research, the top words associated with Samsung Electronics were
"innovation, technology and dynamic". And the brand attitude survey showed, key attributes of Samsung Electronics were "innovative" and "fast-paced".
19 Ina Fried, “Samsung’s Marketing Chief Aims to Stir Passion for Korea’s Electronics Giant”, AllThingsD, Jan 30th , 2012, accessed May 15th,2017
http://allthingsd.com/20120130/samsungs-marketing-chief-aims-to-stir-passion-for-koreas-electronics-giant/