Summary of the Facts This case study analysis is on Samsung Electronics Company (SEC) and how it has climbed up the ranks in the past decade via calculated marketing strategies, extensive market research and analysis, and a risky bet on how the market will evolve. Samsung’s principle outlook took time and education from within and thereafter the general market. Samsung Electronics Company (SEC) began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, “Samsung acquired a semiconductor business” which would be a milestone that initiated the future for SEC.
Entering the semiconductor industry would also be the beginning of the turnaround phase for SEC. In 1980, SEC showed the market its ability to mass produce. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch ; Harrington, 2008). SEC was mainly focused in manufacturing; therefore, it’s no surprise that the executives themselves were also focused on their manufacturing plants.
Profits that SEC received were soon reinvested into Research & Development, manufacturing, and supply chain activities. Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SEC’s sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4. 6 billion, from $15 billion, over a 5 year period.
Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch ; Harrington, 2008). In 2002, SEC posted net profits of $5. 9 billion, on $44. 6 billion in sales, and as a result in 2003 became “the most widely held stock among all emerging market companies”. Unlike other companies who chose to outsource their manufacturing process, SEC remained committed to its core competence, manufacturing (Quelch ; Harrington, 2008). During 1998-2003, SEC invested $19 billion into chip factories and $17 billion into manufacturing facilities for TFT-LCDs, which would be a major component for flat screen TVs and computer screens.
Even though SEC was focused in the manufacturing process, it didn’t make SEC a rigid company. To cope with supply-chain demands, the company remained flexible by building 12 manufacturing plants in China during 2003 and setting up R&D facilities in India (Quelch & Harrington, 2008). With 17,000 scientists, engineers and designers, SEC was able to create an endless amount of digital products. Due to its fast decision-making process and focus on a digital future, SEC was able to move a new product from the drawing board to its commercialization phase in only five months.
This ability was almost 3 times faster than its competition (Quelch & Harrington, 2008).
II. Statement of the Problem A major external challenge SEC had to overcome was brand recognition since it was selling its products mainly to OEMs; therefore, the company had very little interest in working on the Samsung brand. Another internal challenge was with SECs managers’ concept of marketing. The managers perceived marketing as nothing more than selling and as a result, their concept of selling was that it was only needed when the product was weak. III. Causes of the Problem