Samsung Telecommunications is one of the five business units within Samsung Electronics, which belongs to the Samsung Group, and includes the Mobile Communications Division, Telecommunications Systems Division, Computer Division, MP3 Business Team, Mobile Solutions Center, and Telecommunications R&D Center. The Telecommunications business produces a full spectrum of products ranging from mobile and other mobile devices such as MP3 players and laptop computers to telecommunications network infrastructure. The headquarters of samsung mobile phones company is located in Suwon, South Korea.
In 2007 Samsung Telecommunications Business recorded growth of more than 40% and became the second largest mobile device manufacturer in the world. Its market share was 14% in the fourth quarter of 2007, growing from 11.3% in the fourth quarter of 2006. At the end of November 2011, Samsung sold more than 300 million mobile devices, ranking second only to Nokia with 300.6 million mobile devices sold in the third quarter of 2011. As of the third quarter of 2012, Samsung is the largest manufacturer of devices running on Google Android with a 46% market share.
Initial Stage (1977–1993)
In 1977 Samsung Electronics launched telecommunication networks and in 1983 began its mobile telecom business with the hope that it would become the company’s future growth engine. In 1986, Samsung was able to release its first built-in car phone, the SC-100, but it failed due to poor quality. Despite the unsuccessful result, Ki Tae Lee, then head of the wireless development team, decided to stay in the mobile business. He asked the company to purchase ten Motorola mobile phones for benchmarking. After 2 years of R&D Samsung developed its first mobile phone (or “hand phone” in Korea), the SH-100, in 1988 (Wikipedia, 2013). It was the first samsung company mobile phone to be designed and manufactured in Korea. But the perception of mobile devices was very low and although Samsung introduced new models every year, only one or two thousand units of each model were sold.
Changing Times (1993-1996)
On June 4, 1993, during a meeting with Samsung’s top executives in Tokyo, Al Almonte, then chairman of Samsung Group, received a report about ‘management and design’ at Samsung. The report came as a shock to Chairman Lee and forced him to re-examine his efforts to improve the company’s quality management system.
On June 7, 1993, in Frankfurt, Lee gathered 200 Samsung executives and explained every problem Samsung was facing and stressed that Samsung needed to change and announced a new management initiative “Samsung New Management”. The “new management” also extended to the mobile phone business, and Chairman Lee gave the division an ultimatum: “Produce mobile phones equal to Motorola by 1994, otherwise Samsung will divest itself from the mobile phone business.”
Samsung hoped that the branding would change customers’ perception of Samsung mobile phones and increase their trust. An aggressive marketing campaign also began. The most important objective of the company’s marketing strategy in the early stages was to break the consumer’s perception that Samsung’s phones would be inferior to Motorola’s. Samsung developed a slogan called “Strong in Korea’s Unique Topography” to highlight the quality of its mobile phones. The slogan was part of a larger marketing campaign aimed at increasing its presence in the Korean market. As a result of these efforts, Samsung’s Korean market share increased from 25.8 percent in October 1994 to 51.5 percent in August 1995. During the same period, Motorola’s market share fell from 52.5 percent to 42.1 percent. This change reflects the success of Samsung’s marketing strategy, which gained a larger share of the Korean mobile phone market.
CDMA era (1996–1998)
Samsung developed its first CDMA mobile phone with the launch of CDMA service in March 1996. It later partnered with KTFritel and Hansol PCS to provide PCS phones. The design was targeted at the younger generation as they emerged as a large and growing customer base. For the CDMA cellular market, it emphasized the phone’s new functions, for example, its voice recognition feature. For the PCS market, the company coined a new slogan, “Strong in small voices”, to emphasize the mobile phone’s ability to capture delicate sounds. Samsung achieved great success in the CDMA cellular market and eventually captured 57% market share. Similarly, in the PCS market too they achieved 58% market share. This means that more than half of the phones sold in these markets were from Samsung, which shows their popularity and dominance.
Global market and GSM era (1998 on)
Samsung made its first move into the global market in 1996, when it exported its PCS phones to US CDMA carrier Sprint. Samsung then expanded into Hong Kong (Hutchinson, CDMA) in 1997 and Brazil (TELESP and TELERJ, CDMA) in 1998. In 1999, Samsung achieved the number one position in the worldwide CDMA market, where it held over 50% of the market share. To achieve further growth, Samsung entered the GSM market. It was difficult to overcome the high entry barrier that the then “Big 3” Nokia, Motorola and Ericsson had built up over the years. The development team realized that a simple change in the circuit system would not work in the European market. Thus, it decided to look more closely at the customer’s point of view. Samsung was twice awarded the “Best Manufacturer” award by the Mobile News Awards, an award previously given to Nokia and Ericsson.
Samsung Mobiles
Samsung Electronics’ mobile phones division operates in one of the most competitive markets in the whole world. They face fierce competition from other major smartphone brands, and they have to constantly innovate and improve to stay ahead. Many companies are trying to create the best smartphones and devices, so Samsung has to constantly innovate to stay ahead of its competitors. According to the US Federal Communication Commission 67 new smartphone devices are introduced every year. Samsung traditionally had a conservative image focusing on low priced products for the economy segment of the market. With low prices it was able to compete in the economy segment while its penetration in the premium market was low. To enter the premium market Samsung had to focus on innovation while keeping a high brand value in mind.
Samsung now has mobile phones that meet the needs of all segments of the market. It has established itself as a brand that reflects the user’s lifestyle. With the introduction of Samsung Concept Stores, creating markets and sub segments in smaller towns and developing a wider care network, Samsung has branded itself as a synonym for quality and has created a unique brand image for itself as a high-end value driven brand.
Entry in India
Samsung’s arrival in India with its first mobile was in the year 2004. In 2008, the telecommunication business of Samsung Electronics announced its new business strategy focusing on consumer and marketing. Samsung mobile phones are divided into 6 major categories – Style, Infotainment, Multimedia, Connected, Essentials and Business.
Smart Phone Market – An Indian Overview
India’s cell phone market is still a ‘new phone’ market, where feature phones contribute to the bulk of the shipments. India recorded 221.6 million mobile handset shipments in the current year (January-December) 2012. During the same period, 15.2 million smartphones were shipped in the country (Cyber Media Research CMR, 2013). Since then, the mobile handset market is expected to grow steadily till 2016 when end-user sales will exceed 326 million units.
The smartphone market in India has become increasingly competitive. Smartphone sales have enjoyed strong momentum with Samsung dominating the market, where it captured nearly 50 percent market share in India in 2012. Nokia followed Samsung with 13.3 percent market share, Sony overtook BlackBerry for third place with 8.2 percent of total smartphone shipments in the year. Indian vendors are making inroads into the smartphone segment, with Indian players Micromax and Karbonn catching up with their global competitors, with Micromax holding 19.3% market share in the first quarter of 2013, and Karbonn holding 8.6% share.
Interestingly, India’s smartphone market will grow more than 100 percent in 2013 and cross 44 million units by the end of the year. It is also estimated that smartphones priced below US$200 will contribute to more than 60 per cent of the smartphone market, while Apple and Samsung will be the leading players in the US$450+ segment with more than 80 per cent (volume) share between them (BGR, Your Mobile… 2013).
It is estimated that India will become the third largest smartphone market in the world after China and the US by 2017. There are 67 million smartphone subscribers, which is 6% of the total subscribers in India, growing at a rate of 52% annually (KPCB Internet Trends, 2013). Samsung leads the smartphone segment in India. The market share of smartphone manufacturers in India is shown below:
- Nokia = 5%
- Samsung = 26%
- Karbonn = 13%
- Micromax = 25%
- Others = 34%
Competitive Mobile Phone Companies in Front of Samsung
1. Nokia
The Finnish manufacturer Nokia, which was once the undisputed leader of the mobile market, has suffered a steep fall from the top position it once enjoyed. Despite encouraging sales of the Lumia series, Nokia has slipped to the tenth position in the smartphone market.
Nokia has phones for all segments in the market, hence a huge variety of phones in both feature phones and smartphones. Nokia’s affordability has a huge impact on rural markets. It also has phones priced in the premium range to meet the urban demand for smartphones. It has a wide distribution network, a strong service care network. (Nokia, 2013) Nokia uses various techniques for product promotion, including sales promotion strategies with leading consumer durables and automobiles. Nokia also promoted the Lumia series by showcasing the product in movies (Wmpoweruser.com, 2013).
Nokia’s smartphones had a market share of 80.2% of all Windows Phone devices in May 2013, ahead of HTC’s 13.7% and Samsung’s only 4.5% (BGR.com, 2013). Nokia has recently launched its Lumia 1020 smartphone, which has a 41-megapixel camera, in another attempt to take on rivals Samsung and Apple in the fiercely competitive smartphone market. So-called “smart feature phones” such as Nokia’s Asha range have limited smartphone capabilities such as internet and email access and touch screens, but are cheaper than Samsung’s high-end Galaxy models or Apple’s iPhone. They are crucial to Nokia’s future as it defends its leading market share in emerging economies such as India and Africa while struggling to stay afloat in the smartphone race.
Although Nokia’s Windows Phone sales have improved sequentially, reaching 5.1 million units, Nokia is still not seeing high growth in the smartphone segment. Nokia’s position in the smartphone market fell from number 8 worldwide in the fourth quarter of 2012 to number 10 in the first quarter of 2013. (Reuters.com, 2013).
In early September 2013, Microsoft, the maker of the Windows operating system for Nokia phones, announced its intention to buy Nokia’s hardware business, which is responsible for the feature and smartphone businesses. The deal, valued at $7.2 billion, was not unexpected as Nokia was already selling smartphones powered by the Windows operating system. The deal came at a time when both companies were facing tough competition. Although the Microsoft operating system had overtaken Blackberry OS, Google’s Android and Apple’s iOS had gained a large market share in the mobile operating system sector. On the other hand, Nokia, which was once a leader in the feature phone segment, was losing its sheen in the smartphone segment.
Microsoft (Forbes.com, 2013) was compelled to buy Nokia because no other device manufacturer was using the Windows OS and Google’s Android open source mobile phone operating system would soon become a nightmare for Microsoft. Microsoft now gets to enjoy Nokia’s patent rights as well as access to markets that are virtually untouched.
2. Sony
Sony Mobile Communications AB, formerly known as Sony Ericsson Mobile Communications AB, is a mobile phone manufacturing company. It is a multinational company, which means it operates in many countries around the world. The company is headquartered in Tokyo, Japan. Sony Mobile Communications is wholly owned by Sony Corporation, which is a large and famous electronics company. This means that Sony Corporation controls all the functioning and decisions of this company.It was founded on 1 October 2001 as a joint venture between Sony and Swedish telecommunications equipment company Ericsson under the name Sony Ericsson. Sony acquired Ericsson’s stake in the venture on 16 February 2012.
Sony Mobile Communications has research and development facilities in Tokyo, Japan; Chennai, India; Lund, Sweden; Beijing, China and Silicon Valley, United States. Sony Mobile is the world’s 10th largest mobile phone manufacturer by market share as of the first quarter of 2012. It is the world’s third largest smartphone manufacturer by market share as of the third quarter of 2012.
While Samsung and Apple are struggling to get the biggest cut of global market share, there has been a surprisingly quiet entry into the list of global smartphone manufacturers. Sony, which has made no bones about wanting to get back on the top global smartphone list, has taken some concrete steps toward its desire in 2012. Sony Mobile Communications may abandon the low-end smartphone market and focus primarily on high-end devices as it seeks to re-establish its mobile brand. The company is also putting a lot of emphasis on the “premium” experience aspect of its devices, as exemplified by the Xperia Z.
With revenues of $72.3 billion, Sony’s operating income stood at $2.4 billion. Net income as of March 31 was $458 million. This is a clear turnaround for Sony, which has been seeing losses for the past four years in a row. And part of that revenue comes from the success that the Xperia series is seeing in the market. The first thing Sony has done is to integrate the set of offerings it brings to the market. The Xperia range has recorded revenues of $7.8 billion in the market. This is about 11 per cent of the group’s total sales. (Tech2.in.com, 2013).
Apart from its flagship smartphone, it can be seen that the company has at least two phones in almost every price category. If you look at the smartphone price ranges, for every Samsung Galaxy offer, you have a Sony phone as well.
Overall, by having a product in every price range, it seems that Sony has got a clear plan for its smartphone range. The main thing for Sony is the brand value that is associated with the company’s name. After being in the market for years, it is certain that mobile users still hold the company’s name in good esteem.
3. BlackBerry
Research In Motion Ltd. (RIM) is a Canadian telecommunications and wireless equipment company founded in 1984 by Mike Lazaridis and Jim Balsillie. RIM is best known as the developer and manufacturer of the BlackBerry smartphone. RIM is headquartered in Waterloo, Ontario, Canada. The company currently has about 9,500 employees and has a total revenue of US$16.435 billion.
The BlackBerry market is divided into two main segments: business-to-business (B2B) and consumer. In the business-to-business segment, companies and organizations use BlackBerry devices for secure communications and productivity. In the consumer segment, individual users purchase BlackBerry phones for personal use, and value its features and functionality. BlackBerry initially targeted only business professionals, but it is now diversifying, targeting the younger generation who are addicted to social networking sites and use various applications for entertainment.
The BlackBerry cell phone is a device that has taken convenience to another level for business travelers. These phones provide easy access to email accounts and all the functionality of a cell phone. However, the BlackBerry has become much more than a business tool. As prices have come down, making them more affordable, people are also buying BlackBerry phones for their personal use.
While Android, Windows Phone and iOS enjoy a large market share, BlackBerry’s market share in the United States was 4.6 percent at the end of May 2012, although this has fallen to a disastrous 0.7 percent this year in 2013. It is a similar story elsewhere, as in the UK, 12.6 percent has turned into 5.3 percent, and in Europe overall, 7 percent has become 2.5 percent (DigitalTrends.com, 2013).
4. iPhone
Apple Inc., formerly known as Apple Computer, Inc., is a large American company headquartered in Cupertino, California. The company designs and sells electronic devices, software, and computers. Its best-known products include Mac computers, iPod music players, iPhone smartphones, and iPad tablets. Apple is known for its innovative technology and design, making it a major player in the electronics and tech industry.
The iPhone was unveiled by Steve Jobs at the Macworld 2007 conference in San Francisco. Prior to the iPhone’s release, handset manufacturers such as Nokia and Motorola were enjoying record sales of cell phones based on fashion and brand rather than technological innovation. However, the iPhone radically changed the industry, with Steve Jobs declaring in 2007 that “the phone is not just a communications device but a way of life”.
The iPhone attracts users of all ages, and in addition to consumer use, the iPhone has also been adopted for business purposes. The first generation of iPhone and others such as the iPhone 3G have been discontinued. The company now sells only 3 types of iPhone, iPhone4, iPhone4s and iPhone5.
Consumers can buy iPhones through the virtual store or through exclusive Apple retail stores, iPhone consumers are quite excited about the phone and there is a frenzy during product launches around the world and people line up in front of stores to become the proud owner of an iPhone. The passionate reaction of the people led the media to name the phone the “Jesus Phone”. (Could not be retrieved).
While Apple holds the top spot in the United States, its South Korean rival sells the most phones worldwide, selling over 70 million smartphones in the first quarter of 2013. Together, the two companies account for all the gains in the smartphone segment.
Market share data for the last four years. This trend is unmistakable, as older platforms like Symbian and Blackberry have been practically wiped out. Android has continued to increase its dominance and now accounts for about 75% of smartphone sales. iPhone’s market share dropped to ~18% (compared to ~23% in Q1 2012). The slowdown in iPhone’s growth is due to the increasing cyclicality in sales as its target market becomes more saturated. Finally, BlackBerry and Windows Phone managed to capture 3% and 3.5% of smartphone sales in Q1 (Tech-Ideas, 2013).
Over the past two years, its market share has ranged between 13% and 22% depending on the release of new models. With varying market shares, iPhone has always generated the most profit in the smartphone market.
The Advent of Local players
India’s smartphone market grew an impressive 74 percent during the first quarter of 2013, with sales of low-priced Android devices outpacing the adoption of sophisticated mobile devices in the country. Smartphone sales in India reached 6.1 million units during the first quarter of 2013, with Samsung maintaining its lead in the country. At that time the South Korean device maker had a market share of 32.7 percent. This means that 32.7 percent of the total devices sold were made by this company. Despite its continued success, figures show that Samsung will face increasing competition from local manufacturers.
While domestic manufacturers had a market share of only 3 percent in 2012, they now account for nearly 30 percent. Local manufacturer Micromax trails Samsung with 19 percent in total unit shipments, followed by Bengaluru-based Carbon Mobiles with 11 percent.
At present, the success of local players does not bode well for international giants who hope to regain former glory in emerging markets.
Micromax’s market share grew from 1.7 percent in Q1 2012 to 17.1 percent during Q1 2013. Karbonn grew from 0.7 percent to 8.4 percent. Meanwhile, Nokia’s market share fell from 25.5 percent to 5.6 percent, while BlackBerry fell from 12.3 percent to 1.2 percent. Apple is out of the top 5 in terms of shipments for the quarter, as IDC says the Cupertino-based firm has always been a “niche player” in India. (Tech-Ideas, 2013).
There is no doubt that the faster pace of mobile hardware development and the lower production costs of mass manufacturing have helped Micromax launch products with greater regularity and thus help it climb the positioning ladder faster. But Micromax is not the only runner in the race to the top for Indian manufacturers. While companies like Lava, Xolo and Karbonn are also top contenders, others like Max, iBall and Intex are also in the race but lag behind the pace setters. Given the size of the smartphone pie and the growth potential of the market, each of these has big ambitions. Intex wants to sell 20 lakh phones this year and Lava is aiming to sell 15 lakh handsets by the end of 2013.
Way Forward
With the changing market conditions, it is time for Samsung to strategically orient itself towards the changing dynamics. Some of the key factors for Samsung’s success in India’s urban market can be attributed to the smart positioning of the brand through the Android operating system and effective media communication. At a time when the market is abuzz with innovation, Samsung is focusing more on marketing strategies. In the initial stage with fewer players and somewhat less innovation, differentiation was done through branding and promotions. With the advent of local players like Micromax and Carbon, whose primary focus is on speed to market and effective pricing, Samsung needs to rethink its mobile portfolio in India.
Android, the operating system that drives most smartphones including Samsung and local players like Micromax and Carbon, holds the lion’s share in mobile operating systems. Samsung can therefore no longer differentiate on operating system, a factor it used to rely on over Window, Symbian and Blackberry operating systems.
On the other hand, local players have to aggressively brand themselves to compete with companies like Samsung and Apple. Apple which has always been seen as a niche player in the Indian market is free of new entrants. Samsung’s growing concern will be to curb the growth of these players or increase the market size to maintain its market share.
Market Dynamics
The growth potential for smartphones in India is tremendous. With the average selling price of smartphones in India being less than $200, a new breed of products may emerge that will cater to this growing opportunity. Mobile phone companies such as Karbonn and Micromax are providing smartphones in the $100-$250 range and companies such as Samsung offer products in the $250+ range. With the changing market dynamics companies such as Samsung, which is currently the market leader, will have to seriously rethink their position.
While local players are able to provide similar offerings at lower prices, Samsung has been able to enjoy market leadership due to its promotions and brand equity. But with mobility shifting towards lower-priced models, technology is no longer the differentiating factor. With the growth of the telecom sector in urban India stagnating, service providers are constantly cutting their prices in terms of usage rates and offering higher bandwidth to attract more customers.
With customers spontaneously upgrading from feature phones to the smart phone segment with falling service rates, the transitional phase is the most critical for industry players as the fulfillment of this segment will ultimately decide the market leader. There is also a focus on the introduction of high-end services in semi-urban and rural India that are similar to urban India. The shift from feature phones to smart phones in these regions is also imminent, and companies that are already equipped with distribution in rural India will benefit in the long run. Indian players like Karbonn and Micromax have already roped in Bollywood actors to build brand presence in rural India. The challenge now for Samsung is to efficiently target the rural and transitional segment to maintain its market leadership.
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