WOWSamsung

1. Introduction

WOWSamsung is the result of a group assignment for an international marketing programme that will take place in East Hoursley, UK. In March 2012.

The purpose of this Wiki is to get readers understand about Samsung smartphone and tablets brand and its relevance in Western Europe.

2. Description of the industry and market

Consumer electronics industry is a very dynamic driven by innovation and consumer changing behaviour. We can identify different segments. For the purpose of this case study, we will be focusing on tablets and smartphones.

Table 1: The consumer electronics industry
(source: The Future of Tablets: Segmentation, Forecasts and Implications for Related Products. January 2012. GMID)

Interestingly, smartphones and tablets are more or less recent. There is a lot of interaction between the two products. Even if we frequently see people having both, we can expect not to see tablets growing at the expense of the smartphone.

Smartphones appeared in 1994-5, but reached its turning point in 2000 with the progress made on wireless Internet. Since, we’ve seen more and more products and manufacturers in market.

A smartphone can be defined as a small all-in-one device that is used for communication and computing functions. It’s a combination of a cell phone and a PDA (Personal Digital Assistant). Basically, if you want to differentiate a smartphone from a cell phone; the first one has an Operating System (OS), which allow

the user to install and use applications (most current applications include e-mail, faxing, Internet access, corporate network access and various Personal Information Management-PIM features). Cell phone comes with built-in applications; which is a limitation for the user. However, this definition is not static because of the evolution in terms of technology. The difference between smartphone and cell phone is becoming less and less clear.

The launch of iPhone in 2007 gave another pace this market. The value chain of smartphone industry is quite interesting due the multiple players:
- The Equipment Manufacturers (OEM) providing the handsets (Apple, Blackberry Samsung, HTC)
- The Operating System (OS) running the devices (iOS, RIM, Symbian, Android, Windows)
- The network operators (AT&T, T-Mobile, Orange)
- The applications stores (Ovi store, App World, Apple Store)

2010 is the turning point for the tablets with the introduction of iPAD. Tablets have interesting similarity with smartphones:

- Multiple players (OEM, OS, network operators, App Stores)
- Segmentation is more or less the same

Thus, there is a lot of convergence between the two products and we tend to see the same players: Apple, RIM, Samsung etc.

However, on the consumer side, we can identify 3 key segments based on utilization:

- Communicators
o Segment description: Used primarily for enhanced communication in static situations while on the go. These products are tailored for consumers who need to access email, as well as review text and spreadsheet files in environments where using a computer may be inconvenient. While these devices will also be used for media playback and some content generation enhanced communication will be their key selling point

o Target consumer: This consumer market consists largely of young and middle-aged professionals, whose job involves a considerable amount of travel. These are tech-savvy, demanding customers, who are constantly on the look out for a more efficient way to stay in touch while on the go, and have been amongst the earliest adopters of cloud computing services – primarily business-oriented ones.

- Media
o Segment description: These products will excel in displaying stored or cloud-based multimedia content in situations unsuitable for using a computer. The devices will also be used to access social media services and light web browsing, but superior video playback capability will be the defining feature of this category. Content creation capabilities are likely to come only as an afterthought facilitated by optional peripherals.

o Target consumer: It targets all consumers: frequent travellers (for business or pleasure) at the airport, in a flight, in a bus etc., screenagers (teen and tweenagers fascinated by new technology and internet at very early age) and new parents who grew up with the digital revolution.

- And hybrids
o Segment description: These products will combine the functions of communicators and media tablets, with an emphasis on emulating or enhancing the content creation experience consumers expect from clamshell portable computers. While selling as a “Swiss army knife” of computers, the differentiating factor will be the product’s focus on content creation, aimed at consumers who would like to replace, not complement their clamshell portable computer

o Target consumer: students and young professional (frequent traveller).

3. Position of the WOW brand (history, presence)

Smartphones:
History of Samsung Electronics: In 1969, Samsung Electronics was established producing mobile phones, televisions, radios, Computer components and other electronics devices.
In 1993, Samsung developed the 'lightest' mobile phone of its era. The SCH-800 and it was available on CDMA networks and available in Western Europe. During this period, new Samsung mobiles started to emerge.
At the end of the 20th century, they started to develop smart phones and phones combined mp3 player.
In 2008 Samsung Electronics has announced that its flagship smartphone Witu, known in Western Europe under the name Omnia, became the market leader in Western Europe: according to research company GfK, in December 2008, the share of Samsung Omnia with 8GB of memory had 14.9% of the smartphone market in Germany. The model won first place in sales, ahead of devices such as BlackBerry (11%), Nokia E71 (7,6%) and iPhone 16GB (7,6%).

Samsung Electronics in 2011- Western Europe: As far as manufacturers go, in 2011 Samsung has the top spot in smartphone shipments with 22% market share, followed closely by Apple, which has 21% of the smartphone market. The Korean giant's performance can be considered more than impressive, as the company's smartphone shipments have grown by 700% year over year, compared to 64% for Apple. Its Galaxy S II offers a larger screen and faster processor than iPhone 4 - and has been a huge hit among geeky smartphone connoisseurs.
The European market is becoming increasingly concentrated in the hands of the top five players –

Samsung, Nokia, Apple, HTC, research in Motion, all of which - apart from Nokia - owe their success to the smartphone boom. In 2011, the percentage of units shipped by 'other ' players - which include former European stars like Sony Ericsson as well as LG, ZTE and Motorola - was still 21%, but the numbers were down 11% on last year. Overall, the handset sector in the region fell 3% in unit terms to 42.2m.
The key trend, predictably, was the rise of the smartphone. For the first time, handsets with full operating systems overtook featurephones in this region.
This change is mostly attributed to the significant rise of Android OS's adoption (352% year over year) according to IDC. The Google OS devices account for 48.5% of the total smartphone shipments.

Tablets:
By September 2011 Samsung sold only 20,000 units of the Galaxy Tab in Western Europe, out of the 1,000,000 units it claimed to have shipped. The claim comes as a shock: many believed the Tab was the only tablet out there that has given some competition to Apple’s I Pad device. By end of 2011 though Samsung enjoyed a clear second spot in the market-share rankings and also saw an impressive boost in average selling prices (ASPs) during last year's closing months. Figures from market watcher Context find that tablet sales through western European distributors rose 160 per cent year on year in November, and 209 per cent the following month.
Samsung declared its strategy for 2012 is to leverage the success of the smartphones to expand the tablets business, with the tablets playing off the success in phones. As the smartphone business continues to dramatically expand, that’s going to raise the tablet business.
Samsung's larger Galaxy 10.1 tablet remains illegal in Europe thanks to Apple's legal action that stopped the tablet’s launch. The two technology firms have been locked in intensifying legal battles in nine countries over their flagship smartphone and tablet products - battles made more complex by the fact that many related patents are held by other internet giants such as Google and Microsoft.
The latest attacks come after Apple successfully blocked Samsung from selling its latest tablets in Germany and some smartphone models in the Netherlands and forced its rival to delay launching new tablets in Australia.

4. Changes? Growth? Trends) (Macro and micro)

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5. Consumer breeding grounds for innovation

To understand where the Innovation of the company can come in the future, we analyze 3 possible sources of innovation.

1) Non Consumers. Don’t Buy the product.
2) Undershot consumers. The product is not good enough.
3) Overshot consumers. The product is more than they need, they don’t want to pay an extra for an innovation or an upgrade.

Non Consumers.

Basically everybody wants a Smartphone or a Tablet, the main issue for non consumers is MONEY . The cost is a big constraint for a lot of people.

In Average the leader in the Tablet game is Apple Ipad with a cost of $499 us dollars plus connectivity costs.

The market for smart phones and tablets will continue to grow at a fast pace, but still many people will fall behind this technology due to lack of resources.

A big breakthrough will be to Innovate in cost reduction in order to achieve massive production.

Just consider that United Nations has established education as a Human Right and think in all the opportunities to countries and zones that don’t have enough capabilities to educate their citizens.

Samsung has been capable to deliver a tablet and phones at a lower price than Apple, so if they find a way to reduce further the cost of the product many governments could be interested in this hardware to deliver education and information to their citicens.

Consider and important fact Samsung is the leader of Smart phones and Tablets in China it sells more there than in the US , so if they continue to improve their costs many non users could have a better opportunity to get access to this Tecnology.

The biggest opportunity for Innovation for Samsung is Non Consumers.

Undershot Consumers.

Samsung is gaining share in the Industry in the 4th quarter of 2011 Samsung sold 36.5 units vs 37 million units sold by Apple.

So its clear that Samsung is convincing more and more consumers.

But still what is the main complaints with the undershot consumers that Samsung needs to innovate to gain this battle.

In the Tablets market there is complaints of the size of it is a lot bigger than a Phone but shorter than the tablets.

Other complain for the users is the stylus , because its all fashion and remembers the beginning of PDA´s.

Apple consumers also note that they usually have access to a much more Apps than any other competitor.

So Samsung needs to work better in design and Obviously in more people developing Apps that fit consumers needs.

“ It isn´t very practical phone and as a tablet, it cant match the experience of the IPAD with more than 150,000 Apps designed for it”

“Better portability than other Tablets but very big for a Phone It cant fit in your Jeans”

Samsung needs to gain making alliances with developers of Apps in order to gain more of the Undershot consumers and gain share from Apple.

Overshot Consumers:

I think that as in any technology , its difficult for normal people to not use every feature of its device , but if Samsung can Innovate in things easy to use and having better prices than competitors consumers will go for the brand.

For me the stylus is a good idea for overshot consumers because is better and easier to write than to use a keyword for taking notes.

The strength of the brand as global leader in monitors and televisions should also deliver innovation valuable for not geek consumers that can use its phone or tablet to see a movie or a program while on the road , not to mention how it will help with the kids when they are in the car in the middle of a traffic jam.
Conclusion:

Samsung has the credentials to win this market if it continue to improve in cost terms, they can loose with the heavy users but at the end in the emerging markets what we need is connectivity at low cost and easy to use.

6. Who are the most likely innovations (incumbents, new entrants, etc.)

Over the last years we have seen innovations happening on 2 fronts: the handheld itself and its technical features (Screen, Camera, Processor, Connectivity, Operating system etc) and what is called the eco system around the offer the software that can be installed on the smart phone or tablet.

Incumbents:

Apple:
Apple is clearly driving a premium strategy in the described category. Based on a fantastic brand image and the most applications made available through the App Store (350’000 iOS Apps vs 250’000 Android Apps in 2011) the company is able to charge by far the highest average sales prices in the market ($630

vs $146 for Samsung in 2009). This allows Apple to create super natural profits form the category. The fact that the iOS platform is a closed one allows Apple to take full control of the content in their App Store, maximize the consumer experience and keep competition out. The App Store is as reported to be maleware (spyware, Trojans, viruses etc) free which is a truly competitive advantage vs. the open Android market (which is reported by Juniper to have an increase in maleware by 400% from 2009 to 2010).

Via the iAd advertising services and the iTunes and App store the closed platform has allowed them as well to generate substantial revenue streams outside of the classical business areas.

Although from a technical point of view Apple does not always offer the most advanced products its sheer brand and market power coupled with religion like brand admiration and consumer loyalty and the highest customer satisfaction level (838 points on 1000 vs 777 vs Samsung, JD Power & Associates study 2011) Apple remains the biggest challenger for Samsung.

Both the iPhone 5 and the iPad 3 are expected to deliver further innovations such as faster processors, improved graphics processors and a Retina Displays. The recent addition of the iCloud storage and synchronization service have further increased the integration of the Apple "system" and therefore added consumer exit barriers.

RIM:
Traditionally very strong in the enterprise market (17.2% in Q2 2010) RIM is being challenged on their home turf by Apple and Google. To offset this RIM has started targeting youth segments in the consumer market by offering social networking and multimedia services at a substantial

discount vs Apple. They are also strengthening their eco systems via agreements with local content providers. In terms of distribution RIM has moved into the retail segments to better allow targeting of this new consumer segment.

The Blackberry Playbook tablet targeting the enterprise market is equipped with an impressive set of features and specifications. The difference makes their new OS which is much more efficient and stable than any other OS in the market. Based on their strong position in the enterprise market the PlayBook will be able to establish itself in the enterprise market on the back of a strong BlackBerry Smartphone position.

Therefore the BB PlayBook is seen by many as the main competitor to the iPad and Samsung’s Galaxy pad (Frost&Sullivan).

Google:
Wide portfolio of offerings enables the company to enhance its customer reach thereby equipping it with more sources to generate advertising revenue.

The Google Android OS for smartphone is gaining rapid popularity. With the acquisition of Android Inc. in 2005, and the launch of Google's mobile OS Android changed the competitive landscape of smartphone business globally. Over 500,000 Android smartphone are activated daily.
By contrast, every day approximately 150,000 Apple iPhone’s are activated. Additionally, Android is fast emerging as the preferred mobile OS for Original Equipment Manufacturers (OEM) with multiple OEMs using the platform for their devices. HTC and Samsung have been aggressively pushing new mobile phones based on the Android platform.

As per the industry sources, Android is forecast to capture 40% market share through 2011 and is forecast to increase its share to 46% by 2015.
Moreover, the online application store for Android applications "Android Market" is growing at a rapid pace. The Android Market currently offers approximately 250,000 apps, compared to 350,000 offered by Apple's App Store, although Android has been a late entrant in the market. Increasing popularity of Android will increase the market share of Google.

Therefore Google is in a strong position to profit from their wide portfolio, consumer reach and frequency of interaction to “make” the market for new innovations.

New entrants:

Facebook:
With its huge consumer based and the ever increasing trend to access social networks on the go Facebook might as well decide to enter into

the Smartphone and Tablet market as Google has done already (Nexus Phone produced by HTC). This would however mean a substantial change in strategy moving form an internet platform, content and app supplier to moving into hardware provider. So far there are no signs of such intentions.

Local low price manufacturers (Huwaei, TCL, G’Five, QXM):

Some of the fiercest competitors to enter the European Market are low price manufacturers out of China, Taiwan and India. These companies play the value game through profiting form there exceptionally low cost bases, while still offering technologically competitive products.

Huawei is focusing on the lucrative smartphones segment by launching low to mid-end smartphones in emerging markets and mid to high-end Android handsets in mature markets, especially in Europe. They have just announced the launch of a high end tablet at the Barcelona mobile fair.

TCL is introducing 3G-enabled Android-based touch screen smartphones and tablets to the Chinese and European markets in 2011.

G’Five’s core competency is its capability to produce handsets priced as low as $50 (!), and it has a strong distribution network in emerging markets such as India, Mexico and Nigeria.

QXM is focusing on developing value-add differentiated handsets; while integrating emerging technologies and expanding its retail distribution network in China.

In times of an increased financial crisis in Europe those challengers will put the established brands under a lot of pressure testing consumer’s loyalty with attractive low cost offers.

Apple: How strong is our offer in the market?

Market share:

Depending on the data source Apple is holding c 20% of the global smartphone market.

In Europe we see a similar picture (highest share in Britain 31%) however MS of iPhone is come under a lot of pressure from the Android based competition.

In Europe the iPhone share slipped in France to 20 percent from 29 percent a year earlier, in Germany to 22 percent from 27 percent, with similar drops also seen in Italy and Spain.

In part, the European sales of the expensive Apple model were hit by weakening economies across the continent.

Google had market shares of between 46 and 61 percent in all markets. Smartphone makers like Samsung Electronics, Sony Ericsson, LG Ericsson and Motorola Mobility all use its Android platform in their phones.

Pricing:

As Apple is driving a premium strategy iPhone 4S remains the most expensive smartphone in Europe, retailing at about 850 Euro while Samsungs Galaxy Nexus model (which outperforms it’s expensive competitor on most criterias) sells at 420 Euro.

Product offerings:

Apple has decided to run a lean product portfolio vs. competition. There are only 3 iPhone (3GS, 4G, 4GS) and only 1 iPad model on sale today.

Most competitors offer a multiple of this: Samsung is today offering 19 Smartphones and 4 Tables in the Swiss Market for instance.

Wile Apples products are arguably not the most advanced and outperformed by completion from a technical point of view it is Apple’s integrated eco system that makes the difference. The App store is today the most populated app platform and domination all the others in terms of sales and quality.

iPad and iPhone are run on Apples proprietary iOS system while most of its competition has chosen Google’s Android a their OS.

Brand:

So why would consumers pay more for a clearly inferior product (in the case of iPhone 4S? The answer is the brand! Apple is and remains the benchmark Brand, now being ranked as the world’s most valuable brand by Millward Brown. This is as well reflected by the fact the the iPhone is receiving the highest customer satisfaction ratings of all the Smartphones (838 points on 1000 vs 777 vs Samsung, JD Power & Associates study 2011) even if on paper its inferior.

Another aspect of Apple’s superiority is the well integrated Apple system. We tend to see households with entire collections of Apple products

which are all nicely and simply integrated through means like Apple TV or iCloud. The simplicity and consistency of how to operate an Apple product is what consumers love and never want to miss again.

Loyalty:

Apple customers are the most loyal smartphone users, according to research firm Gfk, as the company continues to inspire strong brand allegiance that surpasses its rivals.
According to results, 84 percent of iPhone users would choose the iPhone as their next mobile device, followed by 60 percent of Android users and 48 percent of BlackBerry users.
Apple's brand loyalty has run high since the company introduced the iPhone in 2007, consistently topping other phone makers and leaving rivals like Android and BlackBerry wondering why.
Unsurprisingly, many survey-takers cited ease of use, quick navigation, and customization as the top reasons for not wanting to switch devices, meaning that comfort level is a major factor for consumers when considering a switch.
However, the study also found that the greater number of services a customer uses from one company, the more likely they are to stick with that brand. Apple has consistently added services and perks to its repertoire, including various apps and games, the iCloud digital storage vault, Siri voice recognition software, and the just-released iTunes Match service, which may account for its appeal.
The laundry list of services Apple offers its customers increases the odds of customers remaining with Apple, and the more the company continues to integrate those services, the more devoted its users become.
Apple also has a "cool factor," especially among young consumers, perhaps due to splashy marketing and subsequent success of the iPod and iTunes. The iPhone's user-friendly, highly customizable interface, along with the numerous services it offers to customers and trendy marketing, appears to be a winning formula.