Samsung Mobile

Marketing Strategic Plan By Zaki Krichi Professor : Marco Protano

Executive Summary
1.

The strategic opportunity is: the virgin flexible smartphone market with 30% lower cost than the ordinary smartphone market, with a 9 months time advantage for samsung compared to the competitors who are planning to launch their products in the Q2 of 2014. 2. Critical Protanos 8C insights: Category, still a virgin unexploited terrain. 3. The strategic alternatives are : Product: Create a flexible screen smartphone only in the high end segment or Create a flexible screen smartphone in all segments. Place: Use an exclusive distribution channel or sell the product through all existing channels. Price: Charge High Prices or Charge Normal Prices. 4. The recommendations are : Product: Create a flexible screen smartphone only in the high end segment. Place: Use an exclusive distribution channel. Price: Charge High Prices/ Skim pricing strategy.

Category
The Smartphone Market is very attractive, market studies recorded a growing demand in this category , In the fourth quarter of 2012 smartphone sales recorded a 36% growth.

The Category is : Communication devices supporting apps.

The Market Potential is 225 million Units, 55% penetrated (123,75million units)

GE McKinsey Matrix for Smartphones

Unattractive Weak Disinvest Proceed with care Cash Generator Average Phased Withdrawal Proceed with care Growth Leader Attractive Double or quit 36% growth rate may sound like a big number, but it was 3 points below the projected 39%. A year earlier, smartphone growth was 55%, far above the 40% growth firms had projected.

Average

Try Harder

Leader

Strong

The growth of most technology markets slows rapidly once the 50% penetration is reached

Competition
Competitive Advantage : Superior Technology & Innovation Superior Collaborators
Smartphones : Samsung 25.7% share LG 18.2% Apple 17.1% Motorola 11.2% HTC 6.3%. OS: Android was also on top of all smartphone operating systems with 52.6%. iOS has 34.3% of smartphone platform share BlackBerry 8.3%, Windows Phone/Windows Mobile 3.6% Symbian 0.7%.

With the new technology, Samsung has a Blue Ocean Opportunity

Porters 5 Forces
Bargainig Power of Suppliers Level : Low Why : Smasung is vertically integrated, they manufacture their own parts Substitute Products Level : Very High Why : Non-flexible-screen smartphones can replace flexiblescreen smartphones How to mitigate the risk : By communicating the benefits of the new technology, and emphasizing on that the old smartphones are outdated Threat of New Entries Level : High Why : The technology is available for some competitors How to mitigate the risk : Be the first to get into the new market and create barriers.

Intensiey of Rivalery Level : Low Why : only few competitors can afford the new technology

Bargaining Power of Customers Level : Low Why : Only Samsung who can offer customers the flexible-screen smartphones for now.

Risk Of Cannibalization

Company
Samsung is the leader in the US smartphone segment
Relative Strengths Samsung relies on itself to supply its materials Innovative technology A Stable Growth in smartphone industry (average 30%)

Relative Weaknesses

Insight

Company
Opportunities Threats The new flexible screen technology (30% less costly) Market potential not fully exploited, a remaining 45% (101,25 million) is still a huge opportunity The consistent and tremendous smartphone market growth (55% in 2011, 36% in 2012) Risk of cannibalization (new products may cannibalize the old ones) Possible (very probable) entry of other competitors to the new market

Possible increase in sales and market share and capital Need numbers

Collaborators
Google with its Android Operating System is the main collaborator for Samsung Mobile. Samsung has a 46% of market share from Googles OS (Android), compared to 23% in 2011. Google is also collaborating with Samsung on the new smartphone Nexus.

Googles Android drove Samsungs success in the smartphone category

Context

Innovation : The Flexible-Screen Smartphones use plastic instead of glass 30% less costly than glass

Higher gross margin

Customers
What do customers value? Applications : The more available on the OS app store, the more customers value the OS and therefore the smartphone. Design : must be elegant and modern Performance of the device : the highest and the best available in the market Features : basic features like Bluetooth and Wi-Fi are mandatory, other features are preferable

Target? Americans who are 14 years old or more. Needs : a Telecommunication Device Wants : a Sophisticated Smartphone
The new generation of consumers is spending a lot more time on their smartphones than on their laptops

Alternatives
Product: Create a flexible screen smartphone only in the high end segment. Pros: better brand image and positioning Cons: 1. Unexploited potential in the low end segments 2. The new product may cannibalize the old one. Create a flexible screen smartphone in all segments. Pros: Exploit all possible potential in all segments. Cons: Underperforming in one segment may harm the brand image and lead to losses of market share in other segments

Alternatives
Place: Use an exclusive distribution channel. Pros : ensure better brand image and high valuation of the product Cons : limited access and coverage less market share Sell the product through all existing channels Pros : ensure maximum coverage and market penetration Cons : as a premium new technology, it may decrease the value of the product as perceived by customers. Price: Charge High Prices. Pros: Generate more profit, better positioning at the premium level. Cons: not affordable by all customers. Charge Normal Prices. Pros : better reach to the customers wallet. Cons : Bad perception as a high end product.

GOST
Goal : Lead the Smartphone industry in all segments Objective : Be the leader in the flexible-smartphone segment with at least 90% of market share within the next year

GOST
S:What business are we in? Flexible-Screen Smartphones
What competitive advantage are we using?

Superior Technology & Innovation (Flexible OLED Screens) Superior Collaborators : Google (Android)
Are you using a supplying resource?

Supplying & using resources at the same time

Recommendations: Product: Create a flexible screen smartphone only in the high end segment. Place: Use an exclusive distribution channel. Price: Charge High Prices/ Skim pricing strategy.

(GOST)Continued

T: SIVA : Invest in the flexible-Screen Smartphones

Solution: Create a flexible screen smartphone only in the high end segment. The Samsung Galaxy S4 is to be launched mid April 2013, Therefore we should wait a little bit to launch the new flexible screen smartphone so that we reduce cannibalization rate. Our competitors are rumored to launch their first flexible screen smartphones on Q2 of 2014, we have to benefit from this given time by the customers and launch our flexible screen smartphone on July 2013, Introducing ourselves as the reference in this segment and gaining early leadership. This step will take us to a Blue Ocean for at least 9 months before any competitor can get in.

Less cannibalization rate

Promotion/Information
Preparing the marketplace to welcome the new product

Before the launch of the product, Samsung should Invest a lot on advertising the new technology, customers must be aware of it. they should perceive it as a solution and as an upgrade that takes the smartphones into new dimensions. They should emphasize on the practicality an the utility of the flexible screens.
Changing the customers perception about the old product is key for the success of the new product

Pricing/Value
Skim pricing strategy The absence of competitors will allow Samsung to benefit the most of the market, this pricing strategy is best for new innovations, and insures maximum profit. The Pricing strategy will be as follows : Launching price should be $500, as the product lifecycle of smartphones is on average 9 months, they should reduce their prices each 3 months by $50. This is how it is going to be : July/August/September $500, October/November/December : $450 January/February/March/$400 On March, when the competitors are going to launch their flexible screen smartphone, They will find it difficult to compete with Samsung because Samsung has very low costs compared to the industry, and at a 400$ price, margins for competitors will be very low, therefore it is going to be hard to compete with Samsung in this segment.

The margins from flexible smartphones will cover the losses from cannibalzation

Cannibalization
Weighted Flexible Screen Smartphone unit contribution Cannibalized S4 Unit contribution Total Regular S4 Purchasers opting for flexible smartphones Flexible Screen Smartphone total sales in units Total Cannibalization Rate $ $ 46,11 37,89 18000000 57000000 32%

Total Cannibalized S4 contribution

2 973 238 095,24

Total Weighted Flexible Screen Smartphone Contribution Total Regular S4 Purchasers opting for flexible smartphones Flexible Screen Smartphone total sales in units Total Cannibalization Rate

18 138 761 904,76 18000000 57000000 32%

The margins from flexible smartphones will cover the losses from cannibalization

Place/Access
Exclusive Distribution Channel for Branding Reasons: As a new technology, the flexible screen smartphones should be distributed exclusively, as Samsung is the only company who is going to be commercializing it. Limiting access at the launch will create a rush for flexible screen smartphones in the next few months, as innovators and early adopters will buy the technology and will do the word of mouth marketing for the product.

The less available, the more valuable

Exhibits
S4 Flexible Sccreen Smartphone Total Revenue $ 21 600 000 000,00 Total Revenue $ 25 900 000 000,00 Total Variable Cost f $ 6 245 000 000,00 Total Variable Cost f $ 4 788 000 000,00

Total Margin Total units sold

15 355 000 000,00 57000000

Total Margin Total units sold

21 112 000 000,00 57000000

Total of both segments S4 since flexible Screen Launch (July 2013) Total Revenue Total Variable Cost f Total Margin Total units sold $ $ $ 13 500 000 000,00 4 085 000 000,00 9 415 000 000,00 Margin 39000000 Units $ 47 500 000 000,00 114000000 Revenue $ 47 500 000 000,00

Variable Cost

11 033 000 000,00

2013

2014

April

Mai

June

July

August

Spetember

October

November

December

January

February

March

Price

$ 450,00

$ 450,00

$ 450,00

$ 400,00

$ 400,00

$ 400,00

$ 350,00

$ 350,00

$ 350,00

$ 300,00 300,00

$ 300,00

Revenue Samsung Galaxy S4 Expected Sales

$ 2 700 000 000,00

$ 2 700 000 000,00

$ 2 700 000 000,00

$ 1 600 000 000,00

$ 1 600 000 000,00

$ 1 600 000 000,00

$ 1 400 000 000,00

$ 1 400 000 000,00

$ 1 400 000 000,00

$ 1 500 000 $ 1 500 000 000,00 000,00

$ 1 500 000 000,00

Variable Cost

$ 720 000 000,00

$ 720 000 000,00

$ 720 000 000,00

$ 480 000 000,00

$ 480 000 000,00

$ 480 000 000,00

$ 480 000 000,00

$ 480 000 000,00

$ 480 000 000,00

$ 600 000 5 000 000,00 000,00

$ 600 000 000,00

Margin Expected Sales in units per month

$ 1 980 000 000,00

$ 1 980 000 000,00

$ 1 980 000 000,00

$ 1 120 000 000,00

$ 1 120 000 000,00

$ 1 120 000 000,00

$ 920 000 000,00

$ 920 000 000,00

$ 920 000 000,00

$ 900 000 $ 1 495 000 000,00 000,00

$ 900 000 000,00

6000000

6000000

6000000

4000000

4000000

4000000

4000000

4000000

4000000

5000000

5000000

5000000

Price

$ 0 500,00

$ 500,00

$ 500,00

$ 450,00

$ 450,00

$ 450,00

$ 450,00 400,00

$ 400,00

Revenue Samsung Flexible Screen Smartphones Sales Variable Cost

$ 2 500 000 0 000,00

$ 3 000 000 000,00

$ 3 000 000 000,00

$ 3 150 000 000,00

$ 3 150 000 000,00

$ 3 150 000 000,00

$ 2 400 000 $ 3 150 000 000,00 000,00

$ 2 400 000 000,00

$ 420 000 0 000,00

$ 504 000 000,00

$ 504 000 000,00

$ 588 000 000,00

$ 588 000 000,00

$ 588 000 000,00

$ 504 000 588 000 000,00 000,00

$ 504 000 000,00

Margin Expected Sales in units per month

$ 2 080 000 0 000,00

$ 2 496 000 000,00

$ 2 496 000 000,00

$ 2 562 000 000,00

$ 2 562 000 000,00

$ 2 562 000 000,00

$ 1 896 000 $ 2 562 000 000,00 000,00

$ 1 896 000 000,00

5000000

6000000

6000000

7000000

7000000

7000000

7000000

6000000

6000000

Regular S4 Purchasers opting for flexible smartphones

2000000

2000000

2000000

3000000

3000000

2000000

2000000

1000000

1000000

Cannibalization Rate Estimated Cannibalization Cannibalized S4 contribution $ -

0%

0%

0%

40%

33%

33%

43%

43%

29%

29%

17%

17%

$ -

$ -

$ 448 000 000,00

$ 373 333 333,33

$ 373 333 333,33

$ 394 285 714,29

$ 394 285 714,29

$ 262 857 142,86

$ 150 000 427 142 857,14 000,00

$ 150 000 000,00

Weighted Flexible Screen Smartphone Contribution

$ 1 632 000 000,00

$ 2 122 666 666,67

$ 2 122 666 666,67

$ 2 167 714 285,71

$ 2 167 714 285,71

$ 2 299 142 857,14

$ 1 746 000 $ 2 134 857 142,86 000,00

$ 1 746 000 000,00

Thank You for your Attention