HISTORY OF SAMSUNG:2000-Present Pioneering the Digital Age

The digital age has brought revolutionary change and opportunity to global business, and Samsung has responded

with advanced technologies, competitive products, and constant innovation. Brand Reinforcement
At Samsung, we see every challenge as an opportunity and believe we are perfectly positioned as one of the world's recognized leaders in the digital technology industry. Our commitment to being the world's best has won us the No.1 global market share for 13 of our products, including semiconductors, TFT-LCDs, monitors and CDMA mobile phones. Share of Market Looking forward, we're making historic advances in research and development of our overall semiconductor line, including flash memory and non-memory, custom semiconductors, DRAM and SRAM, as well as producing best-in-class LCDs, mobile phones, digital appliances, and more.

Displayed the worlds thinnest TV (6.5mm) at CES Innovation leader

Launched major restructuring of its businesses Cooperates in creating a foundry with Xilinx of the US

Developed the worlds first 40 nanometer DRAM Point of difference

Announced its Blue Earth solar-powered phone Released its V-line Crystal Rose LCD TV

Samsung is found No. 1 in customer loyalty for 8 years consecutively by Brand Keys of the USA

Market Leader
Samsung Digital Imaging developed an innovative hybrid digital camera Built the worlds largest mobile phone as recorded in the Guinness Book of World Records Received a Quality Management Award in Malaysia SADI, Samsung's design school, received the most iF Concept Design Awards for its entrants Opened samsungmobile.com for its domestic customers Received an Excellence Award from ENERGY STAR of the US Released the worlds thinnest Blu-ray player Introduced Mobile WiMax into Malaysia Released the worlds first full HD camcorder with a 64GB SSD Sold more than 20 million full touch phones in shortest time ever 2009 Samsung took up a record high market share in LCD monitors

Released the worlds first solar -powered mobile phone in India Innovation
Released the JET, its new concept full touch screen phone Released its 120Hz 3D monitor Samsung took the No. 1 spot in the global digital sign market for the first time Sold 500,000 units of its LED TVs in 100 days since its release Opened the visual mobile era with its third generation full touch Haptic AMOLED Released the worlds first infrared video phone Became the first in the industry to acquire TCO 3.0 certification for its notebook computers Announced its Green Management strategy Began mass production of the worlds first 40 nanometer DDR3 DRAM Released the worlds thinnest watch phone Developed the worlds lowest power 1GHz mobile CPU core Opened Samsung Application Store Seller Site Attained its most awards ever at IDEA 2009 Released its strategic smart phone, the Omnia Samsung's Yuna Haptic sold 500,000 units in record time

Became the first in the industry to sell more than 10 million LCD TVs in the first half of the year Samsung won the chairmanship of the 3GPP international standardization association Sold more than 5 million of its STAR full touch phones in 4 months Samsungs Application Store officially opened Released the Corby full touch phone targeted at younger users Provided the WorldSkills Calgary 2009 Competition support Installed the worlds largest video wall in the US Released the first large capacity 16kg automatic washing machine in the domestic market Samsung's Mondi WiMax terminal receives Best Product at the 4G Awards Entered the top 10 list in the worlds top 100 global brands Samsung was selected as one of the top 10 global businesses in responding to climate change Samsung TVs took 50% of the Iranian market Introduced its R&D master system Released the Giorgio Armani smart phone Sold more than 5 million LCD panels for notebooks per month for the first in the industry Developed a 240Hz 3D LCD panel Received the 2009 LCD TV Market Leadership Award Deploys its brand memory card business Reached the worlds first LTE terminal supply agreement Developed the worlds thinnest 3mm LED TV panel Samsung successfully tested WiMax global roaming Samsungs LED TV won TV of the Year in Britain Declared its Creative Company strategy for the next 100 years Passed 4 trillion won in operating profits for its 40th year of foundation Introduced a Creative New Employee hiring system Developed the worlds first 0.6mm 8 chip package Sold 10 million STAR phones in six months of its release Announced its open mobile platform, bada Became the first in the industry to sell more than 4 million LCD panels for TVs per month Supported the hosting of the WCG final Launched a VIP membership program Sold 50 million full touch screen phones in 2 years Samsung's printing solutions won product of the year in the US Announced bada its own smart phone platform Samsung successfully commercialized its 4th generation LTE terminal Restructured its organization and appointed Gee-Sung Choi as its new CEO Sales of Samsung Yuna Haptic phones broke the threshold of 1 million Became No. 1 in the US digital TV market for the 4th consecutive year

Named Yoon-Woo Lee as a Vice Chairman & CEO of Samsung Electronics Launched OMNIA phone Completed establishing TV manufactory in Russia Kaluga Became the official sponsor of 2010 Guangzhou Asian Game 2008 Developed the world's first 2Gb 50 NANO Samsung takes No. 1 spot in U.S. cellphone market Opened Global Brand PR Centre Samsung D'light' No.1 worldwide market share position for TVs achieved for the 9th quarter in a row

No.1 worldwide market share position for TVs achieved for the seventh quarter in a row 2007 Developed the world's first 30nm-class 64Gb NAND Flash memory BlackJack bestowed the Best Smart Phone award at CTIA in the U.S.

Attained No.1 worldwide market share position for LCD for the sixth year in a row

Developed the world's first real double-sided LCD Developed the worlds' first 50nm 1G DRAM Unveiled 10M pixel camera phone 2006 Launched "Stealth Vacuum," a vacuum cleaner with the world's lowest level of noises Launched the worlds' first Blu-Ray Disc Player Developed 1.72"Super-Reflective LCD Screen

Developed the largest Flexible LCD Panel Ranked 27th in "the World's Most Admired Company" of Fortune Became the official sponsor of Chelsea, the renowned English soccer club Released the world's first 7 mega pixel camera phone 2005 Developed the world's first OLED for 40" TV Became the official sponsor of Chelsea, the renowned English soccer club Developed the first-ever speech recognition phone

Produced the first wrinkle-free steam washer Sold more than 20 million cellular phones in the U.S Developed the world's first 60-nano 8GB NAND Flash memory chip Ranked top in mobile phone sales in Russia 2004 Released new PDP TV featuring the highest contrast ratio in the world Developed a 3rd Generation Optical Blu-Ray Disc Recorder Developed cellular phone chip for satellite DMB system Released 46" LCD TV for the first time in the world

Samsung brand value ranked 25th in the world by Interbrand Ranked 5th on the "Most Admired Electronics Company" list released by the Fortune Magazine 2003 Released the first HD DVD combo

Development of the 54"TFT-LCD, the largest digital TV monitor in the world Launches PDP-TV, the slimmest in the world 2002 Launch of colour mobile phones in which the new concept UFB-LCD is introduced Launched new high-definition TFT-LCD colour cellular phone

Ranked No. 1 of world's Top 100 IT Companies by BusinessWeek Unveils 16 Chord Progression Melody Phone Begins Mass Production of 512Mb Flash Memory Device 2001 Unveils Industry's First Ultra-Slim Handset Develops World's first 40 inch TFT-LCD

Unveils TFT-LCD with Record-breaking Definition Launches PDA phone Samsung Olympic Games Phone selected as the official mobile phone of the Sydney 2000 Olympic Games TV Phone and Watch Phone Make Guinness Book of World Records 2000 Unveils the Worlds Fastest Graphics Memory Chip Samsung Electronics and Yahoo! Form Strategic Alliance Develops Unique All-in-one DVD Player Developed world's first 512Mb DRAM

Developed world's first 512Mb DRAM

CORPORATE PROFILE OF SAMSUNG:Vision 2020

As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future." This new vision reflects Samsung Electronics commitment to inspiring its communities by leveraging Samsung's three key strengths: New Technology, Innovative Products, and Creative Solutions. -- and to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all.

As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the worlds top five brands by 2020. To this end, Samsung has also established three strategic approaches in its management: Creativity, Partnership, and Talent. Samsung is excited about the future. As we build on our previous accomplishments, we look forward to exploring new territories, including health, medicine, and biotechnology Market Expansion Samsung is committed to being a creative leader in new markets and becoming a truly No. 1 business going forward.

The Samsung Philosophy

At Samsung, we follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society. Creative leaders
Every day, our people bring this philosophy to life. Our leaders search for the brightest talent from around the world, and give them the resources they need to be the best at what they do. The result is that all of our productsfrom memory chips that help businesses store vital knowledge to mobile phones that connect people across continents have the power to enrich lives. And thats what making a better global society is all about.

Our Values
We believe that living by strong values is the key to good business. At Samsung, a rigorous code of conduct and these core values are at the heart of every decision we make.

People
Quite simply, a company is its people. At Samsung, were dedicated to giving our people a wealth of opportunities to reach their full potential.

Excellence
Everything we do at Samsung is driven by an unyielding passion for excellenceand an unfaltering commitment to develop the best products and services on the market.

Change
In todays fast-paced global economy, change is constant and innovation is critical to a companys survival. As we have done for 70 years, we set our sights on the future, anticipating market needs and demands so we can steer our company toward long-term success.

Integrity

Operating in an ethical way is the foundation of our business. Everything we do is guided by a moral compass that ensures fairness, respect for all stakeholders and complete transparency Ethics driven

Co-prosperity
A business cannot be successful unless it creates prosperity and opportunity for others. Samsung is dedicated to being a socially and environmentally responsible corporate citizen in every community where we operate around the globe.

Samsung Profile 2008

Wherever you are... in the hustle of the streets or the comfort of the home...Samsung is part of the fabric of your life. As a global leader we are at the forefront of change, anticipating today what our customers around the world will want tomorrow.

2007 Financial Overview (WON/DOLLARS/EUROS)

AMOUNTS IN BILLIONS Net Sales* WON 161,847.4 DOLLARS EUROS 174.2 127.2

AMOUNTS IN BILLIONS

WON

DOLLARS EUROS

Total Assets Total Liabilities

284,165.5 180,833.2

302.9 192.7 110.1 13.9

205.7 130.9 74.8 10.1 [Amounts in billions]

Total Stockholder's Equity 103,332.3 Net Income* 12,873.7

We are committed to delivering superior corporate and shareholder value through creativity and transparency in management. Brand equity At Samsung Electronics, our modern, board-centered corporate governance system ensures transparency and accountability in management. The board actively supports top management in effectively managing the company to maximize corporate value. It also plays a key role in increasing shareholder value as well as safeguarding shareholder rights and interests. The boards scope of responsibility encompasses all matters required by statute, specified in the articles of incorporation, or delegated by resolution at the general shareholders meeting. These matters include the setting of basic management policies, guidance on strategic business decisions, and the oversight of senior management performance. As of May 2009, our board is composed of nine directors, five of whom are outside directors. In 2008,

the board convened five times to discuss and decide 23 agenda items. As provided for by law, the board has set up and delegated authority to a number of committees staffed by directors with relevant experience and professional knowledge to aid in timely, efficient decision-making. The board presently operates four committees: the Management Committee, Audit Committee, Outside Director Recommendation Committee, and the Internal Transaction Committee.

Sustai nability
Making sustainability top priority

At Samsung Electronics, the greening of management, products, processes, workplaces, and communities has been our top priority Green marketing
since we launched our sustainability strategy in 1996. Over the years, we have implemented ISO 14001- and OHSAS 18001-certified integrated environment, safety, and health (ESH) management systems at each of our eight Korean manufacturing facilities. As of the end of 2008, 94% of our global manufacturing network had an internationally certified ESH system in place, and

we expect the entire network to be certified by the end of 2009. In early 2009, we established the Environment Strategy Team within our Customer Satisfaction Environment Center to support and enhance our sustainability strategy and execution capabilities.

Cooperating to mitigate climate change

We are actively involved in a number of initiatives to mitigate climate change. Launched in 2002 as part of our efforts to voluntarily reduce greenhouse gas (GHG) emissions, our Catch CO2 project has enabled us to progressively lower the carbon footprint of each manufacturing process. We have also worked to shrink GHG emissions by signing a voluntary agreement with the Korea Energy Management Corporation to cut energy consumption at our manufacturing facilities. Today, we are focusing on developing highly energy-efficient products and components that will enable us to achieve a standby energy consumption of under 1 watt for our entire product portfolio.

CSR

Were helping usher in an era of sustainable, low-carbon growth.

Greening the product life-cycle
We are adopting cleaner, more energy-efficient manufacturing processes and technologies as we work to maximize resource and energy efficiency and minimize waste. We are also striving to reduce GHG emissions over the entire product life-cyclefrom design to manufacturing, usage, and disposalby developing and implementing an eco-design strategy across our operations. This strategy includes eco-certification of our supply chain, ecodesign assessment, and eco-label certification. Beyond our ongoing efforts to make our supply chain more environmentally friendly, we have created an international take-back program to facilitate efficient reuse of resources as well as reduce waste and pollution for a cleaner environment. We also comply with increasingly stringent international rules and regulations on the usage, handling, and disposal of hazardous materials.

Earning the right to be called green

In addition to operating our own eco-labeling program to effectively communicate the eco-friendly features of our products to consumers, we certify our products under six major international eco-labels, including the EU Ecolabel and US EPEAT systems. In 2008, we led the global electronics industrys green revolution by acquiring eco-label certification for over 1,900 products. We also continued to win awards and great reviews from consumers and NGOs for green products such as our LCD TVs with liquid-crystal styling, front-load washers with bubble wash technology, and mobile phones made with corn-based bioplastics. At the CES 2009 show in the US, we won two Innovations Eco-Design Awards, sharing the limelight for the most awards earned in the category.

Samsung's businesses harness the power of the digital revolution to create ground-breaking products and services that take consumers and businesses beyond imagination.

GLOBALISATION

Headquartered in New Delhi, Samsung India has widespread network of sales offices all over the country.

Innovation is at the heart of Samsung. Our R&D activities not only span the globe, they also pave the way for what's next in cutting-edge digital electronics.

Choose the right TV for you Samsung TVs offer world-class picture quality, design and energy efficiency . Find the TV that is perfect for you.
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LED TVRedefine the way we watch television. LCD TVAll the purity of liquid crystal. Plasma TVEnjoy the Superior cinematic experience. Ultra SlimFit TV40% slimmer and 20% lighter.

CASH COWS

Flat TVTechnology and style combine for captivating entertainment.

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Samsung is comprised of companies that are setting new standards in a wide range of businesses, from consumer electronics to petrochemicals, from advertising to life insurance. They share a commitment to creating innovative, high quality products that are relied on every day by millions of people and businesses around the world.

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Samsung Electro-Mechanics Samsung SDI Samsung Corning Precision Glass Samsung SDS Samsung Networks Samsung Techwin Samsung Mobile Display Samsung Digital Imaging

Samsung Heavy Industries

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Samsung Total Petrochemicals Samsung Petrochemicals Samsung Fine Chemicals Samsung BP Chemicals

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Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Card Samsung Securities Samsung Investment Trust Management Samsung Venture Investment

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Samsung C&T Corporation Samsung Engineering Cheil Industries Samsung Everland

y y y y y y y y y y y

The Shilla Hotels & Resorts Cheil Worldwide S1 Corporation Samsung Medical Centre Samsung Human Resources Development Centre Samsung Economics Research Institute Samsung Lions The Ho-Am Foundation Samsung Foundation of Culture Samsung Welfare Foundation Samsung Life Public Welfare Foundation

Samsung - The TOP Brand in the World

According to the global brand scoreboard of 2004 from Interbrand, Samsung, the Korean based electronics brand, has boosted its profile and being listed as 21st valuable brands in the world. Its brand value surged by 16% to 12.5 billion US dollars compared to the figure in 2003 which is 10.8 billion US dollar. (Simon, 2004) It becomes the worlds leading brand in electronics and digital industry. This achievement is closely related to its sponsorship strategies. Samsung associate its name to the TOP plan, which is The Olympic Partner plan. It is a plan which leads Samsung to be the top brand in the world. However, there are many other programs to support Samsungs sponsorship strategy. Without these strategies the TOP plan will not have such effectiveness and efficiency. Samsungs philosophy is devote our human resources and technology to create superior products and services, thereby contributing to a better global society. (www.samsung.com) Under this philosophy

Samsung has adopted a sport-based strategy in building its brand. The Building brand equity multinational consumer electronics firm acknowledges the fundamental role played by sport and by the Olympic Games as a promoter of its brand. Vice president of corporate communication at Samsung, Il-Hyung
Chang, rationalizes the important role of sport sponsorship by stating "sports sponsorship is a strategy that fits well within our operations at Samsung.its an integral part of our companys philosophy". Philip and David, 2003 Entering into the TOP plan propels Samsungs sponsorship to a new era. It has an opportunity to act on the same stage with the world top brand such as Coca Cola, IBM, and Visa, which greatly enhanced its brand image. The companys active and established role in the heart of the Olympic Movement has contributed to its brand value surge in recent years. Samsungs involvement with the Olympic movement began as a local

sponsor for the Seoul 1988 Olympic Games. Then it became the TOP sponsor in the wireless telecommunications equipment category for the Nagano 1998 Olympic Winter Games, Sydney 2000 Olympic Games, Salt Lake 2002 Olympic Winter Games and Athens 2004 Olympic Games. This status as a global partner in the wireless telecommunications equipment category will be continuing in the Torino 2006 Olympic Winter Games and Beijing 2008 Olympic Games. Samsung have agreed to pay the huge amount for corporate sponsorship because they recognize the vital importance of sports marketing on their bottom line. The TOP plan helped Samsung increase its brand awareness and enhance market position considerably. Compared to the results of the survey held before the Sydney Olympic Games, the amount of consumers that became aware that Samsung Electronics was one of the 9 sponsors of the Games approximately tripled. Unaided awareness of Samsungs Olympic sponsorship was 6.0%, it placed 2nd after Coca Cola. (www.samsung.com) Samsung want to accomplish two goals with all its sponsorship efforts. The first goal is to build brand awareness especially create higher level of awareness than its rival Sony. The effectiveness of Samsungs Sponsorship was shown at the ATHENS 2004 Olympic Games which had a positive impact on brand awareness, with an increase from 57% to 62%. (Samsung steps up Olympics marketing campaign, 2004) The second goal is to enhance the worldwide imagery and attitudes towards its brand. Samsung considered its commitment to the Olympic Movement is a key element in positioning and strategy. It contributes to the success of the Olympic Games and at the same time enhances Samsung brand image and its market position. Samsung built its brand through sponsor Olympic Games in the following ways. Samsung mobilized the organization for brand building. Both the process and the result of a brand-building effort often have a key payoff internally to employees, as well as externally to consumers. Samsung sponsored ATHENS 2004 Olympic Torch Relay, which was the first truly journey of Olympic flame. 1,900 torchbearers were selected from over 40 countries including Samsungs employees. (www.sumsung.com) They received emotional benefits from pride in being associated with the sponsorship and have a direct link to the Olympic activities. Samsung provided an experience to the consumers. For example as a part of Samsungs brand presence program it set up Olympic Rendezvous @ Samsung, a 1,064 square meter entertainment complex, located within the Athens Olympic Sports Complex, which was a central gathering place for athletes, their families, and the spectators coming to the Games. The OR@S provided a wide range of activities. For instance consumers were provided with the opportunity to try out Samsungs revolutionary products for themselves. Fans are able to meet their national heroes,

enjoy musical performances and special laser shows. During the Games Samsung has hosted a series of "National Days", which celebrate the many cultures of Olympic nations. In addition, OR@S provided free telephone and on-line services. Over 6,000 athletes from a huge number of the 202 competing countries have based themselves here and taken time out from the pressure of the Games to make contact with home. (Over 6,000 Olympic competitors make use of special facilities to contact loved ones, 2004). At the same time they are experiencing the convenience Samsung brought to them. Samsung used Olympic Games as a platform to demonstrate new products and technology. The most powerful way to introduce a new product and technology is by publicity. It is not only cost-effective but also more credible. Samsung provided its latest wireless communications technology during the Sydney 2000 Olympic Game. Focusing on the future of wireless communications, Samsung launched futuristic products such as the mobile phone watch, the PDA-phone, the digital camera cum mobile phone, the MP3 mobile phone and the its latest model of 3G mobile phone. In addition, visitors are able to experience the future by experimenting with the various digital knick-knacks developed and on display by Samsung Electronics. Samsung boost its brand awareness at Olympic Games. Samsungs dedication in Olympic Games brings great success in elevating its brand awareness. Samsung's sponsorship of the Sydney Olympic Game in 2000 raised awareness of the brand by 5% to 16.2 %. The awareness rise leaded to the sales surge. The first year after the Sydney 2000 Olympic Games, sales of the telecommunications products have increased by 44%. Four years later in Athens, its brand awareness was raised to 62%. (Coca-cola and Samsung present the first international Athens 2004 Olympic Torch Relay, 2003) Develop brand association. The Olympic Games as the worlds biggest sports event requires enormous and sophisticated communication system. Samsung, an official sponsor in wireless communication equipment presented the Wireless Olympic Works (WOW), a communications system to support and guarantee the smooth and efficient running of the event. It also provided wireless communication devices to athletes, officials, media, staff and volunteers. Samsungs expertise in digital wireless communications equipment played a vital role in contributing to the successful operation of the Games. Besides the functional association, it enhanced its market leader image and revealed its status of a global organization through the prestigious Olympic Games. There is no doubt that Olympic sponsorship played an important role in Samsungs brand building. However Samsung can not merely depend on sponsoring Olympic Games to enhance its brand equity. It adopted many associated programs to support TOP plan.

Reposition of its products. In early 1990th Samsung was still perceived as a conservative manufacturer and always associated its brand with bargains. Samsung realized that low price is just a major means to compete in the lower-market whereas in upscale market technology and brand are competitive means. Samsung decided to penetrate the upscale market and gave up lower-market in order to exalt its brand image. It repositioned all series of its products such as mobile phone, consumer electronics and memory flash to upscale market. Correspond to Samsungs new position in the market it has relatively higher price in it category. To Samsung higher price would bring more profit and at the same time it is the better imply of good quality. The strategy of reposition helps Samsung starting to build its noblest image. Technology innovation. Samsung recognized that digital is the future developing aspect of consumer electronics. They regard the digital age as having both incalculable potential and risks. It's a time of intense competition-fortunes can be made or lost in the blink of an eye. (Samsung group timeline and history, 2005) Samsung took this challenge as an opportunity. They switched their core competitive power from mass manufacture to its own brand which based on digital technology. It is well positioned as one of the world's recognized leaders in digital technology and eventually become the world top innovative company in technology. It starts to provide consumers with innovative and cutting edge products and rapidly become a huge player in electronics field competing toe to toe with another magnate Sony. Samsung launched an industry design revolution in order to get rid of its image of imitator. It employed world top designers to expand their thought and keep track on the world highest level. It achieved most of the Award of American Industry Design which is the most important award in industry design area on the global basis. Its brand was recognized by the consumers and specialists. The technology breakthroughs enhanced Samsungs brand image of young, fashionable and strong function. Demonstration of US market. Us market has a strong demonstration effect on the global market due to its leading status. To some extent, the brands should succeed in US market in order to become the top brand worldwide. Therefore Samsung regarded US market as its most important market and put great efforts on marketing in US market. SAMSUNG took part in the Salt Lake 2002 Olympic Winter Games in USA as the worldwide partner in the wireless telecommunications equipment category. Samsung carried out various advance public relation activities and programs centered on the PR pavilion to promote its image of a fist-class corporation. During the game consumers were provided with the opportunity to try out Samsungs revolutionary products for themselves. Samsung spent considerable funds to sponsor this winter game in USA. After few years management, Samsungs brand disengaged bargains and was regarded as high-class products by the

American consumers. Samsungs success in US market plays an important role in its success in other markets. To summarize, the key to a successful sponsorship depends not only on the creative and crucial sponsorship itself but also rely on the supporting strategies. Samsung successfully integrated its product strategy, technology strategy and branding strategy into the TOP plan. The TOP plan provides Samsung a road to be the top brands in the world. Without the supporting strategies the TOP plan can not endow Samsungs brand with internal and rich meaning. The plan comprises huge risk because if the consumers attracted by the TOP plan perceive it as an ordinary product Samsungs brand would be damaged. Samsung has successfully and fully utilize the benefits of the Sponsorship and was rewarded for its commitment to Olympic Games and other sports activities. The webs role in building brand With the prevalence and development of internet, the Web reveals its important role in marketing communication. According to a global web-based survey by Interbrand, the Google brand had the most impact on people's lives in 2002. It beat established brands such as Coke and Apple. (Gerry McGovern, 2003) This reveals how Web builds you brands differently. In the coming digital age, the strong brands in this era will be those that utilize web as a building tool. Web became a new communication channel between brands and consumers. It has unique characteristics compared to the most traditional media advertising. The web is interactive and involving. It provides an innovative way to build brand awareness. For example, when Visa organization plan to set up their long term branding tactic of focusing on young people, they chose MSN Site which is the world's most popular destination on the Web with enormous young users, as the hub of its promotional contest. It chose MSN to build and host the online hub for the promotional competition designed to build brand awareness of Ideas Happen among young consumers. The Ideas Happen campaign allows consumers ages 18 to 29 to submit ideas for businesses and other ventures and vote on the best submissions via a custom-designed site created by MSN. Over three months, more than 5 million unique users visited the site MSN created for the contest. The Ideas Happen campaign is an incredible example of how immediate and interactive of the online medium to make big results happen online. (MSN Again to Make Ideas Happen With Young Consumers, 2004) The campaign boosts Visa's image with target market. In addition to the increase in Visa's brand awareness among the 5 million unique users who visited the contest site, the heavy traffic helped build Visa's image among young adults who are still forging lifelong allegiances to consumer brands. According to polling conducted by

market research agency Millward Brown, perceptions of Visa improved markedly after the Ideas Happen campaign. The number who deem Visa the best credit card overall increased by 13 percent, while those who agreed that Visa offers unique and different features jumped by 9 percent. In addition, 8 percent more of those polled said they consider Visa the most innovative and forward-thinking credit card company. (MSN Again to Make Ideas Happen With Young Consumers, 2004) Ideas Happen is more effective in reaching our target audience due to MSN. Teaming up with MSN has allowed us to realize the potential of online marketing and allowed MSN to stretch its own limits in terms of interactivity and engaging young consumers The web offers current, rich information. On Visas website customers can manage their Visa card account online. The links on its page can take customers directly to their Visa card issuer, which maintains their personal, secure account information. By providing the current information of account, websites can let consumers to track their transactions on the spot. In addition, Visa introduces its various cards in detail on the website. Personalization. When customers enter Visas website they can select relevant content by choosing from the menu. There are three categories on Visa website which is personal, small business and merchants, corporate and government. People coming to it website with different purposes can simply choose corresponding category and go directly into that area to get the information their need. There is a calculator program in the website to help customers to plan their personal budget on Visas website. Moreover customers can order different information of discounts and financial tips through email on the personal basis. With these distinctive characteristics website can be a key part of a brand building program. It serves as a fantastic vehicle for distributing information, providing experiences, leveraging other brand building programs. It affects brand building from the following three aspects. Web can stretch the continuity and depth of the single sale channel, consequently expanding existing customers and increasing potential customers. Furthermore it can be taken as a market attempt, helping marketers to leverage marketing promotion programs in other medium. If use properly, website could effectively impel its offline products. For example there was a successful cooperation between Pepsi and Yahoo. Consumers could collect the number on the caps of Pepsi and Mountain Dew and change to credits on the websites of the two drinks. The credit can be used to exchange prizes or as cash for purchase and auction on Yahoo website. This campaign attracted 350 million people to anticipate. Pepsi increased it sale by 5% while the industry has little growth. (Lili, 2003) Pepsi did one similar attempt before without the help of web but failed eventually. Moreover, Pepsi can

interpret the consumer behaviors through analysis of the data collected in the campaign and work out the relevant strategy. Website can improve the shopping experiences accordingly enhance the brand equity. On the website of Co-op bookstore, consumers can search the books they want, preview the abstracts and check whether they are available. Other information is provided to the consumers like breakdown of every shop throughout Australia. In the Co-op shop or at home consumers can order or reserve a book through the on-line bookstore. The interaction between online and offline greatly enrich the shopping experiences. Web helps to differentiate brand. Product differentiation was regarded as a magic weapon of powerful brand. Without the differentiation brand will be reduced to product, consumers can only choose products from the prices. New brand with high differentiation are usually popular although they do not have high brand prestige. On the contrast high prestige brand with little differentiation will be forgotten gradually by consumers. When product or services enter into the maturity stage, they will reveal commonness and hard to be differentiated. The typical way to be differentiated at that stage is adding new products or services. For example, the customers of FedEx can accurately locate their parcels via its website. This service was even extended to the PDA users. The additional and distinctive service help FedEx enhanced the service quality and relationship between brand and customers. Web provides a platform for the communication of programs in the companys overall brand-building strategy. Web could improve companys brand marketing and sales efforts from internal as well as external. Internally, web offer a special site that every brand-building efforts emerge there. It will help the management to leverage each brand-building project to fit the overall strategy and redress the deviation in time. Externally, a well-designed website could connect every distinct part of business. The website will integrate them to be a continued and correlative means of brand description. There are several factors will contribute to the success of the web brand-building. A clear brand concept and position in the market. A clear brand concept and position will impel companys brand-building process. Companies should make sure to bring their brand identity or core brand elements onto the Web. The integral part of their offline brand identities need to be delivered to the online brand. Integration of web in whole brand-building strategy. The growing importance of web in building brand attracts more and more attention of companys management. To use web more effectively company should integrate web into its whole strategy and make sure it is in

conformity with other brand-building strategies. Companies which leverage their resources between brand-building strategies will achieve greater success. Strategic alliance with other website or brand. Sometimes web allies can give your brand extraordinary success. Especially the alliance between powerful brands will make the cooperation more effective and cost-efficient. In the previous example Pepsi achieve great growth of sales in its cooperation with Yahoo. Yahoo brought Pepsis brand in front of large numbers of people which Pepsi can not access and the hit rate of Yahoo also surged during that period. Visa card attracted its target market of young people by allying MSN to offer MSN Titanium Visa Card. More and more brands become eager to develop alliances through which they benefit mutually and beat their competitors. Loyalty .On the Web, brand loyalty is rooted in providing customers with an outstanding experience. (Gerry McGovern, 2003) To encourage customers visiting website regularly, websites are trying to build their loyalty through different ways. For example, commerce sites can offer a great selection, good prices, and a simple purchasing process while information sites can offer rich, relevant information in a format that is easy to read. With the help of outstanding experience provided by the websites companies draw their customers back again and again. In additional, companies can use email to offer their customers with opportunities or information which is tailored to their needs. For example a membership registration is provided on most websites. Then you can get more customized services by becoming a member of websites. Websites are building long-term relationship between customers and themselves. This relationship is essentially the loyalty. Websites will benefit from the loyalty their customers have, at the same time customers get their distinct needs and interests more satisfied by showing their loyalty. The important role of web in building brands suggests that companies that had successfully built their brand offline should make sure to leverage their resources to build their brands on Web. Retail stores should think of building their web-based shopping to provide a convenient alternative to consumers. Magazines should start to device their online editions in order to attract more readers. Web is providing huge exposure for brands. The brands which use them wisely will achieve tremendous advantage. Brand architecture art of L'Oreal With the growing globalization of markets and competition, the brand architecture became a key component in international firms brand building strategy. It provides a framework to leverage strong brands into other markets, assimilate acquired brands, and rationalize the firm's international branding strategy. The key element contributes to

a successful brand-building strategy is a harmonious and consistent brand architecture across countries and product lines. (Susan, Samuel and Edwin, 1999) L'Oreal, the world's leading cosmetics companies is an apotheosis in brand architecture. It managed very well of its wide range of products and many of them are the world's biggest beauty products. L'Oreal was the only company in its industry continually achieves a double-digit profit for 18 years. Moreover, it is a genuine international company which has operations in more than 130 countries in the world and over 80% of group sales are generated outside France. www.adbrands.net. The LOreal is known for its diverse brand house which includes brands like L'Oral Paris, Maybelline, Garnier, Soft Sheen Carson, Matrix, Redken, L'Oral Professional, Vichy, Lanc me, Helena Rubinstein, Biotherm, Shu Uemura, Armani, Cacharel, Ralph Lauren and so on. LOreals brand architecture is like a brand pyramid which is used to target different group or level of people. The luxury products division offers consumers top range of products like Lanc me, Helena Rubinstein, Biotherm, Shu Uemura and Kiehls. These are premium products known for their innovation, performance and quality. Some of the worlds top perfume brand like Giorgio Armani, Ralph Lauren was also included in this division. The distribution channel of these brands mainly through department stores, perfumeries, travel retail outlets, and the brands own boutiques. Customers will receive personalized advice at the point of sale, enabling them to choose the products best suited to their needs. (www.loreal.com) The professional products division is designed to serve hairdressers worldwide. They provide products to meet the requirements of salon professionals salon customers with a wide range of innovative, high-performance products. The professional products division of LOreal is made up of four different brands: L'Oreal Professionnel, Krastase, Redken 5th Avenue NYC and Matrix. The consumer products division is dedicated to offering consumers its high technology products at competitive prices. The brands in this division covered haircare, skincare, make-up and perfume products. The five major international brands are L'Oreal Paris, Garnier, Maybelline New York, Softsheen.Carson and Le Club des Crateurs de Beaut. They are distributed through mass-market retailing channels. In addition, LOreal has the active cosmetics department offering skin care, sun care, hair care and make-up products. The departments includes three brands Vichy, La Roche Posay and innov. They are sold in pharmacies and specialist retailers. These products offer consumers proven safety and effectiveness supported by advice from pharmacists and dermatologists.

L'Oreal used different product division to help it segment the market and form its band house. Brand architecture is the vehicle by which the brand team functions as a unit to create synergy, clarity and leverage. (Aaker and Joachimsthaler, 2002) We can start to learn the important role of brand architecture in companies brand building from the following aspects in L'Oreals example. Implement differentia of product and strengthen brand recognition. The consequence of differentia strategy of L'Oreal is that consumers from different income level or education background can find the product which is suitable to their own culture and taste. L'Oreal also focuses on continually strengthening the meanings of its brands and fully utilizes the advantages which are rooted from brand recognition. L'Oreal established very clear identity for each of its products. Each brand has its own image. For example, customers associated Lanc me with the image of stylish combination of elegance, charm and daring. Helena Rubinstein was perceived as a pioneer in cosmetic industry which provides cutting-edge science to the art of femininity and glamour. (www.loreal.com) It associates with high-performance and luxury as well. Its underlying brand Garnier represents natural beauty. Each brand has its unique symbol which creates a close relationship to its target market. Distribution based on brand differentia. L'Oreal uses different distribution channels according to the brand position in the market. The mass brand Maybelline promote its brand mainly through TV advertising and product prolocutor. La Roche-Posay, a brand positioned at solving skincare problem, is distributed by dermatologists, specialists of skincare and professional beauty salon. L'Oreal Paris relies on the public praise among professional cosmetic consultant. L'Oreal embodied culture flexibility. Many star brands in L'Oreals brand house are from different culture, but their original culture did not vanish because of being managed by a French company. When a lot of companies are trying to integrate different cultures, on the contrary L'Oreal tends to develop multi-culture in its underlying brands. This strategy proved to be very successful in reality and even played a key role in L'Oreals success. The most representative example is Maybelline New York. L'Oreal developed Maybellines brand culture instead of upsetting it after its acquisition of Maybelline. The sales figure dramatically rose after the acquisition and Maybelline product enter into more than 90 countries. Maybelline became a stylish global brand for all women all around the world from a merely regional brand. L'Oreal provides a platform for the brands under its brand architecture. Every brands target at a specific market and keep the specialty of its own brand. At the same time fit into the overall brand pyramid.

L'Oreals innovations always start from its luxury brands then penetrate to the brands in different price level and different markets eventually implemented in its consumer brands. The innovations based on the same technology platform will reduce the cost. The knack for L'Oreal to create the advantages is to spread around strategic investment by sharing the production of innovation between different product divisions. L'Oreal not only focuses on the single brand but also pays attention to the technology relevancy in the series of brands. For example, L'Oreal first introduced a breakthrough anti-aging composite by using Lanc me brand. Subsequently, it was implemented in Vichy brand and brought into the consumer product division eventually. The broad distribution channel of consumer products was used to promote this technology at last. In term of same products in the different market, L'Oreal also exerts the technology platform to meet the specific needs of consumers. From L'Oreals experiences, the core technology platform is a key component to the success of an international company with complicated brand house. Without leveraging the resources between brands, it will cause increase of operational cost and waste of resources and will be very hard to manage the L'Oreals sophisticated brand architecture. Other than building the brand structure according to the product identity, L'Oreal relied on distribution channel to carry out its strategy of brand structure. There are four product departments in L'Oreals structure. Every department has several brands and each brand has many names. They are conspicuously different in packages and with distinct image and advertising. The different brands share the resources of distribution channel and have high integration effect on management. The luxury brands of LOreal are sold in strictly selected distribution channel like department store, perfumeries and tax free shop. Professional products are provided to the hairdressers. Active cosmetic products are sold in pharmacists. The most important sector consumer products are distributed through mass consumption channel like department store and supermarket. L'Oreal has formed a brand matrix with great power of integration. Any new brand merged into the relevant channel will fully utilize the resources in existing channel as well as expand L'Oreals whole distribution channel by integrating its original channel. The dissemination of brand will improve companys overall influential power. L'Oreal recognized the leverage effect of it brand and focus its propagandas on brand rather than propagandas on particular product. It is dedicated in building the relationship between its brand and the market. It aims to enhance brand power by maintaining the good image in publicities. L'Oreals efforts were also embodied on its marketing strategy. It always concentrates on supporting those brands which can mostly represent its advantages and leverage resources to those premium products.

Firms that aim to expand internationally or strengthen market position tend to acquire new brand into the brand architecture. Acquiring influential and well positioned brand is an important strategy of L'Oreal in developing its brand architecture. It achieves rapid growth by acquiring brand in same or related business and is continually seeking these opportunities in the worldwide scope. L'Oreal expanded its brand architecture by acquiring Maybelline brand in 1996, which was a very successful transaction. The Maybellines image was enhanced by branded L'Oreal while L'Oreal got complementary in its brand architecture. Recent years in Asia, it acquired the third skincare brand Mininurse in China and Japanese top luxury brand Shu Uemura. These acquisitions represent L'Oreals ambition to Asian market. They have the same product business with L'Oreal. In China the acquisition will enhance L'Oreals market position in skincare and acquire distribution channels Mininurse had. It is also a preparation for the future expansion in the most fast-growing market China. By acquiring Shu Uemura, L'Oreal want to use this Japanese brand to compete with SK-which was a competitor in the same level, in order to meet the trend of prevalence of Japanese cosmetic brand in Asia. This is considered to be an effective and cost-efficient strategy which is consistent with L'Oreals overall brand architecture. In summary, companies will be more successful by constructing a well-designed brand architecture.

Market Strategy:-

The Samsung Way

It thrives in low-margin consumer electronics. It favors hardware over software. It's still a conglomerate that makes everything itself. Can Samsung keep defying conventional wisdom?
A black-suited Agent Smith sprints down a city street. As he is felled by an acrobatic kung fu kick from Trinity, the camera pulls back to show the action taking place inside a giant, floating Samsung TV. The screen rotates, revealing that the set is just three inches thick. "You cannot escape the Samsung 40-inch LCD flat-panel TV," intones the baritone voice of actor Laurence Fishburne. "Welcome to the new dimension."

The ad, now appearing in many U.S. theaters showingThe Matrix: Reloaded, has an element of truth: Whether you're a consumer in America, Europe, or Asia, it's getting pretty darn hard to escape anything made by Samsung

Electronics Co. Take the U.S. alone. Stroll the aisles of Best Buy (BBY ) Co. electronics stores, and stylish Samsung high-definition TVs, phones, plasma displays, and digital music and video players are everywhere. Log on to the home pages of USA Today (GCI ) CNN (AOL ) and other heavily trafficked sites, and Samsung's ads are first to pop out. You see its blue elliptical logo emblazoned on Olympic scoreboards. And expect more Matrix tie-ins: Samsung is selling a wireless phone just like the one Keanu Reeves uses to transport himself in the movie. Samsung will be even more visible in this fall's sequel, The Matrix: Revolutions. Samsung's Matrix moment is the latest step in its reincarnation as one of the world's coolest brands. Its success in a blizzard of digital gadgets and in chips has wowed consumers and scared rivals around the world. The achievement is all the more remarkable considering that just six years ago, Samsung was financially crippled, its brand associated with cheap, me-too TVs and microwaves. Now the company seems to be entering a new dimension. Its feature-jammed gadgets are racking up design awards, and the company is rapidly muscling its way to the top of consumer-brand awareness surveys. Samsung thinks the moment is fast arriving when it can unseat Sony Corp. as the most valuable electronics brand and the most important shaper of digital trends. "We believe we can be No. 1," says Samsung America Chief Executive Oh Dong Jin. Its rivals are taking the challenge seriously. "I ask for a report on what Samsung is doing every week," says Sony President Kunitake Ando. A few measures of Samsung's progress: It has become the biggest maker of digital mobile phones using code division multiple access (CDMA) technology -- and while it still lags No. 2 Motorola (MOT ) Inc. in handsets sold, it has just passed it in overall global revenues. A year ago, you'd have been hard pressed to find a Samsung highdefinition TV in the U.S. Now, Samsung is the best-selling brand in TVs priced at $3,000 and above -- a mantle long held by Sony and Mitsubishi Corp. In the new market for digital music players, Samsung's three-year-old Yepp is behind only the Rio of Japan's D&M Holdings Inc. and Apple Computer (AAPL ) Inc.'s iPod. Samsung has blown past Micron Technology (MU ), Infineon Technologies (IFX ), and Hynix Semiconductor in dynamic random-access memory (DRAM) chips -- used in all PCs -- and is gaining on Intel (INTC ) in the market for flash memory, used in digital cameras, music players, and handsets. In 2002, with most of techdom reeling, Samsung earned $5.9 billion on sales of $33.8 billion. Can the good times last? That's a serious question, since Samsung is challenging basic New Economy dogma. In high tech, the assumption is that developing proprietary software and content gives you higher margins and a long lead time over rivals. Yet Samsung defiantly refuses to enter the software business. It's wedded to hardware and betting it can thrive in a period of relentless deflation for the industry. Rather than outsource manufacturing, the company sinks billions into huge new factories. Instead of bearing down on a few "core competencies," Samsung remains diversified and vertically integrated -- Samsung chips and displays go into its own digital products. "If we get out of manufacturing," says CEO and Vice Chairman Yun Jong Yong, "we will lose." Yet the industrial history of the past two decades suggests that this model does not work in the long run. The hazard - as many Japanese, U.S., and European companies learned in the 1980s and '90s -- is that Samsung must keep investing heavily in R&D and new factories across numerous product lines. Samsung has sunk $19 billion over five years into new chip facilities. Rivals can buy similar technologies from other vendors without tying up capital or making long-term commitments. What's more, the life cycle of much hardware is brutally short and subject to relentless commoditization. The average price of a TV set has dropped 30% in five years; a DVD player goes for less than a quarter. The Chinese keep driving prices ever lower, leveraging supercheap wages and engineering talent. Meanwhile, the Japanese are building their own Chinese factories to lower costs. No wonder Samsung exited the low-margin market for TV sets 27 inches and under. Faced with these perils, Samsung needs a constant stream of well-timed hits to stay on top. Even Sony has stumbled in this race: It now depends on PlayStation to support a consumer-electronics business whose glory days seem behind it. Other legendary hardware makers -- Apple, Motorola, Ericsson (ERICY ) -- have learned the perils of the hardware way. Investors got a sharp reminder of the risks Samsung is running when the company announced first-quarter results. In

a tough environment, Samsung racked up the biggest market-share gain of any company in handsets, from 9.3% to 10.5%. Yet it had to lower prices to get there, and memory-chip prices also hit the bottom line. The result was a drop in first-quarter profits of 41%, to $942 million, on sales of $8 billion. Second-quarter profits could drop further, analysts say, hurt by lower sales in Korea's slumping economy -- and in China and other Asian countries struck by the SARS epidemic. Controversy also flared in May when Samsung Electronics agreed to invest a further $93 million in a troubled credit-card affiliate. Many critics believe Samsung should divest the unit but that it is propping it up under orders of its parent, Samsung Group. Concern over corporate governance is the big reason Samsung continues to trade at a discount to its global peers. Even though it's regarded as one of the most transparent emerging-market companies anywhere, Korea's history of corporate scandals means many foreigners will always suspect its numbers. If the earnings continue to soften, plenty of investors around the world will stand to lose. Samsung is the most widely held emerging-market stock, with $41 billion in market capitalization, and foreigners hold more than half its shares. Over the past five years, the shares have risen more than tenfold, to a recent $273. But concerns over 2003's earnings have driven the shares off their recent high this year. The challenges are huge, but so are Samsung's strengths. It is used to big swings: Nearly half its profits come from memory chips, a notoriously cyclical business. Even in the weak first quarter, Samsung earned more than any U.S. tech company other than Microsoft, IBM, and Cisco. Meanwhile, Sony lost $940 million in this year's first three months and chip rivals Micron, Infineon, and Hynix lost a combined $1.88 billion. In cell phones, Samsung has kept its average selling price at $191, compared with $154 for Nokia (NOK ) and $147 for Motorola, according to Technology Business Research. What's more, since 1997 its debt has shrunk from an unsustainable $10.8 billion to $1.4 billion, leaving Samsung in a healthy net cash position. And its net margins have risen from 0.4% to 12%. Driving this success is CEO Yun, a career company man who took over in the dark days of 1997. Yun and his boss, Samsung Group Chairman Lee Kun Hee, grasped that the electronics industry's shift from analog to digital, making many technologies accessible, would leave industry leadership up for grabs. "In the analog era, it was difficult for a latecomer to catch up," Yun says. But in the digital era, "if you are two months late, you're dead. So speed and intelligence are what matter, and the winners haven't yet been determined." Samsung's strategy to win is pretty basic, but it's executing it with ferocious drive over a remarkably broad conglomerate. To streamline, Yun cut 24,000 workers and sold $2 billion in noncore businesses when he took over. Samsung managers who have worked for big competitors say they go through far fewer layers of bureaucracy to win approval for new products, budgets, and marketing plans, speeding up their ability to seize opportunities. In a recent speech, Sony Chairman Nobuyuki Idei noted Samsung's "aggressive restructuring" and said: "To survive as a global player, we too have to change." Second, Samsung often forces its own units to compete with outsiders to get the best solution. In the liquid-crystaldisplay business, Samsung buys half of its color filters from Sumitomo Chemical Co. of Japan and sources the other half internally, pitting the two teams against each other. "They really press these departments to compete," says Sumitomo President Hiromasa Yonekura. The next step is to customize as much as possible. Even in memory chips, the ultimate commodity, Samsung commands prices that are 17% above the industry average. A key reason is that 60% of its memory devices are custom-made for products like Dell servers, Microsoft Xbox game consoles, and even Nokia's cell phones. "Samsung is one of a handful of companies you can count on to bridge the technical and consumer experiences and bring them successfully to market," says Will Poole, Senior Vice President at Microsoft's Windows Client Business, which works with the Koreans. The final ingredient is speed. Samsung says it takes an average of five months to go from new product concept to rollout, compared to 14 months six years ago. After Samsung persuaded T-Mobile, the German-U.S. cell-phone carrier, to market a new camera-phone last April, for example, it quickly assembled 80 designers and engineers from its chip, telecom, display, computing, and manufacturing operations. In four months, they had a prototype for the V205, which has an innovative lens that swivels 270 degrees and transmits photos wirelessly. Then Samsung flew 30

engineers to Seattle to field-test the phone on T-Mobile's servers and networks. By November, the phones were rolling out of the Korean plant. Since then, Samsung has sold 300,000 V205s a month at $350 each. Park Sang Jin, executive vice-president for mobile communications, estimates the turnaround time is half what Japanese rivals would require. "Samsung has managed to get all its best companies globally to pull in the same direction, something Toshiba, Motorola, and Sony have faced big challenges in doing," says Allen Delattre, director of Accenture (ACN ) Ltd. high-tech practice. Samsung can also use South Korea as a test market. Some 70% of the country's homes are wired for broadband. Twenty percent of the population buys a new cell phone every seven months. Samsung already sells a phone in Korea that allows users to download and view up to 30 minutes of video and watch live TV for a fixed monthly fee. Samsung is selling 100,000 video-on-demand phones a month in Korea at $583 each. Verizon plans to introduce them in three U.S. cities this fall. This year alone, Samsung will launch 95 new products in the U.S., including 42 new TVs. Motorola plans to introduce a dozen new cell-phone models, says Technology Business Research Inc. analyst Chris Foster. Samsung will launch 20. Nokia also is a whiz at snapping out new models. But most are based on two or three platforms, or basic designs. The 130 models Samsung will introduce globally this year are based on 78 platforms. Whereas Motorola completely changes its product line every 12 to 18 months, Foster says, Samsung refreshes its lineup every nine months. Samsung has already introduced the first voice-activated phones, handsets with MP3 players, and digital camera phones that send photos over global system for mobile (GSM) communications networks. Samsung has been just as fast in digital TVs. It became the first to market projection TVs using new chips from Texas Instruments (TXN ) Inc. that employed digital-light processing (DLP). DLP chips contain 1.3 million micromirrors that flip at high speeds to create a sharper picture. TI had given Japanese companies the technology early in 1999, but they never figured out how to make the sets economically. Samsung entered the scene in late 2001, and already has seven DLP projection sets starting at $3,400 that have become the hottest-selling sets in their price range. "They'll get a product to market a lot faster than their counterparts," says George Danko, Best Buy's senior vice-president for consumer electronics. Samsung hopes all this is just a warm-up for its bid to dominate the digital home. For years, Philips, Sony, and Apple have been developing home appliances, from handheld computers to intelligent refrigerators, that talk to each other and adapt to consumers' personal needs. Infrastructure bottlenecks and a lack of uniform standards got in the way. Now, many analysts predict that digital appliances will take off within five years. By then, as many as 40% of U.S. households should be wired for high-speed Internet access, and digital TVs, home appliances, and networking devices will be much more affordable. Samsung is showing a version of its networked home in Seoul's Tower Palace apartment complex, where 2,400 families can operate appliances from washing machines to air conditioners by tapping on a wireless "Web pad" device, which doubles as a portable flat-screen TV. It's a grandiose dream. But if the digital home becomes reality, Samsung has a chance. "They've got the products, a growing reputation as the innovator, and production lines to back that up," says In-Stat/MDR consumer-electronics analyst Cindy Wolf. With nearly $7 billion in cash, Samsung has plenty to spend on R&D, factories, and marketing. Samsung Electronics' ascent is an unlikely tale. The company was left with huge debt following the 1997 Korean financial crisis, a crash in memory-chip prices, and a $700 million write-off after an ill-advised takeover of AST Technologies, a U.S. maker of PCs. Its subsidiaries paid little heed to profits and focused on breaking production and sales records -- even if much of the output ended up unsold in warehouses. A jovial toastmaster at company dinners but a tough-as-nails boss when he wants results, Yun shuttered Samsung's TV factories for two months until old inventory cleared. Yun also decreed Samsung would sell only high-end goods. Many cellular operators resisted. "Carriers didn't buy our story," says telecom exec Park. "They wanted lower prices all the time. At some point, we had to say no to them." A top priority was straightening out the business in the U.S., where "we were in a desperate position," recalls

Samsung America chief Oh, appointed in early 2001. "We had a lot of gadgets. But they had nowhere to go." Samsung lured Peter Skaryznski from AT&T (T ) to run handset sales, and Peter Weedfald, who worked at ViewSonic Corp. and ComputerWorld magazine, to head marketing. Yun brought new blood to Seoul, too. One recruit was Eric B. Kim, 48, who moved to the U.S. from Korea at age 13 and worked at various tech companies. Kim was named executive vice-president of global marketing in 1999. With his Korean rusty, Kim made his first big presentation to 400 managers in English. Sensing Kim would be resented, Yun declared: "Some of you may want to put Mr. Kim on top of a tree and then shake him down. If anybody tries that, I will kill you!" The first coup in the U.S. came in 1997 when Sprint PCS Group began selling Samsung handsets. Sprint's service was based on CDMA, and Samsung had an early lead in the standard due to an alliance in Korea with Qualcomm (QCOM ) Inc. Samsung's SCH-3500, a silver, clamshell-shaped model priced at $149, was an instant hit. Soon, Samsung was world leader in CDMA phones. Under Weedfald, Samsung also pulled its appliances off the shelves of Wal-Mart and Target and negotiated deals with higher-end chains like Best Buy and Circuit City. Samsung's status in chips and displays, which can make up 90% of the cost of most digital devices, gives it an edge in handsets and other products. Besides dominating DRAM chips, Samsung leads in static random access memory and controls 55% of the $2 billion market for NAND flash memory, a technology mainly used in removable cards that store large music and color-image files. With portable digital appliances expected to skyrocket, analysts predict NAND flash sales will soar to $7 billion by 2005, overtaking the more established market for NOR flash, which is embedded onto PCs, dominated by Intel and Advanced Micro Devices (AMD ). The company's breadth in displays gives it a similar advantage. It leads in thin-film LCDs, which are becoming the favored format for PCs, normal-size TVs, and all mobile devices. Samsung predicts a factory being built in Tangjung, Korea, that will produce LCD sheets as big as a queen-size mattress will help to halve prices of large-screen LCD TVs by 2005. Samsung also aims to be No. 1 in plasma and projection displays. If Samsung has a major flaw, it may be its lack of software and content. Samsung has no plans to branch out into music, movies, and games, as Sony and Apple have done. Sony figures that subscription-to-content will provide a more lucrative source of revenue. Samsung's execs remain convinced they're better off collaborating with content and software providers. They say this strategy offers customers more choices than Nokia, which uses its own software. Yun has heard tech gurus, publications, and even Samsung execs warn him to forsake the vertical model. His response: Samsung needs it all. "Everyone can get the same technology now," he says. "But that doesn't mean they can make an advanced product." Stay at the forefront of core technologies and master the manufacturing, Yun believes, and you control your future. Many tech companies have tried that strategy and failed. Samsung is betting billions it can overcome the odds.

Samsung targets the high-end to up margins and profits

From being a mass-market playera game where it has seen tremendous success Samsung is now eyeing high-end segments in the various product categories it operates in. Shipra Arora has more details on this strategy and also analyses Samsungs moves on this front, keeping in mind market conditions and the competition Samsung will face

Samsungs meteoric rise in the Indian information technology product space is a well-documented story. But while Samsung has the pole position in many categoriesa 52.5 percent share in monitors, 53 percent of the hard disk drive (HDD) market, and 65-70 percent of the optical drives market, Samsung Electronics India Information & Telecommunication (SEIIT) is largely seen as a massmarket player. Being a mass-market player is not a bad thing in itselfand Samsungs success story is a testament to that. The Korean giants Indian IT arm has gained a reputation for success, has achieved mass reach, great brand visibility and excellent revenues. But in the current market, a mass-market strategy does have its pitfalls. Sure, the consumer market is far from saturation point, but it is the increasingly dwindling margins in the Indian IT hardware industry that necessitates a question mark over any mass-market strategy. Further, driven by price wars, average selling prices have also been on a constant fall, thus making profitability an issue. In effect, apart from brand visibility and its successful mass-market strategy, what Samsung needs today is a separate focus on the high-end business and a better high-end brand image to ensure higher margins and profitability. Though Samsung has been a regular in terms of introducing products touching the higher brackets, a specific high-end business focus had been lacking in the past. To correct this, the company has now initiated a conscious shift in its strategy, entailing a greater focus on high-margin businesses. Vivek Prakash, general manager, sales & marketing for SEIIT agrees, Under the prevailing low-margin conditions there is a need to constantly upscale the business. This strategic shift seems a great idea when you consider the competitive pressure from LG in the monitor market, where according to IDC the gap between the two has narrowed significantly in the last few quarters. And with HP and Seagate holding on to their ground in the printer and HDD markets respectively, theres even more reason for Samsung to go for the high-end to bolster its success story in the mass market. According to Moninder Jain, national marketing manager, SEIIT, the company is now trying to push in more and more high-end sales in the market. What could well evolve over the next one to two years is a two-pronged strategyleveraging on low- and mid-range products to play the volume game, while playing the value and margins game with its highend product range. The products that fall under the purview of Samsungs high-end business include monitors with larger screen sizes, TFT-LCD monitors, laser printers, multifunctional printers, combo drives, and high-capacity 80 GB and 120 GB hard disk drives. The product strategy roadmap being laid out by the company will focus on these lines. Laser printing is emerging as the star product line with the focus heavily skewed towards this segment, followed by TFT-LCD monitors. In fact the laser printer division is going to be branded the star division for Samsung worldwide by 2005. The high-end business accounted for 12 percent of Samsungs total business in 2001, and as a result of the new strategy that figure is estimated to grow to 35-40 percent by the year-end. That begs the question: How does Samsung plan to go about meeting this stiff target? While a Rs 10 crore investment has been laid out for laser printers over the next one year, the company will be spending another Rs 5 crore specifically on popularising TFT-LCDs

over the next quarter itself. Apart from investments, Samsung has also recently appointed a national distributor exclusively for its high-end products. Another fallout of the high-end focus has been an increased emphasis on the corporate segment, the most obvious market in this category. In order to strengthen its corporate presence Samsung has introduced a SPEAR channel programme constituting around 100 channel partners dedicated towards targeting large SMEs and corporates. The products being routed through the SPEAR channel are laser printers, 17-inch monitors and TFT-LCD monitors. Heres how the scenario looks in the main segments that Samsung is targeting as part of its high-end focus: Monitors Samsung has been the undisputed leader in the Indian colour monitor market with a 52.4 percent market share, according to IDC. As mentioned earlier, the only cause for worry for Samsung here is the reinvigorated LG in the last 2-3 quarters. According to IDC there has been a significant narrowing in the gap between these two players, thanks to LGs regional distributor model showing great results.

Samsung, which was four times the size of LG in the monitor market during January-February-March (JFM 2002) quarter came down to being 2.5 times LGs size during the April-May-June (AMJ) quarter. And according to feedback received by IDC, the gap has further narrowed down during the July-AugustSeptember (JAS) quarter, reveals an IDC source. Of late, Samsungs market share in this business has gone down on account of competition from LG. Though LG is still a distant No 2 to Samsung, it has come closer to the leader in the last few months, adds the source. This narrowing of the gap isnt because Samsung has stopped growing in this segment, as it is about LGs rapid growth.

By next year Samsung wants to establish 17inch as its standard monitor size in India, says Moninder Jain

Samsungs high-end focus is a perfect weapon to combat this challenge from LG. The highend monitor market is the unchallenged forte of Samsung, according to IDC. In the highend bracket (comprising of 19-inch, 21-inch and 21-inch flat), Samsung enjoys a virtual monopoly, with LG being pretty weak in these categories. Even the TFT-LCD monitor market is heavily in Samsungs favour. According to IDC, Samsung scores a huge plus over LG when it comes to introduction of the latest high-end technologies. In fact Samsung was the first firm to introduce 19-inch flat and 21-inch flat monitors in the Indian market, and it is now bringing in 24-inch. The company can leverage on this technology leadership to create a niche for itself in the monitor market. What Samsung needs to lay greater emphasis on is the creation of demand for these highend monitors that can bring in higher margins. According to IDC, though high-end technologies like LCD, 17-inch monitors (and bigger sizes) are gaining greater momentum in the Indian market, it will still take a few years for these products to become part of the mainstream market. Till a few months ago, 17-inch and above monitors only accounted for one-sixth of the total monitor market, with 15-inch monitors accounting for almost half of the total market. However, as IDC further points out, there is a definite shift happening from 15-inch to 17inch monitors in the Indian market, assisted by the fall in prices of 17-inch monitors during the last year. The price differential between 15-inch and entry-level 17-inch monitors has

come down to Rs 2,000, as compared to Rs 7,000 earlier. Samsungs strategy on this front is to graduate home and SOHO customers to 17-inch monitors. The key issue here is the speed at which the company is able to do so in order to gain the early-mover advantage. Samsungs strategy includes innovative promotions and schemes (for instance, bundling Lexmark inkjet printers with its 17-inch monitors). According to Jain, by next year Samsung wants to establish 17-inch as its standard monitor size in India. The companys track record does indicate that this is no idle boast. Numbers, which are the best indicator of the truth of any claim, clearly show that the contribution of 17-inch monitors to Samsungs overall monitor revenues have grown to 22 percent by May this year, up from less than 14 percent last year. Thus, revenues from 17-inch monitors are expected to overtake 15-inch revenues by mid-2003. However, some industry experts point out that even 17-inch is no longer a high-margin business, considering the fall in prices, and therefore might not play a significant role in the companys quest for a high-margin focus. Nevertheless, Samsung seems to be smartly laying the foundation for the high-end in the otherwise difficult home market by initiating their first steps towards the high-end market. Its easier to sell a 17-inch TFT-LCD monitor (undisputedly a premium product) to a user who already understands the benefits of using a 17-inch monitor by using one, as compared to a user whos still using a 15-inch monitor. Once this market has been created Samsung could leverage it later as it matures even further. Besides, Samsung is also focusing on corporates and large SMEs for deriving great margins, and further pushing in high-end products. According to IDC, the corporate market is a tough nut to crack considering that it is largely a branded PC market. But Samsungs already powerful presence in the corporate assembled PC market can be effectively leveraged to push its high-end offerings, though it will take some time for significant numbers to pour in. Laser printers The other high-end business where Samsung is looking to establish itself in terms of volumes as well is laser printers. The inkjet market is more or less stagnant, but the laser market is growing at 20 percent, according to IDC, thus explaining why Samsung is focusing on lasers. The company is in fact relying heavily on this business segment to lead its high-end brigade. According to Prakash Vaswani, senior analyst, peripherals research at IDC India, the entry-level and mid-range laser printer market is predominantly HPs forte with Samsung coming in second. During the AMJ quarter of 2002 HP accounted for 65 percent market share in terms of units, with Samsung at 22.5 percent. Samsung says that its market share has grown to 35 percent for the quarter ending July 2002, with a 600 percent growth over the last quarter.

Under the prevailing lowmargin conditions there is a need to constantly upscale the business, says Vivek Prakash

With the huge gap between HP and itself Samsung might still be far from toppling HP from its pole position in this space-especially considering HPs inkjet advantage toobut considering Samsungs growth record, HP cant afford to take the challenge from Samsung lightly. According to Vaswani, considering the fact that Samsung has been there in this business for only about a year-and-a-half, it has made significant growth strides. For more than five to six years HP commanded over 90 percent of the laser printer market, which has

now come down to 65 percent. And it is Samsung that been the biggest gobbler of HPs share, he adds. The reason for this is that most of the growth in the laser printer market has been at the entry-level and HP and Samsung are the only significant players in this segment. While the spectacular growth seen in the last 1.5 years has built up a strong foundation for Samsungs challenge, success in the long term will depend largely on Samsung getting its strategies right. According to IDC, the companys strategy vis--vis HP revolves largely around price points and pushing in freebies. Along with Wipro, Samsung has been at the leading edge of the price war, bringing down the entry-level price to around Rs 12,500 early this year, down from the Rs 16,000 to Rs 20,000 prices seen last year. HP has been a slow mover in this regard, bringing its entry-level price down to Rs 15,000 only. Samsung has been more proactive in terms of schemes and offers as well, being the first one to offer a free laser toner, an offer later followed by HP. Other offers have included a free scanner and additional warranty. According to Vaswani, going by the speed at which Samsung is moving, prices of entry-level laser printers are likely to drop further. But while this price strategy has been fruitful in garnering early market share it cannot remain a viable long-term strategy. Vaswani clearly states that working on pricing alone can be a dangerous strategy to follow. Laser printers are targeted at corporates where brand image plays a more decisive role than attractive pricing. What Samsung lacks today vis-vis HP, is a high-end brand image and stronger brand presence, he adds. Hence, what is needed is a shift in its strategy from a volume-led approach to a more value-led approach in the laser printer business. What Samsung perhaps needs to do today in order to gain an edge over HP is an aggressive brand-building exercise as it has done earlier in the HDD market against Seagate. With the company set to launch its high-end colour laser printers by next year, branding and image will have to be looked at all the more seriously because the pricing factor is not so important in this segment. Wipros aggressive launch of a sub-Rs 1 lakh high-end laser printer was hardly able to dent HPs similar offering at Rs 1.5 lakh. Samsung seems to have taken the cue in this regard, having outlined a Rs 10 crore marketing investment for laser printers. Another area where HP has an advantage is in channel strengths in this segment. Samsung has a relatively new channel set-up for laser printers, versus HPs set channel base. This is another area, where IDC believes Samsung will have to work on through forging greater relationship building exercises.

Journal Article Excerpt

See below...

The growth pattern of Samsung Electronics: a strategy perspective.

by Seongjae Yu For both economic and strategic reasons, Korean economic planners in the 1970s advocated the advantages of developing a domestic electronics industry. Economically, development of the industry was considered highly preferable because of its potentially high value-added, linkage effects (economic and technological), employment potential, and a fast-growing world market with high income elasticity. Strategically, the electronics industry was believed to be particularly suitable for a country like Korea with poor natural endowments but with abundant highly skilled human resources (KIST, 1976). In addition, the industry showed such characteristics as labor intensity,(1) knowledge intensity, low input requirements of energy and raw materials, and the increasing importance of electronic equipment in the emerging information industry. Korea has successfully turned these potential advantages into reality. When the Second Five-Year Plan ended in 1971, total output of the electronics industry was a meager $0.14 billion. Over the next twenty-five years, however, it grew over 440 times (in current dollars) to $62 billion, making Korea the fourth-largest electronicgoods-producing country in the world. Many of the large chaebols, such as Samsung, LG, Hyundai, and Daewoo, have contributed to this phenomenal growth. In particular, Samsung's role is of great interest, as it represents a microcosm of the growth process of the Korean electronics industry. Samsung Electronics Company (SEC), founded in 1969 as a member of the Samsung Group, has grown into the largest manufacturer in Korea, with a sales turnover of $23.9 billion in 1997, and accounting for 32.8 percent of the total output of the electronics industry. In investment, product development, marketing, and technology development, SEC has played the leading role in expanding the frontier of Korea's electronics industry. Since the introduction of monochrome television sets in 1971, Samsung has grown on average 38 percent a year, broadening its product range from simple consumer electronics and home appliances to sophisticated information and communications equipment, computers and peripherals, and semiconductors. SEC claims that, in the area of semiconductors, it has become the largest producer of dynamic random access memory (DRAM) chips in the world, with a market share of 17 percent (Samsung Electronics Group, 1996, p. 8), pulling ahead of such U.S. and Japanese giant corporations as NEC, Texas Instruments, Hitachi, and Toshiba. Samsung has many other products that compete well in the world market. In 1996, for example, sales of computer monitors ranked first in the world, with 12.8 percent of the market; videocassette recorders were fifth with 9.5 percent; microwave ovens were second with 18.2 percent; and static random access memory (SRAM) chips were first with 15 percent. This achievement is remarkable, given that its

takeoff occurred in the 1970s, when the Korean domestic economy was in a fledgling stage of development and Japanese companies were aggressively dominating the world consumer-electronics markets, eclipsing such U.S. firms as RCA, GTE, and Zenith. This article investigates Samsung's growth strategies, which enabled the company to catch up in technology and product development. Specifically, it focuses on Samsung's strategic choices with respect to product development, technology, manufacturing scale and scope, and export marketing. It also analyzes Samsung's strategy in building the competitive advantages required to cope with the unfriendly market environment dominated by world-class U.S. and Japanese electronics corporations. There is a distinctive and coherent pattern underlying these strategic choices, all of which are closely related to the evolutionary learning process of the company and matched with prevailing environmental conditions facing Samsung. However, not all factors that accounted for Samsung's success are considered - such as the effect of government policies, corporate culture, and organizational structure.(2) Growth strategy From the beginning, the goal of the late B.C. Lee, founder of the Samsung Group, was to make SEC one of the largest manufacturers of electronics goods in the world (Kang, 1996, p. 20). However, the initial conditions facing Samsung in technology, market potential, industry infrastructure, and labor skill were too unfavorable to achieve this goal.(3) The tasks required for Samsung were then: (1) to invest in production systems; (2) to acquire the necessary know-how, and (3) to become competitive in world markets.

Case Study
Developing innovative, high-tech products 30 percent faster
Samsung Electronics Co., Ltd.
Siem ens PLMSoft ware technology supports a fully di gital process that encom passes the full spect rum of activities fromcreative desi gn t hrough to manufacturing

Leading the digital convergence revolution Samsung Electronics Co., Ltd. is a global leader in semiconductor, telecommunication, digital media and digital convergence technologies. Employing approximately 138,000 people in 124 offices in 56 countries, the company consists of five main business operations comprised of 13 business units:Digital Media Business, LCD Business, Semiconductor Business,Telecommunication Network Business and Digital Appliance Business. Recognized as one of the fastest growing global brands, Samsung Electronics is a leading producer of digital TVs,memory chips, mobile phones and TFT-LCDs. Like all companies in the business of high tech, Samsung must bring innovative products to market faster while ensuring high quality and holding down costs. It is also faced with the challenge of working with global business partners and its own geographically dispersed facilities. Samsungs strategy for meeting its mission of technology-based value innovation relies

heavily on what it calls a digital convergence revolution.This revolution features two parts: a digital product development infrastructure (involving design, validation and manufacturing) and digital collaboration. Samsung is using product lifecycle management (PLM) technology from Siemens PLM Software as the foundation for its digital convergence revolution. Siemens PLM Software is supporting a number of the companys PLM initiatives including: digital product design with automation, largesize data and bill of material (BOM) management, digital mockups, knowledge management and concurrent engineering. Fully digital design through manufacturing Digital product development at Samsung begins with creative design, which takes place in a virtual environment built on an in-house industrial design solution and Siemens NX I-deas software. Photorealistic rendering and virtual reality take the place of physical prototypes.Tests of design variations and real-time motion simulation are also performed digitally,making it possible to find and fix errors early in the design process. Mechanical designers follow a configuration-based design process.Top-down design based on standard structures and specifications is employed.A mechanical library management system based on Siemens Teamcenter software enables designers to find and re-use existing parts. Samsung has a fully automated part and assembly validation system based on Teamcenter.The system performs more than 500 validation jobs every day in real-time. Samsung has automated much of the mold design and manufacturing process.The automated system, which was developed in-house, is based on rules and continuously updated corporate knowledge. It helps avoid human error and allows the company to develop molds for a cellular phone in the amazingly short span of just 10 days. Samsungs process for product data management and BOM management was developed by Samsung Data Systems and Siemens PLM Software engineers using Teamcenter to effectively manage the flow of product data and to automatically generate bills of material, which are synchronized with the CAD product structure. Benefits across the board One of the advantages of this fully digital design-through-manufacturing approach is greater efficiency in product design.The ability to find and re-use previously validated CAD data has helped shrink the development cycle by 30 percent. In addition, Samsungs process for evaluating design is now more effective. Using digital renderings and mockups has reduced the need for physical prototypes by 30 percent.Automated BOM generation has reduced errors by 95 percent. In the manufacturing realm, automation has also reduced errors, as evidenced by a 19-percent decline in corrections needed to molds and a 50-percent reduction in errors found in first production runs. Collaboration has improved as well, with work-in-process and release data shared globally in one integrated system, and CAD-BOM consistency maintained during engineering changes. Samsung is now preparing to migrate from NX I-deas to the NX product development solution. It also plans to expand its use of Teamcenter overseas, and ultimately to have a concurrent engineering environment that includes all overseas facilities.