Business Growth Strategy

Growth Strategy Analysis: Samsung Telecommunications

Introduction:
Samsung Mobile Division is one of five divisions within Samsung Electronics, belonging to the
Samsung Group, and consists of the Mobile Communications Division, Telecommunication Systems
Division, Computer Division, MP3 Business Team, Mobile Solution Centre and Telecommunication
R&D Centre. In 2007 Samsung Mobile Division Business reported over 40% growth and became
the second largest mobile device manufacturer in the world. Its market share was 14% in Q4 2007,
growing up from 11.3% in Q4 2006. At the end of November 2011, Samsung sold more than 300
million mobile devices.

But, with Samsung’s fall from its number one position last quarter being the most recent instance.
Data from multiple research firms showed Xiaomi, growing at a breakneck speed, surpassed
Samsung in the quarter ending December 2017. According to Counterpoint Research, Xiaomi
claimed 25% market share in India, while Samsung slipped to the second position with 23% market
share. Similarly, Canalys puts Xiaomi’s market share in the December quarter at 27.4%, while
Samsung’s at 24.6%. Although Samsung ended 2017 as the largest smartphone company in India
with a 24% market share as per Counterpoint, it has been losing its sheen for quite a while.
Also, it faces an aggressive competition in the higher-end segment too. It has been struggling to
compete with brands like Apple, Google, Oneplus, etc. Company's global share of smartphone sales
drop from 35% in 2013 to 24% by early 2015.

Analysis:

Scenario Analysis: Trends

In 2019, the number of mobile subscriptions was estimated to pass the eight billion mark for the first
time, reaching a total of 8.3 billion mobile subscriptions worldwide up from 7.9 billion in 2018.
Networks such as 4G/LTE have begun to catch up with Wi-Fi as the preferred means of connecting
to the Internet from mobile devices. The reliance on smartphones and their usage seems likely to
increase as more features become available.

Scenario Analysis: Uncertainties

There are many uncertainties in the smartphone market. For the past 4-5 years, the one of the main
uncertainties for Samsung has been investment in the mid-range devices. Samsung has over-
focused on its flagship portfolio rather than its mid-tier portfolio in terms of design, marketing and
pricing. As a result, its competitors have been able to provide better specifications and better-
designed devices at prices that are 30-50 per cent lower than Samsung's Galaxy phones.

The second uncertainty for the company has been the introduction of augmented reality (AR) and
artificial intelligence (AI) to the customers. Many of the current devices made by the company are
not compatible with AR and AI technology. For example, Samsung’s Bixby AI voice assistant is only
available on Samsung’s flagship Galaxy Note 8, Note 9, S8, and S9 smartphone lines at the
moment. And ARCore — the technology that enables AR on Android phones — is not compatible
with Samsung’s mid-tier J series smartphones.
 Figure 1: Uncertainties for Samsung in the Smartphone Market

Uncertainty 1: Mid-Range
Devices
No Introduction Introduction

No Introduction Scenario A Scenario B

Uncertainty 2: AI and AR

Scenario C Scenario D
Introduction

Samsung, for a long period of time had been in Scenario A, it neither had good mid-range phones
in the market nor were the existing phones AI and AR compatible. Although it managed to exist in
the market. It couldn’t perform at par with other companies. It was able to maintain a certain market
share because of its brand name and customer loyalty. Yet, due to the majority of the customers
being mid-ranged device seeker, its demand went down drastically. A better way for the company
to persist in this is usually a price-cut in the commodities.

Moving to Scenario B, in last few years, companies like Xaiomi, Vivo etc. have successfully
established their foot in the mid-range segment while Samsung was focused on high-end flagship
devices. But regardless, Samsung managed to introduce some decent med-ranged devices and
has been able to regain its customer base to some extent . A recent study by Strategy Analytics
reveals that the Samsung Galaxy A51 was the bestselling Android smartphone in the first quarter of
2020. Samsung Electronics designed Galaxy M-Series and A-series specially to target the middle-
class customers and to retake 1st Place in Indian Market.

Game Theory Analysis:

Scenario C and D are more complex because of the aggressive competition in the smartphone
market. Apple have successfully established their foots in the high-end segment of the market in the
past decade. Iphones are much more in demand than any other phone globally and its AI - “Siri” has
been a great success too. To compete with a company like Apple, Samsung has focused more on
vertical integration and generating a large product volume. The company spends a large fortune in
research and development (R&D) and on capital expenditures. While Apple still imports billions of
dollars' worth of components from its rival every year, Samsung is beholden to nobody.
To compete wit Apple and other flagship companies, Samsung also brought up its own AI – “Bixby”
in it’s flagship devices like Galaxy Note 8, Note 9, S8, and S9. For the budget phones, Samsung
also rolled out Bixby support for the Samsung Galaxy A7 (2017) that has just been launched in
South Korea in 2017, hinting that mid-range smartphones may also be getting support for the AI
assistant. This can help Samsung compete with companies like Xaiomi which introduced its AI –
“Xaio”.
If Samsung is able to bring forth a mid-ranged device with AI and AR support, it can compete the
other established companies in the market with its existing brand name and customer service.

Figure 2: Mid-Range AI Competition.

Samsung vs Xaiomi

Xaiomi AI - Xaio

No Introduction Introduction

No Introduction
Samsung AI – Bixby

Introduction

Xaiomi
Samsung

From the payoff matrix, it is clear that among Xaiomi and Samsung, if one of them introduces AI and
the other doesn’t, then, the one who doesn’t introduce it, is going to lose market share and revenue.
If one introduces the feature, the other is bond to introduce it too in order to remain in the competition.
Thus, it is recommendable and obvious to Samsung for the introduction of “Bixby” to its mid-range
phones as well along with the flagship ones.

Synthesis:

After the scenario analysis and the payoff matrix analysis, it is evident that Samsung should go for
Scenario D, as it is by far the only viable strategy for the company to gain customer base and
establish themselves in the mid-range smartphone market above other companies. With the initial
introduction of “Bxiby AI” in Galaxy A7, Samsung tested its performance in the market and its
compatibility with the device and customers. Based on its performance, Samsung should introduce
its new devices with AI and AR support for the mid-ranged segment too. With its hardware quality
and software optimization, Samsung can effectively gain a large market share in the segment with
strategic developments and a Real Option Analysis Approach (Figure 3).

Figure 3: Option Analysis for Samsung AI Launch

SALES

Check &
Small analyse
Launch data.
NATIONAL/INTERNATIONAL
LAUNCH

AI support
in few
devices.

ABANDON

ABANDON

Nishant Kumar
BMS.
SSCBS’22.
REFERENCES:

1. Business Insider Article.

https://www.businessinsider.com/samsung-strategy-mid-range-smartphones-2018-9?IR=T

2. Business Standards Article.

https://www.business-standard.com/article/companies/samsung-s-challenges-grow-in-india-
114100600991_1.html

3. The Passage Article.

https://thepassage.cc/article/9/

4. Investopedia Article
https://www.investopedia.com/articles/markets/110315/samsung-vs-apple-comparing-
business-models.asp

5. Emerj.com Article.
https://emerj.com/ai-sector-overviews/smartphone-ai-trends-comparisons-apple-samsung/

6. Business Korea Article.

http://www.businesskorea.co.kr/news/articleView.html?idxno=41538

7. Bgr.in Article
https://www.bgr.in/news/samsung-and-xiaomi-mid-rangers-beat-premium-flagships-in-q1-
2020-sales-892212/

8. Market Realist Article.

https://marketrealist.com/2016/03/opportunities-challenges-samsung-smartphone-market/

9. Gadgets 360 Article.

https://gadgets.ndtv.com/mobiles/news/samsung-galaxy-a7-2017-bixby-support-launched-
mid-range-smartphone-features-1723906