CASE STUDY

SAMSUNG MOBILE: MARKET SHARE AND

PROFITABILITY IN SMARTPHONES

Introduction

Samsung is one of South Korea's leading companies founded in 1938 and it’s Korea's

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largest conglomerate. The group consists of 44 subsidiaries and a number of other

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legal entities. It has 429 locations and 230,000 employees in 68 countries around the

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world. Its business involves electronics, finance, machinery, chemistry and many

other fields. Samsung Group includes: Samsung Electronics, Samsung Networks,

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Samsung Securities, Samsung Products, Samsung Heavy Industries, Samsung

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Engineering, Samsung Airlines, etc. Three of the subsidiaries were selected as Fortune
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500 by Fortune Magazine. Samsung Electronics is the largest subsidiary of the

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company. It is the world's second largest mobile phone manufacturer and the world's
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largest electronics company. In 2009, among the world's top 500 companies, Samsung
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Electronics occupied the 40th place. The world's most respected company ranked

50th, Samsung's brand value ranked 19th, In 2011, the global corporate market

capitalization was $150 billion.

Case analysis

In December 2015, Samsung appointed DJ Koh as the head of the mobile division as

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 they desire to further intensify innovation in an increasingly commoditized product

area. this means Koh will face many complicated issues including : Should the mobile

division push for profitability or market share? Were those objectives mutually

exclusive? What was the best strategy for obtaining the chosen objective? And, how

could Samsung differentiate itself in an increasingly crowded, competitive, and

commoditized market?

Strategic and Situation Analysis

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Samsung's strengths are outstanding, but the weaknesses are also obvious, the

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opportunities exist, but so do threats. Samsung's advantages are as follows: Samsung

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was in a very strong position relative to many of its peers. It sold more smart phones
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than any other company worldwide.Moreover, Samsung's six models range in price
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from 144 dollars to 768 dollars, indicating that in the market, Samsung's mobile
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phones occupy all markets.Samsung's disadvantage comes from its own. In 2015, Two

new mobile phones released had big problems in design, quality and production,
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which had a huge impact on the revenue of the mobile sector. The data shows that in

2015, mobile departmental revenue fell by 38%. In terms of profitability, compared

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with Apple, although Samsung dominates market share and sales are far more than

Apple, but the profit is far less than that of Apple.More unfortunately, from exhibit 2,

Samsung’s market share is declining every year, from 32.2% in 2012 to 21.4% in

2015. In the market of smart phones, there are still many opportunities. Since the

launch of smart phones, its influence on consumers has increased day by day. From

the initial call-only function to the current multimedia, smart phones are becoming

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 more and more popular and comprehensive. The market will be bigger. The pressures

and threats from competitors are also huge. In recent years, Apple has dominated the

high-end market. In the low-end market, Xiaomi and Huawei in the Asia-Pacific

region also occupy a large market share. Not only Xiaomi and Huawei, but also more

than a thousand other companies, they are sharing the market share.

Evaluation of Alternatives and Recommended Action

Push profitability vs. Push market share

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As mentioned before, Samsung's sales are the most in the world, but the profit is far

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less than Apple. If increase the price of mobile phones, Samsung may bring more

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profits in the short term. However, in terms of technology, quality, etc. Without
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significant improvement, consumers may begin to question the value of Samsung.
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From a long-term perspective, simply pursuing higher profits is not a good idea. On
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the contrary, maintaining and increasing market share may be a better choice. For

example, some manufacturers such as Microsoft-Nokia professed to be less concerned

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about profitability. In their view, they prioritized market share over margins. Such a

strategy prioritized the income derived from the selling of software applications
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(apps), device upgrades, services, and complementary products over the sale of the

initial handset itself.

Android OS vs. Exclusive Samsung OS

Samsung also has a problem about its operating system. Samsung did have some

phones with Microsoft’s Windows operating system, but Samsung phones

predominantly featured Android. The Android operating system was the featured

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 operating system of more than 80 per cent of the world’s smart phones.Android is

well known to consumers around the world. For Samsung, The advantage of Android

is that it is a mature operating system, and almost everyone is used to using it.

However, this can be said to be its disadvantage: lack of differentiation and

commoditization.In contrast,the reason why Apple's profit is greater than Samsung, to

a large extent, Apple have its own operating system “IOS”.Consumers are more

willing to pay for Apple's unique rather than ordinary Android. In fact, Samsung's

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Android operating system is not the most common one, it also has a lot of custom,

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unique design to distinguish other mobile phone manufacturers. However, more than

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half of Android users did not feel it. In addition, Samsung's mobile phone and
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Samsung's other products have not been contacted. Unlike Samsung, Each Apple
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device reinforces demand for the company’s other products. The Apple OS is at the
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heart of that,this is just what Samsung really required.

Recommended Action and Conclusion

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The better strategy for Samsung is : Focus on market share rather than profitability,

sell mobile phones at lower prices and gain continued attention and support from
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consumers. Similar to Microsoft Nokia, through selling of software applications

(apps), device upgrades, services, and complementary products over the sale of the

initial handset itself.Develop Samsung's own operating system and closely link all

Samsung products.

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