INNOVATION AND DESIGN STRATEGY
SAMSUNG CASE ANALYSIS
Started by Byung-Chull Lee in 1939 as an exporter of agricultural products. Samsung Electronics established in 1969 followed by product diversification. Strategic Joint Ventures with NEC, Sanyo and Corning Glass work in 1970 Brought 50% stake in Korea Semiconductor Inc.
Acquisition of Korea Semiconductor Inc. in 1978 followed by the successful implementation of reverse engineered product design
Vertical integration by developing their own IC’s DRAMS(Dynamic Random Access Memories in 1985
Focus on qualitative growth than quantitative growth in 1990
Loosening of import restrictions by South Korean government. And Samsung achieved price competitiveness in 1991.
In 1994, Samsung established R&D centre in US markets. In 1997, Samsung cuts its Korean and overseas workforces due to Asian Financial crises.
In 1999, Samsung was regarded as world’s premiere consumer goods and services industry By Forbes.
In 2000, Samsung embarked vision to convert itself into a Digital- e company. Increased design staff and R&D in 2004 In 2005, Samsung increased its design budget by 20%-30% In 2006, Samsung registered 17,377 patents worldwide In 2007, Samsung held dominant worldwide market share
M e t hod s t o I mpro ve Pro du c t i v i t y
• Improvement in the product development processes • Increasing their investments in R&D and product design i.e. R&D globalization. • By adopting right innovation strategies. • By mastering the less tangible, more intuitive qualities of superior design. • By diversification of products and step by step or continual improvement. • Implementing Global localization strategy. • Achieving Vision of leading in digital convergence by using e-processes (electronic integration of processes by going online).
I n n o vati on a nd pro duc t D e s i g n a t Sams ung El ectr oni c s
• Creative people in the organization which contributed in the development of technology. • Co-operation between the business partners throughout the supply chain • Firms ability in exploring end penetrating into the new markets • Speed of innovation and product development.
Sa ms ung R & D bud get a n d pe rc enta ge s al es
Source: EXHIBIT 3
I d e a beh ind th e gl oba liz a t i o n o f R & D n etw ork
• Focus on innovation and generating new products for global market. • There is a huge scope of product improvement. • This provides an access to the emerging markets. • Leverages the market opportunity for the firm.
U s e r - Cen tric D esig n Ph i l o s o p h y
Ma rke ting
between of and
marketing. This thing helped Samsung in improving: • Brand Image • Helped in product differentiation • Better value propositions or bundle of benefits to the customers.
N e t sal es a nd ope rat ing p r o f i t o f Sa msun g E lec tron ics i n 2 0 0 7
S a m s ung Elec tr onic s ’ E - pr o c e s s e s
C o m p a r i s o n of perc ent age of Net s a l e s on R & D In ves tm e nt
C omp eti tive La nds ca p e
Samsung Apple Landscape Electronics Computer Inc.
Nokia Electronics Corp.
Sony Corp. Motorola Inc. Electronic games, Motion pictures, Financial services, etc. Mobility solutions, mobile services, cellular comm. Devices ,etc.
Consumer PC’s, Consumer Leading electronics portable Electronics Mobile (LCD TV’s, music ( mobile Comm. Microwave players, handsets, Company Ovens, PC’s, Mobile Front loading ( started as etc.) communicati washing wood pulp on devices, machines, producers) etc. AC’s, etc.)
C omp eti tive La nds ca p e
Landscape Samsung Electronics Apple Computer Inc.
Nokia Corp. Sony Corp.
Focuses on Occupies ‘Reason’ and ‘feeling’ zone feeling to and emphasis create a design on the Innovation and used simplicity of & Design global products in localization terms of strategy to design and establish as a usability. first class consumer electronic company(user centric)
Concentrated on Adopted 5 areas: telecom as its Mobile comm., core business digital and designing appliances, was based on 3 digital displays, principles: digital media andSimplicity, home Relevance and networking and Experience design their products by using 4 values: Theme, Style, Interface, and Finish
Creates Value Added products by doping 4 principles of Design: Originality, Lifestyle, Functionality and Usability
Focus on two criteria's for design the products for their consumers: Personalization and Socialization
C omp eti tive La nds ca p e
Samsung Landscape Electronics Apple LG Nokia Sony Corp. Computer Electronics Corp. Inc. Digital Improvement Originally Product Do not rely convergence in Design and produced categorizatio on customer using EProduct electronics for n is done by: surveys and Processes and Features mass Explore Live create value Marketing efforts in consumption Classic, added user improving but later Classic, experience design by transformed achieve and through investing in to produce entry and feature R&D premium communicati design, consumer ng brand concept products for value to the development attracting customers and ecopremium friendly customers and sustainable to gain brand design image Motorola Inc. Paid attention on development of new revenue generating services and technologies and enabling customers to experience media mobility
CO NCL USIO N
Ø Relations with suppliers: Improve the relations with the suppliers. This can be done with Suppliers relationship management Ø Relations with buyers: Customer is the king Ø New entrants: It is important for Samsung to analyse the threats from new entrants Ø Substitutes: With the emergence of Chinese products in the market which can act as the substitutes for Samsung products . Establish Generic technology strategies which includes: Cost leadership Differentiation Cost focus Differentiation Ø Rivalry among established firms: There is a strong competition between the already existing firms like Nokia, Sony, Apple, LG, etc. Therefore Samsung will have to improve its competitiveness in the market.