Samsung’s strategy on the Russian and world markets

Several days ago Samsung officially introduced 4 new models for the Russian market. Their specifications and tests are already existed at our site. Announcing of new models is a cause to speak about business policy of the company on the Russian and world markets. So, let’s view the outlooks.

Review Samsung X400
Review Samsung S500
Review Samsung E400
Review Samsung C100
Review Samsung T500

Originally Samsung positioned its handsets as expensive phones of high quality. When the company made only first tries to conquer Russian market, a theory that to attract new users the company should produce cheap phones (less than 100USD) was dominated on the Russian and even world GSM-market. So, many manufacturers subsidized their phones themselves or with a help of operators. The main goal was to offer the best conditions for the user. The manufacturer hoped that many users would remain admirers of that trademark and next purchase would compensate their costs. In reality, many makers based on this idea partly cheapened their brand and turned into manufacturers of cheap devices in users opinion. Another disadvantage is that it is very difficult to profit from cheap phones production, though value of service equipment, marketing and advertising costs are comparable with the products of high and middle class levels.

On the other hand, invasion of the new company with expensive phones means that sales would be low and market share growth would be very slow. There are two ways to stimulate sales: firstly conduct active advertising campaign; secondly, offer products, which have unique functions. Samsung chose this way.

Samsung had one of the largest advertising budgets. It is corporate identity of the company, related not only to phones but to all products made by Samsung. Phones attracted primary attention due to large advertising campaigns. They are well-known on the market. Unique functions, mostly sound possibilities and color screens, available in Samsung are also very important. In the beginning of its invasion the company tried to introduce products, similar to those, which were on the market, but they were almost not interesting to consumers. Clamshell phones of the company raised interest of European users, because there were no phones with such form-factor on the European market at that time. Samsung tried to occupy this free niche. Producing clamshell phone – A100, the company quickly increased its sales. This model had been sold till recently and it had been in great demand. The next popular phone was A300. it was the first clamshell phone with two screens. One could argue which company first invented a handset with two screens, but no doubts that Samsung was the first one, which flood the market with them. Large advertising campaing focused on A300 was held in every country, where it was delivered. I spent holidays in Tunis that year and A300 was the only pone advertisements of which I saw in this country.

The company concentrated on producing clamshell phones, feeling that it would be possible to compete with other manufacturers. Originally many models are produced only for local domestic market and after some period of time, they are adapted to European market. Price of the developments reduces in this case. Taking into account that the company covered many fields and it had very strong positions in the field of memory and color screens production, it is clear that prime cost of the product could be minimum. For example, among other mobile terminals manufacturers only Motorola has strong department of transistors. Philips has all necessary resources and developments but probably phones is not a field of high priority for this company and the company didn’t pay considerable attention to it.

Samsung had an advantage and became the first company introduced a clamshell phone with a color internal display. T100 immediately attracted attention of both consumers and distributors. Large budgets were spent to promote this model more than one year ago. In a year the price for this phone wasn’t greatly reduced, new models from Samsung were launched but the phone has been sold without problems.

The company began to introduce fashion for clamshell phones in Europe. The only rivals were clamshells from Motorola, but they were functional and not very attractive as fashion phones. On the contrast, Samsung staked on design. The company chose this strategy because it understood that it couldn’t reach other leading manufacturers by features during 1-2 years. Samsugn staked on clamshells, though other models were produced as niche solutions (till R200). Exclusive features such as polyphony and color screen were added to the handsets to be different from the phones of other manufacturers.

Simultaneously the company tried to stronger its positions in other market segments with the phones of traditional design. All attempts were failed till R200. The success of this phone is that consumers liked it design, functionality and price. Good sales of expensive models also helped to promote this phone.

N600/N620 with 16-tones polyphony were one of the first in their class. These models do not belong to clamshell class. Till now these phones are well-sold and the company plans to take them out of the production only in the end of this year.

Of course, the company had several failures. A reaction on the new product is not always understandable. One of such failures is N400, which has original design, and automatically moved antenna, which is a unique features even today. An attempt to introduce functional business clamshells was not successful either, Q-series didn’t become popular. At that time phones from Samsung were considered belong only to fashion class. Business users didn’t think about them while purchasing a phone. The manufacturer made a mistake, staking on IrDa and GPRS in that phones. Later the company refused to produce advanced phone immediately , it preferred to add new functions in existed models. That is the main reason of company’s success and its popularity.

Consolidating its position in the class of expensive fashion phones due to color screen and form-factor, the company began to equip handset with new features: IrDA, GPRS, MMS. It followed the simple rule: each new product shouldn’t be more expensive than existed ones (except top models). So, producing new phone the company gained new market share. Samsung is unique company because it conquers market from top segments. It is known that entry-level segment occupied about 45-50% of sales, though fashion segment – only 5-15%. Fashion solutions is an engine which moves cheaper phones from Samsung.

Innovations in the phones of the company are remained for a long time. The main competitors are own phones. Reducing the prices for old hadnsets, the company avoids it. Simultaneously it prolongs the life cycle of these models and reduces prime costs.

Than the company tried to invade 150-200$ price band. It developed a new phone – C100, which is more functional than other phones in this segment, there are only rivals in 250 USD price group. This phone will be successful, because none of the manufacturers could oppose a similar model in the near future. Besides the company has been conducting large advertising campaign. Later the price for this phone will reduce and as a result it would be more and more popular. It would be profitable for the company.

Today Samsung took the third place in Europe, only Nokia and Motorola stand before it. Siemens was moved from the third place. The same situation was in Russia in the 2Q, now it is similar to European. Samsung didn’t have jumping growth, it is slow but stable. Every new model has more functions and even today they are comparable with most of phones available on the market. In the end of the year there will be models, which have all features among available ones.

Samsung is the only manufacturer which elaborated niche phones, targeted to a small target group. First one was A400 aimed for women. Its successor became T500. Later we could see T700, which would be also aimed only for women.

The company considers only Nokia to be its competitor. It is very self-confident approach but the company has an outstanding market growth. In the 3 and 4Q Samsung will try to invade middle price segment. It will be troublesome to other manufacturers; the completion will be higher. The situation will be interesting in he beginning of the next year, when the company will offer several new products in new segments (originally the phones will be aimed to different price segments, which now have only old cut-price models).

Currently the company introduced 4 new models for Russian market, such as С100, Т500, S500, X400. They can be first examples of new price policy of the company. All models are rather cheap while launching. C100 will be available on the market in the middle of July (third week), a retail price is 165-170 USD.

T500 aimed to women has been already sold on the market (there will be no shipments to Europe, only to Bulgaria, Ukraine and Russia). Its price is about 430-440 USD today. In the near future the price for this phone will reduce to 400 USD.

Initially S500 was postponed and it was planned to launch E400. But later E400 was postponed to August, now the company has been shipped S500. In the beginning of August, this phone will cost about 240 USD, it is minimum price for the new phone with two color displays.

X400 will be available in the middle of August. The primary price will be about 270 USD.

All introduced models will be produced in several color solutions, it is also the tradition of the company. Last week the company reduced wholesale price for some models, so, in a month these changes reach the market (retail chains).

Links:

Review Samsung X400
Review Samsung S500
Review Samsung E400
Review Samsung C100
Review Samsung T500