Company Case 8 – Samsung: From Gallop to Run

1] How was Samsung able to go from copycat brand to product leader?
Samsung started out as a maker of cheap consumer electronic knock-offs. CEO Lee Kun-hee has taken major strides to make Samsung the company it is today. In 1993, Lee unveiled what he called the “new management,” which was a top-to-bottom strategy for the entire company. Under Lee’s new management, he took Samsung Electronics in a very ambitious new direction. His goal was to make Samsung become a premiere brand that would dethrone Sony as the biggest consumer electronics firm in the world. Instead of being a copycat, Samsung was to become a cutting-edge product leader. As part of Samsung’s revamped strategy and positioning, along with developing stylish and innovative new products, the company altered distribution to match. Samsung quickly abandoned low-end distributors such as Walmart and Kmart and built strong relationships with specialty retailers such as Best Buy.

2] Is Samsung’s product development process customer-centered? Team-based? Systematic?
Customer-centered new-product development focuses on finding new ways to solve customer problems and to create more customer satisfying experiences. Samsung uses the product development process by using market testing. Samsung created the “Wow!” test which every new product had to pass. If the product did not pass the “Wow!” test it went straight back to the design studio. Team-based new-product development is an approach in developing new products in which various company departments work very close together and overlap the steps in the product development process to save time and increase effectiveness. Samsung uses the team-based approach when CEO Lee started the “new management” era. This strategy was utilized to make Samsung the premiere brand they wanted to be and to create a top-to-bottom strategy for the entire organization. Systematic new-product development is defined when the process is holistic and systematic rather than compartmentalized and haphazard. Samsung uses the systematic new-product development by investing heavily into the development of new, innovative ideas. The company hired a new crop of fresh, young designers who unleashed a torrent of new products.

3] Based on the product life cycle, what challenges does Samsung face in managing its high-tech products?
Samsung CEO Lee Kun-hee admitted that the world’s largest technology firm’s current main products may likely become obsolete within the next ten years. This forward thinking has CEO Lee in reform mode. He has dubbed Samsung’s newest strategy mabuljungje, which is a Chinese axiom that means “horse that does not stop.” In a memo to Samsung employees, Lee stated, “The ‘new management’ doctrine for the past 17 years has helped catapult the company into being one of the world’s best electronics makers. Now is not the time to be complacent but a time to run.” As with any truly forward thinking, innovative company, Samsung does not claim to know what will replace today’s products as they become obsolete. Rather, it is investing heavily to ensure that it is the company that develops them. Samsung recently unveiled a $23 billion investment plan, its biggest to date. Much of this budget is earmarked for capital expenditures, new equipment, and plants to ensure that Samsung stays ahead of the game. The rest of the money will be used for research and development. Samsung risked losing market share if it did not completely overhaul its business model.

4] Will Samsung likely achieve its goals in markets where it does not dominate, such as smartphones? Why or why not?
I do believe that Samsung will achieve their goals in markets they do not dominate, such as smartphones. Samsung will achieve their goals because they will capitalize on interactivity- as in mobile phones with TVs. Such advances in product interactivity go beyond just presenting customers with flashy hardware features. They will take Samsung into a competition for consumer eyeballs with companies such as Apple. Samsung knows that it cannot thrive in the long term by merely offering better sound quality or sharper colors. Pricing power comes only from unique features or control over content. Samsung is putting plenty of resources into discovering unique features. Samsung is a very motivated and highly dedicated company that creates the best and most innovative products for high-end consumers. Possessing these characteristics will most likely help Samsung dominate the smartphone market.