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Report On

New Product Development Strategy of

Samsung R&D

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Table of Contents

S.No. Topic Page No.

1. Introductioni. History

ii. About Businessesiii. Vision 2020iv. Financial Datav. Market Share and Penetration

vi. Samsung in India

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2. Objectives 6

3. Methodology 7

4. Data Collection, Analysis and Findingsi. Samsung’s meteoric rise

ii. In a galaxy on its owniii. Samsung’s Investment for R&Div. Smartphones hitting new heightsv. Comparative Analysis of various brands

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5. Findings: The next big thing 12

6. Conclusion and Limitationsi. Conclusions: Breakthrough innovation

ii. Limitations: Expand into new categories

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7. References 15

Introduction

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History

Samsung Group was founded in 1938 as exporter of dried fish, vegetables, and fruits and flour mill and confectionery machines.

In Korean War, Samsung lost all assets aimed to help rebuild Korean economy; entered the manufacturing industry (sugar, fabrics). It became a leader in modern business practices (recruiting from outside)

In 1960’s expansion of key industries, entered electronics and chemical industries

In January 1969 Samsung Electronics Co. was established.

In 1970’s bet the future on electronics laid the groundwork for electronics in Korea which helped the domestic economy grow and paved the way for exports

In 1980’s, a more comprehensive electronics company; it established plants in Portugal and US. It also established Semiconductor and Communication corporation and began memory chip business

Samsung’s Logo used so far:

The Samsung Byeolpyo noodles logo, used from late 1938 until replaced in 1958.

The Samsung Group logo, used from late 1969 until replaced in 1979

The Samsung Group logo (“three stars”), used from late 1980 until replaced in 1992

The Samsung Electronics logo, used from late 1980 until replaced in 1992

Samsung's current logo, in use since 1993

About Businesses

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Samsung Electronics in 1938

Samsung basically operates in five major divisions. It provides an array of devices and solutions that can be tailored across industries. These enterprise solutions help you move information efficiently and securely,

integrate technology with relevant industries for a smarter ecosystem, and facilitate the necessary collaboration of colleagues and partners.

Apart from these businesses, it also provides solutions also:o Mobile Solutions

o Printing Solutions

o Large Format Display Solutions

o Hospitality Display Solutions

Vision 2020

The underlying principle that defines our vision for the future of Samsung Electronics

is "Inspire the World, Create the Future".

Financial Data

The various financial data for Samsung Group is as follows:

o Revenue US$ 268.8 billion (FY 2012)

o Net income US$ 30.1 billion (FY 2013)

o Total assets US$ 590.4billion (FY 2013)

o Total equity US$ 256.3 billion (FY 2013)

o Employees 427,000 (FY 2013)

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Samsung Enterprise Business

Education Retail Hospitality Healthcare Finance

Market Share and Penetrationo In the field of Smartphone, Samsung is the global leader with 33% market share

(2013)

43%

3%12%

8%

5%

4%

4%

4%

3%3%

11%

India Marketshare

SamsungNokiaMicromaxKarbonnAppleHTCBlackBerryLavaLGSonyOthers

Samsung in India

o Samsung Electronics commenced its operations in India in December 1995 and is

today a leading provider of Consumer Electronics, IT and Telecom products in the Indian market.

o Samsung India is the Regional Headquarters for Samsung’s South West Asia

operations, which provides employment to over 8,000 employees with around 6,000 employees being involved in R&D. In 2010, Samsung India achieved a sales turnover of US$3.5 billion.

o Samsung India is a market leader in product categories like LED TVs, LCD TVs,

Slim TVs and Side by Side Refrigerators. While it is the second largest mobile handset brand in India, it leads in the smart phone segment in India.

o Apart from development of innovative technology, Samsung places great importance on acting as a responsible corporate citizen in the communities where it operates. Its CSR programs respond to the social and environmental needs and seek to give back to communities that support the company. In 2009, Samsung launched the company’s Corporate Social Responsibility initiative – ‘Samsung

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Source: Cyber media’s Voice & Data Annual Survey of the Industry 2013

Hope Project’ with projects in the areas of education, culture, sports, social welfare and community development. Each program under the Hope Project uniquely addresses the needs of individual communities while emphasizing on innovations for development of the community including education, technology, engineering and IT technical training.

Objectives

To understand new product development strategy overview in Samsung R&D :

As new technologies are being constantly introduced to the market, speed is

essential for remaining competitive in today's digital era, and new markets have to

be pioneered continuously. Through the interplay of creative, imaginative people;

a global R&D network, an organization that encourages collaboration and

cooperation among business partners all along the supply chain, and a strong

commitment to ongoing investment, Samsung has put R&D at the heart of

everything

To understand methodology followed by Samsung R&D in New Product

Development phase:

The popularity graph of the Samsung mobile phones shows an ascending curve.

The reason for such a rise obviously directs to the dedication of the makers in

offering a state-of-the-art technology that is cost-effective, stylish, and most

importantly user friendly. Being the owner of a wide range of service support

centers throughout the globe, the popularity of the Samsung models of this make

stems from the reason of cost-effectiveness of the phone models.

To study effect of Consumer behavior on New Product Development of Samsung :

Customers are seemed to move to those products which have good balance

between style, technology and price of the product. Samsung is one of the leaders

that have sensed the pulse of the mobile phone users. Mobile phones from this

technological giant are a rare admixture of style and functionality.

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To challenges and problems faced by the organization in the process

Here we are considering only the Mobile Market segment of Samsung

Methodology

The methodology followed by Samsung in the New Product Development is as follows:

1.) Planning : In this phase, Samsung plans about the type of products it has to develop

depending upon the choice and requirements of the customers. For this, company does a

market survey about the requirements of the customers. Depending upon these data from

the market, Samsung designs its new products suiting the consumers.

2.) Research : After getting the requirements of customers about the new product, Samsung

according to its already available technologies design the product prototype. In this phase

it also searches for the appropriate patents for the same technology.

3.) Samsung Design Lab : After these initial steps, the prototype goes to Samsung Design

Lab where the basic design and research is carried out.

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PlanningResearch

(e.g. patents)

Samsung design lab (e.g. GUI/ Interfaces)

Standard Product

Development (in Korea)

Customized Product Developm

ent Regions

(India /US/

Vienna)

Testing (alpha/ beta)

Improve and

Version releases

4.) Standard Product Development : In this phase, all the standard features of the product are

development giving a shape to the product.

5.) Customized Product Development : After the standard product development, product is

now send for customized product development where it is developed for various

advanced and customized features of the product, before sending it for testing.

6.) Testing : In testing phase, the product is subjected to two phases viz. alpha and beta

testing. In alpha testing product is tested by the company R&D department only. It is

given to testing officials who test the various features in the products and then it is passed

for beta testing. Now in beta testing, the product is given to few selected customers who

use the product for some definite time and then the product is qualified for launch in the

customer market.

7.) Improvement : After the product is released in the market, various versions and releases

are made into the market. These releases are mostly available free of cost to the

customers.

Data Collection, Analysis and Findings

Samsung’s meteoric rise:

A: Samsung’s growth was mainly fuelled by sales of digital TVs (in particular LCD TVs)

B: Global sales of electronic products were affected by the economic downturn. Samsung’s

phenomenal growth was dragged down by the downturn that affected the US and Western

Europe.

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C: Samsung managed to achieve stellar growth, driven primarily by sales of its smartphones,

in particular its Galaxy range.

In a galaxy on its own:

o Samsung’s

ascendance as

the market leader

in mobile phones

was mainly

powered by

sales of its Galaxy

range of

smartphones,

especially its

flagship

Galaxy S3 and

Note 2 models.

o Samsung

leveraged the Galaxy branding and offered a cheaper version, the Galaxy S3

Mini for emerging markets. The combination of flagship and cost competitive

models allowed the Korean chaebol to leapfrog Apple Inc. by a substantial 50%

margin in volume sales.

o Apple Inc. insistence on a streamlined product line-up and higher profit margins

helped the company rake in record revenues, but had an adverse impact on its

market share in volume terms. Critically, the lack of a low-cost iPhone affected

its sales in the burgeoning emerging markets.

o Nokia Corp and Research in Motion Ltd continued their transition, and struggles

to offer an operating system to compete with Android and Apple’s iOS saw sales

of these two companies fall sharply.

Samsung’s Investment for R&D

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In 2010, Samsung Electronics invested $ 0.01 trillion, or 6.1% of consolidated sales in R&D.

Currently, has 50,084 R&D personnel which is equivalent to 26% of our total workforce. In

recognition of R&D endeavors, Samsung Electronics was included among the top 10 global

companies in R&D investment announced by the U.K. Department for Business, Innovation

and Skills.

Smartphones hitting new heights:

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o Samsung leads the global smartphones market and commanded 40% of retail

volume in the high growth markets of Asia Pacific and the Middle East and

Africa in 2012. Its share in Eastern Europe was 27% and 31% in Latin America

in 2012. Both regions were traditionally strongholds for Nokia.

o Samsung's market share was nearly double that of second ranked Apple in 2012,

aided by both its flagship models like the Galaxy S3 and Note 2, and low-cost

variants like the Galaxy S3 Mini, developed for emerging markets. A

comprehensive suite of products allowed Samsung to dominate the smartphone

market while BlackBerry (marred by its BB10 operating system), Nokia

(transition to Windows) and Sony (financials and change in strategy) were

unable to mount a serious challenge to the South Korean chaebol.

Comparative Analysis of various brands

Landscape

Samsung Electronics

Apple Computer Inc.

LG Electronics

Nokia Corp. Sony Corp. Motorola Inc.

Product Offered

Consumer Electronics (LCD TV’s, Microwave Ovens, PC’s etc.)

PC’s, portable music players, Mobile communication devices etc.

Consumer Electronics (Mobile handsets, Front loading washing machines, AC’s etc.)

Leading Mobile Comm. Company (started as wood pulp producers)

Electronic games, Motion pictures, Financial services etc.

Mobility solutions, mobile services, cellular comm. Devices etc.

Innovation and Design

Focuses on Reason and

Occupies ‘feeling zone’

Concentrated on 5 areas:

Adopted telecom as its

Creates Value added

Focus on two criteria’s for

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feeling to create a design and used global localization strategy to establish as a first class consumer (user centric)

and emphasis on the simplicity of products in terms of design and instability

Mobile comm., Digital appliances, digital displays, digital media and home networking and design their products by using 4 values: Theme, Style, interface and finish

core business and designing was based on 3 principles: Simplicity, Relevance and Experience

products by doping 4 principles of design: Originality, Lifestyle, Functionality and Usability

products for their consumers: personalization and socialization

Marketing Digital convergence using E-Processes and efforts in improving design by investing in R&D

Improvement in design and product features

Originally produces electronics for mass consumption but later transformed to produce premium consumer products for attracting premium customers and to gain brand image

Product categorization is done by: Explore Live classic, classic, achieve and entry and communicating brand value to the customers

Do not rely on customer surveys and create value added user experience through feature design, concept development and eco-friendly sustainable design

Paid attention on development of new revenue generating services and technologies and enabling customers to experience media mobility.

Findings: The next big thing

o Internal memos presented as evidence during the Apple-Samsung lawsuit dented

Samsung’s image as an innovator, but the lawsuit also showed consumers

Samsung’s relentless pursuit and obsession to mimic and beat Apple’s iPhone while

creating its smartphone range.

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o The company’s sponsorship of the London’s Olympics in 2012 and the 2-minute

advertisement during the Super Bowl in 2013 reinforced the Samsung brand image

in the minds of the consumers.

o Samsung has been spending consistently on advertising and is one of the largest

advertisers globally. Ad Age reported that Samsung spent US$4.3 billion

worldwide in 2012, four times more than Apple.

o Not content with its success in smartphones and TVs, Samsung has also identified

several other categories in which it intends to compete aggressively, such as

appliances, cameras, health and medical equipment and printers.

o The five forces are:

Relations with suppliers: It means that Samsung needs to improve their

relations with the suppliers. This can be done with Suppliers relationship

management and by bringing the suppliers on a single platform.

Relations with buyers: Customer is the king. There is a need to improve their

relationships with the buyers or customers by developing appropriate

marketing strategy, timely delivery of the products and supply chain

management

New Entrants: It is important for Samsung to analyse the threats from new

entrants in the customer electronic market

Substitutes: With the emergence of Chinese products in the market which can

act as the substitutes for Samsung products. Hence, it is important for Samsung

to implement Generic technology strategies which includes:

o Cost Leadership (e.g. Lower/cheaper material input, logistics)

o Differentiation (e.g. Enhance features, deliverability)

o Cost focus (minimum features)

o Differentiation (niche markets)

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.

In order to sustain its position in the near future Samsung will have to consider all the above

mentioned points.

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Conclusion and Limitations

o Conclusions: Breakthrough innovation

Within smartphones, the South Korean manufacturer banked on its

AMOLED screen and custom UI for its Android-powered flagship

smartphone, and single-handedly created the phablet (phone/tablet)

market, with its Note smartphones sporting a large screen back in late

2011.

Samsung demonstrated that it was not short on ideas and was focused on

catching up with both Apple and Nokia in the mobile arena, as well as on

strengthening its lead in digital televisions in 2012. Now that Samsung is

the market leader, there must be a significant shift in its strategic direction

if it is to build on its position.

Samsung has to show its competitors that it is confident and knows exactly

where it intends to steer the market. The market is expecting Samsung to

create category defining products, much as Apple has done with

smartphones and tablets.

o Limitations: Expand into new categories

Samsung is still not strong in cameras and laptops, which offers it room

for growth, while the company is also aiming to consolidate its lead in

mobile phones and digital TVs. While forecast growth for cameras and

laptops is lower than smartphones, these products offer relatively high

average unit prices and longer replacement cycles than smartphones.

- Samsung’s know-how in large-scale manufacturing and its economies of

scale give the company an advantage over competitors like Acer in

computers and Nikon in digital cameras. In addition, Samsung can

leverage its strong brand: Consumers are likely to be willing to give

Samsung’s foray into these new categories a try.

- However, Samsung has to be selective in its product line-up and avoid

direct competition with its rivals. For example, Samsung should focus on

high-end fixed lens cameras and compact system (mirror less) cameras,

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and not try to compete with established players like Canon in the DSLR

market.

References

o www.samsung.com/us/aboutsamsung/samsung_electronics/business_area/rd_page/

o http://www.businessinsider.in/Samsung-Has-A-Totally-Different-Strategy-From-

Apple-And-Its-Working-Great/articleshow/21250813.cms-

o http://www.portal.euromonitor.com/portal/default.aspx

o http://www.businesskorea.co.kr/article/1505/samsung-group-marking-300-trillion-

won-revenue-500-trillion-total-assets

o http://articles.economictimes.indiatimes.com/2012-11-30/news/

35483331_1_samsung-targets-asim-warsi-samsung-electronics-india

o http://www.engadget.com/2013/07/03/samsung-to-build-five-new-randd-centers/

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