E Book Reader Strategy Daniel Kamerling Final

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  • Presentation prepared by Daniel Kamerling for Samsung GSG internship 2nd round interview.
    Topic: e-Book Reader strategy for Samsung
    How well is Samsung currently positioned in the e-Book Reader market?
    What strategy do you think Samsung should take in the e-Book Reader market?
    What are the key success factors / dependencies to executing your recommended strategy?
    What are the risks to your strategy and how would you mitigate them?
  • The primary application of e-Readers is display of e-Books using electronic ink which does not strain eyes. However, e-Books can be viewed on a variety of other devices not specifically designed for reading. In addition, books and periodicals remain the dominant media for the consumption of books.
    The chart above provides a sample comparison of the consumer benefits served by various types of media for reading books. This qualitative approach infers the following:
    Function and Price are not discriminators to current e-Reader consumers.
    Readability is necessary in order to compete within the product category.
    Samsung’s current product line lacks in a competitive source of content.
    The iPad would be categorized under mobile computers. This field could be broken down further into laptops, netbooks, and tablets. While the qualities of devices within these fields is may diverge (and debated) from that listed the key point to consider is readability. Samsung will be supplying the CPUs for the Apple iPad.
    Device notes:
    Displays are currently undifferentiated and use E Ink® VizplexTM technology.
    Both Sony and Samsung have partnerships with Google for books within the public domain.
    Sony has also partnered with Borders.
    Jinke Electronics is a Chinese firm which has leased its technology for rebranding.
  • The US market was chosen because it is currently the largest market. The demographics obtained from Forrester research suggests that the primary driver of this growth are “super-readers”.
    International market considerations
    European Union: England is the second highest publisher of fiction in the world. Sony and iRex are best positioned in Europe.
    Japan: Despite being technology adopters the lack of language support and digital content has severely limited the e-Reader market. FLEPia, by Fujitsu, is also expensive at $1,000.
    China: Is poised for growth but suffers from significant competition (introduction of ~5 readers) and piracy concerns.
    India/Brazil: There is little competition currently in these markets.
    South Korea: Samsung has a dominant brand image in this country and should launch any e-Reader product in Seoul.
    Revenue calculations:
    Low side: 15M * 10% * $100 = $300M
    High side: 15M * 15% * $200 = $750M
    20% share by Samsung by 2013 would amount to 3M units. This is the same amount shipped to consumers in 2009. As such, this seems like a reasonable conservative benchmark for performance going forward.
    Other market considerations:
    Customer education burden has been absorbed by Amazon. While e-Readers have been around for some time the Kindle was the first to excite the market.
    Samsung is late to market with the announcement of their product line-up at CES 2010. The Sony Reader was released in 2006 and the Amazon Kindle in 2007.
  • Market Attractiveness:
    Based on the competitive landscape Samsung should pursue the e-Reader market.
    Approach:
    The strategy involves the synthesis of diverse content, latest technology, and a robust platform into a device which provides customers with the #1 reading experience. These three pillars are critical to insuring a marketable, competitive, and sustainable product. Content is a gatekeeper to the consumer that must be satisfied before the purchase can be considered. Technology will provide a better experience for the user when reading. Finally, a platform will develop network externalities that will increase switching costs and over time build momentum for the brand.
    Capabilities:
    Currently, Samsung has capabilities in technology and platforms. In order to be successful Samsung must fill the content gap by partnering with publishers. The primary target are avid readers.
  • The recommended strategy for Samsung is broken down into more discrete components including current and future steps.
    Publishers were highlighted because the content provided is critical to competing.
    Electronic retailers are important because it provides exposure to consumers not currently leveraged by most competitors (nook is sold in store). 40% of online US customers have heard of an e-Reader but haven’t actually seen one. If the product can be tested in person then the benefit of Samsung’s superior design will become apparent.
    Mobile phones are also critical to the long-term strategy. An important distinction must be made between the e-Book and e-Reader market. Since e-Book customers can easily switch between devices and the ability to cater to that behavior is important. Developing the mobile phone e-Book community will provide captured consumer interactions which can be converted into purchases for Samsung products.
    Price is a sensitive issue which must be closely monitored. Currently, since many of the companies use the same technology it is difficult to maneuver. However, as new suppliers come on board Samsung must be prepared for shifts in the competitive landscape.
  • The chart outlines the factors that will affect the e-Reader market in the near future. Critical factors were highlighted and will be elaborated upon in later slides.
    Success factors:
    Being a component supplier hedges risk by providing revenue from competitor sales.
    A point of sale demonstration is important, at the current level of awareness, to inform the customer on the benefits (not the purpose) of e-Readers.
    Samsung is a leader in design and engineering and should leverage this to stay at the edge of e-Reader innovation.
    Samsung produces many of the internal components, such as CPUs and memory, for e-Readers and is thus afforded room to determine price.
    An active community will create a network externality that which will create an emotional attachment to the brand.
    Samsung should leverage business sales to offer e-Readers directly to professionals.
    Brazil and India are poised for growth without much competition.
    Risks:
    There are many new entrants expected into the space.
    The current technology is provided by a single source. If new suppliers are slow to enter the market it could create a shortage.
    The mass market adoption price is estimated to be ~$100 USD .
    It is possible that the current market leader, Amazon, will retain customers into the future.
    While China is an attractive market, piracy is a pervasive issue that threatens the business model.
  • A “One Samsung” customer facing is important to insuring customer investment into not only the e-Reader but the entire digital content platform.
    Backward integration: In addition to publishers there is a threat of retailers such as WalMart and Target developing e-Readers and selling them as “private label.” If likely then it is important to try and lease Samsung’s technology for this purpose.
  • Through consumer focus and technology leadership Samsung will offer the #1 e-Reader in the market.
    Thank you for your time!
    Daniel Kamerling
    Kellogg School of Management
    MMM Candidate 2011
    [email_address]
    Phone: 224-420-6130
  • E Book Reader Strategy Daniel Kamerling Final

    1. 1. E-READER STRATEGY by Daniel Kamerling2/19/2010
    2. 2. 2 Market Position: Strong Design, Weak Content Media Players Design e- Reader Mobile Compute r Mobile Phone MP3 Player Books Periodica l Content Multi-Function Readable Price Samsung customer Samsung customer Distributor Content partner E6, E101
    3. 3. 3 Market Position: Entering during Growth Samsun g >20% Samsun g >20% Amazon (60%) Amazon (60%) Sony (35%) Sony (35%) OtherOther ₩350k ($300) 3M ₩230k ($200) 15M 5X Growth1 3 years Goal Capture 20-25% of the US e-Reader market in the next 3 years resulting in revenues between ₩340B – 850B ($300M-750M) Demographics Tech Optimist Avid Readers Upmarket Female Age 47 39 42 Gender (% male) 54% 60% 46% Income (won) 132M 100M 96M Income (USD) 116k 88k 84k Books/Month 3.5 5 3.7 % Online Shopper 1.50% 5.60% 24% 2 1 E-Reader sales projection: “How Big Is the eReader Opportunity?”, Sarah Epps, May 2009 2 E-Reader adopter demographics: “Who Will Buy An eReader?”, Sarah Epps, July 2009 Adoption Curve
    4. 4. 4 Strategy: Enrich the Book Lover Experience Provide Consumers with the #1 e-Reading Platform Platform •Cross-device Purchasing •Social Networking Tools •Self-Publishing Platform •Cross-device Purchasing •Social Networking Tools •Self-Publishing Content •Publishers (HarperCollins) •Newspapers (Tribune) •Online (Blogs) Content •Publishers (HarperCollins) •Newspapers (Tribune) •Online (Blogs) Technology •Benefits (Screen, Quality) •Features (Color, Video) •Applications Technology •Benefits (Screen, Quality) •Features (Color, Video) •Applications ConsumerTarget – Avid Readers, Upmarket FemaleConsumerTarget – Avid Readers, Upmarket Female Samsung •Reputation and capability for engineering excellence •Samsung Apps released cross-platform •>227M installed base of mobile phones (e- readers)1 Samsung •Reputation and capability for engineering excellence •Samsung Apps released cross-platform •>227M installed base of mobile phones (e- readers)1 Partnerships •Google to provide 500k books in public domain Partnerships •Google to provide 500k books in public domain 1 Samsung: Earnings Release Q4 2009
    5. 5. 5 Strategy: Reach out and grow the user base Short Term Long Term Target Channel Price Tech 0-3 Years >3 Years Publishers Avid Readers Upmarket Women Self-Publishing Mobile Phones Electronics Retailers < 230k ($200)₩< 350k ($300)₩ VideoColor Discount Retailers Partners Focus High-tech features for early adopters which convert to champions Social and convenience value for discerning product mavens Content is the gatekeeper to customers Publishers are the gatekeeper to
    6. 6. 6 Success and Risk Factors Success Factors Risks Factors Competito rs Customer Latest Technology Diverse ContentDiverse Content Active Community Backward Integration – Publishers Customer Loyalty Division Co- Operation Division Co- Operation Crowded Market Device Substitutes Component Shortages Piracy – China Point of Sale Demo Backward Integration – Retailers Price War Component Supplier Product Markets Emerging Markets – Brazil, India Single Portal Access Single Portal Access Late to Market Internal Mobile Leadership Business Channel Product Definition Cost Leadership
    7. 7. 7 Success Factors: Partnerships and Applications Revenue sharing (>30%1 ), open pricing Newspapers, textbooks, publishers Subscription based payment Reduce upfront price to consumer Cross-device purchasing Service plan integration, Samsung Apps Social networking tools Self-publishing2 / Rating system Agile feature integration Hire talent, acquisitions, investments Design to value Appeal to core needs of customer 1 WSJ, Amazon.com, Macmillan Settle Price Dispute 2 CNN, Cell phone stories writing new chapter in print publishing
    8. 8. 8 Risk Factors: Backward Integration and Internal Co- operation Ambiguous Market •Devices designed independently •Data on customer habits not shared •Territorial behavior as market evolves Assign Oversight •Establish/support an e-Books managerwithin Samsung Apps •Clearly define product space, inclusive and exclusive of e- Reader E-ReaderValue Chain Solutio n Proble m Backward Integration •Skiff backed by Hearst Corp.1 •BeBook is a rebranded Jinke reader EmpowerCustomer Content •Encourage networkeffect by providing publishing/review tools. •Focus sales on favorable terms for device components.231 Hearst-Backed Skiff e-reader to debut this year 2 Jinke HanLin CPU supplier 3 Samsung is the Apple iPad processor supplier
    9. 9. 9 Summary: Path to e-Reader Leadership Market Opportunity: ₩340B – 850B ($300M-750M) Strategy: Enriching the Reading Experience •Publishers •Subscriptions •Color •Video •Cross-device •Samsung Apps Provide Consumers with the #1 e-Reading Platform
    10. 10. 10 Backup Slide: Global Perspective No major players Few entrants Low adoption, Content support Largest market, 25 million @ $199 Major publisher, #2 @ >172k books/year

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