37364004 samsung-electronics-innovation-and-design-strategy

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37364004 samsung-electronics-innovation-and-design-strategy

  1. 1. Samsung Electronics: Innovation and Design StrategyIntroduction:The case study commences with the integration of innovative design and brandmanagement by Samsung Electronics which started a new trend in the electronics industry.As discussed in the case, initially Samsung was not much popular and lacked designidentity but later it relocated itself by: y Improvement in the product development processes y Increasing their investments in R&D and product design i.e. R&D globalization. y By adopting right innovation strategies. y By mastering the less tangible, more intuitive qualities of superior design. y By diversification of products and step by step or continual improvement. y Implementing Global localization strategy. y Achieving Vision of leading in digital convergence by using e-processes (electronic integration of processes by going online).All these methods were implemented by Samsung in order to improve its productivity andto gain competitive advantage over its competitors like LG Electronics, Sony, AppleComputer Inc., etc. Despite this, Samsung is facing the challenge to stay ahead incompetition in the near future. Consumer electronics industry is facing a tough competitionand the need of the hour is to optimize the R & D costs, having relevant informationregarding the IPR (Intellectual Property Rights) while design outsourcing and usingappropriate product design followed by appropriate market strategy. 1
  2. 2. Case Analysis:As mentioned in the case, the background of Samsung can be discussed in a tabular form:y Started by Byung-Chull Lee in 1939 as an exporter of agricultural products.y Samsung Electronics established in 1969 followed by product diversification.y Strategic Joint Ventures with NEC, Sanyo and Corning Glass work in 1970y Brought 50% stake in Korea Semiconductor Inc.y Acquisition of Korea Semiconductor Inc. in 1978 followed by the successful implementation of reverse engineered product designy Vertical integration by developing their own IC s DRAMS(Dynamic Random Access Memories in 1985y Focus on qualitative growth than quantitative growth in 1990y Loosening of import restrictions by South Korean government And Samsung achieved price competitiveness in 1991.y In 1992, Samsung established R&D center in European markets.y In 1994, Samsung established R&D center in US markets.y In 1997, Samsung cuts its Korean and overseas workforces due to Asian Financial crises.y In 1999, Samsung was regarded as world s premiere consumer goods and services industry By Forbes.y In 2000, Samsung embarked vision to convert itself into a Digital- e company.y Increased design staff and R&D in 2004y In 2005, Samsung increased its design budget by 20%-30%y In 2006, Samsung registered 17,377 patents worldwidey In 2007, Samsung held dominant worldwide market share 2
  3. 3. Samsung Electronics integration of brand management, product design and investment inR&D provided them advantages over its competitors. Hence, they improved step by stepwith the product diversification, Mergers and Acquisitions, vertical integration andimplementation of new technology. They were aggressively involved in marketing andimproving their brand image in the minds of their customers.The Samsung s learning and leveraging matrix can be explained as: Dedicated business units e.g. New venture department or Informal technology transfer division, e.g. skunkworks( Investments in R&D s) Independent business unit, e.g. Direct integration or business Predivestment or potential team ( Vertical Integration by spinout developing their own IC s) Low Leveraging existing competencies HighInnovation and product Design at Samsung ElectronicsSamsung Electronics leading position was contributed by the enlisted factors: y Creative people in the organization which contributed in the development of technology. y Co-operation between the business partners throughout the supply chain y Firms ability in exploring end penetrating into the new markets y Speed of innovation and product development. 3
  4. 4. Along with this Samsung also increased the investments in their R&D centers. After doingthe trend analysis for the Exhibit 3 which shows the Samsung R&D budget andpercentage sales, 10 9 8 7 6 5 R&D budget 4 % sales 3 2 1 0 2003 2004 2005 2006 2007We arrive at the conclusion that the Samsung s R&D budget increased till the year 2007linearly. But there is decline in the percentage of sales in the year 2007, which suggests thatthe Samsung will need to rethink this strategy. There is an urgent need to optimize the costrelated to Samsung s R&D expenditure to prevent the decline of sales in future.Samsung globalized their R&D network worldwide to develop technologies which can becommercialized in the future. Basically the main idea behind the globalization of R&Dnetwork is to: y Focus on innovation and generating new products for global market. y There is a huge scope of product improvement. y This provides an access to the emerging markets. y Leverages the market opportunity for the firm. 4
  5. 5. User- Centric Design PhilosophySamsung s philosophy was to strike the balance between the reasons and feelings. This wasdone by them with the rationalization of the design of product by using geometric andtechnological parameters and enhancing the design to the product so that it can make theemotional connection with the user. Emotional Reason Feelings ConnectionTheir global localization strategy helped them to become a top class consumer electronicscompany.MarketingSamsung used electronic processes to achieve their vision of leading in digital convergence.The Convergence and integration between manufacturing, promotion & distribution ofelectronics included releasing, promoting and marketing. This thing helped Samsung inimproving: y Brand Image y Helped in product differentiation y Better value propositions or bundle of benefits to the customers. 5
  6. 6. This graph shows net sales and operating profit of Samsung Electronics 2007 30000 25000 20000 15000 10000 5000 Net Sales 0 Operating Profit( in $)Samsung Electronics E-processes comprised of: Component R&D management suppliers process Supply chain Customer management Management processThe SCM, R&D management and Customer management processes were integrated withERP (Enterprise Resource Planning). ERP implementation provided them a wider access tothe Samsung Electronics operations.This improved their overall processes and improved efficiency. 6
  7. 7. Competitive Landscape:Landscape Samsung Apple LG Nokia Corp. Sony Corp. Motorola Electronics Computer Electronics Inc. Inc.Product Consumer PC s, portable Consumer Leading Electronic MobilityOffered electronics music players, Mobile games, solutions, Electronics Comm. (LCD TV s, Mobile Motion mobile ( mobile Company communicatio pictures, services, Microwave handsets, n devices, etc. ( started as Financial cellular Ovens, PC s, Front loading wood pulp etc.) washing services, etc. comm. producers) machines, Devices ,etc. AC s, etc.)Innovation Focuses on Occupies Concentrate Adopted Creates value Focus on two& Design Reason and feeling zone d on 5 areas: telecom. as added criteria s for Feeling to and emphasis Mobile its core products by design the create a on the comm., digital business & doping 4 products for design and simplicity of appliances, designing principles of their used global products in digital was based design: consumers: localization terms of displays, on 3 Originality, personalizatio strategy to design and Digital media principles: Lifestyle, n and establish as a usability. and home Simplicity, Functionality socialization first class networking Relevance and Usability consumer and design and electronic their products Experience company by using 4 (user centric) values: Theme, style, interface and finish 7
  8. 8. Digital Improvement Originally Product Do not rely on Paid attentionMarketing convergence in design and produced categorizatio customer on using E- product electronics for n is done by: surveys and development Processes and features mass Explore create value of new efforts in consumption Live classic, added user revenue improving but later classic, experience generating design by transformed achieve and through services and investing in to produce entry and feature technologies R&D premium communicati design, and enabling consumer ng brand concept customers to products for value to the development experience attracting customers and eco- media premium friendly mobility. customers sustainable and to gain design brand image 8
  9. 9. Comparison of percentage salesIt is clear from the graph that both Nokia and Motorola are ahead than Samsung in termspercentage of net sales. This means that Samsung needs to redesign and reform theirbusiness network to gain competitive advantage from its competitors. Moreover in 2007,there is a slight decline in sales for Samsung which is a cause of concern. Though, Samsungis relatively doing well as compared to its competitors Apple, LG and Sony. 14 12 10 2003 8 2004 2005 6 2006 2007 4 2 0 Samsung Apple LG Nokia Sony Motorola 9
  10. 10. ConclusionWe can analyze the whole case by using Porter s legacy which deals with innovationstrategy. There are five forces to develop a competitive innovation strategy: 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 analyze the threats from new entrants in the consumer 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: y Cost leadership (e.g. Lower/cheaper material input, logisitics) y Differentiation (e.g. Enhance features, deliverability) y Cost focus (minimum features) y 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 theabove mentioned points. 10

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