High tech products, solutions and services are evolving faster than most IT organizations and end-users can keep up. In this ever accelerating and competitive industry, Samsung has made huge strides in gaining the competitive advantage in the international market. Interbrand (with Businessweek/Bloomberg) provides an annual ranking of the world’s 100 most valuable brands. As of last year, Samsung ranked #9 on Interbrand’s list, but back in 2000 Samsung didn’t even make the cut. So how did they do it?
A Shift in Business Focus, A Change in Culture
Samsung’s business system was so tightly integrated with its home market of South Korea that it faced the challenge of securing its future in global markets. Samsung needed to reinvent themselves. To do so, Samsung began by shifting their business focus. Instead of focusing on process improvement, Samsung shifted to focus on innovation. With the focus on innovation came a complete shift in the workforce as well. Once a homogeneous work environment, Samsung introduced innovators that could not speak the language and were unfamiliar with the company’s culture. As a result, the culture shifted from a Confucius-like paradigm to a workforce where innovation and forward thinking was rewarded through merit pay and promotion.² The previous reverence and authority restricted to senior employees had been diluted, and in many instances younger workers were put in positions of authority over their elders.
Certainly these internal changes were received with skepticism and doubt, but Samsung Chairman Lee Kun-Hee recognized that the key was to only change what needed to be changed. He ensured that people understood the new practices, and never wavered in his commitment to these efforts. Lee demanded a complete rethinking of key fundamentals and set the stage for long-term investment in innovative, premium products and brand value.¹ With the appointment of Vice Chairman Yun Jong Yong and Executive Vice President for Global Marketing Operations, Eric Kim, Samsung pursued a bold combination of new strategies, many of which contradicted their previous business approach and corporate culture.¹
Digital Product Innovation
When most people think of Samsung they think of Samsung Electronics, producer of semiconductors, cell phones, TVs, and LCD panels—the group’s highly diversified businesses span a wide range of industries, including financial services, information technology services, machinery, shipbuilding, and chemicals.² By 1987, when Lee Kun-Hee succeeded his father as only the second chairman in the company’s history, Samsung was the leader in Korea in most of the markets it served. However, outside of Asia, Samsung’s position as a low-cost producer was becoming less and less desirable as competition from Japanese electronics-makers grew. In order to get ahead, Samsung would have to figure out a way to diversify their offerings.
During the early 1990s, consumers began flocking to digital technologies that were being introduced in consumer goods like cameras, audio equipment and other electronics. As the analog marker leaders, Japanese companies were reluctant to adopt this new technology. Lee championed digital product innovation, opening the door for Samsung to develop the agility, innovation and creativity needed to succeed in the digital market. While this was a risky move, investing in the digital convergence set Samsung apart from the competition. Samsung forged ahead creating an array of digital products across a remarkable range of consumer goods.
In addition, Samsung, once stymied in its tunnel-vision focus on improving business processes, was now able to use those skills to better understand the finer points of the marketing mix, including pricing models, product development and how to optimize these factors to make the most of short product life cycles. Samsung had the ability to move a product from concept to commercialization in just five months, as opposed to the previous 14 months five years earlier. This was twice as fast as its competition. As a result, Samsung could refresh its product line twice as often.¹ Product life cycles shortened and prices fell.
Anticipating the Digital Convergence
Lee took advantage of a huge opportunity by staking Samsung’s claim in the market by anticipating the switch from analog to digital. This fluency in the digital space led to a keen insight on how consumer behavior was changing and where the industry was headed. Samsung was among the first to recognize that different technologies were merging into single products and that these products themselves were further enabled by connectivity to the network.¹
How was Samsung able to foresee the digital convergence? Many believe it was probably because of Samsung’s position in the fabrication of semiconductors and manufacturing of allied technology like liquid crystal display (LCD) and other electronic components. Samsung’s rivals like Apple and Sony were caught up in creating proprietary software and content (music, video games, movies, etc.), while Samsung was focused on developing advanced hardware and vertical integration.¹ They focused on creating devices that could collaborate with content providers, letting customers access more software through its devices than its competitors.
Global Marketing Prowess
In the early 1990s, there was very little interest in building the Samsung brand globally. Samsung’s logo and brand messaging was fragmented and inconsistent. Plus, product managers controlled the marketing budgets and were more favored to promote “below-the-line” price promotions to meet short-term sales goals instead of long-term “above-the-line” brand building.¹ However, in 1993 all of this changed with the new management initiatives and focus on innovation and converting the company’s product line from an emphasis on low-end commodities to high-end premium goods.
For Samsung and many high-tech companies, the focus had historically remained on R&D, product development and manufacturing. Samsung’s executives set out to invest their efforts in one of the areas they were lacking in the most; creating a strong brand. And, they succeeded in doing it! Eric Kim was just the right guy to usher Samsung into the global market. Kim was Korean-born, US educated and experienced in the technology sector. Chairman Lee Kun-Hee gave him the clout, the money and the opportunity to remake Samsung as a global business leader.
Kim set out to build the corporate brand image across 200 country markets and Samsung’s 17 business units worldwide. With assistance from an internal computer program, M-Net, Kim was able to determine where funds would reap the highest returns. The program collected data on sales, margins, market shares and expenditures to analyze the efficiency of previous marketing plans in order to recommend where marketing funds should be spent moving forward. The system also made pricing adjustment recommendations.
As the company and product lines changed, it was essential that the allocation of marketing resources was evaluated and adjusted as well. Previously, Samsung had enlisted over 55 different advertising agencies world-wide to sell their products using 20 different slogans. Kim and his Global Marketing Operations (GMO) team developed new logo and product presentation guidelines and consolidated advertising efforts using one global advertising agency. They also combined global marketing initiatives with a very niche approach to country markets, recognizing that the Samsung brand had different positions in various countries.
All in all, this focus on marketing and brand strategy is really a testament to Samsung’s leadership and executive vision. Chairman Lee and Vice Chairman Yun championed Kim’s GMO strategies, but employees were skeptical and there were many challenges in getting internal buy-in. Educating the importance of marketing was fundamental in achieving these changes. At the very granular level, I feel the shift in Samsung’s corporate culture and focus on innovation were the most essential factors in harnessing their potential as a global brand. There is nothing accidental or coincidental about their marketing success; it’s just smart.
¹John A. Quelch and Anna Harrington., Samsung Electronics Company: Global Marketing Operations. Harvard Business Review, March 2004. (Revised January 2008.) http://www.hbr.org