CONSUMER ELECTRONICS

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CONSUMER ELECTRONICS

• The Case of Samsung 2003

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SAMSUNG

• BEFORE 1997
• Samsung was financially crippled
• Brand associated with cheap, me-to TVs and
  microwaves
• Carried huge debt following 1997 Korean financial
  crisis (10.8bn)
• Crash in memory-chip prices
• 700 million write-off after an ill-advised
  takeover of AST Technologies (U.S. maker of PCs)
• Subsidiaries were more interested in breaking
  production and sales records than profits

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SAMSUNG (2) Global Market Shares

• NOW 2003
• In 2002, Samsung earned 5.9 bn on sales of 33.8
  bn Market value, 41bn debt of 1.4bn
• No.1 for Big-Screen TVs, at 32 (followed by
  Sony, 25, Mitshbishi 25, and Hitachi 11)
• No.3 for Cell Phones with 10 (following Nokia
  36, Motorola 15)

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SAMSUNG (3) Global Market Share

• No.2 in Flash Memory at 14 (following Intel with
  27 and ahead of Toshiba 11, Advanced Micro
  10).
• No. 1 in LCD Displays at 18 (followed by LG
  Philips 17, AU Optronics 12, Sharp 9)
• No.3 in MP3 Players at 13 (following Sonicblue
  18, Apple 17)

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SAMSUNG (4) Global Market Share

• No. 1 in DRAM (dynamic random access memory)
  Chips at 32 (followed by Micron at 19, Hynix
  13, Infineon 12)
• No.3 in DVD Players (following Toshiba 15, Sony
  14)
• No.1in Microwave Ovens at 25, followed by LG
  22, Galanz 19 and Sharp 15)

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SAMSUNG (5) TURN-AROUND STRATEGY

• Focus on high-end products
• No to software business
• Vertical integration own factories
• Highly diversified
• Reduction in workforce
• Sale of non-core businesses
• Fewer levels of bureaucracy to win approvals

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SAMSUNG (6) TURN-AROUND STRATEGY

• Forces own units to compete with outsiders
• Customizes as much as possible (gains price
  margin)
• Speed five months from new product concept to
  rollout, compared to 14 months 6 years ago.
• High new product launch rate (95 in US, 2003)
• Refreshes product line every 9 months
• Doubles no. of designers to 350
• Use South Korea as test market (70 of pop wired
  for broadband)

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SAMSUNG (7) DANGERS

• Must keep investing heavily in RD and new
  factories across numerous product lines
• Life cycle of much hardware very short, with
  falling prices
• Needs a constant stream of well-timed hits
• Half of profits come from memory chips, a
  notoriously cyclical business
• Lack of software and content