What have been the key success factors for Samsung? Please analyze an actual problem in Marketing Management and make recommendations, as you would in real life. 50 marks

APPLICATIONS Marketing Debate Are Line Extensions Good or Bad? Some critics vigorously denounce the practice of brand of revenue for the firm. extensions, as they feel that too often companies lose focus Take a position: Brand extensions can endanger brands and consumers become confused. Other experts maintain versus brand extensions are an important brand growth that brand extensions are a critical growth strategy and source strategy. Marketing Discussion How can you relate the different models of brand equity different? Can you construct a brand equity model that presented in the chapter? How are they similar? How are they incorporates the best aspects of each model? Marketing SPOTLIGHT SAMSUNG "Huh?"That would have been the reaction of most consumers Apple announced that the ipod Nano would use flash chips when asked about Korean electronics giant Samsung (meaning rather than a hard-disk drive. Samsung is contracted to supply "three stars") a decade ago. Indeed, the situation was so bad that most of the chips. The Nano is just one of many digital devices Samsung chairman Kun-Hee Lee had ordered all the cell phones that may switch to NAND memory. Samsung intends to invest in its factory to be smashed after he found out that those he around $33 billion on new chipmaking facilities. "Pre-emptive had given to some employees and friends were defective. The investment is critical to success in the semiconductor industry," mid-1990s marked the turning point for Samsung. The company says Lee. Samsung is also the world's largest producer of thin- identified and embarked on three main areas it believed would film LCD screens and computer monitors. help it to become a global leader: technology, design, and Samsung VP Seung Soo Park says, "Our mission is to branding. consumerize digital technology,and that means finding economies Samsung invested heavily in R&D in digital technology. of scale."Employees working on diverse products devise common Today, it employs 2,400 scientists with PhDs and 25,000 other manufacturing techniques and parts. In 2002, Samsung junior researchers in 15 labs worldwide. It makes the world's introduced 30,000 products, up from 18,000 in 2000, with the biggest LCD display (82-inch) and plasma HDTV (102-inch). same number of parts (67,000), enabling huge cost savings. Recent cell phone innovations include a model that uses voice- Samsung encourages competition between its product divisions, recognition technology to convert speech into text messages; leading to some novel innovations. A recent contest between and another that automatically scans business cards and inserts the digital-camera team and the camcorder unit yielded the the details in the user's address book. In all, R&D accounted for DuoCam, a product that combined both. $2.9 billion in 2003, or about 8 percent of Samsung's revenue. From a company that started selling just TV sets in the 1970s, Memory chips had been Samsung's first big win, and, along Samsung is now the world leader in eight product categories, with LCD screens, allows Samsung to control two of the three and is the second largest maker of cell phones. Samsung entry's pillars of the digital age (Intel leads in microprocessors, the third into the cell phone market was precipitated by the Asian financial pillar). Samsung created the world's first one-megabit chip, and crisis and plunging chip prices in 1997. Says Kitae Lee, its global by 1994, it was making the first chip that held 256 megabits. cell phone chief, "We didn't have many products we could use Samsung is now the world's largest producer of DRAM and SRAM to build our brand except, maybe, cell phones. "To thrive in the chips. Samsung supplies the world's biggest tech names with cell phone business and command higher prices, Samsung these parts, and also embeds them in its own products. The chip poured profits from the chip and LCD businesses into innovation and LCD divisions sell to other Samsung businesses and outsiders that would enable it to jump far ahead of current technology, for the same price, with no favoritism. This assures Apple, HP,and and into marketing. The cell phone has contributed significantly other clients that they are treated fairly-and knowledge of their to build Samsung's new image. "We saw the cell phone was buying patterns offers valuable intelligence to Samsung. In 2005, changing from a utility item to a fashion statement," says Eric1 316 PART 4 BUILDING STRONG BRANDS Kim, former Samsung marketing head. "People used to say,"Why launching consistent and more daring advertising campaigns. would anyone want to take a photo with a phone?" Now Samsung also used product placements to good effect. Many Samsung has a 12 percent share of the camera-phone market, of its futuristic gadgets appeared in the cult movie "Matrix just a point behind leader Nokia. In 2004, Samsung launched Reloaded." Samsung was also a principal sponsor of the 2004 the first clamshell handsets that worked with both the CDMA Olympic games in Athens. This has paid off with a huge leap in and GSM systems used in different parts of the world. brand awareness. Kim more than doubled Samsung's marketing Better design clearly played a role. As Samsung's CEO, Jong- budget to about $3 billion annually. And it is still looking for areas Yong Yun, said, "Good design is the most important way to of improvement. "Samsung isn't satisfied with where it is in the differentiate ourselves from our competitors. "To keep its product U.S.," says Brendan Ryan, head of its incumbent ad agency, Foote designs at the leading edge, Samsung designers can now go Cone & Belding. Planning is under way to encourage consumers straight to top managers with ideas for new products and to turn to the Samsung brand before they think about what designers now tell engineers the features they want. Samsung product to buy, rather than being led to the brand by an is shedding its traditional Confucian-based, hierachical structure, interesting device. Says Lindemann,"(Samsung) is not yet a brand encouraging younger designers to challenge their superiors that can live without the product."To get that iconic status, Samsung when they think something needs changing. Samsung designers has to be perceived to be even more "cool" than it is today. are sent to work at furniture, fashion, and industrial design houses Samsung's initiatives have led to revenues of $71.6 billion to keep abreast of the latest trends. Since 2000, Samsung has and profits of $9 billion. It is the fastest rising among the world's opened or expanded design centers in San Francisco, Los top 100 brands, according to Interbrand.In 2005, Samsung ranked Angeles, London, Tokyo, Seoul, and Shanghai.It studies everything 20th, up from 34th three years ago. In the process, it surpassed on how consumers actually use products, from the packaging Sony, which slipped to 28th position, to become the king of to owners' manuals to ring tones. As a result, Samsung's designs consumer electronics. have won numerous awards worldwide. Brand building is Samsung's final strategic pillar. A decade Discussion Questions ago, it was mostly seen as a producer of cheap TVs and 1. What have been the key success factors for Samsung? microwave ovens. While its TVs were technically as good as Sony's, 2. Where is Samsung vulnerable? What should they watch out Samsung's sets would sit at the back of retail stores or be found for? in discount stores. Jan Lindeman, Interbrand's global brand 3. What recommendations would you make to their senior valuation director, said, "In 1997, Samsung products were marketing executives going forward? What should they be appreciated as good in pricing and quality but short in brand sure to do with their marketing? differentiation. The strategy is not sustainable as you have to be a low-cost producer forever. To achieve brand repositioning, Sources: Mae Lynn Tan, "Samsung Having the Last Laugh," The Samsung embraced changes in all aspects including product New Paper (Singapore) (October 7, 2005):6;"As Good as It Gets?" design and distribution. It pulled out all its handsets from The Economist (January 15, 2005):60-62; Heidi Brown and Justin discount stores like Wal-Mart. More importantly, its senior Doebele, "Samsung's Next Act," Forbes (July 26, 2004): 18-22; Cliff management was committed at an early stage to make its brand Edwards, "The Lessons for Sony at Samsung," BusinessWeek play a key part of its competitive advantage and made brand (October 10, 2005):35-36;"Being Asian: A Competitive Branding Advantage," The Singapore Marketer (April-June, 2005): 24-25; development a corporate performance target." Rana Foroohar and B.J. Lee, "Digital Masters," Newsweek (October In 1999, Samsung appointed Eric Kim to head its global 11, 2004): 31-33; David Rocks and Moon Ihlwan, "Samsung marketing office. Kim succeeded in unifying fragmented sales Design," BusinessWeek (November 29, 2004):44-49; Moon Ihlwan channels that were using more than 50 different advertising and lan Rowley, "March of the Flash Chips," BusinessWeek agencies. He also exploited Samsung's prowess in technology, (October 17, 2005): 24