Sunday, February 20, 2011

Blue Ocean Strategy (BOS) – Samsung Electronics 2006-2010

Value Innovation, first component of Blue Ocean Strategy is Samsung’s primary tool for product development. Value Innovation Program centre was started in 1998 and by 2004 the centre was playing a very key role in rapid growth of Samsung to become the world’s top consumer electronics company. Many cross-functional Blue Ocean project teams were at work, and had ingrained the approach in the corporate culture with an annual conference presided over by their entire top management. One of the key successes of VIP centre was, within five years of entering the mobile phone market, in 2003 Samsung has become the No2 player in the mobile phones market.

Samsung BOS strategy has also helped it to maintain top position in TV market (since 2006-2010), Global; LCD panel market since 2002. BOS is still at the core of the Samsung product strategy and company has been able to make the necessary adaptations according to the business environment and changing consumer preferences. In 2006 Samsung launched Market Driven Change (MDC) where its focus was on the consumer insights and how to develop better and new products using consumer insights. One of the successful results of the MDC was Flat panel LCD TV Bordeaux. This TV has played a crucial role in Samsung overtaking Sony in the LCD market. In 2007 Samsung keeping focus of teenager customers has launched a store in the Second Life Site. The virtual space will be used to showcase range of mobile handsets to teenagers the future consumer group, in a competition-less way.

2008 has been a tough year for Samsung as the Chairman of the group was indicted and forced to resign on tax evasion charges. Samsung also failed to acquire SanDisk, the flash memory giant. Fall in sales of microchips and TVs has hit the company badly due to recession. Early 2009 Samsung merged its LCD (liquid crystal display) and semiconductor business into one business unit called Device Solution Business. It is also merged its digital media and its telecommunications business into one business unit, called Digital Media & Communications Business. Samsung launched green management initiative that is intended to make Samsung a leading eco-friendly company by 2013. The 'Eco-Management 2013' plan seeks to reduce greenhouse gas emissions from manufacturing facilities by 50 percent, and to reduce indirect greenhouse gas emissions from all products by 84 million tons over five years.

2009 also saw Samsung enter into Mobile OS market with launch of its own open mobile operating system, called "bada," which can be used to develop applications for Samsung phones. Samsung launched mobile phones Wave based on Bada platform along with its first smart phone on Google’s Android platform – Samsung Galaxy. The company plans to bring down smart phone prices significantly. Samsung launched 3D LED TVs and at a premium pricing and changing the home entertainment experience from 2-D to 3D.

2010 saw Samsung launching a a new tablet PC named Galaxy Tab as the latest device meant to rival Apple Inc.'s popular iPad. Samsung is still innovating in a big way and it still relies on a basic assessment: product’s competitiveness is everything, and it must be kept away from price wars.

Discussion points:
  1. Discuss Samsung strategy to weather recession with innovation
  2. What has been the affect of the change of management and restructuring on the company?
  3. What should be the Samsung strategy in future?
Financial Information Samsung:
Year                       2007            2008            2009
Sales                     98,508         121,294        136,324
Gross profit          27,627          31,532          41,729
Operating Profit     8,973            6,032           10,925
PBIT                     9,633            6,578           12,192
Net Profit              7,421            5,526            9,761
Currency: Won Tn  Source:

2. Divisional/Geographical Performance
(1) Sales by Division (Sales between parent and subsidiaries included)

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