Galaxy S4 – Market Snapshot Final

Samsung Galaxy S4 – Market Snapshot MRKG 1311, Tuesday/Thursday 1:00Pm, 22nd Nov 2013

Omar S.

Instructor: Kimberly Cade Davis

Public URL : http://bit.ly/1iChlbE

Product names, logos, brands and other trademarks referred to within this paper are the property of their respective trademark holders. These trademark holders are not affiliated with HCC, the instructor or me. They did not sponsor or endorse the included materials.

Samsung Galaxy S4 – Market Snapshot | 2

Product Background Samsung Galaxy S4 is the fourth generation release of Samsung's popular Galaxy smartphone. The Galaxy S4 was announced in March 2013, with public availability in late April. Retail pricing for the Galaxy S4 started at close to $600 and carrier discounted prices hovered in between $199 -‐ $299. Prelaunch speculation and consumer anticipation for the product was very high. It was launched both in the US and other international markets. The phone is a high-‐end smartphone, certainly Samsung’s’ top of the line. The

specifications at time of launch were cutting edge and much better than majority of its competitors. To this day, 7 month after its launch, it remains one of the highest specs phone in the US market. The target market is huge, any one who uses a smart phone has been targeted, teenagers, parents, elderly citizens, executives, Apple fanatics, etc. Consumer demand for smartphones grew year after year for the last few years. Samsung being world’s largest manufacturer of mobile phones is expected to sell a huge number of its leading Galaxy S4. Samsung is heavily promoting this phone and

spending billions of dollars behind its success.

Samsung is calling the Galaxy S4 “Life Companion” and this is what it says about the phone -‐ Make your life richer, simpler, and more fun. As a real life companion, the new Samsung GALAXY S4 helps bring us closer and captures those fun moments when we are together. Each feature was designed to simplify our daily lives. Furthermore, it cares enough to monitor our health and well-‐being. To put it simply, the Samsung GALAXY S4 is there for you. This brief paper will highlight some of the facts & brains behind the phone, its manufacturer, the competitors & their offerings, its distribution and marketing strategy, strategic issues & challenges, all from a marketing students point of view.

Samsung Galaxy S4 is made in Korea.


Manufacturer Background

The Samsung Philosophy

Moto

‘Inspire the World, Create the Future’ Mission Statement

“At Samsung, we follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society.”

Profile

Samsung Electronics Co., Ltd. mainly engaged in the production of consumer electronic products. It operates in two divisions: end product division and component division. Its end product division produces digital media products, such as digital televisions (TVs), monitors, printers, computers, air conditioners, refrigerators and others, and communication products, such as mobile phones and network systems. Its component division produces semiconductors, such as memories, storages and others, and liquid crystal display (LCD) products, such as thin film transistor (TFT) LCDs and active-‐matrix organic light-‐emitting diodes (AMOLEDs).

Name Samsung Electronics Co., Ltd.

Industries served Consumer electronics, Telecoms Equipment,

Semiconductors, Home Appliances

Geographic areas served Worldwide

Headquarters South Korea

Current CEO Kwon Oh Hyun

Revenue ₩ 201.103 trillion (2012)

Profit ₩ 23.845 trillion (2012)

Market Capitalization $174.39 billion (2012 May)

Employees 221,726 (2012)

At Samsung, we follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society. Every day, our people bring this philosophy to life. Our leaders search for the brightest talent from around the world and give them the resources they need to be the best at what they do. The result is that all of our products—from memory chips that help businesses store vital knowledge to mobile phones that connect people across continents— have the power to enrich lives. And that’s what making a better global society is all about.


Strategic Issues & Challenges There are various strategic issues and challenges which can be described briefly in this paper regarding Galaxy S4 and ultimately Samsung, the manufacturer. Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. Samsung needs to keep up with these changes, plan and implement stategies accordingly. The Galaxy S4 is sold in more than a few dozen countries, each with its own type of customers and unique needs. Samsung being such a large golbal corporation has the resources to work strategically & overcome marketting and stratgic challenges such as these described below -‐

Quality -‐ There has to be a balance be tween qua l i t y -‐p rofit ib i l i t y -‐customer expectations & needs.

Production -‐ Samsung needs to d e c i d e w h e r e a n d h o w t o manufacture the Galaxy S4.

Service -‐ They need to make sure that customers wo are purchasing the Galaxy S4 are getting the best serviceat point of purchase & after sales.

Human Resources -‐ They need to make sure they are following are laws regarding HR & follow ethical standards, this has implications on sales of their products such as the Galaxy S4.

R&D -‐ Samsung needs to employ capable and innovative employees. Sales of Galaxy S4 would not have reached 40 mil l ion without a wonderful R&D team.

Price -‐ Galaxy S4 sells are different prices in different international markets. They need to sell it at prices which makes potential customer want it.

Logistics -‐ This step is important to help each & every potential customer get his or her Galaxy S4 on time.

Promotion -‐ Samsung spent close to $4 billion in advertising in 2012, mobility being their number 1 business & S4 being their top phone, it is safe to assume the importance of promotion.

Competition -‐ Any manufacturer without sound knowledge of their competitors are living in the past. Galaxy S4 has much competition & Samsung needs to be aware of that and act accordingly.

Relationship and Value (Brand Equity) -‐ Samsung needs to make sure that those customer who bought Galaxy S4, return for their next iteration of offerings. Building a relationship & creating value will ensure that it happens.

Speed and innovation -‐ In a rapidly changing marketplace, Samsung needs to update the Galaxy S4’s software to have the latest and greatest of software features available to be competitive.

Brand Reinforcement -‐ Samsung needs to be recognized for what it is. People need to trust the brand. Galaxy S4 would have never been successful if people did not trust and like Samsung.

Cultural Relevance -‐ Samsung needs to be able to promote the Galaxy S4 in ways which connects to its customer culturally. This is part of promotion, but it is extremely important regardless.

Timing -‐ Samsung needs to me sure that the timing it chose to launch products and subsequent promotions matches with customer demands and placed properly.

Social Media -‐ Youtube, Facebook & Twitter are the major venues of social media Samsung used to promote Galaxy S4. Had it not used them, the sales of S4 might have turned out differently.

Product Integration : Samsung needs to try to integrate its Galaxy S4 well into its product offerings. An example would be native compatibility withs its amazing line of consumer products such as televisions, appliances etc.

Customer Perception : The Galaxy S4 has been plagued with customers saying it feels plasticky, a.k.a cheap. How samsung responds to that and how it develops further products is important.

Negative PR -‐ Handling negative press, especially from competitors and disgrunted customers needs to be done in a professional and efficient way. A good example would be how Apple handled negative press about its antenna problems on iPhone 4 launch.


SWOT Analysis

I t i s imposs ib le to do a deta i led research on Ga laxy S4 w i th in the scope o f th i s b r ie f p ro jec t . The da ta above have been ga thered f rom mu l t ip le sources re fe renced a t the end o f th i s paper .

Strength

Galaxy S4 is a product from Samsung is the biggest strength for this product. Galaxy S4 claims that its screen is harder compared to the iPhone, its major rival. Its dual camera enables user to take photos and videos simultaneously with both front and rear camera. Samsung has tried to recover from its ‘me too’ strategy. It has a general impression from the consumers that its smart innovation are similar to iPhones. Now Samsung has come up with a much innovative model compared to its other competitors like iPhone, HTC and Nokia. 5-‐inch full-‐HD Super AMOLED display with a resolution of 1080×1920 pixels packing 441 pixels per inch makes it more appealing for people who judge models based on attractive displays.

Weakness

The plastic is made of polycarbonate and it doesn’t have a rich appeal like iPhone and HTC. Square Trade’s estimate shows Samsung Galaxy S4 gets broken for one in 8 people among American users. Though it has a better pixel resolution, the camera clarity in low lighting and night mode are not convincing to users. It doesn’t have its own OS. It’s a major weakness when compared to Apple’s iPhone. S4 software is slower compared to iPhone.

Oppurtunity Galaxy S4 is much trendier and it enjoys Google play apps which attracts ‘youth factor’.Andorid accounts to more than 3/4th of the total smart phone OS, and Samsung is the market leader. Galaxy S4 has many preloaded apps like S Planner, Voice Recorder, ChatOn messaging app, Samsung Apps app store, Samsung Hub content store, WatchON – a universal remote control software that also offers program guide functionality, S Translator, Optical Reader, S Memo, S Health, Story Album and Group Play, Samsung Link for transferring and syncing content to other devices via cloud services like Dropbox.

Threat The market share continues to decline for Samsung from 46.4% to 35.8 in the last quarter of 2012. The general perception among smart phone users is Samsung follows the features of Apple and its poor design and quality. Though Apple seems to be the direct competitor in smart phone segment, it faces threats from HTC, Sony Xperia and LG. Even in emerging markets like India and China, Samsung faces threats as there are more brands giving smart phone at lower prices. Chinese makers are the biggest threats for people see on price rather than quality. When compared to other mobile makers Samsung manufactures a wide range of products, it can impose threats to the overall brand equity and also loss in other business units can affect company’s future strategies.


Target Market

Note: The font size above does not correspond importance

Samsung has a huge target market with the Galaxy S4. They engineered the phone to be practical, useful & wanted by almost every one. Apart from very young children, the Galaxy S4 is practical for most people who want a capable smartphone. Due to its price however, it is expected that the person is capable of buying one though. Samsung has identified various users of the Galaxy S4 through its television and Internet advertises. Some are – elderly, business & organizations, teens, executives, homeowners, folks who watch TV online etc. Demographically speaking, Samsung has made the S4 available in multiple dozens of countries, each with unique features suitable for that area. Samsung even goes as far as to physically change hardware inside the S4 to make sure it is compatible with high speed date networks of the respective region. It does seem that Samsung does not have a fixed target market to reach a particular niche, its popularity with S4 made it available almost every where, online or offline who has been able to afford one. Especially in the US, the Galaxy S4 sees carrier subsidies, which makes it cheaper to afford one to begin with. More recently, the S4 is being offered by various carriers in the US with loans to buy the phone, T-‐Mobile being the first to start such an offer. Samsung makes it possible to easily unlock the Galaxy S4, this in turn promotes the usage of the phone by international travellers and expats alike. It is also helped by compatibility, international travellers are expected to be able to use the Galaxy S4 any where in the world where there is a cell phone company which uses sim cards.

It might be easier to say some of the target markets Samsung did not intend to sell the Galaxy S4 to – homeless people (because they cannot afford one), recreational drug users (possibly because of negative PR), extreme sports junkies (possibly because the S4 is a sensitive device), swimmers and scuba drivers (because S4 is not water proof), folks in extreme weather etc.

Competition This might be my favorite sub topic in this paper. Global smart phone industry is close to $300 billion / year. It seems from various sources that Apple & Samsung takes a heavy portion of the profits from the sales. Others are distant 3rd and so on. Apple & Samsung are archenemies and battle in the marketplace and recently even in the judicial system (courts). Ironically, Apple is one of the

Elderly

Online TV watchers

Business & Orgganizations

Executives

Teens

Married & Unmarried

Families with Children Home Owners

Male & Female

All Ethnicity


largest buyers of NAND flash from Samsung. It is trying to change that, but Apples requirements are so big that only Samsung can handle at this point.

The chart on right shows Apple & Samsung market share in the United States. Over the years that has risen and around 2012, this Duopoly reached over 50% combined market share. Out of the $300 billion / year estimated sales, these two companies take more or less half of it. It is no wonder why they would want to fight each other out and grab their respective existing market shares. Both companies provide similar products, have the same target market, sell them for around the same price.

There are specific phones, which were launched, in close proximity to the Galaxy S4 with similar feature sets, notably the iPhone 5. The Internet has thousands of comparisons between the two phones; I am showing you one of them. From the comparison on the right, it can be seen that both phones are capable devices. As mentioned above, they have the same target market, sell them for around the same price point. The iPhone 5 lacks in micro SD slot so that makes it impossible to add more storage capacity to the phone. The iPhone 5 also has proprietary lightning connector to charge and transfer date to the computer.

Samsung’s Galaxy S4 on the other hand uses the standard micro USB cable found on almost all other smartphones today, has NFC which is short for Near Field Communication, is probably faster and tends to go better with people who like larger phones, or like me who has thicker thumbs and even the elderly whose eye sights might be compromised.

I am bringing in two more competitors this time. On the left, you can see the Blackberry Z10 (which was partially responsible to drive RIM to bankruptcy court) and Lumia 920 (the step child of Microsoft and Nokia). It can be seen that Apple, Blackberry and Nokia all have similar brand appeal. Each one of these companies ruled the mobile industries globally for a period of time in the past. Features wise, Samsung leads the pack. Apple coincidently is also the most criticized brand mobile phone.

Below you can see the market share of other notable competitors

without Apple to skew the pie charts. As of late, Samsung has been gaining traction and it is clearly evident from above. HTC is the biggest loser of market share. LG market share has remained stable through 2012. Other companies, notably new startups in China and gaining market share at an increasing pace. Samsung has a lot to worry, even an elephant can be scare of a mice.


On the left, it shows US market share among the major competitors. Product launches from Samsung & Apple create major surges in the share for a time being. Aug 2013 saw iPhone 5s launch, hence the sudden spike. It can be seen from here that Apple & Samsung combined dominate the smartphone market in terms of sales share % in the United States.

LG is the 3rd highest-‐ranking competitor in the US market thanks to Google giving them the contract to manufacture its very popular Nexus 4 device.

Pricing The Galaxy S4 is available worldwide at different prices. I am going to display the prices from majority outlets in the United States. This phone is Samsung’s cash cow as of Nov 2013, when it released in summer it was the star product. Galaxy S4 is priced to attract the upper middle class & higher from the target market. The price keeps a perception of high quality within the customers, it is part of Samsungs marketing strategy.

We can see from here that non-‐contract pricing starts as low as $519 and contract pricing starts as low as $99. Unlocked phones are not available

below $500, $550 being the median pricing. Samsung’s pricing strategy includes keeping

the prices up and above $500 if some one wants to buy the Galaxy S4 outright. The price is not expected to fall much as time goes by, the stock will deplete and a new version will come out and start at a higher price again. This artificially high price keeps a status quo as a premium device. Even if Samsung could manufacture the Galaxy S4 for $250, it would not go below $500 at it has to keep the phone at a price level and up before it will cannibalize the sales of its lesser offerings. Samsung seeks to maximize profit at the high price point, while marinating as high of a sales quantity as possible. When Samsung first released the phone, the unlocked versions were being sold for as high as $800; this lasted for first 15 days or so, followed by gradual price drops. This is known as skim pricing, and it works every time for high-‐end devices such as the Galaxy S4. The Galaxy S4 has never seen penetration pricing, Samsung has other phones to change customer perception and improve brand loyalty. The S4 does not rely on low pricing to gain sales. The discounts can only be had if the carriers subsidize the phone, or if a 3rd party gives a loan, such offers are available from T-‐Mobile right now. In the used market, such as eBay, Amazon & Craigslist, I was able to find the phones for $350 and up for good condition, $300 for average condition. Even being used, the phone carries a premium demanded by the high-‐end status of the phone.

Regardless of Samsung’s intent on keeping the price to go with the status quo, the Galaxy S4 is priced strategically to be very close to the iPhone 5. Customers do not consider price to be a buying factor when cross shopping between iPhone 5 and the Galaxy S4.

Verizon $199

Contract $599 No Contract

ATT $99 Contract

$639 No Contract

Tmobile $99 Contract $627.99 No COntract

Sprint $99 Contract

$599 No Contract

Cricket $579.99 No Contract

Metro PCS $519 No Contract

expansys-‐usa.com

$599.99 Unlocked

negrielectronics.com

$558.50 Unlocked


Promotion / Advertising Promotion, one of the 4Ps of the marketing mix, has a lot of marketing dollars behind it for the Galaxy S4. Samsung has done some major stunts in promoting the Galaxy S4. Thanks to its deep pockets, Samsung was able to spend billions of dollars for the success of the phone. Samsung has used every popular form of mass media to promote their top of the line phone. Social networks played a big roll pre launch of the device. The speculation kept rising and the rumor mill kept grinding. Televeision ads, extravagant launch events, special promos all helped pormote and get the Galaxy S4 to a solid start. I have personally seen more than 15 well built ads on Youtube & the TV combined.

Samsung took over Londons famous iMax theatre Samsung spent more $ than any one else

Distribution

In the United States, the primary method of distribution for mobile phones are through the carriers. Over the years, they have built up strong retail presence and excellent online ordering systems. Galaxy S4 is distrubed by all major carriers and also many smaller ones. New startup AIO Wireless even carries the Galaxy S4 these days. Samsung does not have a direct to customer distribution method in the US at this time. It does however sell unlocked, non subsidized phones through a distribution channel other than the telecom carriers. These distribution channel includes distributors (such as Ingram Micro) and retailers. Most of these retailers are online & have no brick & mortar stores. One good example would be Amazon.com. Other major venues to buy unlocked phones such as the Galaxy S4 is expansys-‐usa.com & negrielectronics.com They are a global compay with offices here state side. Samsung has a strong logisitcs setup, they maintain their launch dates and histroically have been able to ship to its distributors post launch on the date promised or even earlier.

Positioning Statement With the launch & imminient success of the Galaxy S4, Samsung strengthened is brand equity and changed customer perception about itself. It is probble that Samsung will continue to ride on this success in the future. Samsung tags the Galaxy S4 with its own position statement ‘ Life Companion ‘ . I would however say

‘ Redefining the phone you want ‘ This statement seems to go well with the Galaxy S4 because Samsung has put a lot of effort into giving the phone a robust set of new useful features, features which a smart phone user probably would want to have; features, the competion doesn’t have.


Summary It has been my pleasure & honor to be given this topic to base my research upon. Although I have tried to keep my biasness & judgment out of this paper, I have to say, I am big fan of Samsung’s products. I have been for a very long time. I started using their original Galaxy S Vibrant phone from T-‐Mobile, then I upgraded to the Galaxy S2 from T-‐Mobile version, then the Galaxy S2 international version, then Galaxy S3, soon followed by the Galaxy S4 and now finally the Note 3. Samsung has come a long way and the sales numbers prove that. Although I still have my feelings that Samsung is capable of manufacturing a higher quality device (think HTC or Apple), they are doing well with what they have right now. Their phones do not break as much as the completion. The S4 was very easy to use and I simply loved the big bright screen. Samsung is known for the colorful displays, S4 was no exception. If I were to rate it, I would give __________ myself, partly because I felt that the battery life could be better. Regardless, the Samsung Galaxy S4 is a winner and people who have given it enough time might agree with me. Thank you, Ms. Davis & HCC.

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Samsung Galaxy S4. (n.d.). Webopedia. Retrieved November 7, 2013, from http://www.webopedia.com/TERM/S/samsung_galaxy_s4.html

Samsung Electronics. (n.d.). Forbes. Retrieved November 7, 2013, from http://www.forbes.com/companies/samsung-‐electronics/

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"Samsung Galaxy S4 from Sprint."Samsung Galaxy S4 from Sprint. N.p., n.d. Web. 20 Nov. 2013. <http://www.sprint.com/landings/samsung_galaxy_s4/>.

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The End.

Galaxy S4 – Market Snapshot Final

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