Go to contents

Samsung Electronics Can Make Mistakes Too

Posted June. 07, 2005 06:37,   


Market Predictions Off Target-

Vice Chairman Yun Jong-yong says ‘speed management’ is the key factor that made Samsung Electronics a global company.

In the IT industry, the changes in technology are rapid, so the most important thing is bold, quick decision-making. Samsung’s semiconductors, LCDs, mobile phones were all able to succeed on the basis of this.

The MP3 player, however, is one product that Samsung Electronics did not engage in “speed management” with, which marked a dent in Samsung’s successes.

Samsung Electronics was the MP3 market leader until 2002, but was then pushed to the periphery of the market. This was because they did not foresee the significance of the MP3 player market and how big this market would grow.

In 2003, the U.S. company Apple bought copyrights and enabled consumers to download music at a low price. The introduction of such “Solomon’s Wisdom” changed the market situation completely.

At the time, Samsung Electronics, along with other global companies, considered Apple’s chances of success to be very slim, and the popularity Apple enjoyed to be a temporary phenomenon. However, Apple sold over 10 million MP3 players in three years and took over the world market.

Vice President Yun reproached his employees, saying, “We must think about why we were beaten even though we were the ones who made the first MP3 player available in the world.”

A Late New Beginning-

MP3 players have a unique meaning. First of all, these players are used by people in their early teens, so it opens up opportunities to attract future potential customers. Sony’s most faithful customers are those in their 30s and 40s. They were the ones that were mesmerized with the Walkman in their teens.

Also, MP3 players are carried around everyday so their brand name is naturally advertised. This is in line with the fact that Samsung’s mobile phone “Anycall” exposure was the number one reason behind Samsung’s international reputation.

Samsung acknowledged these facts and, although late, is now concentrating on MP3 players. Samsung Electronics has brought in an affiliate company Bluetek’s audio R&D and marketing personnel, and is strengthening its efforts in this area.

Aftereffects of Lower Price Policy-

Samsung Electronics, as the late runner, is utilizing all of its resources accumulated from microchip technology, design, and global sales networks to become number one in the market in three years.

However, in actuality, Samsung’s strategy is one of lower prices. This strategy is not like China’s of low-priced low quality products, but lowering the prices of high quality products.

The problem is that this strategy will hurt not Apple, but Korean small- and medium-sized companies such as Reigncom, Cowon Systems, and MPIO.

One source of the small-and medium-companies said, “Foreign buyers are saying that our products cannot be more expensive than Samsung Electronics products, since Samsung has a high brand value, and are requesting lower prices, so our margins are continuously dropping.”

Samsung Electronics explained, “The lower price strategy was started by Apple, and we were merely responding to it.”

Do-Young Kim nirvana1@donga.com