Samsungs strategy on supply chain design

Published Date: 23 Mar 2015

Introduction

Samsung as one of the leading companies for the electronic products has their business covered almost all over the world, their success are mainly based on the innovative products with a relatively low price. Although they are not in the leading position in the photographic manufacturing industry, their products with the innovative design and relatively low prices can still help them hold a certain range of customers. This report will give a view of how do Samsung manage their supply chain while find themselves a proper position in the digital camera manufacturing industry.

The market qualifiers and order winner

There are some huge challenges that every high tech companies facing in the current market conditions ---- the short product life cycle, product variability and steadily declining prices. Instead of investing huge percentage of capital into developing new technologies for the digital cameras, Samsung decided to put their effort in designing their product with the existed technologies, and attributes more on the fashion outlook of their average functional products. It turns out that they thrived in low-margin consumer electronics. [1] 

As a result, Samsung do not have such ambitious to win the technology leadership position as Canon and Nikon have at the current stage, they simply focusing on low prices and the fashion design. Therefore, the core competencies of Samsung can be defined as low cost, innovative design and flexibility.

Thus, the market qualifiers for Samsung cameras are 3 aspects as good brand image, good quality and feasible functions. Moreover, since Samsung has stick to their cost saving strategy, the relatively low prices and the innovative design of their product have contributed to the order winner aspects.

Market segment

Based on the criteria that Samsung have as their market qualifier and order winner, a group of non-professional customers can be easily attracted. The market segment is mainly towards the middle-class consumers who pursue fashion designs with an acceptable price range. Not mentioning the geographic segmentation, within Europe, the market segment of certain customers can be classified into the following paragraph.

Standard

Age

Salary level

Interests

Groups

20 -- 40

Low to middle

Fashion pursuit, non-professional

Besides, according to the Roger Moore Curve (refer to Appendix 1), Samsung have jumped off the innovator and early adaptor groups, who focus more on the technology and performance, and directly put themselves into the market where customers pursue more on solutions and convenience (the groups of Early majority, Late majority and Laggards).

Customer values

It is essential for Samsung to value their customers and set different strategies towards them, in order to reach a better performance and finally get a better profit margin. However, Samsung should firstly define themselves in a proper value position and consistently operate according to that. Treacy and wiresema model [2] is the one helping companies defining their value position.

The objective of Samsung is to build a competitive advantage by their innovative designs and some special functions by using the existed technology. Therefore, the cost of their product development would be relatively low comparing to their competitors. Moreover, Samsung provide more choices for their customers on both functions and the styles, and the global allocated product and service support centers also help satisfying the consumer needs to a very large extent. As a result, Samsung is in the position of a product leadership, and these advantages are also reflecting in their customer value aspects.

Based on the four main objectives for customer value ---- quality, cost, service and lead time, the customer value of Samsung can be summarized as follow: Customers who bought the Samsung cameras would normally perceive that they were delivered for a better product and service than other brands on the same price.

To sum up, the nature of customer value in the digital camera industry is somehow to provide the innovative products while cut the cost down. However, since the product life cycle in this industry is getting shorter, companies should do more effort to balance the cost of developing new technology and the consistency of turning profit. Samsung's success is a good example of value position and the caution of their customer value.

Pressure on the supply chain

In the high-tech industry, operational performance is tightly connected to the supply chain performance. Product availability, lead time and cost as three major factors that define the profitability of a product line are also impacted by supply chain performance to a large extent. [3] 

In the case of Samsung, who do not outsource their manufacturing part, instead, they have created their own "cell-based" manufacturing system that doubles the production for their entire product portfolio. [4] Thus, they have less pressure on the product availability comparing to their competitors. However, being treated differently to the LCD products, the production of Samsung digital cameras is not invested a lot on the part of technology development. They simply buy the technology from other companies and add some functions as well as the designs. Therefore, the time to market has become the major pressure within the Samsung supply chain.

In addition, the competition within the photographic industry has brought the sequence of short product life time issue, Samsung has to contribute more on their product development part, in order to launch their product to the market at a fast speed, and ensure a certain profit margin.

Moreover, as Samsung set their production base mostly in the far-east countries, the cost and the risks from the transport sector have also become a pressure on the supply chain, and finally contribute to the pressure on the lead time.

Summary

Samsung as the world's leading electronic production company have successfully managed their marketing strategy, by setting themselves into a proper value position and understanding the needs from their target customers. Therefore, a proper service could be delivered into the certain target groups which attributes to their huge profit margins even in period of the global economic crisis. However, the pressure on their supply chain, especially in the lead time sector has brought them some barriers that needed to be conquered. Nevertheless, the outstanding performance of Samsung is still reflecting their successful marketing strategy as well as the suitable control of their supply chain.