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ARTICLE : Two Moons To A Galaxy
Saturday, 06 April 2013 02:24


Two Moons To A Galaxy
From bit player to global behemoth, the Samsung parade rolls on. But can it shake an Apple bugbear?

Samsung Strategy

  • Product blitzkrieg Launch products from entry level to super premium level; ensures a Samsung product for everyone
  • Aggressive pricing Ensure that there are products at every price point to suit every consumer. Designed products specifically for low- to mid-end market with enhanced features at lower price points to satisfy aspirations.
  • Speed and innovation Quickly bring new technologies to the masses even if it is not the first one to launch it globally
  • Branding pays Increase brand visibility and brand equity through huge campaigns, aligning through popular events like global sports events
  • Be ruthless Exit segments that are not considered savvy and encourage people to upgrade themselves—exited CRT TVs to force people to migrate to LED/LCD and window ACs to make split ACs the order of the day

Even 18 years later, Venugopal Dhoot can’t help break into a wide smile while recounting Samsung’s entry into India. It was December 1995. Samsung—then a name hardly recognised in the world—came into India via a 51-49 joint venture with Dhoot’s Videocon Industries. That’s when Samsung’s then chairman made a startling announcement: by 2010 the Korean firm would be the No. 1 electronics and appliances company in India. It was such an audacious claim from a fledgling equipment supplier, recalls Dhoot, that many in the audience openly tittered. “Nobody believed them then,” says Dhoot, chairman of Videocon Industries, “we never thought they’d achieve this position.”

Two decades later, India—and the world—is fully aware of the rampaging ambitions of this South Korean chaebol. On its own now, the unlisted Samsung India is India’s top electronics and appliances firm today. The $187.8-billion parent has also become one of the world’s most prominent names in technology. It’s nothing short of a hallyu, or Korean wave. In mobile phones, tablets and flat panel TVs, Samsung is the undisputed leader not just in India, but across the world. Now, after dispatching global giants like Nokia and Sony, Samsung is taking on the mighty Apple.

In a world obsessed with mobile phones and tablets, this is the defining marketing battle. If America reacted to the ‘Made in Japan’ tag in the 1980s, ‘Samsung vs Apple’ is the latest battle cry. Though Samsung officials deny it, most of the company’s arsenal in this field continue to be pointed towards products from the Cupertino (Apple HQ) in California. Like the Galaxy smartphone series to take on the iPhone, the Galaxy tablets to counter the iPad and now the new Series 9 notebooks which echo many features that Apple’s famed MacBook range shows off. “Samsung is like a steamroller—you know it’s coming and you better get out of the way,” says Prasanto K. Roy, technical analyst and editorial advisor, Cybermedia. “That said, it’s quite unlike Apple which has come from nowhere and set trends with its products.”

“Apple is a cult brand...Samsung is not out to apportion that space. What it does is provide choice. ”Lloyd Mathias, Green Bean Ventures

A heated debate has been triggered on whether Samsung’s amazing rise signals the advent of an Asian century in tec­h­nology. But is Samsung more a copier of ideas, a great exe­cutor, than an original innovator? For now, at least, consumers don’t really care—they are too busy buying up the ever-expanding range of the company’s products. In India, the buzz around Samsung has led to 30 per cent growth in annual turnover for the past five years to a staggering Rs 27,000 crore (the unlisted firm doesn’t share profit figures; globally Samsung made $26.1 billion in profits in 2012).

Nokia may have bounced back with its brilliant Lumia series of smartphones, but Samsung has already cemented its place as market leader in all mobile categories—a heterogeneous field from smartphones to tablets. Others like LG, BlackBerry and Motorola as well as Indian companies like Micromax have single-digit or less market share in India. And yes, that includes Apple, which says it “doesn’t comment on competition and business matters, so unfortunately an interview won’t be possible”.

Samsung’s India success is a reflection of its global triumph (it’s also now world No. 1 in mobile phones sales). For many firms like Apple, it is also a crucial equipment supplier. Earlier this month, Samsung made a strong statement with its new Galaxy S4 which tries to prove a point or two to Apple’s iPhone 5. Samsung left no one guessing on what it was up to. First, the phone was launched in the US, on Apple’s turf, and the launch itself was designed like a Broadway show, creating the same euphoria every Apple launch event under Steve Jobs did. And it had a similar reaction, complete with night-long queues of people at the stores to grab the first set of S4s.

Imagination is all, an Apple showroom in the capital.

Now remember, this comes after the legal battle Samsung had with Apple over patent infringement. Apple had won that round (In a popular internet hoax, Samsung is supposed to have sent over $1.05 billion to Apple’s headquarters in 30 trucks filled with 5 cent coins). Of course, Apple will respond, at its own pace, with yet another of its game-changing devices, but for now, the moment belongs to Samsung. As Rafat Ali, founder of paidContent, puts it aptly in a recent tweet, “That moment when you realise Samsung phones have surpassed the number of iPhones in your regular subway car....”

“I talk to Samsung often...but I can’t comment on something (Tizen) I haven’t seen.”Eric Schmidt, Google execuitive chairman

While Apple’s strategy centres around cutting-edge design and innovative products, Samsung looks at consumers, their preferences and affordability, a strategy that has fetched them dividends both in India and the world. It has played on all turfs—from multiple models to operating system platforms even as it pushed Android (Google’s open source operating system for mobiles) adoption to new heights. In a few months, however, Samsung is expected to launch its own open source operating system, Tizen, which it is developing with Intel, a development that is making Google rather uneasy. “I talk to Samsung often; and they make great phones. I cannot comment on something I haven’t seen,” Eric Schmidt, Google’s executive chairman, deadpanned to Outlook when asked about Tizen during a recent visit to Delhi.

Experts, though, feel much of Samsung’s strength is derived from Apple—and that it is lucky that post-Steve Jobs, the company may no longer have the edge it was known for. “No other company’s been able to internalise Apple’s industry-leading practices more than Samsung and that has clearly worked to their advantage,” says Deepak Kumar, former IDC analyst and founder of analytics firm Businessandmarket.net. “Samsung’s products  show a telling influence of Apple’s range,  best demonstrated through the difference in their products of the pre-iPhone era and after. Samsung’s edge, however, comes from practising the processes and techniques with a perfectionist’s approach, again an Apple thing,” he adds. Whatever it is, consumers are biting: As Lydia Polgreen, New York Times Johannesburg bureau chief, tweeted recently: “Definitely worth looking for deals on Samsung packages (she tweets from her iPhone).”

Showgirls at the Galaxy S4 launch in Radio City Music Hall, New York, Mar 14, 2013.

A few decades ago, Korean companies believed in the anc­ient management concept of koenchanayo which meant ‘that’s good enough’—just a shade better than India’s famous chalta hai culture. The Japanese, in contrast, practised kaizen or ‘constant improvement’. Samsung has combined the best of both—and has looked at not what is good today but on a long-term and sustained basis. They want to achieve technological excellence through organic and inorganic growth and they want to do it palli-palli (quickly). That’s how Samsung India has overtaken Sony to become No. 1 in panel TVs (LCD/LED); it comes a respectable No. 2 in white goods like refrigerators, split Acs, and washing machines (tellingly, Korean compatriot LG is No. 1 in all these categories).

“In India, you need a portfolio of products, brand strength, good distribution. Samsung has it all.”Anshul Gupta, Principal research analyst, Gartner

Samsung also had a long-term vision and out-thought rivals by making big investments and taking some tactical risks. In 2008-09, when touchscreen phones were just coming in, Samsung took a gamble and put its weight behind it. When Nokia, the market leader, exited the CDMA sector because of low volumes, Samsung stuck it out and became virtually the sole vendor for service providers. And later, it took a bigger gamble by getting into smartphones when few were ready to tread that route. There have been rich dividends from all these risks. “Samsung combines the best of Japanese and Chinese concepts—bringing in good technology and flooding the market with products,” says Lloyd Mathias, founder of Green Bean Ventures and former chief marketing officer for Motorola and Tata Communications.

A crucial part of Samsung’s strategy was also creating a strong, larger-than-life brand. Says Anshul Gupta, principal analyst with Gartner, “In today’s time, innovation is not enough. It’s not just the wow factor. You have to have stickiness to products. That’s what they have done by creating visibility in mature and emerging markets with affordable products along with great brand positioning.” Last year, it was one of the big sponsors of the London Olympics and the torch relay and emerged as the biggest brand gainer. According to industry estimates, in 2012, Samsung increased its mobile phone ad spend by over 400 per cent over the previous year in the US which, in value terms, was 20 per cent more than what Apple spent. The gratification was near-instant. In the Consumer Electronics Show (CES), the biggest annual exposition of technology, in Las Vegas in January, Samsung got more eyeballs than any other, including Apple.

But in a world dominated by the innovations of Apple and the marketing genius of Steve Jobs, even Samsung’s admirers are a bit sceptical about giving it full marks for its successes. Vinod Dham, venture capitalist and globally considered the father of the Pentium chip, feels that even though Samsung is a technology giant, much of its strength comes from Apple and its partners like Google. “Samsung continues to imitate Apple...even its recently launched new mobile phone Galaxy S4 is not a compellingly innovative product and is unlikely to be a turning point of new innovation from Samsung,” he says.

“Right now, Samsung is like a steamroller. You know it’s coming, and you better get out of the way.”Prasanto K. Roy, Technical analyst

Another key factor is that while Apple outsources its production to companies like Foxconn, Samsung has a vertically integrated production system and manufactures everything under its name. This improves flexibility, but at a price. Apple makes more money out of its iPhones than Samsung does from its Galaxy series. “Samsung doesn’t innovate but finds a way to do it better and give consumers a choice,” says Mathias.

Samsung India’s contribution to the MNC’s global revenues is just about 4 per cent (the figure is naturally much higher for mobile phones and tablets). Like many other companies, India forms an important link in Samsung’s overall scheme of things. For instance, India’s three R&D centres are instrumental in developing many key features in Samsung pro­ducts, especially mobiles. In fact, the Indian R&D operations are one of Samsung’s 15 R&D operations globally and the biggest outside South Korea. “Our R&D here contributes significantly to new product development worldwide...they are developing some key features of Samsung’s new global products from here,” says Samsung India CEO B.D. Park. The India centre develops, for instance, internet applications for Galaxy phones across the world and also touch features.

So what’s next at Samsung’s R&D factory? Well, it’s loo­king at investing in areas like healthcare and lifescie­nces to take it to the next hallyu. But for now, all eyes are still set on who takes the honours in the Samsung vs Apple battle.