Samsung China: The introduction of colour TV.

             Another important dimension to the case is the consumer’s buying power in China. 60 Million Chinese had per capita purchasing power exceeding US$ 1,000, an income level above, which Chinese could start buying colour TVs. By 1992, five urban areas showed average per capita income levels exceeding the required minimum level. “Where were the Chinese getting all this money from?” The Chinese had undisclosed income thanks to the booking black market in labour, goods, services and foreign exchange. There were no housing mortgages in China. This reduced their spending on housing and utilities to a large extent as compared to the spending in other East and South Eastern countries. This says a lot about the buying power of Chinese consumers: they have the power to demand for their choice of goods.                Knowing China’s size and scope pf scalability it would be impossible to succeed throughout China in all product sectors.  Consumer’s Colour TV preferences in urban China areas were a deep contrast with the rural ones. City dwellers were more concerned about brand names and the functionality of the products, while consumers in rural markets preferred colour TVs with reasonable quality and lower prices. Niche markets are hard to penetrate but also give high margin profits – the dream of any business enterprise. With the integrity of their reputations to protect, foreign firms have some valid reasons for having higher costs than their local competitors - such as their need to maintain international standards of environmental and worker safety. China’s excessively fragmented retailing sector is consolidating fast. By working closely with the rapidly emerging retail chains, Samsung can improve distribution efficiency and make sure superior product quality and performance are communicated effectively to end customers.

Segment wise analysis

Product-line wise analysis

 Recommendations:

• Use the strategy of “selection and concentration”: Having originally concentrated on the production and sales of low-medium end products, Samsung should gradually shift to higher-end products, towards niche market. It should focus on city dwellers. It is a risky venture but with greater risk comes greater potential reward.
• Product Differentiation with limited line of products. It should focus on high value-added, currently popular and technologically advanced products. It should focus on product quality, product specialization and technological innovation. Samsung should focus on building and burnishing its brand value. It should work towards a unique style and personality. And this is exactly what city dwellers look for in their colour TVs. By going for quality over quantity, Samsung might just find a way to differentiate itself. It might also find the key to success in China.

• Production bases: Cheap labour costs in China should be used as a completive advantage. Samsung should increase its production bases in China
• Product Lines: Initially introduce the 29-inch product line. Only local manufacturers Changhong and Xiongmao (Panda) manufacture it. And slowly increase its product line.
• Strategic Branding: The biggest challenge for Samsung is to the strategic step from mass advertising and promotion for awareness building to building perceived value for each key customer target. In order to survive the fierce competition in the high-end market segment, Samsung should learn the science of market segmentation and branding for target segments.
• Push to Pull Strategy: Samsung should pursue a systematic approach of targeting high-end customers shifting from push selling to pull marketing.
• Streamline distribution channels: Bring distribution strategy in line with long-term brand plans. Samsung should equip itself with dedicated sales channels and networks of distributors that extend deep into China’s major cities. Instead of establishing discount retailers in separate cities, it should set up general agencies in cities like Shanghai, Shenzhen, Beijing, Tianjin, and Guagzhou. It should recruit regional managers for this geographic structure. Each regional agency should work with several distributors who in turn might have several sub-distributors that serve exclusive regional territories. Also, Samsung should work on professional sales force and after-sales services to gain that competitive edge. It should try to gradually increase its loyal distributor base.
• Localise R&D: In the past, most foreign firms have viewed their China operations as importers of the results of their R&D elsewhere. But there are good reasons for localizing more R&D in China. For one thing, it would improve the chances of meeting local customer needs and increasing speed to market. In addition, given China’s vast supply of cheap and talented scientists and engineers, localizing R&D could substantially reduce its costs. Samsung should invest in its customers.  Also transferring R&D to China would do a lot to help sweeten relations with government at every level and could provide a powerful bargaining chip for soliciting official support for other parts of a company’s China business. 

Conclusion:

          Samsung should successfully make brand building the key focus of its marketing strategy including product development, selection of distribution channels and channel marketing as well as external and internal communications. An old adage in China says, “everything is possible, but nothing is easy". This applies to “Samsung China” as well. Marketing is a learning game. Samsung should invest in knowing its customers better because Samsung’s competitors surely will.