SAMSUNG SMARTPHONES

INDIA

Market Report Analysis

SHAMLYN S. FERNANDES ASAD HOOSAIN

MBA

FROM TO

MARKET STRUCTURE

“Markets are judged by performance, not by performance”

• OLIGOPOLY MARKET

• Only a few sellers of a standardized or differentiated product

• Affects the companies price and output

• Similar products differ only by the brand and some features.

• The differences are proved to the USP for each firm.

FIRMS THAT DOMINATE THE MARKET

• Market capitalization of over 50% in the industry.

• SAMSUNG

• NOKIA

• HTC

• MOTOROLA

• LG

• MICROMAX

CONTROL OVER PRICE

• Control over price – the firms are price makers. Which means freedom to MAKE or FIX their own price without losing some or most of their profits.

• The pricing is not uniform which is why we see that smart phones are sold at a higher price when they are launched a compared to later in the future.

HIGH BARRIER OF ENTRY

• Firms require a large amount of capital investment to carry out work such as RESEARCH & DEVELOPMENT, ADVERTISNG, MARKETING AND SO ON.

• OLIGOPOLY is characterized by MUTUAL INDEPENDENCE and STRATEGIC BEHAVIOUR.

• Each firm anticipates each others moves closely.

CONTESTABLE MARKET

• Samsung India chooses to be in contestable market, where there is no/very less collusion chances.

• The profits are determined by the firms MARKET SHARE.

PRICE ELASTICITY OF DEMAND

• The degree of responsiveness of the quality demanded of a good to changed in price of a good.

• A product is known to be elastic if the consumers are sensitive towards changes in price.

• Smart phones – ELASTIC DEMAND

CROSS – PRICE ELASTICITY

• Measurement of a good demanded got a change in price of another related good.

• A survey conducted by O&M was used where the price of non – smartphones decreases by 50% to determine the behavior.

• Out of 15 respondents 73% will not consider to switch from a smartphone to a cheaper phone even the price of non smartphone decreases 50%.

INCOME ELASTICITY

• Measure of degree of responsiveness of demand to the changes in income.

• It indicates that the smartphone is a luxury good.

• The demand for smartphones is higher than changes in income.

• Consumers will not buy a non-smartphone.

DEMAND & SUPPLY

• Report by BGR INDIA about 2 fierce competitors IPHONE 5 AND SAMSUNG S4 case.

• To beat iPhone 5 Samsung has to decrease the price of S4 in order to attract customers.

• Deadweight loss

• Opportunity Cost of both.

CHANGES IN PRICE OF SUBSTITUTES INDIAN MARKET

CHANGES IN PRICE OF SUBSTITUTES INDIAN MARKET

2004 41 million feature phone shipments

NOKIA share :- 67.4%SAMSUNG share:- NA

200557 million feature phone shipments

NOKIA share:- 65.7% Samsung:- NA

200666 million feature phone shipments

Nokia share:- 61.4%Samsung: NA

2007 73 million feature phone shipments

Nokia share:- 59%Samsung:- NA

200885 million feature phone/ smart phone shipments

Nokia share:- 55%Samsung: NAAPPLE:- NA

200993 million feature phone shipments

5 million smartphones Nokia share – 54%

Samsung :- NAApple:- NA

2010103 million feature phone shipments

6 million smartphonesNokia share:- 41%

Samsung :- NAApple :- NA

2011155 million feature phone shipments

12.1 million smartphonesNokia share:- 38.2%

Samsung:- 25.3%Apple :- NA

2012206.4 million feature phone shipments

15.2 million smartphonesNokia share 13.3%

Samsung 43.1%SONY 8.2%

2013261.2 million feature phone shipments

21.4% million smartphonesNokia share:- 7%Samsung:- 38.7%Micromax:- 22.1

FEATURE PHONE AND SMART PHONES

Cont..• Samsung maintained its leadership followed by Micromax and

karbonn.

• Remarkable migration from feature phones to smartphones last year, primarily because of the narrowing price gaps between the 2 product categories.

• 5 – 6.99 inch tablet screen size smartphones accounted for about 20% of the markets overall in Q4 out of which SAMSUNG has 9.7% of their own.

• Samsung has always been experiencing difficulty in boosting supply in the short term because of the pre – order demand being far stronger than expected.

AD. CAMPAIGN ANALYSIS

• Samsung ad is seen on TV every 15 minutes!

• IGN.COM says that Samsung advertisements from a ratio of 100, 91 are global based with an estimated budget of nearly $8 billion out of which 9.3% is allotted for expenditure in the Indian market scenario (REUTERS)

• They focus on both ‘high end’ and ‘rest of the pack’.

• Samsung has cultivated the elite brand image through their advertisements.

• Advertising doesn’t just increase sales but to a point where the consumer listens and demands that brand product only avoiding the rest.

• Focuses on broad appeal for innovation, targeting millions in its advertising with messages positioning its devices as offering the latest and greatest features.

• Samsung products make news because they have the biggest screens, fastest processors.

• 2008 – 09 – Samsung made Aamir Khan their brand ambassador which was very fruitful for the company as their distributions doubled.

• Aamir khan was the brand ambassador for 3 years and now Samsung has part-time ambassadors such as Nargis Fakhri.

Cont..

• Samsung has global integrated marketing communication (IMC) for the past 6 years.

• Samsung has started a new ad trend with the zero – plan to focus on extending support to the less income generation audience to attract them in buying the top models.

• Segmenting in psychological positioning

TWO IMPORTANT ADS

• Low – end Samsung product under the galaxy Y series.

• Targets the Indian consumers through its middle level product which is the mid galaxy series.

• The ad is based on youthful group where they wanted to convey that if you are a Samsung galaxy user then you are by default smarter than the rest.

• Galaxy note 3 and Galaxy Gear – the advertisements are in collaboration with Vodafone focusing on its connect with the far reaches of the country.

• The ad captures the element of re unions.

• S3 was advertised saying that It’s the human companion, made for humans.

ADVERTISING EXPENSES

PRICE - POINT STRATEGY

Rupees 6000 – 12000Focus group – low income

The entire galaxy Y series. Ex – DUOS

Rupees 12000 – 18000Focus group – middle income group

Products like ACE PLUS

HIGH INCOME GROUPSRs 18000 – 25000

Dominated by most of its tabletsProducts like galaxy beam, note 1, 2

Above Rs 25000Can be called as the niche market

Products like note 3, s3, s4

PRICE RANGE OF VARIOUS SMARTPHONES IN THE

MARKET

POINT-OF-VIEW

BIGGEST WINNERS

SAMSUNG (2004 -2014)

CAPITAL EXPENDITURE

Samsung can produce more production as they are more advanced in technology.

SERVING THE TARGET MARKET

40 million smartphones sold in 2013.

Half of the users are younger than 25 years which is the focus group Samsung has been targeting for the past 5

years.

ELITE CIRCLE CHANNEL PROMOTION INITIATIVE

Segregating the market first

Multiple distributors

PRODUCT DIVERSIFICATION

• New strategies and risk takers

• Militaristic attitude

GREAT CUSTOMER ACQUISITION COST

• Has communicated strong thoughts and substitutes.

• In the ‘playing XI’ rather than the ‘substitute’

FLAGSHIP PRODUCT ‘GALAXY’ SERIES

Innovative and sustained ace products

HORIZONTAL INTEGRATION

More profitable

PRICE POINT STRATEGY

The lowest in the elite circle range at around $100 in 2013 and apple is $800,

HTC $540, SONY $500

BETTER RECALL

Better recall in Tier-2 cities.

Cities like Lucknow, Pune and Ahmedabad

SALES PROMOTION AND DISTRIBUTION

Marketing strategies and incentives to boost sales. Marketing budget is $ 14

billion.

$4 billion spent on marketing 2012.

MARKETING TACTICS

Zero plan initiative :- also known as STAY NEW.

EMI scheme will 0% interest will be extended to till June 30th 2014

Buyback scheme:- with one time free display

replacement

NEGOTIATIONS

Samsung in the past 3 – 4 years has acquired companies and their integrative

technologies, 2 of them are Tizen and Corning.

RETAIL STRATEGY

Micromax cannot compete very well with the well established Samsung.

POINT-OF-VIEW

WEAK LINKS AND POINTS

HIGH COST PLACING PRODUCTS

Price is quit high for Indian standards

COMPLIMENTARY

GALAXY GEAR hasn’t been successful.

Grey-market Invasion

NO BRAND AMBASSADOR IN INDIA?!

• Aamir khan in 2010 which increased the distribution share of the product in the market.

• Its unfair as they are spending millions worldwide having global brand ambassadors such as LIONEL MESSI.

LESS COLLABRATION

• Haven’t focused on regional market.

• The competition has indulged in collaborations with Micromax, Lenovo and even iPhone 5S (with Airtel and Aircel)

FOCUS ON NEW MARKET DEVELOPMENT

Samsung has the tendency to go after new avenues rather than sticking to its contained markets and building it.

PROBLEM WITH THE AVERAGE SELLING PRICE

• Brought down their average selling price

• Constant fluctuations in the market where Samsung is not able to cope up.

LACK OF DEMAND

• Criticism for high pricing.

• Substitutes like Micromax and karbonn are available at low prices.

SHELF LIFE SUSTAINANCE

• Extended shelf life. Eg- S2• Industry average is 1 year, Samsung

has 2 yrs.• Samsung S4 experienced price drop of

nearly 30%.

LOCAL AGGRESSIVENESS

• Chinese players like GIONEE and XIALOU.

• Local players.

APPLE’S AGGRESSIVENESS

• Have launched a buy and try scheme.

• Samsung was caught off guard with Apples aggressiveness in India.

INSTABLE LEADERSHIP

• Samsung India has 3 different country heads for smartphone business importantly in 3 ½ years between November 2009 and March 2013!

• No country head for over 6 months!

CUT – THROAT PRICE WARS

• Due to competitors

• Local players

• Micromax and karbonn

OPERATING SYSTEM

• Problems regarding Samsung's OS.

• Leads to many bugs and glitches disturbing many preferences.

CANNABILISM

New products introduced where these products are already established.

HIGH CAPITAL EXPENSES

Declining prices on smartphones creates a pressure on profit margins for components that go into mobile devices such as memory chips, display panels and so on.

SAMSUNGS BIGGEST COMPETITORS

TOP SELLING PHONES IN INDIA (2004 – 14)

2004Nokia 2600

Motorola RAZRNokia 6010

2005Nokia 1110

Motorola C139Nokia N 70, 72, 73

2006Nokia 1600Nokia 6070Nokia 7360

2007Nokia 1200Nokia N95Nokia 5130

2008Apple IPhone 3G

Nokia 1680Nokia 2330

2004Nokia 2600

Motorola RAZRNokia 6010

2005Nokia 1110

Motorola C139Nokia N 70, 72, 73

2006Nokia 1600Nokia 6070Nokia 7360

2007Nokia 1200Nokia N95Nokia 5130

2008Apple IPhone 3G

Nokia 1680Nokia 2330

2009Apple IPhone 3GS

Nokia 2700Nokia 6303

Samsung STAR

2010Nokia 5230

Apple IPHONE 4Samsung galaxy S

2011Apple iPhone 4S

Samsung galaxy s2Samsung galaxy Y

2012Samsung galaxy s3

Apple iPhone 5

2013Apple iPhone 5s

Samsung galaxy s4

TOP SELLING SMARTPHONE BRANDS IN INDIA (2013)

CONCLUSION• Samsung equation can be summed as :-

AFFORDABILITY GROWTH INCOME GROWTH

BEHAVIOUR ATTITUDE

• Samsung sold more than 12 million galaxy smartphones.

• Samsung is quit profitable in the smartphone division which is their biggest cash flow with more than 2/3rd profits (FORBES).

• End of 2013, MICROMAX was the 2nd largest smartphone player with a rough 16% market share, according to IDC less than half of Samsung 38%.

• Highly-focused King-lomerate!

• Consumption comfort.

• Product diversification .

“THERE’S A STORM COMING IN…” -Sarah Connors.

SOURCES

1. POSITIONING – The battle of minds by TROUT & RIES.2. www.bgr.in3. REUTERS4. THE FINANCIAL TIMES5. ECONOMIC TIMES6. WWW.WORDPRESS.COM7. Mc Connell, Brue, Flynn & Grant, 20128. Muhd Iqbal., 20139. IDC India10. Bloomberg11. FORBES India12. Winning the story wars – Jonah Sachs and so on…

RESPONSIBILITIES

Shamlyn S. Fernandes – Head Editing, Developer.

Asad Hoosain – Head Data Compilation, Research and Interpretation.