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Executive Summary
1.
The strategic opportunity is: the virgin flexible smartphone market with 30% lower cost than the ordinary smartphone market, with a 9 months time advantage for samsung compared to the competitors who are planning to launch their products in the Q2 of 2014. 2. Critical Protanos 8C insights: Category, still a virgin unexploited terrain. 3. The strategic alternatives are : Product: Create a flexible screen smartphone only in the high end segment or Create a flexible screen smartphone in all segments. Place: Use an exclusive distribution channel or sell the product through all existing channels. Price: Charge High Prices or Charge Normal Prices. 4. The recommendations are : Product: Create a flexible screen smartphone only in the high end segment. Place: Use an exclusive distribution channel. Price: Charge High Prices/ Skim pricing strategy.
Category
The Smartphone Market is very attractive, market studies recorded a growing demand in this category , In the fourth quarter of 2012 smartphone sales recorded a 36% growth.
Average
Try Harder
Leader
Strong
The growth of most technology markets slows rapidly once the 50% penetration is reached
Competition
Competitive Advantage : Superior Technology & Innovation Superior Collaborators
Smartphones : Samsung 25.7% share LG 18.2% Apple 17.1% Motorola 11.2% HTC 6.3%. OS: Android was also on top of all smartphone operating systems with 52.6%. iOS has 34.3% of smartphone platform share BlackBerry 8.3%, Windows Phone/Windows Mobile 3.6% Symbian 0.7%.
Porters 5 Forces
Bargainig Power of Suppliers Level : Low Why : Smasung is vertically integrated, they manufacture their own parts Substitute Products Level : Very High Why : Non-flexible-screen smartphones can replace flexiblescreen smartphones How to mitigate the risk : By communicating the benefits of the new technology, and emphasizing on that the old smartphones are outdated Threat of New Entries Level : High Why : The technology is available for some competitors How to mitigate the risk : Be the first to get into the new market and create barriers.
Intensiey of Rivalery Level : Low Why : only few competitors can afford the new technology
Bargaining Power of Customers Level : Low Why : Only Samsung who can offer customers the flexible-screen smartphones for now.
Risk Of Cannibalization
Company
Samsung is the leader in the US smartphone segment
Relative Strengths Samsung relies on itself to supply its materials Innovative technology A Stable Growth in smartphone industry (average 30%)
Relative Weaknesses
Insight
Company
Opportunities Threats The new flexible screen technology (30% less costly) Market potential not fully exploited, a remaining 45% (101,25 million) is still a huge opportunity The consistent and tremendous smartphone market growth (55% in 2011, 36% in 2012) Risk of cannibalization (new products may cannibalize the old ones) Possible (very probable) entry of other competitors to the new market
Possible increase in sales and market share and capital Need numbers
Collaborators
Google with its Android Operating System is the main collaborator for Samsung Mobile. Samsung has a 46% of market share from Googles OS (Android), compared to 23% in 2011. Google is also collaborating with Samsung on the new smartphone Nexus.
Context
Innovation : The Flexible-Screen Smartphones use plastic instead of glass 30% less costly than glass
Customers
What do customers value? Applications : The more available on the OS app store, the more customers value the OS and therefore the smartphone. Design : must be elegant and modern Performance of the device : the highest and the best available in the market Features : basic features like Bluetooth and Wi-Fi are mandatory, other features are preferable
Target? Americans who are 14 years old or more. Needs : a Telecommunication Device Wants : a Sophisticated Smartphone
The new generation of consumers is spending a lot more time on their smartphones than on their laptops
Alternatives
Product: Create a flexible screen smartphone only in the high end segment. Pros: better brand image and positioning Cons: 1. Unexploited potential in the low end segments 2. The new product may cannibalize the old one. Create a flexible screen smartphone in all segments. Pros: Exploit all possible potential in all segments. Cons: Underperforming in one segment may harm the brand image and lead to losses of market share in other segments
Alternatives
Place: Use an exclusive distribution channel. Pros : ensure better brand image and high valuation of the product Cons : limited access and coverage less market share Sell the product through all existing channels Pros : ensure maximum coverage and market penetration Cons : as a premium new technology, it may decrease the value of the product as perceived by customers. Price: Charge High Prices. Pros: Generate more profit, better positioning at the premium level. Cons: not affordable by all customers. Charge Normal Prices. Pros : better reach to the customers wallet. Cons : Bad perception as a high end product.
GOST
Goal : Lead the Smartphone industry in all segments Objective : Be the leader in the flexible-smartphone segment with at least 90% of market share within the next year
GOST
S:What business are we in? Flexible-Screen Smartphones
What competitive advantage are we using?
Superior Technology & Innovation (Flexible OLED Screens) Superior Collaborators : Google (Android)
Are you using a supplying resource?
(GOST)Continued
Promotion/Information
Preparing the marketplace to welcome the new product
Before the launch of the product, Samsung should Invest a lot on advertising the new technology, customers must be aware of it. they should perceive it as a solution and as an upgrade that takes the smartphones into new dimensions. They should emphasize on the practicality an the utility of the flexible screens.
Changing the customers perception about the old product is key for the success of the new product
Pricing/Value
Skim pricing strategy The absence of competitors will allow Samsung to benefit the most of the market, this pricing strategy is best for new innovations, and insures maximum profit. The Pricing strategy will be as follows : Launching price should be $500, as the product lifecycle of smartphones is on average 9 months, they should reduce their prices each 3 months by $50. This is how it is going to be : July/August/September $500, October/November/December : $450 January/February/March/$400 On March, when the competitors are going to launch their flexible screen smartphone, They will find it difficult to compete with Samsung because Samsung has very low costs compared to the industry, and at a 400$ price, margins for competitors will be very low, therefore it is going to be hard to compete with Samsung in this segment.
The margins from flexible smartphones will cover the losses from cannibalzation
Cannibalization
Weighted Flexible Screen Smartphone unit contribution Cannibalized S4 Unit contribution Total Regular S4 Purchasers opting for flexible smartphones Flexible Screen Smartphone total sales in units Total Cannibalization Rate $ $ 46,11 37,89 18000000 57000000 32%
Total Weighted Flexible Screen Smartphone Contribution Total Regular S4 Purchasers opting for flexible smartphones Flexible Screen Smartphone total sales in units Total Cannibalization Rate
The margins from flexible smartphones will cover the losses from cannibalization
Place/Access
Exclusive Distribution Channel for Branding Reasons: As a new technology, the flexible screen smartphones should be distributed exclusively, as Samsung is the only company who is going to be commercializing it. Limiting access at the launch will create a rush for flexible screen smartphones in the next few months, as innovators and early adopters will buy the technology and will do the word of mouth marketing for the product.
Exhibits
S4 Flexible Sccreen Smartphone Total Revenue $ 21 600 000 000,00 Total Revenue $ 25 900 000 000,00 Total Variable Cost f $ 6 245 000 000,00 Total Variable Cost f $ 4 788 000 000,00
Total of both segments S4 since flexible Screen Launch (July 2013) Total Revenue Total Variable Cost f Total Margin Total units sold $ $ $ 13 500 000 000,00 4 085 000 000,00 9 415 000 000,00 Margin 39000000 Units $ 47 500 000 000,00 114000000 Revenue $ 47 500 000 000,00
Variable Cost
2013
2014
April
Mai
June
July
August
Spetember
October
November
December
January
February
March
Price
$ 450,00
$ 450,00
$ 450,00
$ 400,00
$ 400,00
$ 400,00
$ 350,00
$ 350,00
$ 350,00
$ 300,00 300,00
$ 300,00
Variable Cost
6000000
6000000
6000000
4000000
4000000
4000000
4000000
4000000
4000000
5000000
5000000
5000000
Price
$ 0 500,00
$ 500,00
$ 500,00
$ 450,00
$ 450,00
$ 450,00
$ 450,00 400,00
$ 400,00
5000000
6000000
6000000
7000000
7000000
7000000
7000000
6000000
6000000
2000000
2000000
2000000
3000000
3000000
2000000
2000000
1000000
1000000
0%
0%
0%
40%
33%
33%
43%
43%
29%
29%
17%
17%
$ -
$ -