Samsung Sources of Competitive Advantage

Introduction

Samsung is a leading electronics brand with a formidable presence in the smartphones and tablet market. Apart from that, it has also acquired a leading position in the consumer electronics market. Despite the heavy competition in the smartphone and consumer electronics industry, Samsung has maintained its leading position due to its focus on technological innovation. The result has been growth in popularity and sales. Some of its core strengths include advanced technology, supply chain, marketing and brand image. However, its leading position is supported by several sources of competitive advantage. It is also a leading chip maker and its Galaxy smartphones are among the most popular that compete with Apple’s iPhone. Have a look at how its various sources of competitive advantage have helped it strengthen its position in the consumer electronics and particularly the smartphone market.  

Research and innovation :-

Samsung is an innovative brand that focuses a lot on innovation to bring efficient products that are excellent in terms of performance as well as productivity. Apart from its smartphones which are both attractive and efficient, the brand is also a leader in the chip industry. Galaxy is a market leading model of smartphones whose popularity around the globe is high. It is among the leading competitors of Apple’s iPhone. The computing and smartphone industry has grown highly competitive and to remain ahead of the others, it is important to focus upon research and innovation. Samsung invests a large sum each year in Research and development. This enables it to respond faster to changing demand and customer trends as well as release new features and models. It also enables higher user engagement, better brand recall as well as higher customer retention. Samsung is also a leading innovator and invests heavy sums in modern technologies like AI, IoT, security and privacy as well as autonomous mobility and data infrastructure.

Brand image:-

Brand image plays a central role in making a large and global business like samsung successful. Samsung is a leading technology brand with a strong presence in smartphone and tablet as well as consumer electronics and chip industry. One major reason behind the global success of the brand is its strong brand image. It is a customer centric brand that has consistently focused upon the consumers’ tastes and preferences as well as overall customer experience. All these things have together resulted in a strong brand image and brand equity.

Supply chain:-

A strong supply chain is also a determinant of the competitive  strength of a brand. It enables faster production, smooth operations and faster delivery. Overall, a strong supply chain is important for maintaining your leadership position and a healthy bottom line. Global brands that have successfully managed their supply chains have been able to reduce their operational costs and pass on the savings to their customers. Samsung is a global brand and sources its raw material from thousands of suppliers from around the world. It has been able to manage its suppliers well using digital technology. Samsung operates its supply chain with the help of around 2,500 suppliers from around the world. Apart from focusing on sustainability in its supply chain, the company has also built a code of conduct for its suppliers and provides them the necessary support for compliance. The company has also started several innovation initiatives for engaging its suppliers and for driving innovation throughout the supply chain. It conducts regular audits of supplier factories and also provides tools and training that make them more efficient and productive.

Marketing strategy :-

The marketing strategy of Samsung is also a primary driver of its growth and profitability as well as competitiveness. Its marketing strategy is focused at the customers as well as the quality of its products. Marketing plays a central role in driving demand higher and growing the sales of a company as well as creating a strong brand image for any product or business. Samsung invests a large sum each year in marketing and promotions of its brand and products. In 2018, the advertising expenses of Samsung were around 4 trillion Korean won and sales promotion costs totalled around 7.1 trillion Korean Won. Total marketing expenditure of Samsung was higher than 9 Billion US dollars in 2018. It shows how much Samsung spends on growing the sales and demand of its products. Apart from that the brand is using digital technology heavily for marketing and customer engagement. The result is higher customer retention as well as faster growth of customer base. Overall, this has worked to make Samsung’s position in a highly competitive industry and global market stronger.

Pricing strategy:-

Samsung’s pricing strategy is also an important support behind its competitive strength and global leadership position. It  has brought products for both the higher and the lower end market. Apart from the premium Galaxy models of smartphones, the company has also brought a large range of affordable smartphones to the market. This is an important reason behind the brand’s competitive strength and a reason behind its large customer base. Apart from the mobile phone segment, in the consumer electronics segment too, it has brought products in both the premium and the lower end segment.

Customer base:

Samsung is a global company and its products are famous all over the world. Some of its market leading products like Galaxy smartphone and its range of televisions are highly popular and have a very large customer base. The company keeps releasing new features and models to keep its customers from all over the world engaged. A large customer base also means higher sales and revenue. Samsung focuses a lot on customer retention and for that purpose invests a large sum each year in marketing as well as R&D. This enables the brand to produce new market leading products and to engage its customers better. In this way, the brand has kept expanding its customer base globally.

Customer loyalty:

Apart from having a large base of customers from around the world Samsung has been successful at building high degree of customer loyalty as well. Competition in the consumer electronics industry as well as the smartphone industry has grown intense. Building customer loyalty requires a large investment in research and innovation to remain ahead of competition as well as a major investment in marketing to retain market share and for customer engagement. Samsung focuses on both promotions and customer engagement. Therefore, the brand has been able to build strong customer loyalty. It’s a major source of competitive advantage for Samsung.

Sources: Samsung Annual Report 2017.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.