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Surprisingly, media reports suggest that Sony is scrambling to catch up. However, Lindemann thinks that, in the global market, Samsung still faces an uphill climb against the Japanese giant. “With respect to the brand. I think [Samsung] have a long way to go. Sony has been in the Western market for 50 years, with different exposure everywhere. Everyone has a Sony product somewhere. From the pure perception of the brand, they are still fit -- very strong and comfortable.”

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  Samsung Shows its Strength   Samsung Shows its Strength Best Global Brands 2003 Best Global Brands 2003  
         
 
Samsung Shows its Strength Samsung Electronic’s high ranking at number 25 on the list doesn’t mean it has the competition beat. Sony came in at 20, a position it has basically owned for the last three years (21 in 2002, 20 in 2001). But Samsung’s upward rise from 42 in 2001 to 34 in 2002 to its present position at 25 indicates that the brand has gathered momentum against its competition. The whole possibility would have seemed unlikely to many observers just five or six years ago. At that time, Samsung was seen as a low-quality brand in a tough consumer electronic industry (Korean companies in general were associated with corporate scandal and Asia was in a financial crisis).

Today the brand’s parent company, Samsung Group, is the number one business group in South Korea edging out Hyundai Group. Total sales for 2002 were reported at won 146,052 billion (US$ 116.8B; €110.4B). Founded in 1938, the chaebol now comprises 14 listed companies, including divisions in credit cards, chemicals and securities.

But it is Samsung's electronics' arm that is perhaps most visible to the public with consumer products like flat-screen TVs, mobile phones and microwave ovens. Less visible to the public, but comprising a large part of Samsung’s revenue, is its manufacture of semiconductor chips, a highly cyclical industry. As the world’s top memory chip maker, Samsung hit a bump when chip prices fell in the second quarter of this year, down 41 percent from the first half of last year. However, analysts expect profits to increase as sales of computers rise in the second half of 2003. (Memory chips are used to store data in equipment such as computers, digital TVs, digital cameras, and MPR3 players; Samsung’s dominance in this field is not to be confused with Intel Corporation's success as the world’s largest producer of microprocessors.)

As South Korea’s top electronics company, Samsung Electronics is the third largest electronics maker in the world behind number one Sony and number two Matsushita – which counts Panasonic, Quasar, Technics, and JVC in its brand portfolio. Both Sony and Matsushita are Japanese behemoths with over 50 years of experience in the global market.

 
In spite of its strong position globally, what’s extraordinary about Samsung Electronics is the way it has managed to reinvent itself as a brand of quality despite decades of consumer perception that it manufactured low-end, cheap knockoffs. Today, consumers appear to take Samsung seriously as a quality brand of VCRs and TVs, and even consider it a superior brand in areas like mobile phones where it competes with Nokia, Motorola and Sony-Ericsson.

Director of Brand Valuation at Interbrand Jan Lindemann observes that Samsung is changing popular perceptions: “In different markets, Samsung is moving up more on the premium side. For instance, they used to produce -- a couple of years ago -- middle of the range [mobile phones], now in many markets around the world [they] focus on the premium high-end phones. They tend to be among the most expensive ones you can buy in most cases.”

Samsung’s real estate is improving as well. By moving its product from budget stores like Wal-Mart to more specialized retailers like Best Buy, the brand is better showcased as a quality brand.

Certainly making a more appealing quality product is one way to change perception, but Samsung has coupled this with a consistent and highly visible marketing and PR effort across many channels of communication. Kyung Suh, a manager at Samsung, cites what he refers to as a “holistic brand campaign” strategy to reposition the brand in consumers’ minds.

Corresponding by email, Suh cites Samsung’s commitment to a single global advertising agency, which allows it to control consistency and continuity in its communications across all markets. The brand owners have also made good use of Internet advertising on heavily visited sites, sponsorship and product placement in movies such as the The Matrix: Reloaded, and sponsorship of popular sporting events such as the Olympics. The attention to entertainment marketing is seen as a way to “enhance brand familiarity.”

Lindemann thinks it’s working. “[Samsung] has marketed itself much more efficiently. They are reaping the benefits of having set up a proper global marketing organization,” he says. “All those years they’ve spent much more and the visibility of Samsung is much bigger now. Two years ago they sponsored the Sydney Olympics; they are in the movies. All those things help to push the brand forward.” Samsung intends to concentrate on maximizing sponsorship of the Olympics in Athens 2004 to continue the global association with popular quality events.

 
On the brand management end, Samsung took the now standard approach for any successful global company of mapping out a platform to determine what the Samsung brand stands for; this information is used to arrive at target segments, positioning, and brand architecture. Suh suggests that the primary reliance of the Samsung masterbrand will come under scrutiny in the next year while the company looks at the feasibility of introducing sub-brands.

Perceptions do not change overnight and consumer electronics products are easily copied and quickly commoditized. But it is the combination of these factors that makes Samsung a formidable opponent. Just five years ago, it would have been laughable to suggest that Samsung might pose a threat to huge brands like Sony. Even now, although Samsung may be a stronger name in certain product ranges or regions of the world, it still faces strong competition (which differs depending on business area).

Sony, for instance, has done an extraordinary job of image management overall. Even though some analysts wonder if Sony is not overstretching its brand, the size and scope of its brand management work is extremely strong by any standard. The company, however, sees its broad range of businesses as a competitive factor in its edge over its equally broad range of competitors.

A spokesperson for Sony, commenting by email, says that Sony’s unique position as a global media and technology company is that it “can create new product categories through the convergence of our different businesses.” PSX, which has yet to be released, was used as an example. This souped-up version of the PlayStation 2 offers games, DVD, TIVO, and CD/DVD burning capabilities as well as the ability to download media from the Web and access content from Sony's memory sticks. In this manner, Sony aims to integrate its game and electronics technology to compete at a different level than the competition.

Sony can also throw its weight around by creating unique products and accessories that are not interchangeable with non-Sony equipment. For instance, connectors for DC power or signal transfers are created as proprietary plug types forcing the consumer to buy Sony cables. Aftermarket AC adapters are difficult to locate for Sony products because the company creates its own standard rather than merely manufacturing equipment that could use any of the five universal tip sizes available. Strategic brilliance? Perhaps if there is no competition, but with other reliable brands offering alternatives, the practice could turn risky if consumers get fed up with being forced to buy overpriced Sony accessories that are generally considered commodity components. Sony will have to work harder as reliable alternatives like Samsung become more prevalent.

Samsung clearly has its eyes on Sony’s top position. According to Suh, the goal for the next five years is to “position Samsung as a company that is leading the digital convergence revolution” and “to fortify leadership position in key business areas such as flat panel TVs, monitors, mobile phones and semi conductors.”    

[28-Jul-2003]

 
  
  

Robin Rusch is Editor-in-Chief of Brandchannel.

     
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