The rise and rise of Samsung

For decades, Korean companies have struggled with their 'second best' image. Korean brands, whether makers of cars or computers, have always suffered in comparison with their Japanese, American and European rivals.

They are usually good-quality, good-value products that everyone can afford to buy, but that no one brags about owning. You buy a Hyundai car because it looks like a Jaguar, or a Daewoo refrigerator because it is less expensive than the Westinghouse and Miele models. Simply put, Korean has long meant cheap.

But at least one Korean company is trying hard to break the mold. Samsung, the $35 billion electronics giant, has spent the last few years positioning itself as a premium brand in Europe and United States - two of its largest markets. The company, valued at $8 billion, was ranked 34th in the global listing of brands in 2002, which represents significant growth. Now, Samsung is extending this 'rebranding' exercise to the Middle East and Africa region. And the results so far have been extremely positive.

'We don't want to cater to the middle or lower segments of the market. Our strategy has been to position ourselves as a premium brand. Our marketing, and even our pricing, is comparable to other premium brands,' says B.W. Lee, president of Samsung Middle East and Africa, adding that Samsung began focusing on the Middle East region only recently.

'Earlier, we neglected this region. But over the last two years,' says Lee, 'we have paid a lot of attention to the Middle East: we are investing heavily, both in terms of finances and manpower, in the region.' Samsung is believed to have invested over $10 million in the region to set up the infrastructure needed to boost its sales.

'We are very selective in introducing new products in the region,' says Lee. 'We have only introduced high-end products: mobile phones, TFT [thin-film transistor] televisions and plasma screens. The Middle East is part of our global strategy.'

For a company trying to increase sales in a new region, aiming for the top end of the market can be a highly risky strategy, but it has paid off handsomely for Samsung. The company's total revenues in the region increased 15 percent to hit the $1 billion mark in 2001.

The growth rate for 2002 reached 40 percent, with revenues of $1.4 billion. Samsung's growth is even more impressive when one takes into account the fact that it comes at a time when the global economy is sluggish, and the electronics and IT markets are lurching close to recession.

The biggest growth for Samsung in the region came in the mobile phone segment: the company has edged out several other global rivals to take the number two spot, just behind Nokia. In fact, in certain individual markets, such as Iran, Samsung has claimed market leadership in mobile phones. Lee says that his target is to make Samsung the market leader in mobile phones across the Middle East and Africa region by 2005. And all this despite the fact that Samsung does not sell any phone for less than $100, leaving a big chunk of the market for rivals.

But Lee is not worried, saying that the company does not find it worthwhile to target the low-price, high-volume market, where the returns are small and the competition fierce. He is also encouraged by the response to Samsung's T100 phone, which was launched in June 2002 and which racked up sales of over 200,000 units in the Gulf states alone, despite the impressive price tag of $450.

Continuing with its strategy, Samsung has a series of upmarket mobile phones planned for launch for the first half of this year. The company recently launched the T-500, a mobile phone aimed at women, with a lot of fairly silly gadgets - including a calorie counter and makeup mirror - thrown in. Samsung will also be launching its camera phone, which will also enable the users to record karaoke music.

Samsung has also seen rapid growth in its consumer electronics business. The Korean company claims it has already captured 35 percent of the top-end television market in the United States and Europe, with its latest cutting-edge offerings. The company hopes to repeat its performance in the Middle East with massive marketing and promotion of its products. Lee says that the company saw 100 percent growth in the sales of LCD monitors last year; DVD player sales also grew.

Samsung has also launched so-called 'white goods,' like Internet-capable refrigerators and other kitchen appliances that can 'talk to each other.' The company's HomePAD refrigerator not only stores food but also allows consumers to send and receive e-mail, surf the web or watch a movie by using the touch screen panel of the refrigerator, which can be used as a detachable hand-held computer.

No one needs to watch a film on their fridge, of course, but that's precisely the point. For Samsung, this is an exercise in branding, a statement about how the company hopes to be seen.

As part of its aggressive marketing campaign, the company organized a road show, entitled 'DigitALL Inspiration 2002 Samsung World Tour.' The tour was one of the company's big moves to boost its brand image. Indeed, marketing has been the key to Samsung's success: the company spends nearly five percent of its sales each year in marketing promotion.

'There are three elements behind our success,' says Lee. 'First, our products are highly saleable. The second factor is design. We also try to localize our products, adapting them for the region. The third is promotion, which is very important for us.' With over $75 million in its war chest for the Middle East, Samsung has an edge over its bigger and better-known rivals when it comes to marketing.

Lee says setting up a reliable and efficient distribution chain and after-sales service network has also been crucial to the company's success. 'We like to ensure that these elements are in place before we introduce any new product line in the region,' says Lee.

The same approach is being used as Samsung gears up to launch its laptops in the Middle East in the first half of the year. Lee and his team are busy putting the support systems in place before launching the machines, which will be positioned at the top end of the market.

Lee says that his target is to reach a turnover of $3 billion in the region by 2005, with an even distribution among the product lines: 'I expect that our sales in 2005 will be equally divided between digital media, mobile phones, white goods and IT products.' Given the company's recent performance, it looks like Lee will have little problem achieving his goal.