While it appears bizarre for a company which is the world’s biggest in its sector as measured by sales, Samsung Electronics (‘Samsung’) may be facing a crisis. According to a 12th September 2011 article entitled Samsung needs to hit reset button in the redoubtable Financial Times, the technology giant which has become synonymous with its parent country of South Korea is facing problems on numerous fronts: financial losses at its flatscreen television division are arguably dwarfed by the potentially more serious problem of intellectual property battles with Apple Inc. (‘Apple’), an issue which has already seen the American brand behind the iPhone and iPad successfully obtain court injunctions blocking the sale of certain Samsung products in three separate jurisdictions (Australia, Holland and Germany).
The IP skirmishes with Apple – ironically, one of Samsung’s best customers for its chips and display screens – are particularly troubling as they are symptomatic of what is perceived as a structural problem: Samsung’s weakness with software. Under the leadership of its fabled chairman Lee Kun-hee – and confronting the exigencies of the late 1990s Asian financial crisis – Samsung shredded the chaebol social contract, shuttering swathes of its Korean production and outsourcing manufacturing to lower wage economies from Slovakia to Mexico; in the process, the company became an immensely competitive maker of sophisticated, feature-rich electronic goods, but at the broader cost of losing its focus on intangibles, an especially pressing concern given that Google’s Android operating system which is presently shipped with so many Samsung products is no longer certain to be available to third parties in the future.
These are certainly challenges, but after some consideration Mediolana’s chief blogger thinks that he might have formulated a viable way forward out of the impasse for the company which many regard as the pride of the Republic of Korea:
1. Back to School. One of the advantages of shifting more telephones, tablets and televisions than anyone sane cane really count is the pile of cash that almost invariably accrues from doing so: Samsung is sitting on reserves of a cool US$17.6bn. Faced with a crucial weakness in the area of software design and provision, the company can afford to open a brand new international centre of excellence in Seoul and pay the world’s best and brightest minds top dollar to teach a new generation of Korean genii the secrets behind a fabulous OS.
2. Brand Soul. As with many companies that manufacture good stuff in great volumes, Samsung is not associated with non-material values in the same way as premium brands such as Sony or Apple, who often go out of their way to stress their products’ ‘spiritual’ attributes, such as environmental credentials or sex appeal. Samsung has mastered the making of electronics crammed with features; now it needs to inject some more soul into its selections.
3. Recessionary Markets. At the same time, Samsung should not forget that its products have captured a massive share of the global market in electronics by offering consumers advanced products at irresistible prices, whether these be LCD televisions, colour multifunction laser printers or mobiles with a fake call facility. In times characterised by fonduenomics, the company would do well to focus on bringing a slice of Far Eastern magic to aspirational emerging markets, while making cash-strapped denizens of the First World offers that they literally cannot afford to pass up.