China:The Introduction of Colour TV

Alex Dorward, Liam McGeanMatthew Tomlinson, Yixi Hao

Agenda

• General Background -Yixi• Chinese Market Overview -Yixi• Marketing Mix -Matt• SWOT Analysis -Liam• PEST Analysis -Alex• Marketing Strategy Proposals -Alex• Proposed Marketing Mix -Matt

General BackgroundSamsung (South Korea)

1938-1969 Starting1970-1979 The industrial age1980-1989 Into the global technology market1990-1993 Went on the world stage1994-1996 “New business” age1997-1999 Digital Frontier Samsung 2000-present Guide the digital age

Samsung Philosophy: to devote the talent and technology to creating superior products and services that contribute to a better global society.

Samsung Electronics’ vision for the new decade is:”inspire the World, Create the future”.

• In 1985, Samsung established the Beijing office • In 1991, Samsung set up offices in Shanghai and

employed by South Koreans• April,1992, Samsung established the first joint venture in

Tianjin, China• August 1992, Beijing and Seoul established diplomatic

relations; Samsung China began to develop fast.• January 1995, Samsung began to strengthen business in

China, established Samsung China headquarters.• In 1996, set up the Samsung (China) investment company

General BackgroundSamsung (China)

-In 1992, 60 million Chinese had capita purchasing power exceeding US$1000 and by the year 2000 the number will be 200 million-China had more than 20 indigenous firms which focused on the low-end market segment ( Changhong, Panda, Konda and so on)-Major segments of the color TV market:18-inch 23%, 20-inch 24% and 21-inch 36%-Depend on the unit sales, China’s market size was 1.5 times as large as Japan

Chinese Market Overview

Chinese Market Overview-China was a highly protected market. eg. The tarifffor colour TVs was 60% in average in 1995-Chinese consumers had a tendency to be loyal to afirst mover’s products-Urban consumers more concerned about brandnames and the functionality of the products whilerural consumers preferred reasonable quality andlower price

Product

-High quality colour TV’s in various sizes

-Sizes (in inches) include: 13,14,16,18,20,21,25,26,27,28,29,31,33

Place

-Production in: Mexico, Hungary, UK, Turkey, Thailand and China

-Sold in many countries around the world

Price

-Prices range based on screen size

- 20” TV $210, 27” TV $430

-Penetration pricing strategy is used due to very low price

Promotion

- Limited advertising compared to other companies

-Spent significantly less in advertising than top three competitors (1968-1994)

Marketing Mix

•Strong customer base in the USA•Samsung has a much wider variety of TV sizes than other competing companies in China•High TV quality index compared to competing firms•Overall price position cheaper than competing firms

SWOT AnalysisStrengths

•Limited market penetration•Significantly less advertising than competing firms•Little brand loyalty in China•Lack of innovation in product development and design

WeaknessesSWOT Analysis

•Overall market is expected to grow by 10% per year•Medium and large colour TV markets are rapidly growing•171 million households without colour TV’s in China•Income levels in China are rapidly increasing•Tariffs on colour TV’s are decreasing•Taxes are low•Chinese colour TV market second largest to the United States

SWOT AnalysisOpportunities

•The first companies are automatically recognized•Samsung was experiencing increased competition in home market, as well as global market•Japanese production bases are expected to increase from 19 to 30 within China•Increasing labour costs in South Korea, where Samsung headquarters is based

SWOT AnalysisThreats

-Relations between SK and China have improved-Chinese tariffs are high-Chinese tariffs are on a decreasing slope-Taxes in China are low-”Reform and Opening” policy-Reduction in subsidies and export credits for big

businesses in South Korea

PoliticalPEST Analysis

-Chinese economy is growing-9.2% average GDP growth from 1994-2000

-Chinese average incomes are increasing-Additional disposable income due to housing

subsidies in China-Increase in labour costs in South Korea-Removal of entry barriers in South Korea

PEST AnalysisEconomic

-Chinese prefer the first mover-Brand names are not easily taken to-Many Chinese do not report income, thus

income levels are higher than recorded-A trend of urbanization-Less children per household

PEST AnalysisSocial

-Technology is becoming cheaper-Demand for larger TV’s is increasing in China-Other forms of TV technology are emerging

(LCD, Plasma, LED, 3D)-Potential for TV being watched online on

laptops

PEST AnalysisTechnological

-Target the Upper Medium class in the Chinese market meaning high quality with a reasonable price- Target those in the Upper class using a high quality, high price ratio- Target the Lower Medium class using a medium quality, low price ratio with limited promotion-Target the Upper class by significantly promoting high quality, setting the price high thus establishing a brand name. Then reduce price and effectively target Upper Medium Class.

Marketing Strategy Proposals

-Target the Upper Medium class in the Chinese market meaning high quality with a reasonable price- Target those in the Upper class using a high quality, high price ratio- Target the Lower Medium class using a medium quality, low price ratio with limited promotion-Target the Upper class by significantly promoting high quality, setting the price high thus establishing a brand name. Then reduce price and effectively target Upper Medium Class.

Marketing Strategy Proposals

Proposed Marketing MixProduct

-Eliminate the section of TV’s that are 17 inches or smaller-Remain focused on current high quality levels

Price

-$230 (after brand has been established) for the 20’ TV-$550 (after brand has been established) for the 27’ TV-These prices are comparable to Sharp

Place

-Keep selling in urban areas-Sell in Department stores and Electronic stores

Promotion

-Initially significantly increase advertising to Panasonic levels to establish brand recognition-Once brand is recognized, reduce advertising to similar level as Sharp

Thank you

• Any questions??