Samsung today owes much of its success to its Value Innovation Programme. With 6 design labs staffed by 450 people it is serious about understanding what it is consumers need long before considering the technologies required to deliver them. It believes (and, to be fair, evidence suggests) that success in consumer electronics can only ever be short term and there is therefore a pressing need for continuous innovation in order to develop new technology platforms and create products that are first of its kind in the marketplace.
Samsung spends more than $6bn on research annually. It recognises that many of its products, such as semiconductors and flat-screens, are now basic commodities, and its focus is on producing iconic devices for the next generation as Sony’s Walkman was in the ’80s and the iPod is today. Samsung’s innovation focus is therefore set firmly on design and, most specifically, on the design of digital TVs. Samsung launched the R7 LCD TV in 2005 which paved the way for the 2007 “Bordeaux”, a flat screen television with contours reminiscent of a wine glass. This is Samsung’s first LCD television to sell more than 1m units.
Samsung has also turned its hand to designing slick mobile phones, teaming up with Bang & Olufsen to produce the Serene, and most recently the Serenata handset. Described by FHM as “cooler than an Eskimo in an Armani anorak” it is certainly giving its peers a run for their money. In the third quarter of 2007 Samsung’s mobile phone division overtook Motorola to gain second place in the market and has again seen growth in handset sales reaching 14% share. Although still far behind Nokia, with the increased demand for 3G handsets and its strong position in emerging markets, Samsung expects a further growth.
However, it is not all flash and glamour: Up until recently Samsung’s memory division was responsible for 70% of the profit but overcapacity has led to an industry wide decline. Undaunted however, Samsung, which often makes big investments during downturns so that it can increase its market share and make bigger profits when the industry cycle picks up, is raising its capital investment in this division. As peers cut back this is a bold move that signals a strong confidence in the eventual upturn of the memory market. With a brand value now greater than Sony, it is clear that Samsung’s strategy of delivering high quality products with an emphasis on design is paying off and the company is confident of its future performance. Time and again Samsung has proved it is able to look into the future and create what’s just around the corner for the rest of us.
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