Business, Entertainment

Analysis: How Samsung Executes its Mobile Strategy

The quick version – Samsung didn’t pay much serious attention to smartphones until last year, but once it ‘woke up’ it has run on all cylinders. They tick all the boxes, and have a great strategy – which they are executing perfectly. Do I need to say more? First off – this is an Tomi Ahonen analysis, thus your latte won’t get cold while you’re reading this. Sit back and enjoy.

Samsung is everywhere. They offer Symbian smartphones and Windows Mobile smartphones. They offer Google Android smartphones. As if that was not enough, they launched their own smartphone OS, called Bada. And to top it off, they are one of the five confirmed handset makers to do Microsoft Phone 7 smartphones. Now you have to bear in mind that Samsung Mobile is smaller than HTC. Ranked number 5, they are barely bigger than Motorola selling only about 2.9 million smartphones per quarter. RIM does 11.2 million smartphones on only one OS…

But this position allows Samsung two advantages. First, it means they know every platform that allows licensing to third parties [Apple, RIM and Palm/HP do not license to others]. They can optimize given smartphones for given OS capabilities. That means Samsung can release new phones whenever anyone OS gets an upgrade, but is not hostage to any delays of one OS, because they can then release similar phones on a rival platform.

And perhaps more importantly, they can always answer ‘yes’ to any requests by any carriers/mobile operators. If the operator has a preference [and they could not insist on any OS that is not licensed to others ha-ha, so this preference can only be between Symbian or WinMo or Android etc.] then Samsung can say ‘yes’.

So what makes Samsung so hot? Half of the big success is the Galaxy S series of smartphones running Android. Large screen multi-touch iPhone look-alike smartphones, the Galaxy includes basic minimalist iPhone clones, QWERTY sliders and even a model – called the Galaxy Beam – with a built-in Pico projector that will shoot a video on any white wall that is 50 inches wide. That brings any argument about whose screen is bigger – to an abrupt end. Did you say 50 inches? Yes, look at this…

Oh, and they launched the Galaxy Beam in Singapore already – price point? Same as the iPhone 4. The reaction of the people on the street was quite unonymous: "I want one so badly…"

How is that Galaxy strategy doing? Pretty stellar in fact. In only three weeks, Samsung Galaxy was sold in 500,000 units. In South Korea. Alone. For comparison, Apple’s iPhone 3GS did 800,000 in six months. In the first month, the Galaxy did a million in the world across some 30 carriers/mobile operators. Yes, that is not 1.7 million like iPhone in three days – but compare this to a certain superphone launch by Google or a pair of Kin phone launches by Microsoft, and suddenly Galaxy is quite impressive and viable.

Then remember that the Galaxy will be available with more than 100 networks – the most of any Android handset and you start to understand its full potential. In the USA, Samsung is the best-selling dumbphone so Americans already love the brand, and the Galaxy is probably the first phone that is carried by all major telcos: Verizon, Sprint, T-Mobile and AT&T all launched the device at the same time. Samsungs touch-screen dumbphones are already well established, selling more worldwide than Apple’s iPhone. This is now the ‘next upgrade’ phone for those Samsung touch screen customers.

As Samsung’s carrier relationships and global footprint is far wider than HTC and what’s left of Motorola’s shrinking market, and as Samsung is already the 3rd biggest smartphone maker in China – expect a stellar autumn for the Galaxy. Early reviews have been very positive, in particular about the Super AMOLED screen that is considered the brightest and most impressive screen behind only the Retina Display of the iPhone. Except that the Galaxy screen size is 4 inches, and is remarkably clear in direct sunlight, unlike some of the afore mentioned phones.

While Samsung came late to the Android party [HTC and Motorola were well established by then], this company arrived with a bang. It has an excellent base from which to build, not just the bestselling dumbphone in the USA, Samsung is now running neck-to-neck with Nokia for bestselling dumbphone of Europe. So the customers and the carriers know the brand well. And with this launch, expect a strong share of Android phones this Autumn to be in the Galaxy class.

Samsung WAVE - powered by Bada, Samsung's first operating system for smartphonesThe Galaxy is in the superphone class of about 600 dollar unsubsidized phone prices like the iPhone. That is a nice premium price bracket, but that is not where market shares are made. In dumbphones Samsung has 21% market share. It’s the second biggest phone maker behind only Nokia, so Samsung has to cater to a wide range of price points, across its customers worldwide. So to be really viable and contend for the mass market, Samsung needs a low-priced smartphone strategy as well.

And here it did its surprise OS announcement last year, called Bada. The OS is now ready and the first Bada based phone was released, called the Samsung Wave. Have a guess how many it sold in its first month? A million, yes. Now this is quite different. Bada is a new operating system. New operating systems don’t sell a million in a month. Android did not sell a million in its first month, not even in its first quarter. The only other new smartphone OS that managed to sell a million in its first month was the iPhone in 2007. Now Bada is the next best new OS launch since the iPhone. But most people didn’t hear about it. Many don’t even know that Bada exists.

Well, much of that reason is that the Wave is a low cost smartphone and is aimed at Emerging World markets. It sold about 280,000 of those Wave phones in China. But that’s more Wave phones in one month, than iPhones sold in the whole of second quarter in China – the second largest country for smartphone sales in the world, behind only the USA.

What can I say? If you are a dumbphone maker, you have to migrate your customers to smartphones. Samsung has a cheap smartphone platform with Bada, which is far newer than Nokia’s Symbian [aiming for the same low-cost market segment]. The first month of Wave sales suggests Bada will be huge. Samsung now can capitalize on its enormous global reach to bring the Wave to those markets where prices are very tight, and the Galaxy to markets where there is ample space for luxury phones. And then they still do the occasional Windows Mobile, Symbian and soon Phone 7 smartphones as well, just to cover all the bases. And Bada’s developer community is growing well, with its nascent app store also starting to be populated with early apps.

Samsung grew strongly smartphone sales since the start of 2010, far faster than the indu
stry grew. Samsung made profits both quarters in its handset unit [even as its profits declined with the intensifying competition]. Samsung launched a very potent superphone class smartphone in the Galaxy, to very good market reception; and launched a new OS and with it a low-cost smartphone – to the best new OS launch since the iPhone. This is a great smartphone strategy, executed perfectly.

If the company continues its aggressive advancements, we might see the repeat of Samsung’s strategy that worked oh so well in all other industries where Samsung entered as the underdog. Do you remember what were the comments when Samsung launched its CRT TV sets or when it came into the MP3 player industry? In Consumer Electronics, Sony dominated the space, only to be soundly beaten by Samsung.
In fact, if Samsung went on to built a game console, we wouldn’t be writing them off. Then again, Samsung just might have the best gaming platform of them all – a Smartphone.