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Samsung In China: The Introduction Of Colour Television

1887 words - 8 pages

The Introduction of Colour TV1.What are the major problems Samsung faces as it tackles the television market in China?In 1995, the South Korean company, Samsung, decided to integrate all of their individual Chinese business units into a single Samsung China. It was decided that color televisions would be Samsung China's flagship product since the demand nearly doubled from 1990 to 1995, from 7.7 million to 14 million, respectively. Upon entering the color television market in China, Samsung faced several obstacles.Before the 1990s, the South Korean company Samsung enjoyed a distinct advantage. Cheap labor costs in South Korea allowed Samsung to produce inexpensive "low-end" products and avoid direct competition from more expensive "high-end" Japanese made products, but this soon changed. South Korean workers soon had an average wage of $1,144 per month which was second in Asia only to Japan. Samsung was losing its advantage as a low cost competitor.By 1995, China had twenty local companies developing "low end" color televisions. The competitors were selling small inferior quality color televisions at low prices. This created a problem because South Korean goods were typically known for selling the same kind of product and this threw Samsung into the stereotype. Samsung needed to separate itself from the 'country of origin effect' so that it could gain a larger market share in the second largest color television market in the world.When Samsung entered into the Chinese color television market they faced several problems other than their recognition as a South Korean company known for low quality products. They were faced with the decision of which market segment to enter into. In the "low-end," small sized television market segment there were more than 20 local Chinese companies who had a large market share. If Samsung was to compete with these companies they would not be successful in ridding themselves of their poor brand image. In addition, the small color television market was shrinking while the medium and large sized television market was rapidly increasing. Samsung had to choose between competing in a shrinking market or competing in a growing market against fierce competition. The high end market was dominated by Japanese companies such as Sony and Matsushita, who together had 75% of the market. Furthermore, these companies already had excellent brand recognition, which is a very valuable asset and usually takes years to develop. The Japanese companies already had 19 production bases in China and were increasing them to 30 in hopes of increasing sales.Samsung was also faced with the fact that if they were to move into the medium to large color television market they would be coming in relatively late. Since Chinese typically remain loyal to first comers, it would be difficult to compete with companies like Sony and Matsushita who had already well established themselves as premium companies. These companies had invested large amounts of...

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