Is Samsung Really in Trouble?

Samsung has more or less dominated the smartphone market in the past couple of years. After a short, yet fruitful reign of the Cupertino based Apple Inc. and their iPhone, Samsung took the pole position and has not wanted to let go ever since then.

With the power of 100% component control, in-house manufacturing and software R&D, Samsung led the rat race thanks to all its strengths. But, just like every other leader in the past, Samsung took the threat of competition lightly. So sure of their position and their loyalties, the Korean manufacturer failed to realise the need of the modern day man.

2014 may have seen less of it, but up until last year it was impossible to go ten days without an announcement from Samsung and that too just the mobile division. With their consumer electronics and home appliances doing their bit separately. Samsung wanted to be present, and today it is present in each and every price segment.

So here is a big question; why has Samsung started to dwindle, why are the consumers against the company they loved so much and what has really happened?

The answer lies in Samsung’s own flawed approach. Even though the company made sure it could tighten its ends and function like a well-oiled single operational unit, too much goodwill from within the organization led to almost zero critical feedback. Everyone in-house was busy appreciating how wonderful they are,  no one telling them where they are wrong.

The Korean giant also failed to answer people’s unanimous need of better-built phones that not only performed well but were also made with the use of premium materials. Samsung failed the consumer’s demand and hope within a brand that people had only just begun to trust. Samsung never changed their design philosophy, making handset after handset to feed the familiarity of the brand.

A premium phone to create excitement in the flagship market; and then a mid-segment with similar looks and software capabilities to excite and create aspiration for those who could not afford the premium segment. Then there was the down segment shift of the same design to the lowest price point.

Not to say that this strategy didn’t work for Samsung, 2012 and 2013 alone saw an estimated 150+ launches for Samsung Mobile division, that is four times their next closest competitor and 75 times that of Apple Smartphone announcements, being the iPhone 5s and 5c.

2014 was also supposed to be a year of Samsung; many launches and many price segments and many new-magical innovations. But, things like multi-window and air gesture were not going to get attention. Hopes were pegged on a metal built handset with a 2k display, which was supposed to woo the crowd and earn the Korean company millions and millions of dollars with the Samsung Galaxy S5. But, ironically the complete opposite started to happen, the Korean giant started to lose market share and how. The company is worried, to the extent that they have reshuffled policies and opened up board rooms for strategy building. Resources are being spent, and ideas are being made within the company to rebuild the position that Samsung seems to be losing fast.

Samsung knows very well that they failed with the Samsung Galaxy S5, especially in markets like India, where they offered a sub standard and sub performance flagship, which not only quickly dropped in price but also in fan fare.

Samsung lost their prime spot in major markets like China, being overtaken by Xiaomi, and in India thanks to the notorious Micromax Mobile.

What happened?

Lee Kun-hee

Samsung has never been a humble company; employees seem to be trained always to be arrogant and adamant about their policies, and about the position of the company. The beginning of the company itself is said to be tainted by a tale of controversy. Originally started as a trucking business in 1938, by the name of Samsung Trading Co, the company had corrupt ties with war governments trying to give an industrial strength to the country and survived through the war to become what is now a mega company.

The company’s chairman of 25 years, Lee Kun-hee resigned from Samsung in 2008 after being indicted and found guilty of embezzlement and tax evasion in Samsung’s infamous slush funds scandal. It is estimated that the company had over US $200 million in budgets for bribing prosecutors and politicians in favour of Samsung policies and making them blind towards the company’s misconduct.

But how does that play in today’s scenario? and how does that affect us in any manner?

It is speculated that Samsung has kept a stiff upper lip in India since its inception in the early days. The company is said to have deep ties with the Indian government and deeper pockets for the not so honest few in control. Samsung has often managed to bend rules in favour of their products and managing to change laws to better help the company’s growth.

However, while the Korean company was busy playing its deep rooted tactics, a new enemy was lurking in the shadows. Samsung essentially dethroned by local competition in markets they wouldn’t have imagined possible.

Micromax has always been playing catch up with Samsung, playing on the weaknesses of the company and essentially delivering a value for money prospect for the consumer who was sick of the boring design and hardware mix of Samsung. Micromax even brought unibody aluminium phones  to mid and low segment markets while Samsung’s flagships continued to be made out of plastic. (we meant “Polycarbonate painted – er – plastic”)

In China on the other hand, Samsung never considered Xiaomi a threat, assuming that the company would never reach production requirements of the market. Most investment specialists and market reach firms estimated that Xiaomi would fizzle out in less than a year from inception. But just like Nokia back in the day, these people were wrong, very wrong; Xiaomi dethroned Samsung to gain not only the current position but as the leader in the Chinese market. The company has secured millions of pre-orders of their upcoming phones, the Redmi and the Mi4, ensuring them success and a tight position on the top of the chain for a few months if not years.

Xiaomi has also seen success in markets like India where they have managed to gather interest of the consumer, although largely lacking supply. The Indian market may not be that forgiving to the company if their current policy of sale of phones continues. However, this has set rolling the notion for a perfect budget phone, making companies like Samsung with red-rock strategies of selling dated products for newer markets obsolete.

The reign of Samsung is far from over, in-fact the company may as well be in a great place to play its strengths and recover market share with ease. The lack of great phones hasn’t helped the Korean manufacturer, and with their flagship of 2014 fizzling out in the market, Samsung will need new products and cut throat pricing strategy to regain their stronghold in markets like India. With players like Motorola, Xiaomi and Gionee playing catch-up in India, Samsung may have their work cut out for them.

Their previous relationships with their distribution and end retail chain are also in the swamp, and the company is having a real hard time coping with the situation. With all eyes perched on the new Note 4, Samsung may have more on the line than ever before. If the Korean smartphone maker fails to deliver in their monopolised category, they might have a tough time recovering. Samsung India plans to play a lot more in the online space, which initially was being ignored by the Korean company, and if previous examples have taught us anything, we know India is more than ready for e-commerce.