'Good execution', leaders key to Samsung's success

Strong handset sales may have boosted Samsung's business in fourth quarter of 2011 but strong, visionary leaders, innovation and good execution help put Korean company ahead of rivals, analysts say.
Written by Liau Yun Qing, Contributor

South Korean consumer electronics giant Samsung can thank its strong, visionary leaders for executing its business strategies, as well as a strong track record for innovation across multiple device segments, for its successes, analysts noted.

In its fourth-quarter earnings guidance revealed earlier in January, Samsung said it expected to have generated revenue of between 46 trillion won (US$39.6 billion) and 48 trillion won (US$41.3 billion), while it projects revenue for the whole of 2011 to reach 164.7 trillion won (US$142 billion).

The company subsequently announced on Jan. 27 that it raked in revenues of 47.3 trillion won (US$41.9 million) for the fourth quarter, which represents a 13 percent year-on-year increase. This also meant its full-year 2011 revenue hit an "all-time high" of 165 trillion won (US$146.2 million), up 7 percent from the previous year, it stated.

Commenting on its performance, Samuel Tuan Wang, research director at Gartner, attributed Samsung's success to "good execution" as the company's strong leaders have the vision to meet the objectives it had set out to achieve. He also pointed out in his e-mail that the nature of Koreans with their strong determination and diligence at work helped lay the foundation for the company's good showing.

Ken Hyers, senior analyst of networking and mobility practice at Technology Business Research (TBR), added that Samsung's results were largely driven by its strong handset sales as the company clinched top spot above all other smartphone vendors in 2011.

The Korean company benefited from having a strong supply chain, massive scale, lower manufacturing costs in Asia, extensive research and development (R&D), strong carrier relationship and establishing many sales channels, he elaborated.

Jayesh Easwaramony, vice president at Frost & Sullivan's Asia Pacific ICT practice, said that beyond handsets, the company has also performed well cross multiple businesses such as LCD TVs and memory products.

"Samsung's strategy is working well since it has created a strong portfolio of products that are riding the growth wave like smartphones, flat and smart TVs, etc," he said in his e-mail.

"It has created high barriers to entry for the competition by investing in better technology platforms and vertical integration that gives them better pricing power and creating a scorching pace for product development and innovation."

Wang noted that one such tech platform is in the chips used in smartphones. He explained that Samsung has been innovating in DRAM and NAND as well as LCD flash technology, which has led it to become the market leader.

The Gartner analyst added that Samsung's large-scale integration division grew 100 percent in 2011 to reach US$10 billion by supplying the ASIC (application-specific integrated circuit) chips in Apple's A4 and A5 application processors. These processors are used in Cupertino's popular iPhone and iPad mobile devices, he noted.

Outperforming competitors
Asked why Samsung has outperformed regional competitors such as Sony and LG Electronics, Easwaramony said the two rival companies did not create next growth platforms to replace some of their more popular products that are seeing slowing sales. Sony, for example, has not addressed the declining growth rate of its games consoles, he stated.

By comparison, Samsung's better execution of strategy for its Samsung Galaxy series of smartphones, and faster pace of innovation for its LCD and smart TVs, give the Korean giant an advantage, he explained.

Hyers, too, said that Sony has lost out to Samsung, particularly in the smartphone arena, because the Japanese company does not have the "carrier partnerships, channel strength or brand recognition" outside of Japan to be a major player.

"In order to get back into the game, Sony will need to make significant investments to expand its smartphone portfolio and will need to spend more on marketing to build brand awareness in the space," he stated.

LG, on the other hand, has failed to build the same channel and carrier relationships that Samsung had over the last five years, the TBR analyst pointed out. Its "uninspired design sense" and products have also failed to capture consumers' imaginations, Hyers added.

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