From a monitor and fax machine business in 1994, to a company that enjoys the highest brand recall value in the Indian PC market, Samsung sure has come a long way. And going by its revenue projections of Rs 1,900 crore in 2003, the company is upbeat about its future. Shipra Arora has more details

According to Vivek Prakash, Samsung’s widespread portfolio has given the company a distinct advantage—the ability to cross-leverage across product lines

Samsung Electronics India Information & Telecommun-ication (SEIIT) is close to hitting the 3-million installed base mark for monitors in the country this month—up from 1 million units in 2000. Yet SEIIT, the 100 percent subsidiary of Samsung Electronics Korea, boasts of no USP—because there is no single point to base SEIIT’s success. In fact uniqueness forms its every selling proposition—whether it is the wide product line, innovative marketing, aggressive branding, or for that matter strong channel base.

In the eight years of Samsung’s IT operations in the Indian market, the company, as Vivek Prakash, general manager of sales and marketing at SEIIT points out, has been consistently building its performance upon the foundation of five ‘P’s—processes, products, programs, partnerships and people. And the company’s success can be credited to its knack of getting the basics right, and getting it right quickly. It’s no doubt then that the Rs 1,400 crore company boasts of being one of the few companies with the highest revenue generation per employee (approx. Rs 43 crore/employee). Moreover, its product line constitutes 70 percent of PC value; its products are in the top slot or at least in close vicinity of the top slot within just 2-3 years of their launch; it has one of the strongest channel networks in India with 10,000-11,000 partners, and though not a PC company, Samsung enjoys the highest brand recall value in the Indian PC market.

From SEIP TO SEIIT
Samsung started off its Indian operations in October 1994 with the setting up of a liaison office in Delhi and kick-started the monitor and fax business the following year in March. Following this, the company went on to enhance its product line by adding hard disk drives (HDD) and CD-ROMs to its portfolio in 1997, laser printers, and CDMA and GSM terminals in 1999. Year 2000 marked the launch of the 100 percent subsidiary Samsung Electronics India (SEIP). The next key landmark for the company was the change in its name from SEIP to the current SEIIT. According to Prakash, the change in name was on account of the confusion vis-à-vis the consumer electronics business. “It was necessary to have a name that was truly reflective of the IT and telecom business of the company. And SEIIT solved our purpose,” he explains.

Today the SEIIT product portfolio comprises PC monitors with around 22 models, ranging from 14- to 22-inch sizes and TFT-LCD monitors, storage products consisting of HDDs ranging from 20-80 GB, optical disk drives (52X CD-ROM, 12X DVD-ROM, 32X CD-RW, DVD-RW and combo drives), laser printers, multifunctional products, and mobile phones, including MP3 and CDMA phones. The company also set up its colour monitor manufacturing plant in Noida (Samsung’s seventh plant globally) in July 2000 with a $35 million investment. This apart, SEIIT also markets keyboards, speakers and floppy disk drives in India. According to Prakash, the widespread portfolio has given the company a distinct advantage—the ability to cross-leverage across product lines. So damp market conditions in one segment can be overcome by growth in other product lines. This also offers the company an edge over companies like LG and Seagate that compete with Samsung in only certain product lines.

An effective brand pull, wide geographical reach and a good after-sales support infrastructure complement the company’s extensive portfolio. The premium attached to the Samsung brand is the result of a right combination of plump marketing investments and a proactive approach. Take the case of CD-RWs, wherein SEIIT pumped
Rs 5 crore in July-August this year towards its marketing promotions. This is the first time a company has run television advertisements for a product category like CD-RWs across the globe. And this vision, according to Moninder Jain, national marketing manager at SEIIT, is paying off well in terms of growth in the CD-RW business. On the other hand, the wide channel base has deepened the company’s reach across the country.

SEIIT’s channel structure comprises five national distributors, namely Tech Pacific, Ingram Micro, Redington, Savex, and more recently, Neoteric. These are followed by 200 big dealers called the ‘Star Elite,’ followed by resellers and system integrators and assemblers further down the line. The company is also in the process of opening regional offices in Mumbai, Delhi, Bangalore and Calcutta in order to strengthen its pan-India presence. For providing effective after-sales support, SEIIT is leveraging on the support infrastructure of its sister company SIEL. Currently, it services products through 100 service centres. According to Jain, the fact that SEIIT outsources most of its activities like logistics, services, etc. is the reason for its lean structure—comprising only 31 employees. And it is Samsung’s robust e-processes that have made this possible, he adds. Owing to the e-processes, data is always available at the management’s fingertips to formulate strategy, monitor implementation and build strong relationships with customers. Innovation is the name of the game for SEIIT as far as after-sales service is concerned with programmes like national free service camps and inventive warranty policies (it was one of the first companies to offer a three-year warranty on its products).

In fact, it is the ability to constantly innovate and re-orient itself that has kept SEIIT at the helm of technology and market curves in the Indian IT hardware industry. As a result, the last year-and-a-half has seen the company transform its image from an ‘IT peripherals’ company to the more high-end image of a ‘PC essentials’ company. And the move has augured well for Samsung. Says Jain, “The change in image has helped in positioning our offerings as a Samsung-powered PC, thereby helping the company move up the value chain.” And market figures manifest Jain’s confidence in Samsung’s selling proposition. SEIIT’s current market share in various product categories stands as follows—colour monitors: 52 percent (up from 41 percent in 1999); HDD: 53-54 percent (up from 22 percent in 1999); laser printers: 35 percent (up from 8 percent as an entrant in 1999); CDRs: 60 percent.

Future challenges
With a formidable market share in most segments, SEIIT is now charting out a new challenge for itself. Says Prakash, “Having achieved this kind of market share, the key to growth is to grow the market itself because this will automatically grow our market share.” This explains its relative shift from a ‘channel-centric’ to ‘consumer-centric’ marketing approach. The changing ratio between channel-centric and consumer-centric investments is evident in the company’s marketing budget. According to Prakash, three years back marketing investments and programmes were totally channel-driven, even two years ago, 80 percent of the marketing budget was directed towards channels. This year though, the ratio is 50:50. Thus indicating that consumer-centric marketing programmes are gaining ground. The thrust has been there for the last one year with some key consumer promotions like ‘Value ++’, ‘Bol Baby Bol’ and ‘Digital Adventure’ making their mark.

“This does not hurt channel partners as increased sales are directed towards them. With this taken care of, they can further focus on their throughput,” explains Jain.

“There is a huge opportunity in the Indian market, which is yet untapped because a PC still comes very low on the priority list of home users. The idea, with our changed strategy, is to grow the market by addressing this segment,” adds Jain.

The consumer promotions are directed towards educating consumers about PC technologies and building awareness regarding technology so that they are comfortable with both the brand and technology. This, feels Jain, will spur growth in the segment. This apart, SEIIT is also moving from PC-centric promotion to more of stand-alone product-centric promotions, that is, promoting monitors, CD-RWs and laser printers for instance, as desirable stand-alone product offerings, to strengthen its different product lines. The company is now running promotions, bundling 17-inch monitors with Lexmark inkjet printers.

Moninder Jain says that with its new strategy Samsung hopes to grow the market by addressing the home segment where PCs are still not a priority

Corporate segment - the new target
Apart from growing the market, SEIIT is also eyeing newer territories to drive growth. This includes increased focus on the corporate segment, maturing smaller ‘D’ class markets and increasing the base of its high-end business. According to Jain, SEIIT has a weak presence as far as the corporate market is concerned—with almost 70-75 percent of its business currently coming from the home and SOHO markets.

SPEAR program
In order to garner market share in the corporate segment, the company has recently kick-started a drive to strengthen its corporate presence through its SPEAR channel programme. The SPEAR channel constitutes around 100 channel partners dedicated towards targeting the big SMEs and corporate segment.

The products being routed through the SPEAR channel are largely the high-end products—laser printers, 17-inch monitors and TFT-LCD monitors. “We are trying to push in more and more high-end sales. In a business where the average selling price is declining, there is a need to constantly upscale and increase the mix of business as it is from here that maximum revenues and profitability are going to come,” explains Prakash. Apart from laser printers and TFT-LCDs, the high-end product line of Samsung also includes Multi Functional Printers (MFPs), Combo Drives and 80 GB & 120 GB HDDs.

While in 2001 the high-end sales accounted for only 12 percent of the total sales, the proportion has grown to 25 percent in the last eight months and is expected to touch 35-40 percent of SEIIT’s entire business by the year-end. Towards this end, the company has appointed Neoteric as its national distributor for the high-end business including 7,200 rpm HDDs, RW Combos, Laser printers and MFPs. In fact, while in absolute terms monitors continues to be the highest revenue grosser, in relative terms laser printers is the most profitable product line for the company having registered a 600 percent growth during the current quarter over the same period last year. The company is also targeting to grab 60 percent of the laser printer market by H2 2003. And going by Samsung’s past record the target is not unachievable for the company. The strategy is clear-cut and well defined—maintain exclusive laser printer focus, competing on value propositions than price points, leverage home grown technology competencies. The company is also increasing its laser printer investments from half-a-million dollars last year to around $ 2 million this year.

The SCAP program
To strengthen its presence, the company initiated its Small City Adoption Plan (SCAP) in June 2002, to address the ‘D’ class towns. Even while the top 8 cities account for almost 80 percent of the company’s business, SEIIT is now targeting its presence even more aggressively in the smaller towns as part of its growth strategy. The company has outlined around 150 cities under its SCAP program, of which 49 have already been covered and the rest are going to be covered by September this year. The program includes road shows, closer interaction with the channel partners in these towns, etc. “Till now we had been focusing more on our channel partners in bigger towns and our interactions with those in the smaller ones had not been as regular. However, with the PC penetration levels we are going to address the emerging markets more aggressively now,” says Jain.

Having outlined the growth strategy SEIIT is expecting a 40 percent growth with a revenue target of Rs. 1,900 crore for the year 2003. In terms of product lines, the focus will be clearly on laser printers and MFPs, which according to Samsung, is clearly going to be the most profitable business. On the other hand, the company will continue with its growth trends in the other product segments as it is expecting to grow its CDR market share from 60 percent to 75-80 percent and HDDs from current 53 percent to 60 percent by next year. Within the monitors segment, the thrust will be on growing the 17-inch share, which is likely to overtake Samsung’s sales for the 15-inch range by mid next year. And for Samsung this is the very way of doing things—doing it first, doing it fast and most importantly doing it right.