By | Dr. Sundar Parthasarathy | Helping you with insights and actions for success
Like most global MNCs, Samsung entered China for manufacturing outsourcing (i.e., use China manufacturing to serve markets outside China), and later started to tap the local Chinese market demand – and became the #1 mobile phone brand for a while.
Then came the Chinese brands (Huawei, Oppo, Vivo and Xiaomi – the order is alphabetic, and does not represent any other order), and they edged out Samsung (Today, Apple is the only global brand that has a fair standing in the mobile phone market in China).
These Chinese rivals (mostly, either new entrants or marginal players) upset Samsung by coming with brands that segmented the market smartly, and went after their distinctly different target segments.
Samsung shut down the last of its manufacturing plants in China in 2019, and today they have less than 1% market share in the Chinese consumer market for mobile phones.
New entrants (and hard-fighting marginal players) are hungry. They work hard at segmenting the market because they know that they have to find the cracks that can help their market entry. Nothing new here! But, the more difficult challenge is for the incumbents to constantly rediscover the market – by using segmentation. This is difficult because it calls for the ability to step back and look at things afresh. And, the more successful an incumbent is, the more difficult this will be – from my experience/observation as a practitioner/business-mentor/researcher, successful incumbents find it difficult in part because of hubris and in part because it is like chipping away the very ground you are standing on. Clients who I have worked with have come to know me for asking this question, “What if you went back to the whiteboard and started all over again?” If you lead/advise a business, think about the times when you brought up (or could have brought up) the “white board” question. China as a market stands out for Samsung as an exception (and, a sore one!), for the brand enjoys a dominant positions in many mobile phone markets around the world. Samsung’s success as a global corporation resting on three pillars, viz., Tech./R&D/Innovation, Manufacturing, and Marketing/Sales/Distribution. And yet, what happened in China seems to show weakness in marketing.
Samsung went into China way before anyone else did – and even became the #1 mobile phone brand. Their entry into China was with the motivation to tap into the opportunity for low-cost production, and they were quick to respond to the emerging market opportunity for mobile phones in China. However, Samsung was slow to react when Chinese brands carved out the market for themselves at the expense of Samsung. Balancing global strengths (and strategies) with the responsiveness (to local needs/opportunities/threats) is an inescapable challenge for any global behemoth. To put it another way, subsidiaries within a global MNC network are beset with the challenge of balancing conformity [i.e., fall in line with global strategies (sometimes, even headquarter diktats)] with being entrepreneurial [i.e., showing the agility that is needed to shape/respond to emerging/promising opportunities in a local setting]. For that matter, when Samsung first forayed into the Chinese consumer market for mobile phones, they demonstrated what is known to be “entrepreneurial orientation” (EO). Strangely, did they lack in EO – to be comfortable with the risk-taking that comes with chipping away the ground one is standing on, when having to step back and look at things afresh when the going is good? EO also helps a company ensure the strategic agility that is needed to stay relevant and successful. Companies that demonstrate EO have within their culture the ability to comfortably raise the question, “What can spoil our party?” when the going is good. (Another of my questions my clients know me to ask is, “What can stop the music?“)
A purposeful business is one that makes the most of the lesson learned! Samsung used its China-market experience to improve its ability to tackle the next emerging market for mobile phones after China. Successful companies demonstrate a “learning orientation” (LO) that shapes their strategy, hones their abilities, and consolidates the gains. For any successful firm, LO serves to enrich EO.
In my PhD thesis (in international business) I tried to explore and understand the EO and LO (among a few other elements), when I studied closely the internationalization strategies of firms of Indian-origin. (More on that some other time).
Reach out to me if you are interested in understanding how you can step up the EO in your firm/business.
#entrepreneurialorientation #globalstrategy #growthstrategy #internationalbusiness #learningorientation #marketing #strategicagility #strategy
Courtesy: https://youtu.be/uYo6MDMaIPY (run time ca. 15 mins.)