Samsung, as the biggest producer of electronic products, semiconductors and
mobile phones, they attract a huge market in the world. Samsung was founded in
1938 by Lee Byung-chull，it was relied on export fish and vegetable in the beginning.
In 1960s, Samsung entered in electrostatic products market and become huge than
before. After Lee's death, Samsung was separated to 4 Company: Samsung Group,
Shinsegae Group, CJ Group and Hansol Group. Following the reform measures from
1993, Samsung dribbles out into the international market. They achieved the change
from quantity management to quality management, and come forward with their new
marketing concept. This is the turning point in Samsung. Their new business practice
leads them to success.
In the1970s, Samsung's main product is black- and- white television, it's cheap
and just little profit. Although they have great performance at the global
semiconductor market, but for those advanced country such as USA or some
European country it was be regarded as booth goods. Because at that time, most of the
company gets so caught up in quantity of their products but not quality. They attempt
to use mass production to decrease their cost, then through a low price to occupy the
market. So the lower price indicates that is only a lower level competition, and just
can get a lower profit. Samsung was one of those companies. When they understand
this , they changed their management strategy and mainly to the high level product
market. They decide focus on improving the brand image but not research. The first
thing they must to do is building a strong brand. "A strong brand occupies a distinct
position in consumer's mind based on relevant benefits and creates an emotional
connection between business and consumers"(Mr.Levens,2012, p.120). So in 1993，
Lee Kun-hee told employees to "change everything except your wife and kids". Only
a high quality is an initial condition of a strong brand not high amount. Samsung sold
their 10 Group's subsidiaries one after another, quit from all the business that low
profit or no growth prospect and withdraw their products from chain hypermarket,
then move to brand store and specialized shop. On the other hand, they did not forget
the development of brand image, corporate with some heavyweight sports event is a
quick way to increase their awareness. This strategy change is also the reason make
Samsung became one of the little company to survive in financial crisis in Asia. And
now, Samsung is already the world's top 500 enterprises, Samsung Electronics is the
largest of its subsidiary and the world's largest mobile phone maker, their revenue is
the biggest around all the electronics company, the global enterprise market value of
$150 billion in 2011.
Demand and Supply
All of we know, Samsung’s cellphone become more and more popular in the
world, the following will discuss this situation. Demand and supply are the basis of
economics, many complicated event can explain by this principle. Because all the
things that people to do is for personal interest or collective interest, just like foods,
water and clothes, or transport, education and warfare. So demand and supply are the
core of economic, when we need to know economic, firstly we should know demand
and supply. Demand is a principle to describe a consumer's willingness and ability to
pay for a goods or service(Steven M. Sheffrin 2003). It was effected by many
elements, such as substitution and income. For example, beef is the substitute of
chicken, when the price of beef goes up, if other things remind same, so the demand
of chicken will go up. But when people's income decrease, the demand of the amount
of chicken also will decrease. There have many cellphone producer, that means
Samsung cellphone have many competitors, in order to stand out from the numerous
mobile phone brands, they take many measures to improve the demand of consumers.
In 2011, Samsung's broad product line embodied in the product prices to cover high
and low-end, different levels of consumers can be found in accordance with own
product price expectations. ZDC statistics show that in February 2011 of China
Mobile phone market, the price between RMB 1000-2000 models for the mainstream
in the end, followed by low-end products under one thousand yuan which product up
to 173 type of cellphones. When occupied a certain market share, Samsung will focus
to high-end brand. Samsung quietly pulled out of Wal-mart and other discount stores,
because these places not conducive to high-end brand positioning, and then put a
DVD, TV, computer products moved to Best Buy, Sears and high-level consumers
such as Circuit City stores. In the digital age, Samsung Electronics focuses on
extreme: those that have remarkable influence on brand key points, such as high-end
crowd, high-end brands, so as to realize the low cost, high growth of the brand.
Furthermore, Samsung Electronics spent a lot money on advertise, you can easily see
those advertisement when you walk straight at street, cinema and shopping malls, it’s
the simply but useful way to improves their brand name. At that year, Samsung
surpassed Nokia became the third largest mobile phone brand.
Price elasticity of demand and supply
Price elasticity of demand is a measure to show the elasticity of the rate response of
quantity demand due to a price change(Mike Moffat, 2013). Price changes, there is a
close relationship between demand price elasticity and total revenue.This is because
the total revenue is equal to the price by sales, price change caused the change of
demand, thus caused the change of sales. The demand elasticity of different
commodities is different, the price changes caused by changes in the sales also is
different, so the change of total revenue is different. If a particular commodity
demand is elastic, then when the fall in commodity prices, demand increase amplitude
is greater than the fall of prices, total revenue will increase, this product can adopt the
strategy of the meager profit but high turnover. If a particular commodity demand is
inelastic, the situation was opposite.Such as cigarette demand curve is inelastic,
because addicted smokers will not care about the price high and low, so the price have
a smaller effect on demand for cigarettes. Beside that, companies should consider the
product brand awareness when making the price,for those high attention brand, they
usually have a good reputation, excellent quality, first-class service, the price
change on the consume can not bring more profit, just like Samsung cellphone,
whatever the price, it will sell more when the new product come out, so it’s inelastic
demand. For the product like this, generally producer will use promotion and
advertising to improve the sales, Samsung Elastics will spent 10 billion dollars on
advertise and kinds of activities, we always can see Samsung in many major sport
events, and so many stars also is the face of Samsung product. The price of elasticity
of supply measures the rate of response of quantity demand due to a price change (Jim
Tandon, 2008). The factor that influences the elasticity supply is the production. If
producer produce a product need a long period of time, than that is the elastic supply,
because it can through adjusted productivity and equipment to adapted market
variations. Samsung has sufficient funds and equipment to increase output, thus they
can according the market needs to change their supply to avoid shortage and surplus.
Difficulty or facility of production is also the reason to effect the price elasticity of
supply, Samsung attaches great importance to the technology, they build their own
Economic and Development Research Institute to fully committed to the development
Levens, M .(2012).Marketing. 2nd Ed. Laura Town. p.120
Moffat.M. (2013).Price Elasticity of Demand, retrieved from
http://economics.about.com/cs/micfrohelp/a/priceelasticity.htm
Smith.M.(2005). Marginal Utility, retrieved from
Tandon.J.(2008) Economics communicate.
http://en.ce.cn/Business/Macro-economic/index.shtml
