Bigger than Sony

Samsung is a global behemoth in the truest sense of the word. The Korean company is not only the world’s biggest electronics manufacturer by sales but also built what was the world’s tallest building – the Petronas Towers – and is Tesco’s retail partner in Asia.

However, in brand terms Samsung is a relatively new name on the world stage. It does not have the marketing heritage of rival consumer electronics brands such as Sony and Philips but it is showing that it is not afraid to allocate serious money to its marketing department to meet that challenge.

As well as a series of high-profile sponsorship deals with the likes of the Olympic Games and Chelsea Football Club, Samsung this week launches a £30m global advertising campaign for its G800 mobile phone (MW last week). The campaign has been created by CHI & Partners, which has been making inroads into the company’s £200m global advertising account since its appointment to Samsung’s roster earlier this year. Leo Burnett remains the global lead agency on the account.

Samsung makes everything from laptops and printers to washing machines and microwaves but its two biggest product categories are mobile phones and flat-screen televisions. It is now the second-biggest mobile phone manufacturer in the world behind Nokia, having overtaken Motorola earlier this year, and is the clear market leader in flat-screen TVs in the UK.

The mobile phone division has been particularly strong in recent years and former LG marketer John Bernard, who is now at Sony Ericsson, believes the rest of the company has enjoyed a “halo effect” from the success it has had in mobiles.

He adds: “LG aspires to do what Samsung has done – it sees Samsung as a benchmark. It is very good at splashing the cash when it comes to marketing, and sees the advantage of raising its brand profile.”

A source at Sony admits Samsung is a “ferocious” business machine but says that, like many Korean companies, it looks up to Japanese brands. However, an industry observer argues that, while Samsung is playing catch-up when it comes to brand heritage, its products are superior to Sony’s.

He describes Samsung as one of the “fundamental pillars of the Korean economy” and adds: “It is coming up with technology and innovation that is way ahead of everyone else. As a brand it is quite new but it has technology that is light years ahead of the brand. I don’t think Samsung looks up to Sony – I think it realises it is better than Sony. Sony just has more heritage.”

Samsung UK and Ireland chief marketing officer Anthony Marsella dismisses the threat from LG but admits Sony’s brand heritage is something the company has had to spend a significant amount of time and money addressing. “LG is not a major player,” he says. “It doesn’t have the product quality or design or marketing. Yes it’s there but we don’t really consider it seriously. Sony is a more serious company for certain but we don’t look up to it. Maybe we did two or three years ago but now it’s the other way around. Marketing takes longer but I’m confident that with more strong products next year we’ll be able to turn our sales leadership into marketing leadership.”

Another source points out that Samsung is “very hierarchical and very centrally run from Seoul”. It owns its own advertising agency, Cheil Communications, which, according to one insider, acts as an “intermediary” between the company’s marketing department and its external agencies.

Bernard says tight central control is a common theme at Korean companies. “It can tie the hands of marketers,” he adds. “It could be seen as quite frustrating for some marketers – and agencies.”

But the complex hierarchy does not seem to be affecting Samsung’s business performance. It may trail Nokia by a considerable margin in mobile phones, but is almost 2% clear of an ailing Motorola in second place, according to Strategy Analytics.

Strategy Analytics director Neil Mawston says that, as with Sony Ericsson, an improved product portfolio and an expanded distribution network has enabled Samsung to prosper at Motorola’s expense.

“In the past Samsung was very technology focused – now it has become more design focused,” adds Mawston. “It is not selling the perfect handset yet but it is getting much closer to that.”

Samsung is going from strength to strength on both the sales and brand fronts. But allegations of corruption are threatening to cast a shadow over its recent successes. At the start of this month, a former head of Samsung’s legal affairs team urged prosecutors to investigate claims that the company maintained “slush funds” for lobbying politicians, government officials and public prosecutors.

Kim Yong-chul, who ran the group’s legal team until 2004, claimed each of Samsung’s affiliates created billions of won of slush funds and put the money in its executives’ bank accounts. Samsung denies the allegations and the current and former presidents of two Samsung affiliates have taken legal action against Yong-chul.

However, those allegations aside, it would be a bold move to bet against Samsung’s recent progress continuing. As a professor at Harvard Business School said recently: “Samsung will be to our children what Sony is to us.”vData supplied by:Facts and figuresSamsung Global market share – mobile phones Quarter 3, 2007 Nokia 38.9% Samsung 14.8% Motorola 13.0% Sony Ericsson 9.0% LG 7.6% Source: Strategy Analytics UK Market share – flat panel TVs (by sales units/volume) September 2007 Samsung 14.8% Sony 9.3% Panasonic 8.4% Source: GFK