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| A ‘Samsung Entertainment Experience' booth set up by the company in an outlet of BestBuy, a major U.S. retailer. Samsung is looking to carry out more efficient marketing spending. / Korea Times file |
Tech giant overcomes putting greater focus on R&Ds
By Kim Yoo-chul
Samsung Electronics is tightening its belt on marketing as the world's biggest smartphone manufacturer prepares for future business projects.
Previously, Samsung had a branding problem because its smartphones were not widely recognized in foreign markets, forcing the company's top management to invest heavily in marketing expenditure.
Now, Samsung is eyeing new business territories and allocating more resources to research projects.
"It's very clear that Samsung's heavy spending for marketing made a big positive impact. As the global smartphone market is being saturated and smartphones are no longer a huge cash-cow, we are rationalizing spending on marketing as we are attempting to spend more on futuristic projects," an senior executive at one of Samsung's technology affiliates said.
Specifically, Samsung Electronics is slashing its budget for marketing activities, said the executive.
"We are carrying out marketing spending more efficiently, including using more lower-cost marketing channels to reach consumers and more multi-brand group marketing initiatives," said another Samsung official.
Samsung is retooling its strategy to spend more for "Samsung Experience Shops" in major U.S. retail channels such as BestBuy and Suning in China.
The firm said during a conference call upon its first quarter earnings that it will maintain a level of marketing at the "proper level."
"The new focus is not how to pitch Samsung brands. Rather, we should find out ways on how to make our future-oriented campaigns more effective," said another Samsung official, who only asked to be named as Yeom.
Record spending on research projects
Such cost-cutting and transitions are aimed at taking a firmer lead over its bigger international peers in next-generation technologies, which many companies believe is the next cash-cow.
The cuts don't mean that Samsung is looking to make dramatic cuts in expenditure in support of its brands. Rather, marketing costs are still accounting for a hefty amount, right behind research and development (R&D).
Meanwhile, to cut costs without sacrificing impact, according to Samsung officials, it is actively using technology to shift spending from more traditional consumer gadgets such as TVs and mobile to more efficiently targeted consumers such as corporate and government clients.
Samsung is approaching governments in the United States and United Kingdom to sell its mobile security solutions.
Samsung identified smart-home solutions, wearable devices, mobile application processors and telecom equipment as some of its next cash-cows. Those business segments are receiving much more budgets from the top company management.
In accordance with the moves to grow businesses that are relatively weak, Samsung Electronics is expected to spend more than four trillion won only for research and development (R&D) during the second quarter of this year, a quarterly record.
Data from the Financial Supervisory Service (FSS) showed that Samsung spent 3.87 trillion won for R&D during the first three months, accounting for 7.2 percent out of its quarterly revenue of 53.67 trillion won.
Back to the R&D spending during the quarter, Samsung spent 13.6 percent more, year-on-year, FSS said. Samsung spent 14.78 trillion won for R&D in 2013 from 11.89 trillion won it did in the previous year.
"Samsung invests more that Google and Apple combined. We should prepare another 'survival strategy' and we need to find new ways to counter new challenges."
Samsung spokesman said it's been consistent in caring for R&D and futuristic projects; however, he declined to elaborate further.
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