Just two years ago, Samsung was far behind Apple and others in the race to win the global smartphone market. Now, Samsung is running neck and neck with Apple, capturing a 30.4% market share and 25% of industry-wide profits. Samsung is on the verge of launching the Galaxy S4 which could further solidify its leadership position.
How did Samsung catch up in the smartphone market in such a short period of time? I’ve been traveling to South Korea every year since 2010 and I’ve had a chance to talk with professionals from various companies in the region. Based on conversations, I believe the following factors have played a central role in Samsung’s rapid ascent in the smartphone market.
National support: Samsung is South Korea’s flagship company, producing about a fifth of the country’s GDP. With its central importance to the South Korean economy, Samsung has developed close ties to government and other local companies. It also has strong relationships with the leading universities and is able to hire the best graduates. In short, competing with Samsung is like you’re competing with all of South Korea (combined with Samsung’s global operations).
Execution capabilities: Samsung not only gained a lead in smartphones, but accomplished this feat in a very short period of time. This suggests to me that Samsung has tremendous execution capabilities. These capabilities are likely derived from its significant experience with new product development, talented executives at the top, highly skilled managers and engineers, and strong organization and work ethic.
Technology: The Samsung Electronics subsidiary has leading businesses in a variety of related and complementary technical areas, such as LCD displays, semiconductors, and rechargeable batteries. The in-house resources and capabilities that come from these businesses likely give Samsung a significant advantage in the smartphone space. For instance, its smartphone business can leverage engineering talent and proprietary technology that resides in its semiconductor businesses.
Corporate culture: Samsung executives and employees, and South Korean workers in general, are under enormous pressure to remain globally competitive. It’s operating under a constant state of crisis. This can be a tremendous motivating force, at least for a period of time until the pressure drives turnover. This pressure can also dampen creativity and the tolerance for failure, together reducing Samsung’s ability to strike first in new, untested markets. Samsung is counteracting some of these headwinds by investing heavily in “Worldwide Innovation Centers” and other related initiatives.
In closing, Samsung was able to quickly ascend to the top of the smartphone market in large part by leveraging its unique, corporate-wide resources and capabilities. These resources and capabilities have now proven valuable across multiple businesses. They will continue to provide Samsung with a significant and sustainable corporate advantage as it competes for dominance in the post-PC era and beyond.