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Chapter No.L RATIONALE and SIGNIFICANCE of STUDY Chapter No.l RATIONALE AND SIGNIFICANCE OF STUDY 1.1 A REPORT ON GLOBAL TELEVISION MANUFACTURERS INDUSTRY A significant change in consumer and industiy dynamics are currently happening in the TV set industry. Rapid changes in technology and industry structure present unique challenges to all players in the value chain of video content development and delivery. Understanding these dynamics, designing strategies to benefit from them and executing business operations is vital for TV set manufacturers and adjacent industries to thrive in this dynamic industiy. TVs are a fundamental staple of the consumer electronics market, consistently representing around 30% of annual global consumer electronics product sales. Manufacturers shipped an estimated 210 million TV sets in 2009, representing a modest 3.1% CAGR in the last 5 years. As global economic growth has slowed in the last two years since 2007, TV set growth fell to 2.5%o annually. Stark regional differences exist in TV set shipments but global growth overall is slow and likely to be slowing further. In the developed world, consumers are replacing their tube TV sets with flat-panel TVs. in 2009, 36million such sets were shipped to the US and 45 million were shipped to Europe, a 12.4%) compound annual growth rate since 2007.But growth will slow quickly in these regions as the replacement cycle of tube TVs by flat panels matures. The developing world has seen flat to slightly negative growth in TV set shipments in the last two years, reflecting a modest slowdown in wealth accumulation. Market maturity in the developed world and the near end of the replacement cycle portends slow growth in global TV shipments despite V . Pu(^® modest growth in the developing world. Market maturity tends to shrink margins and force manufacturers to look for growth in other lines of business. The research firm, Display Search, projects flat-panel television shipments will increase by 6% inlOlO Y/Y but the fastest selling segment of LCDs will be with screens smaller than 40"; indicating some large- screen market maturity and price conscience consumer purchasing behavior. Diminishing profit margins in TV manufacturing will force competitors to pursue market share to contribute absolute margin in lieu of percentage margin. Scale will enable the reduction of some operating costs and help larger firms compete as prices drop. For manufacturers, scale is almost always vital. As flat-panel technology matures and sales figures weaken, sustainable competition will hinge on price. The 5 largest manufacturers in 2009 represented 63% of global shipments, up from 57% in 2007.Smaller firms will be forced to compete on premium technology. Removing the tubes from televisions has boosted Asian exporters. Flat- panel televisions are cheaper to ship than their tube predecessors. Asia has been able to triple down on its manufacturing process, its lower labor costs and now lower shipping costs. China shipped a whopping 90% of the world's televisions in 2009Televisions are increasingly connected to a wide variety of content from an array of sources in addition to traditional network and cable. The average number of available channels in the U.S. have more than doubled since 2000Additional content sources sometimes called Over-The-To (OTT) include gaming devices, the internet, video applications in audio streaming. TV set ownership per connected household in the U.S. has grown from 2.00 sets in 1990 to 2.8sets in 2009, representing about 325 million sets installed in the U.S. 2 Major Television brands in the global market place Samsung Electronics is a South Korean multinational electronics and information technology company headquartered in Samsung Town, Seoul. It is the flagship subsidiary of the Samsung Group. With assembly plants and sales networks in 61 countries across the world, Samsung has approximately 160,000 employees. In 2009, the company took the position of the world's biggest IT maker by surpassing the previous leader Hewlett- Packard. Its sales revenue in the areas of LCD and LED displays and memory chips is number one in the world. In the TV segment, Samsung's market position is dominant. For the four years since 2006, the company has been in the top spot in terms of the number of TVs sold, which is expected to continue in 2010 and beyond. In the global LCD panel market, the company has kept the leading position for eight years in a row. Only ten years ago, Samsung's only goal was to catch up with Japanese rivals. But now it is outperforming major Japanese electronics makers in many categories: in terms of global market share, Samsung is No. 1 in flat-panel TVs and memory chips; it is No. 2 in mobile handsets; it is one of the top suppliers in other home appliances. In 2005, Samsung surpassed Japanese rival Sony for the first time to become 20th world's largest and most popular consumer brand as measured by Interbrand. In 2006, Business Week rated Samsung as 20th on its list of global brands, 2nd in the electronics industry. Business Week also ranked Samsung as 20th in innovation. In 2009, Samsung overtook Siemens of Germany and Hewlett-Packard of the USA with a revenue of $117.4 billion to take the No. 1 spot as the world's largest technology company. To become the top brand in the electronics business, Samsung has spent enormous sums on marketing and branding. As part of fulfilhng this strategy, the company devised in 1996 a plan to sponsor major sporting events. It succeeded in becoming an official sponsor for the 1998 Nagano Winter Olympics. Samsung today is the name that almost always appears in many big games. Despite being a giant in the global technology business with abundant growth, Samsung, along with its chairman Lee Kun-hee, is famous for fretting over its future and coming crises. Global consumers' brand recognition of Samsung Electronics has increased steadily: According to the top-100 brand list compiled by Millward Brown, the British brand consultancy, Samsung, ranked at 68th on its list, was one of the world's most valuable brands whose growth has been most pronounced during the 2009-2010 period. Its brand value, estimated at as much as US$1.1 billion, grew by 80 percent. In the "World's Most Reputable Companies 2010" ranking published by Reputation Institute of the United States, Samsung was placed at 22nd, a large advancement from the previous year's 74th. This ranking, compiled by the U.S. consulting company since 2006, reflects survey results collected from consumers in 24 different countries for global 600 large corporations in terms of annual revenue and its GDP share in respective countries. The respondents answer questions in seven categories including products and services, inventiveness, work conditions, corporate governance, social responsibility, leadership, and financial performance. Samsung was also ranked 11th in the "50 Most Innovative Companies 2010" list put out by Business Week, a five-notch increase fi"om the previous year's 16th. The ranking, collated jointly by the U.S. weekly magazine and Boston Consulting Group since 2005, is based on answers to innovation-related survey questions asked to executives of global corporations. While survey answers take an 80-percent weight to the compilation of the ranking, the remaining 20 percent is accounted for by annual share appreciation (10%) and three-year average sales revenue and profit margin (5% each), respectively. Samsung had emphasized innovation in its management strategy since the early 2000s and it again highlighted innovation as part of core strategies when it announced the Vision 2020 in which the company set an ambifious goal of reaching the $400-billion sales revenue within 10 years. In order to cement its leadership in the areas of memory chip and TV production, Samsung has invested aggressively in research and development. The company currently has 24 R&D centers around the world. In the 2010 Business Week innovation ranking, Apple Computer and Google retained the leading positions as in the 2009 list, followed by Microsoft, which gained one notch from 2009's fourth place. Meanwhile, Samsung took the 33rd place in the "World's Most Valuable Brands 2010" list made public by the Forbes magazine. Forbes said that Samsung's brand value was as much as $12.8 billion with an average sale revenue growth rate of 17 percent for the past three years. Samsung Electronics' TVs and display products have undergone a race toward ever- slimmer panels. In 2009, the company succeeded in developing the super- slim panel for 40-inch LED TVs, with the thickness of 3.9 millimeters 5 (0.15 inch). Dubbed the "Needle Slim," the panel is as thick (or thin) as two coins put together. This is about a twelfth of the conventional LCD panel whose thickness is approximately 50 millimeters (1.97 inches). While reducing the thickness substantially, Samsung could maintain the performance as before, including full HD resolution, 120 Hz refresh rate, and 5000:1 contrast ratio. In October 2007, Samsung broke the 10- millimeter barrier by introducing the 10-mm thick 40-inch LCD TV panel, followed in October 2008 by the world's first 7.9-mm panel. Samsung is leading the industry by developing panels for 24-inch LCD monitors (3.5 mm) and 12.1-inch laptops (1.64 mm). According to Samsung officials, the biggest factor in reducing the panel thickness was the LED backlight. They are optimistic that their company could cut TV width by 40 percent within two years from now. For years in a row, Samsung has taken the top spot in the world TV market, with the launch of best-selling items.
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