No Samsung or Nokia, No Cell Phones

The unshakeable number 1 company in cell phone business, Nokia`s global research team strengthened collecting information about Samsung Electronics.

It is because Samsung Electronics introduced the Smart Phone, which combined a cell phone and a personal digital assistant (PDA), for the first time in the American market, and it left a strong impression of `Technology of Samsung` to the hard to please American consumers, so it became a new power in the business.

▽The `Absolute Power` Nokia vs. the `Rising Dragon` Samsung Electronics=The scale of the world cell phone market for this year is 400 million phones. According to a market analysis company Data Quest, which analyzes the market share based on the number of phones sold to consumers, the market share order for the 3rd quarter of this year (July ~ September) is Nokia 35.9%, Motorola 14.4%, and Samsung Electronics 10.6%.

In number of phones sold, Samsung Electronics is one third of Nokia and even behind Motorola. However, the story is different if you look at the statement of profit and loss. The trading profits rate of cell phone part for the third quarter is Samsung Electronics 29.7% (assumed by Dongyang Capital company analysis team), Nokia 22%, and Motorola 8.5%.

Samsung Electronics does `profitable business` like that, so its total trading profits are higher than the number two Motorola.

According to Strategy Analytics, which analyzes the market share based on number of phones supplied, Nokia is on top in the market share with more than 40% in the European GSM system, but on the other hand, Samsung Electronics is on top in the CDMA system with almost 30% market share. However, since the GSM system takes 66% of the whole market, Nokia is leading Samsung Electronics by a big margin.

In terms of total market share (based on number of phones sold), Nokia is planning to raise it to 40% from the existing 36%.

The head of the Dongyang Capital company analysis team, Min, Hoo-Sik said, “There is a good chance for Samsung Electronics to go up to the 2nd place with 14~15% market share in 2004.”

▽`Nokia Design Center` vs. `Power of Korean Consumer`=Experts said cell phones are now practically `fashion items.` Therefore, design is important more than any other product. The Nokia Design Center located in California is famous for its development of design that the target consumers prefer the most.

However, the size and the present condition is still a top secret. The marketing manager of Nokia Korea, Kim, Ji-Won said, “In order to avoid to be exposed, it is `camouflaged` as a regular house in a resident district. It has never been opened to outside personnel so far,” and “the power of Nokia come from here.”

On the other hand, there is an analysis that the power of Samsung Electronics cell phone design comes from the Korean consumers, who prefer new models.

So it introduces many models inside the country, and it can export the models that passed the verification of consumers. Therefore, the number of new models that Samsung Electronics introduced this year was 100, but it was only around 30 for Nokia.

▽Nokia brand vs. pronoun for `expensive brand` Samsung=The brand value of Nokia that a brand research institution Inter Brand researched this year was the 6th in the world with 29.9 billion dollars. Although Samsung Electronics went up from 42nd to 34th and its brand value also went up from 6.4 billion dollars to 8.3 billion dollars; however, the margin with Nokia is still big.

The brand value is directly related to the loyalty of customers. The reason why the business showings of Nokia for the third quarter was good is because the European consumers, who bought Nokia cell phones in large quantity, bought Nokia products `without asking` when the upgrade timing came.

The merit of Samsung Electronics is the `expensive brand` strategy. The head of the Samsung Electronics Information and Communication Division US Corporation, Kim, Jung-Han said, “In America major CEO`s are using Samsung Electronics cell phones.”

The average retail price of Samsung Electronics cell phone for the 3rd and 4th quarters is 188 dollars, and it is higher than that of Nokia (120 dollars). However, the market share of expensive products is around 30%. Mid and low price products are controlling the market, so it might be unfavorable to Samsung Electronics.

The head of the marketing team of Samsung Electronics Mobile Division Ji, Young-Man showed his confidence saying, “Since the replacement demand is enlarged, the premium class cell phones with cameras and color LCD`s will lead the market.”

Jong sik Kong kong@donga.com