Samsung Group is a South Korean multinational conglomerate company headquartered in Samsung Town, Seoul. Samsung was founded by Lee Byung-chull in 1938 as a trading company. It entered the electronics industry in the late 1960s and the construction and shipbuilding industries in the mid-1970s. Since the 1990s Samsung has increasingly globalised its activities, and electronics, particularly mobile phones and semiconductors, has become its most important source of income. In the first quarter of 2012, Samsung Electronics became the world's largest mobile phone maker by unit sales, overtaking Nokia, which had been the market leader since 1998.
Since 2001, Samsung expanded its business to the Chinese market. Although the Chinese market is huge, it is fragmented and unbalanced in economic development between city and countryside, east and west. Therefore, the distribution channels have always been a perplexity to foreign manufacturers and sometimes even to domestic manufacturers in many industries, including the mobile phone industry. Before the year of 2010, Samsung mainly depended on agencies for exporting its products into the China market. More specifically, Samsung delivered different models of mobile phones to the Chinese national agents, such as EagleTec, Fortune Telecom Holdings Limited, Aisidi Limited Company, Newland, Telling Telecom Holdings Limited and so forth, and then such national agents would to distribute the products to the provincial agents. The responsibility of provincial agents was to deliver the products to different wholesalers and retailers for selling to final customers. It could be seen that the distribution channel of mobile phone was highly complex as there were many steps by flowing a product from manufacturers to final customers and Samsung was not responsive towards the market.
However, in order to maximize the profit, Samsung China mobile phone division had decided to restructure the mobile phone distribution channel in December, 2010. Instead of only depending on the distributors for the selling of its mobile phone, it has begun to cut the number of its agencies in China and carried out a plan step by step for seeking a flatter and broader distribution network. This was done by directly supplying its mobile phones to the bigger household appliances retail store chains like Suning Appliance Co., Ltd and GOME Electrical Appliances Holding Ltd. The strategy of direct supply system mainly covered the market of the first-tier cities such as Guangzhou, Shanghai, Beijing and the capital market and other markets. For the peripheral regions such as the county and township market, Samsung still has to make sales through distributors.
In this research, I am going to focus on studying Samsung’s mobile distribution network in the first-tier cities of China.
2. Distribution network
Since 2010, Samsung has used the direct supply platform for the first-tier cities. Under the new distribution network, household appliances retail store chains such as Suning Appliance Co., Ltd, GOME Electrical Appliances Holding Ltd, China Paradise Electronics Retail Ltd, Five Star Appliance Co., Ltd, Dphone and so forth directly purchase phone products from manufacturers Samsung and enjoy more preferential prices and policies. Moreover, Samsung also deliver its mobile phone to its exclusive shops for sales, which is the shops operated by Samsung and exclusively sell its own products, including mobile phones. This distribution network of Samsung mobile phone belongs to Retail Storage with Customer Pickup. It is often reviewed as the most traditional type of supply chain, inventory is stored locally at retail stores. For customers who want to buy Samsung mobile phone, they could walk into such retail stores and then directly pick it up at the there. The below is the diagram of such distribution network:
With this type of distribution network, it has its own...