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Fri 7 Nov 2008 04:00 AM

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Entry point

Samsung is preparing to enter the lion's den when it launches its own range of notebooks in the Middle East region later this year.

Samsung is preparing to enter the lion's den when it launches its own range of notebooks in the Middle East region later this year. While the electronics vendor has its work cut out breaking into such a crowded and established market, the managing director of its IT division in the Gulf region, Madhav Narayan, is confident of proving the sceptics wrong.

Samsung has been selling notebooks in Europe and Korea for a while now. Why has it taken you so long to launch them in the Middle East?

Samsung launched notebooks in Europe on a country by country basis and the approach was to understand the markets, position the products and build the infrastructure to ensure we delivered the core values of Samsung.

The early birds have had the first-mover advantage, but then they would have had the disadvantage of not really knowing what products to offer, how to position them or what channels to use.

Getting to understand markets and offering the right products at the right place at the right time has been a very successful strategy. As we started growing in terms of products and business volume, it was a natural step that the products would be made available in some of the key emerging markets.

With that initiative and the fact that Samsung Gulf is a fairly established subsidiary here in the region with a huge base of customers, channel partners and distributors, it was only natural that Samsung would start looking at the Middle East, especially as the regional market is growing more than 60% year-on-year in some cases.

Will you be targeting your notebook range at the entire Middle East region or just specific countries?

The launch is primarily going to be in the UAE and Saudi Arabia.

The strategy is always to go market by market and it is only logical that we start with those two because the UAE and Saudi Arabia are the biggest markets in the region for notebooks. Roughly almost 60% of the notebooks get sold in those two markets.

Are there plans to eventually launch outside the UAE and Saudi Arabia?

We will eventually do that, but there is no fixed timeline on it. We have chosen the biggest markets in the region first and as the business becomes successful, and the rest of the infrastructure is developed, we will look at other markets.

When can channel partners in the UAE and Saudi Arabia expect to take delivery of mobile PC products?

The launch is slated for December so the channel can expect the delivery of products in the early weeks of December.

The launch is currently being tentatively planned for mid-December because we want to make sure that when we announce the first day of the commercial launch the products are there in the stores.

Is your intention to target both the consumer and corporate segments?

We are introducing consumer notebooks first. We do have a commercial range too, which will be available next year. The objective is to enter into the space where Samsung is pretty strong in terms of percentage.

The consumer sector was a no-brainer, also because of the fact that if you look at the notebook market in the region today it is fair to say that almost 65% to 70% of it consists of consumer notebooks.

Are you giving any consideration to the notebook channel strategies of your competitors as you plan your own go-to-market approach?

We are factoring that in and studying what has been successful, but at the end of the day what we will come out with will be something that is relevant to us and which we think could be an important element in our success.

It will factor in the current competitive landscape and the way competitors are approaching the market, as well as Samsung success stories in other markets. If a distribution model in a particular country has been very successful then we want to look at that.

The notebook PC market in this region is full of established brand names such as Acer and HP. What is your response to industry critics who say Samsung is coming too late to the table to make an impact?

The point here is that we have a very distinct advantage because there is a thorough understanding of what's really going on.

The early birds will have had the first-mover advantage, but then they would have had the disadvantage of not really knowing what products to offer, how to position them or what channels to use.We have the advantage of knowing what market trends are, what products we should be bringing in and what the consumer buying behaviour is like. That is going to be a big advantage for us.

And secondly, the technology is completely home-grown. 75% of the notebooks contain Samsung components and in all these components we have got leadership, whether it is LCD, memory or storage products.

Pricing in the notebook market is notoriously aggressive. How can you remain competitive while also protecting partner margins?

We are looking at value leadership, and value is a combination of all the product feature elements. The channel is extremely critical for us and we want partners to make a healthy margin. All our discussions internally have started in that direction because that point is very clear.

Are notebook partners going to be expected to make their margin from the product or will you be introducing any sales incentive programmes?

There will definitely be programmes. We want to encourage those who are focused on Samsung and are able to deliver our values to the customer as well as generate a fair amount of business for us.

It is important that we develop quality programmes that partners will be able to appreciate, rather than just throwing a rebate around. The Power Partner Programme we have used in Europe is very well-known and we are trying to see if we can adapt it to the region.

We have started building a sales-out team because to implement those programmes we need the feet on the street to be moving around, to know what's going on and to work with the partners to ensure they achieve the given deliverables.

The power retailer channel will naturally play a major part in your notebook aspirations, but do you expect the Computer Street trading community to embrace Samsung notebooks as well?

I'm sure they will be one of the channels for these products. We can't be restrictive - we have to make sure that Samsung is available everywhere and they are traditional retailers with their own traditional customer base.

They give a sizeable business to us today for our printers and LCD monitors, and some of them are very strong and loyal partners for us.

How many notebooks do you expect to ship in the region next year?

We have not set ourselves ambitious targets. What is important for us now is building the infrastructure, getting the whole network of channel partners ready and establishing the support network.

It is about getting people trained and switched on, putting our team into place and mapping the products correctly. That is going to be our key focus next year.

But you must have an idea of how much you think you are capable of selling?

The current plan that we have is realistically 3% of the total market, which is estimated at three million units in the Middle East. We think that seems to be achievable if we are successful, but it could be between 1% and 3% so it is very difficult to say.

Our focus is more about laying a solid infrastructure in the first year and then we can start talking certain figures after that.

The analyst viewOmar Shihab, Programme manager, systems and infrastructure, IDC MEA.

There is definitely room for growth in the Middle East notebook market as we are talking about much larger numbers than there were before and we are still continuing to forecast double-digit growth.

Samsung needs to bear in mind that the rules of the game are changing. We are seeing a lot of differentiation happening, competition is very fierce and end-users are becoming more mature. There will always be that very price-sensitive segment of the market that just looks at low-end PCs, but there is also a growing portion of consumers that consider much more than just price. There is a lot of room to play in terms of differentiated products and so it all depends on where Samsung tries to compete.

The consumer sector is a very profitable segment of the market and when we say ‘consumer' it doesn't necessarily mean the low-end segment because we are actually seeing high-end products being sold there in markets like the UAE and Kuwait. A lot will come down to the distribution and retail partnerships that Samsung makes - that will make a big difference.

There are a lot of established vendors that have been doing this for a while so Samsung will face strong competition, but it already has some very strong consumer products in the Middle East so it is not like it is a new name. And, as I said earlier, there is a lot of room for expansion. The market is not stagnant - there is still a piece of the pie to be shared.

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