Grabbing them when young helps drive Samsung's billion-dollar Africa strategy

Chinese rivals lurks, as South Korean firm's $14b 2013 advertising spend was more combined GDP’s of Rwanda, Malawi, Burundi and Cape Verde.

TWO teenage girls hare round the all-weather running track at the imposing training complex on the northern outskirts of Lusaka, Zambia’s main city, while simultaneously managing to hold a conversation. 

In the foreground, a young female judo tyro confidently strides in for practice, nodding rather sagely at a passing would-be pugilist gaily lugging his pair gloves. 

An arresting 16-sport multiplex, the five-year-old Olympic Youth Development Centre also packs among other provisions a swimming pool, lodge and a health centre, including the country’s first sports science unit.

Funded by the International Olympic Committee, it on average admits up to 10,000 youngsters a month.

At the football pitch nearby, Zambian star and national side skipper Christopher Katongo is conducting a training camp attended by three dozen starstruck youngsters, all clad in Samsung-branded bibs.

“I am not a celebrity, I am just a hero for this country,” the 2012 Africa Cup of Nations winner and BBC African Footballer of the Year awardee says amiably at them, before proceeding to give a pep talk thirstily lapped up by his audience.  

The drill, organised by Samsung, the multinational conglomerate and the largest of the South Korean chaebols, has roped in aspiring footballers from Munali and Matero boys schools, the former of which counts ex-presidents Kenneth Kaunda and Rupiah Banda among its alumni.

The camp is designed to tap into the passion around the Cup of Nations, to which Zambia qualified and which Samsung is the official sponsor. It is mirrored in Ghana, giving a glimpse into part of Samsung’s overall strategy for Africa.

“It all starts early…if you initiate products early in the youth, they are more likely to grow with those products,”  the company’s country manager James Chona, who is also in charge of three other southern Africa countries, says in an interview.

It is a profitable approach for Zambia so far: Munali’s sociable high net minder tells me he is “saving up” for the flagship Samsung Galaxy Note 4, while one of the attendants at the centre insists he will replace his current model with yet another from the Asian company, as the growing economy allows its consumers more latitude with their spending.

The Asian race for the African market is not lost on the observer—in the background is the impressive National Heroes Stadium built by the Chinese, major new competitors in Samsung’s biggest mobile business. Similarly, the risks remain: Samsung executives can be seen trying to blend unobtrusively in the background, even if they are clearly in charge.

Africa remains very much a growth market for the company, Chona says, but a blend of traditional marketing and newer targeting may help entrench its hold and fend off tenacious newer players.

Big money

The Suwon-based Samsung Electronic’s marketing and advertising spend was in 2013 projected to have been $14 billion—more than the combined GDP’s of Rwanda, Malawi, Burundi and Cape Verde.          

This easily places it at the very top rung of spenders globally, as it seeks to project an image of innovation and ubiquity. The Samsung conglomerate, which is preparing for a generational change, accounts for 20% of the South Korean economy, while it generated $325 billion in sales last year.   

In 2012, the company unveiled its Africa strategy, which it saw as making it a $10 billion firm in sales by the close of this year. 

But due to stiff competition, among other factors in mature markets, Samsung has had to rump up sales targets in newer markets, in addition to placing a premium on innovation and loyalty projects. 

The firm’s electronics unit, which accounts for nearly a third of the global smartphone market, has this month seen its market value fluctuate around $185 billion, according to Bloomberg data.

Worryingly, the company’s market share in China, its second-largest market after the US, fell by a projected third last year according to the International Data Corporation, under increasing pressure from local makers.

This has in part helped fuel global investor wariness about the space for new growth, with the firm under pressure to offer more by way of dividends to investors—it has one of lowest price-to-earnings ratio among its peers.

Challenge of new markets

New markets, such as Africa, are not exactly slam and dunk.

Chinese manufacturers such as Tecno have launched an assault on its lower-end smartphone market, as feature phones continue to shrink in an increasingly data-hungry region. Even the high-end market could come under stress, as feature lines become more blurred, while its other products such as televisions and washing machines also put up a battle. 

Samsung has also had to keep up with emerging technological trends in a booming African market. 

“Everything we have now revolves around data usage and exchange of data; social media, messaging platforms. These are what are driving customer trends in terms of usage now,” Chona says, as Facebook users in the region close in on 55 million, and messengers like Whatsapp take off. 

The company has its work cut out to ensure more Africans use its devices to play in this vast new expanse.

As a further bulwark, the company is looking to become a bigger player in data and content accessibility, which it sees as the next big space. 

Despite flatlining mobile, Samsung remains highly profitable, among other things due to its dominance in the memory-chip business, which are staples in personal computers, workstations and devices such as USB drives and cameras. This has had a hand in informing its focus on education in Africa—a major absorbent of billions of dollars of both government and private revenue.

The firm has been piloting a programme to train 10,000 electronics engineers in the region, with more countries set to this year join South Africa, Kenya and Nigeria in the ambitious plan. 

It also has a solar-powered mobile internet schools plan that is heavy on Samsung-manufactured infrastructure to help rope in millions of learners—and new consumers—that would otherwise have been left out especially in the rural areas. This is in addition to actively backing developers of apps and educational content meant for the region.

This multi-faceted approach means that even the Chinese, more preoccupied with pricing, will find it hard to attain this kind of brand value, or to match the war chest that Samsung has deployed to pitch its consumer devices as necessary in making their users’ dreams come true.

It would be stretching it to say that Chinese devices are currently the stuff of Africans’ fantasies—aspiration is a notoriously difficult thing to compete on, even using pricing.

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