J
Jared Peters
Guest
Samsung’s profits have slowly been declining all year, and we’ve heard multiple reports that the company is working on changing their business plan going into 2015 to try and turn things around. The latest information comes from the Wall Street Journal and claims that Samsung is considering a drastic change in management after the Galaxy S 5 completely missed its original sales target.Early reports say Samsung is planning on moving J.K. Shin out of his role as co-CEO and head of Samsung’s mobile division. Shin currently leads that part of Samsung’s business, and he’s been around since Samsung gobbled up tons of early market share with the first few Galaxy S phones. To replace him, Samsung is looking at giving one of the other co-CEOs, B.K. Yoon, control of the mobile division. Yoon currently runs Samsung’s home appliances and television business.
By folding up the mobile division into Yoon’s responsibilities, it would potentially streamline things for Samsung and allow them to tackle the smart home approach that most companies are chasing right now. Internet connected washing machines and air conditioners might be the next big thing, and Samsung needs to be in position to take advantage of it if technology does move in that direction. Samsung acquired a connected home company, SmartThings, earlier this year, so that move makes sense.
Samsung’s third co-CEO, Kwon Oh-hyun, is currently over Samsung’s component business, and he is expected to keep his role since that portion of Samsung isn’t struggling.
Part of the cause of this large management shuffle is due to the Galaxy S 5 missing sales expectations by a large margin. Early projections for Samsung’s 2014 flagship weren’t great, but Samsung produced about 20% more devices than they did of the Galaxy S 4 based on survey results from business partners around the world. Unfortunately for Samsung, however, those business partners weren’t responsible for unsold phones, so Samsung had to beef up marketing and advertising to speed up sales.
Samsung ended up selling about 40% fewer Galaxy S 5 phones than they expected, moving about 12 million in the first three months after release. For reference, the Galaxy S 4 sold about 16 million in the first three months. Ouch. The only bright side Samsung has there is that sales were actually up in the US, which is one of the most important markets for smartphones around the globe. However, that growth was mostly negated by the fact that sales were down roughly 50% in China compared to last year’s S4.
In the US, Samsung is already working on merging their mobile and consumer electronics divisions and doing away with duplicate positions between the two, so the change with the CEOs would mostly affect global operations. The company still doesn’t have a head of the mobile division for the European market, though.
As a company, Samsung isn’t at risk of going bankrupt or abandoning the mobile market, but this is a great example of just how volatile and difficult the smartphone market is. Competition is extremely fierce on the high end and the low end, which is why we’ve seen most other companies commit to one or the other, but not both. Samsung has stuck to their original practice of hitting every sector of the market with as many devices as possible, and that’s just not a feasible option anymore.
source: Wall Street Journal
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