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Technology Stocks : Samsung and Wireless -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (84)	10/29/2002 5:18:47 AM
From: elmatador	Respond to of 374

Samsung VS Sony Sony faces a tough test in China push By Richard McGregor and Michiyo Nakamoto Published: October 28 2002 21:36 \| Last Updated: October 28 2002 21:36 To show where he wants Sony positioned in the market, Nobuyuki Idei has with him a brightly-coloured sheet listing the Japanese company's global brand ranking - at the top at home and in the US, and number four in Europe. With its Vaio PC and Hollywood film studios, Mr Idei insists that the Japanese electronics pioneer "is regarded as a company which has successfully shifted from an AV company to an AV and information technology company". "Sony has changed its image worldwide," he says. But Mr Idei, chairman and chief executive, has no sheet indicating Sony's standing in China, the venue over the past week for a company board meeting and high- profile brand promotion. There may be a good reason for that. Any list in China would not be so clear-cut, catching Sony in a rapidly developing market crowded with foreign and local brands jostling for recognition. Sony lags its compatriots, such as the usually cautious Matsushita and Sharp, which have made an aggressive push into China in recent years. Even worse, a promotional blitz over the past two years by Samsung and LG, South Korea's ambitious electronics companies, puts them ahead of Sony in some brand awareness surveys. Sony's standing in China does not do justice to its status as a global giant with sales of $60bn and a brand that ranks among the most recognised in the world. As its profits from consumer electronics come under greater pressure, Sony is having to look to places such as China for more growth. Three years ago, after a similar strategy session in China, Sony stopped manufacturing 20-inch televisions in Shanghai in the face of a wave of local competitors, many operating at a loss. Instead, Sony struck out for the high ground, going upmarket where its executives believed it could profitably take on all competitors and build a name for top-quality products. But, while Sony has been busy in China, Samsung and LG have been even busier in the consumer electronics and mobile phone market. Both are outspending Sony in advertising in China by a factor of almost three, something that Mr Idei says Sony will not try to match. "We know how to build a brand - advertising is just one method," says Mr Idei. The Koreans' relentless promotions, however, are reflected in sales. Sony has total annual sales in China of about US$1bn, mostly of electronics. LG's revenues climbed from US$2.1bn in 2000 to a projected US$4bn this year; Samsung sold US$2.8bn in goods last year and expects sales of US$3.6bn in 2002. Matsushita, too, indicated this year that it would double sales in China of products manufactured by its subsidiaries there to Y600bn (US$3.2bn). Sharp has also said it expects revenues from its manufacturing business in China to triple over the next three years to Y350bn. Some in Sony worry that companies such as the aggressive Samsung will be better positioned in the future to attract wealthier consumers in higher-margin products. Sony has only recently started selling its high-end Vaio in China and its mobile handset joint-venture with Ericsson is also just underway, two areas expected to contribute to larger revenues. In the grander game of remaking Sony into an integrated AV and IT company, Mr Idei says the company's music and movies franchises will help "differentiate our image over Samsung". So too will the official launch of PlayStation in China, at some point next year, a first for global games makers that have shied away from the mainland because of piracy problems. Furthermore, Sony must be hoping that the PlayStation, which quickly became a must-have item in western markets and the driver of Sony's profits, will provide similar momentum in China. Sony's recent meetings in China did solidify a significant change of strategy, which will have to be factored into all product launches. For Sony, says Mr Idei, China, Japan, Malaysia, Singapore and South Korea are all to be treated as a single market, with a synchronised release of products. For China, Sony is focused not on the 1.3bn population but on the 80m or so consumers whom it judges can afford its products. "We used to think of China as a place for [manufacturing] exports; now we have changed," he says. "If you look at Shanghai today there's no difference in lifestyle with people in Tokyo."