Samsung profits from go-it-alone strategy

Samsung profits from go-it-alone strategy
Bangkok Post ( 6 Oct 2007)

Samsung says its mobile handset sales have improved significantly since it began doing its own distribution after its main local distributor terminated its contract. But the South Korean company has faced higher costs from the expansion of its sales team to cover dealers nationwide, said Kwang Ki Park, managing director of Thai Samsung Electronics. Mr Park said Thai Samsung would no longer use an outside distributor in Thailand but would operate its own distribution channels and appoint wholesalers to sell particular phone models. Samsung was accused recently of selling outdated models of mobile phones to its main distributor, Sam Corporation, a subsidiary of SET-listed TWZ Corporation, and providing no marketing support. Sam Corp filed fraud charges on July 23 against Mr Park and Thai Samsung general manager Chung Jun Kim, claiming it had suffered losses totalling 63 million baht. The case has also prompted other retailers to file fraud complaints with the Crime Suppression Division, claiming they encountered similar problems. The case between Thai Samsung and Sam Corp is now before the courts, with Samsung executives required to report to court on Monday. Mr Park said that his company's monthly sales volume rose by 20% this month to 120,000 units and the figure would increase to 150,000 in December. He said the increased sales in the fourth quarter were expected to compensate for a sharp reduction of handset sales in the second quarter. ''We expect to see an increase of between 15% and 16% in sales volume to 1.2 million units this year. Revenue would increase by 4-5%,'' he said. Mr Park also said that Sam Corp would have no longer exclusive rights since it did not pass the three-month probation period, due mainly to limited distribution coverage and poor stock management control. He said Thai Samsung had signed only a letter of appointment, not a contract, to designate TWZ as its sole distributor on Dec 20 last year. The exclusive distribution right was transferred to Sam Corporation on Jan 1 this year. Mr Park also dismissed allegations that Thai Samsung did not pay incentives to 700 dealers. The company has paid 4.12 million baht worth of incentives out of a total of 4.23 million and the rest were now being processed, he said. Thai Samsung Electronics reported US$1.3 billion in revenue last year. Of the total, 65% came from exported products with the remaining 35% from the domestic market. The company was the largest electronics exporter in Thailand according to Board of Investment, said Mr Park.