The launch of a new product is a complicated and multi-level process that requires considering all the aspects of the market activity. While working on product development, a company necessarily carries out the relevant market research, targets its audience, works out SCM strategy, and evaluates potential risks. Product development always has some practical aims whether it is the sales’ increase or positions’ strengthening.
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The paper at hand is devoted to the analysis of the launch of Samsung Gear VR from different perspectives: the product development model, the business analysis, its technical implementation, etc. The key focus is put on the potential outcomes that this implementation will have for the company’s performance in general.
Idea Generation and Screening
Every product that appears in the market is initially developed in response to the relevant demand. Thus, it is reasonable to assume that Samsung Gear VR was introduced to meet the demand of keen gamers and those who would spend hours playing the Sega VR in the early nineties.
It is essential to note that Samsung was not the first one to enter the VR market – by the time it appeared, such products as Oculus Rift, PlayStation VR, and HTC Vive had already occupied the niche (Lowe par.1).
Moreover, according to the latest annual report produced by Samsung, the innovative sphere is “critical for the company’s survival” (Samsung 6). The launch of the VR product is a successful attempt to support their innovative strategy. Hence, the prerequisites of Samsung Gear’s appearance are the following: the launch of the similar products developed by competitors, the need to introduce some innovations, and the intention to engage new clients.
While developing a product’s concept, it is critical to ensure that it possesses some unique characteristics that will guarantee a certain competitive advantage in the relevant market. In the case of Samsung Gear VR, its key distinguishing feature resides in the fact that it is the first time that the virtual reality option is available through a mobile device. As long as their product line already comprises different mobile versions – Galaxy S7, S6, etc. – it is only necessary to develop the relevant hardware. Hence, in terms of costs, the company managed to fit in a relatively moderate budget as there was no necessity to start from scratch.
The product engineering was carried out in close collaboration with Oculus, an experienced market player in the field of innovative technologies. It is essential to note that the company chose a highly beneficial strategy ensuring that the new product would be compatible with the most expensive products – Galaxy versions.
The success of the company’s performance is based on an effective and consistent strategy. Thus, every product produced by the company is aimed at expanding the product line, the targeted audience, and the type of the occupied market niches. Moreover, the introduction of a new product is often determined by the increase in demand for the already existing items. As a result, before the concept of Samsung Gear VR was designed, it was essential to understand in what way it might contribute to the business’s development.
First and foremost, Samsung Gear VR is expected to assist in extending the targeted audience. Thus, gamers and high-tech lovers are likely to join the Samsung club. Also, the project was outsourced with the help of another professional in the relevant market. Hence, the cooperation with Oculus also opens new prospects in terms of the clients’ engagement – the loyal customers of the latter will necessarily get interested in the commonly produced innovation.
Moreover, according to the company’s forecast, their smartphone sales were about to fall in 2016 (McCormick par.5). Keeping in mind the fact that their innovation is compatible with smartphones only, it is rational to presume that product development is partially determined by the attempt to push up the smartphones’ sales.
Lastly, the environment within which Samsung has to operate is highly competitive. Thus, the gap between Samsung and its key rival, Apple, in terms of the market share is very insignificant (see Figure 1).
Therefore, to keep up with its competitors, the company is obliged to introduce some innovations once in a while. Otherwise stated, the appearance of Samsung Gear VR is a strategic trick aimed at strengthening the brand’s positions in the market.
Beta Testing and Marketing
Beta-testing and marketing testing are important stages in the process of a product launch as they allow eliminating some critical flaws that might hurt the product’s performance. The first pilot test carried out by Samsung and Oculus showed that the product had some disadvantages that would essentially impede its promotion. Thus, for instance, the first version of Samsung Gear VR was only compatible with Note 4.
Besides, the cost of the pilot variant was not competitive – thus, the customers were supposed to spend about 200 dollars on the innovation (Lee par.1). Taking into account the fact that a potential client might also have to purchase the relevant mobile phone, this price is excessive. As a consequence, Samsung and Oculus have incorporated the essential modifications so that the final version is compatible with a larger number of smartphone versions and its cost is twice lower.
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Samsung has one of the most efficient Supply Chain Management (CSM) strategies in the relevant market. Thus, the company has developed a complex and multi-level chain that ensures a prompt and cost-effective operation. According to experts, Samsung relies on the principle of the so-called “six sigma” which implies extra effort in terms of the innovation activity (Emerald Management First 2).
From this perspective, the developed SCM strategy turned out to be highly assistive in the framework of promoting Samsung Gear VR. The company saw to the fact that their loyal clients were particularly encouraged to purchase the product by making it compatible with the largest number of Galaxy versions possible. Moreover, all the official distributors were engaged as soon as the so-called “clients version” appeared so that the product became immediately available both in the shops and at the online platforms.
It is essential to note that the price of the product is highly competitive. Thus, in comparison to the products of a similar type, Samsung Gear VR is a low-cost innovation (see Table 1).
|Samsung||Samsung Gear VR||99$|
Table 1 “Cost Comparison”.
Assuming that along with buying Samsung Gear VR one is also required to purchase the relevant Galaxy version, the price will turn out to be almost twice higher. In the meantime, even taking into account the extra expenses, this product remains the cheapest in this line.
The launch of the product was accompanied by a powerful advertising campaign. Thus, Samsung decided to introduce Samsung Gear VR on Christmas Eve; as a result, the first revenues were quite considerable. Further revenues depend largely on the competitive capacity of this product. At the current point, its key benefit resides in the low cost. However, if the quality parameters turn out to be lower than those of the rivals’ offers, the revenues are apt to fall by the second year of sales. According to experts’ forecasts, the general demand for VR products has been initially overestimated; thus, the revenues are expected to be gradually decreasing (Grubb par.1).
The analysis of the product development of Samsung Gear VR has shown that its launch is a perfect pitch in terms of marketing. Thus, first and foremost, the introduction of this product has assisted Samsung is strengthening its positions in the innovative sphere. Moreover, the company is likely to push up its smartphones’ sales as the owners of Gear VR will necessarily have to purchase some versions of the Galaxy mobile phone as well.
Also, the developed product possesses a consistent competitive advantage from the pricing standpoint. In case it manages to show good quality characteristics, it will remain the leader in the relevant niche.
From the revenue perspective, it is problematic to forecast the potential impact as the VR market is a relatively new field and, thus, it is highly difficult to make any predictions. In the meantime, an insignificant increase is likely to be seen in the course of the first two years.
Emerald Management First. Supply Chain Management Six Sigma at Samsung, 2007. Web.
Grubb, Jeff. Super Data trims virtual reality revenue outlook for 2016 by 30%, 2016. Web.
Lee, Nicole. Samsung Gear VR review (2015): A no-brainer if you own a Samsung phone, 2015. Web.
Lowe, Mike. Samsung Gear VR Consumer Edition review: The Stepping-Stone to Oculus Proper, 2016. Web.
“Marketing budget of Samsung Electronics and its major competitors for 2013” 2013. Web.
McCormick, Rich. Samsung confirms its first profit growth since the Galaxy S4, 2015. Web.
Samsung. Sustainability Report, 2015. Web.