Samsung's mobile division has experienced a positive start to its African expansion, despite the barriers to entry.
James Munn, VP of the mobile division, says although the group has been active in Africa for the past three to four years, Samsung's focus globally had been on the mid to high end of the market.
But in the final quarter of last year the group expanded into the upper low-end market after Samsung Electronics announced a new strategy.
Mark Sale, export manager for the group's mobile division in SA, says the move is challenging, as the low-end market in Africa has several barriers to entry. These include high and varied import duties, a highly active grey market, and foreign exchange controls resulting in few distributors having access to the foreign currency needed to deal with Samsung.
In addition, handsets are not subsidised by contracts as they are in SA. The continent has also been inundated with cheap handsets and end-of-range phones dumped from Europe.
The market is also competitive, with Nokia, Motorola and others having been involved there for several years, Sale says.
"But because it's at the low end, the margins are low, so it becomes a volume game."
He adds that Samsung has launched three new products into Africa, aimed at the upper level of the low-end market. Munn says these have been very well received, particularly because of an extremely low failure rate.
Munn says there are no immediate plans to enter the bottom end of the market. "We have to start somewhere," he says. "We are a high-quality supplier, and we own the core technology such as the display and so on, and in fact competitors source that from us.
"It would be dangerous to go right down to the low end where it's a volumes game, so we're cautiously getting into that market, but never at the expense of brand equity. If we found that brand equity was being affected, we would get out immediately."
Munn adds that one of Samsung's key differentiators as it expands in Africa is its brand quality. "The customer who buys Samsung has an emotional safety net that it is a large quality company and that the phone won't break."
Sale says Samsung has a strong consumer electronics presence in Africa and the brand is well known, which gives the group an advantage.
Africa is now being served from Samsung offices in Dubai, SA, Morocco, Kenya and Nigeria.
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