Major Asian tech companies struggling to keep profits strong have shifted their businesses models from B2C to a B2B focus to position themselves in a stronger market, according to a Korean Times article published Thursday (Oct. 30).
Major players making the transition include Samsung Electronics, LG Electronics and others such as SK hynix, Doosan Infracore and Dongbu-Daewoo Electronics — all of which who have turned their tech strategies into B2B to be able to target a more stable industry.
A Samsung official who spoke on the terms of anonymity, said Samsung is spending more to increase its partnerships with companies retailers like Suning. The Korean Times article highlighted that product and service differentiation is a measure that Korean companies can keep up with against Chinese companies.
“The business-to-consumer segment is very volatile and highly competitive, so Samsung is now focusing on the B2B segment as it believes being a solutions provider means stability,” an official told Korean Times.
Because China is no longer viewed as the “land of opportunity,” Samsung and other Korean tech companies need to change its business strategies in order to boost profits in the highly competitive market. Kim Jeong-sik, head of the Korean Economic Association shared why this is happening.
“Korea’s competitiveness in the technology and consumer electronics industries is weakening amid the rise of Chinese competitors,” Jeong-sik said in the article. Japanese manufactures have been able to get ahead in the industry because of the weakening Yen, and Chinese manufactures have an edge on technology. This leaves Korean manufactures struggling in the B2C market, which has further pushed them to examine potential on the B2b side.
“We have to try our best to effectively compete with our Chinese rivals by implementing fine-tuned strategies,” said another Samsung Electronics executive who requested anonymity told Korean Times. “Samsung understands that we should invest more to innovate and roll out devices on time according to market demand, a capability that is quite difficult for rivals to copy or even to compete against.”
The article also explained that market analysts were supportive of moves by companies like LG Electronics to invest more in its B2B side, saying there “LG’s tech units are well positioned to provide B2B solutions in China and find new growth opportunities there. ”
“Since 2011, LG Electronics has been increasing its investment in air conditioners for business rather than individual clients. This shift has helped LG’s air conditioning division earn more as the B2B segment has higher technological barriers but correspondingly higher margins,” Shinhan Financial Investment analyst So Hyun-chul told the Korean Times.