UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Trƣơng Hồng Chuyên INEFFICIENT AFTER-SALE SERVICE PERFORMANCE AT SAMSUNG SYSTEM AIR CONDITIONER DEPARTMENT MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Trƣơng Hồng Chuyên INEFFICIENT AFTER-SALE SERVICE PERFORMANCE AT SAMSUNG SYSTEM AIR CONDITIONER DEPARTMENT MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. TRẦN PHƢƠNG THẢO Ho Chi Minh City – Year 2018 TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 1 Table of Contents Executive summary. 3 CHAPTER 1: PROBLEM IDENTIFICATION. Initial cause-effect map.
Updated cause-effect map. Main problem validation. Main problem definitions and measurements. Consequences of the problem.
18 CHAPTER 2: ALTERNATIVE SOLUTION. Lack of service and product training. Lack of human resource number. Shortage of technical capability of the service team.
Final cause-effect map. 30 TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 2 2. Action plan in the organization. Recruit technical engineers.
Select and sign contract with dealer service centers. 37 CHAPTER 3: SUPPORTING INFORMATION. Data for the existence of inefficient after-sale service performance. 73 TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 3 Executive summary The intensely competing market called for the shift from primary product offer to more customized solution package.5,6 After-sale service played an equally important role in the value chain of the company45 to enhance customer value,46 which eventually benefited the organization in higher competitive advantage,14 long-term customer relationships, and sales effectiveness.6 The objective of the research was to identify the central problem happening at the Samsung system air conditioner department, to explore the causes and effects of the issue on the performance of the company, and to provide the direction for a solution.
In this study, the research method comprised of literature review and interviews with different informants (the head of the department, the manager and the technical engineer in the service team, and two customers). The findings from the interviews suggested that the company encountered inefficient after-sale service performance, which affected the competitiveness of the end-to-end service solution to attract a higher number of large projects, and eventually on the sales effectiveness of the department. Based on the main cause, the alternatives for the shortage of human resource number included internalizing, outsourcing, and partnering options. An action plan for the 14-month project of improving the efficiency of after-sale performance of all three regions was developed, which would cost about 71,000 USD.
By doubling the number of internal engineers and dealer service centers, the expected result of the project was to reduce the average time responding to service requests by 50%. From financial perspective, the outcome of the project would expect to increase sales and profit for end-to-end service solution by 390,000 USD and 319,000 USD respectively. TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 4 CHAPTER 1: PROBLEM IDENTIFICATION 1. Company overview Headquartered in Seoul, Korea, Samsung was one of the largest conglomerates in Korea.
Since its establishment in 1938, Samsung expanded its business from a small trading company into numerous fields including food processing, insurance, securities, retail, electronics, construction, and shipping. After the founder passed away, Samsung was divided into four business groups: Samsung, Shinsegae, CJ, and Hansol. Since the 1990s, Samsung Group focused its activities in electronics, mobile phones, and semiconductors on a global scale. Among many subsidiaries of Samsung, Samsung Electronics was the largest electronics company based on revenue and the fourth largest brand in the world in 2012.
Since its arrival in Vietnam in 1996, Samsung contributed significantly to the Vietnamese economy regarding job creation, GDP growth, and export volume. By 2018, Samsung invested total 17 billion USD in Vietnam, contributed 25% to Vietnam’s total exports and created 110,000 jobs. Samsung had four factories, namely Samsung Electronics Vietnam (SEV), Samsung Display Vietnam (SDV) in Bac Ninh province, Samsung Electronics Vietnam Thai Nguyen (SEVT) in Thai Nguyen province, and Samsung Electronics HCMC CE Complex (SEHC) in Ho Chi Minh City. These factories were responsible for manufacturing electronic devices, communication equipment, and display panels.
These products were exported to 52 countries, which generated 61 billion USD in revenue and 6 billion USD in profit equivalent to 30% of the global revenue and 16% of the global net profit of Samsung. In addition to major factories, located in Ho Chi Minh City, Vietnam, Samsung Vina Electronics (SAVINA) was one of the most critical business entities of Samsung, which was responsible for all sales and marketing activities of Samsung’s products and services in Vietnam. The company followed the business structure of the headquarter and included two major business divisions: consumer electronics (CE) and information technology and mobile communications (IM). CE division included audio and visual, digital appliances, system air conditioner, remote and microphone, and display units while IM division consisted of mobile and network units (Chart 1 – Appendix).
TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 5 Besides, in order to support the operation of the company, there were customer service, marketing, management support, product inventory, human resources, general administration, and strategic sourcing teams (Chart 1 – Appendix). System air conditioner (SAC) department belonged to the consumer electronics division. Hence, the head of SAC department reported to the director of the CE division and managed five business functions including sales, product management, business development, customer service, and admin. Product management was responsible for inventory management, pricing, ordering, and marketing activities.
Business development was responsible for system design drawing, design software training provided to partners and university students as well as relationship establishment with technical departments of partners. Customer service was responsible for system installation, training, repair, and maintenance. Admin was responsible for administrative tasks. There were total four managers and 22 employees (Chart 2 – Appendix).
Except for project sales, business development and admin teams having only staffs, other teams had a manager and at least one staff. All teams in the SAC department were expected to cooperate well with each other and commit towards the goal of growing SAC revenue and profit. The product portfolio of air conditioners consisted of room air conditioners (RAC) and system air conditioners (SAC). Based on the product type, RAC was usually seen hanging on the wall with one indoor unit and one outdoor unit, so it was best suitable for a room.
On the other hand, SAC was a system that connected multiple indoor and outdoor units. It included technical solutions such as commercial air conditioners (CAC), free joint multi-air conditioners (FJM), digital variable multi-air conditioners (DVM), heating, ventilation and air conditioning (HVAC), which was suitable for residential houses with multiple rooms, small to medium-sized commercial buildings, or high-rise buildings. Between the two product types, SAC contributed the higher share of 95% to the total sales compared to 5% of RAC (Table 7 – Appendix). Based on the customer type, the company utilized a distribution network to sell to retailers and business customers such as contractors, installers and investors of construction projects including but not limited to residential houses, luxury apartments, hotels, office buildings, shopping malls, retail stores, restaurants, galleries.
TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 6 To reach its customers, SAC department utilized a sales force comprising of two sales managers (the head of SAC department and channel sales manager) and 12 sales reps. Within 12 sales reps, two-thirds of them work in the project team and the rest worked in the channel team. The significant difference between two groups was that channel sales reps had to move customers to buy through distribution with a fixed price scheme, while project sales reps sold directly to customers with more flexible price scheme depending on the project value. Project team sold to projects worth 50,000 USD and above while the channel team sold to project worth less than 50,000 USD.
However, sometimes the divider to distinguish the project value between two units could be unclear, so both teams worked closely with each other to ensure that there were no overlapping accounts. Symptom Firstly, Samsung SAC faced small market share compared to its competitors. Market share of Samsung AC (5%) was lower than key competitors including Daikin (25%), Panasonic (25%) and LG (7%). Daikin was the market leader because of its specialization in one business of air conditioner.
In Vietnam, Japanese brands such as Daikin and Panasonic gained popularity not only because of product efficiency but also attentive after-sale service network.41 For example, Daikin had a plan to invest nearly 90 million USD on building the training center and showroom in Ho Chi Minh City in order to seek about 10,000 technicians from universities, colleges and retailers for their installation, maintenance and repair service by 2020.41 It was in accordance with their expansion plan to increase the number of store to 2,000 and repair center to 25 by 2020 while meeting 900 million USD by 2022 which doubled from 2017.41 Table 1: Vietnam AC market share (2017) Samsung 5% LG 7% Panasonic 25% Daikin 25% Other brands 38% 41 Source: Nikkei Asian Review , internal information TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 7 Secondly, Samsung SAC experienced low sales. From 2015 to 2017, Samsung SAC sales experienced a slower growth rate than that the whole company, its largest competitor – Daikin as well as the global, Asia, Vietnam AC markets. Table 2: CAGR of Samsung SAC, Samsung Vina Electronics, Daikin, global, Asia and Vietnam AC markets (2015 – 2017) Samsung SAC 13% Samsung Vina Electronics 25% Daikin 30% Global AC market 2.5% Asia AC market 34.3% Vietnam AC market 14.64% Source: Nikkei Asian Review, TechSci research, Samsung business report41-44 The forecast of 2018 revealed that total sales would be lower than 2017 result. The target was set at the beginning of the fiscal year based on history sales.
Based on the target, each sales person was assigned with sales quota. Sales forecast was conducted and reviewed quarterly based on sales opportunities in the pipelines of the sales team. The management compared sales forecast with the target to evaluate sales performance and develop sales plan. Based on the sales forecast, there would be a gap of 13% in the total sales.
Specifically, captive sales would be 19% higher than the target, but local and channel sales would be 11% and 42% lower than the target respectively. Table 3: Sales forecast vs. target (2018) Unit: million USD 2018 Forecast 2018 Target Gap Captive 5.5 6 -42% Total 20 23 -13% Source: internal sales report Samsung SAC experienced low sales in channel and local project. From 2015 to 2017, the average captive sales had the highest contribution of 50% to the total TIEU LUAN MOI download : skknchat@gmail.com Inefficient after-sale service performance at Samsung system air conditioner department 8 sales, while local and channel sales had smaller contribution of one third and one sixth to the total sales respectively.
Table 4: Sales by destination to total sales (2015 – 2017) Unit: million USD 2015 2016 2017 Average % Average Captive 11.1 100% Source: internal sales report Thirdly, Samsung SAC experienced an increased number of after-sale service complaints. In the last nine months of 2018, 63% of 19,000 customer calls to the call center of the company was after-sale service requests. Among 12,000 requests, about 13% of them were after-sale service requests for SAC, which doubled that of 2017. Besides, the recorded customer complaints revealed that the highest number of complaints about after-sale service came from the largest captive projects (300 cases) and the largest local projects (180 cases).