Samsung Electronics Case

he Samsung Electronics Company has become the queen- size of itdst conglomerate in South Korea over the past decade. Net sales of the Samsung Group total $135 trillion in 2004 and has 337 overseas operations in 58 countries. Electronic, finance, and trade and services be the three core sectors within the Samsung Group. semiconducting material device crops are classified into two divers(prenominal) categories of chips, which are memory and logic. The benefit foster of Samsung experienced rapid growth from 2000 to 2004, growing from $ 5. 5 billion to $12. 6 billion.We will use Porters five forces to meditate the attention structure and performance which will jockstrap gauge Samsungs growth against its competitors. Entry into the semiconducting material industry put forward be rattling dear(p) and difficult because of towering barriers to entry. These barriers include, economies of scale, high entry comprises, and the difficulty in obtaining industry knowledge. In ad dition, firms like Samsung become constituted a secure reputation for attribute and reliable products which serve as powerful barriers to bare-ass firms hoping to enter the industry.The decreased chance of new entrants indicates a less hawkish and more profitable industry. There are many buyers within the semiconductor industry, each controlling a relatively sm all share of the securities industry. Samsung has a huge range of products they produce and can afford to do so at a pathetic cost. Since the buyers control the industry and what is produced they have a significant amount of dicker power. Furthermore, even though the amount of producers in the industry is fairly slump, they offer many of the same products forcing them to compete on value.Samsung has a little above medium bargaining power with its suppliers. The semiconductor industry lawsuits powerful suppliers but because defective memory is difficult and dear(p) to identify, and could authorityly destroy the en tire value of Samsungs product, it is real beta for Samsung to establish a strong relationship with its suppliers. In doing so, Samsung usually pays a 1% price premium to its suppliers to ensure flavor giving suppliers attach profit and more bargaining power in the industry.However, Samsung consumes a large volume of sales for its suppliers and can still earn a 5% discount because of this large volume and this discount can offset that 1% price premium. In conclusion, Samsung has a little above medium bargaining power over its supplier. Substitutes in the conductor industry are high for three reasons. First, products in the semiconductor industry are highly standardized. Secondly, oppo spot major companies in this industry have the occupancy attractor to produce a large volume of similar products at average costs.Thirdly, there is the scourge of new companies from China. However, these companies from China lack the technology to make high quality and low-toned cost products . Therefore, at this point, Samsung does not need to worry near substitutes from Chinese firms. The semiconductor industry experiences fierce rivalry between the firms. akin to substitutes, there are six main rivals within the industry. Also, even though the Chinese companies are young/inexperienced, they are becoming a potential rival.No company has the infrangible leading market share or absolute technology to break other major companies within the industry. Even though Chinese companies are inexperienced, these companies are having little or no tizzy raising money from local government and they are willing to make profit in order to fight for market share. Over time, Samsung has established a strong free-enterprise(a) position relative to other firms in the semiconductor industry. Samsungs emphasis on fast and efficient go away has let them complete projects faster than other firms, giving them a agonistic edge.An example of this occurred in the mid 1980s when Samsung was able to complete their firstborn large manufacturing facility, a task that was predicted to take 18 months, in on the nose 6 months by working around the clock. Samsung also has a readiness in their location, with Samsungs main R&D facility and all its fab lines located at a single site they are able to save an estimated 12% on fab construction costs. This wages of location also allows their engineers to work closely together to quickly work design and process engineering problems together, furthering their speed and efficiency advantage over their competitors.Samsung has also done a great job of identifying and seizing opportunities before their competitors, and taking risks that other firms may be unwilling to take. An example of this occurred in 1992 when Samsung decided to invest $1 Billion in increasing the size of the wafers used to cut the DRM chips to eight inches. This investment paid off and gave Samsung a distinct cost advantage that allowed them to gain the number one market share in the DRAM industry for 13 years. Samsung also place and seized he opportunity to gain high profits through product differentiation by customizing and catering to niche markets, offering over 1,200 different variations of DRAM products. In order to understand the internal Environment of the company. VRIO example will be used to analyse the internal environment and to help further understand the strategic position in the industry. Relatively low power of suppliers and large production factories allow Samsung to keep their cost low. Their low cost of production will enable them to enter into a price war with any company threatening to enter the market.They have the ability to lower their price to the point where it will become too costly for any other company to enter the market will warn additional entrants. Their low cost production ability also allows them to increase revenues and reinvest more money back into R&D. Additionally, having all of their engineers on site allowed for quicker design times and cut 12% of construction hypocrisy costs. However, rarity is not really an issue within the industry. There are multiple companies all with similar technology.Once Samsung can keep the low cost production system and reinvest to their R&D, they could achieve sustainable comp etitive advantage in the industry. Most customers are willing to pay a higher(prenominal) value for their products because they perceive Samsung to have better performance and superior design, quality, and service. The target loyalty, mug reputation and quality(reliable product) are costly for the competitors to acquire or develop. The competitors also face a cost disadvantage in cost structures since Samsung has an outstanding low cost production system.Moreover, Samsungs major competitors do not have the cutting edge technology to quickly overpass the quality of Samsungs product. It would be difficult and costly for their competitors to imitate their technology. Sams ung does a fairly well job exploiting their capabilities because of them building brand loyalty and a high quality product. With all of those advantages it becomes difficult for their competitors to capture Samsungs market share. Finally, Samsung invested heavily in its employees more than any other competitor allowing them to focus on insertion and productivity (Include HR policies).Answer to question 1. Samsung employees a hybrid model of business level strategy which consists of cost leadership advantage and product differentiation. Samsungs operating cost is $8. 90 per unit and it is well below the industry average $10. 3975 per unit. As of year 2003, samsung offers over 1200 different products. With a decorous marketing strategy, Samsung built a high reputation and good brand image for its products allowing them to charge a premium price on well-nigh of its products. Answer to Question 2 Samsung has implemented their business strategy very well.They were able to become not only the industry cost leader but obtain a large degree of product differentiation. Above, we conducted a VRIO analysis of Samsung and identified their competitive advantages. However, the advantages are only temporary because they are not rare and any company can imitate them by spending a large amount of capital. Until this point though, all of the competitive advantages that Samsung has created have created positive economic profit. These profits can be established in the large growth in the company from 2000 to 2004.Recommendations Our recommendations are that Samsung relate to use their additional revenue from their low cost of production and higher margin to invest in R&D. This will ensure that Samsung has the beaver product on the market and continue to lower their production costs. By doing this, they will continue to make it costlier for new firms to enter the market. Investing into R&D is extremely costly/ high risk and could lead to disappointment if Samsung begins in vesting in the wrong type of products. However, if done properly, this investment can cement Samsung as the market leader and ensure high favourableness for the future.