Samsung Electronics Case

he Samsung Electronics Comp any has bring forth the largest conglomerate in South Korea e veryplace the past decade. Net gross revenue of the Samsung throng totaled $135 billion in 2004 and has 337 overseas operations in 58 countries. Electronic, finance, and trade and services atomic number 18 the collar core sectors inwardly the Samsung Group. Semiconductor intersection charges argon classified into two antithetical categories of chips, which argon retentiveness and logic. The net value of Samsung experient rapid offshoot from 2000 to 2004, growing from $ 5. 5 billion to $12. 6 billion.We volition riding habit Porters five forces to study the manufacturing structure and performance which forget jock gauge Samsungs return against its competitors. Entry into the semiconductor exertion depose be very courtly and touchy because of blue barriers to entry. These barriers include, economies of scale, high uper(prenominal) entry prices, and the barrier in persi sting exertion knowledge. In addition, firms want Samsung have established a toilsome reputation for case and reli adapted products which serve as violenceful barriers to new(a) firms hoping to reckon the persistence.The decreased chance of new entrants indicates a less private-enterprise(a) and to a greater extent requitaling industriousness. There ar many buyers inwardly the semiconductor fabrication, each controlling a relatively sm exclusively sh are of the commercialise. Samsung has a huge range of products they produce and finish afford to do so at a hapless monetary value. Since the buyers control the industry and what is produced they have a significant tote up of bargaining cause. Furthermore, even though the meter of producers in the industry is middling natural depression, they assign many of the same products forcing them to compete on price.Samsung has a footling above fair bargaining power with its suppliers. The semiconductor industry faces p owerful suppliers but because defective memory is vexed and costly to identify, and could potentially def sufferinger the entire value of Samsungs product, it is very important for Samsung to establish a healthful relationship with its suppliers. In doing so, Samsung usually pays a 1% price premium to its suppliers to date quality bad suppliers increased returns and more bargaining power in the industry.However, Samsung consumes a large sound deal 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 flyspeck above medium bargaining power over its supplier. Substitutes in the conductor industry are high for three reasons. First, products in the semiconductor industry are exceedingly standardized. Secondly, otherwise major(ip) companies in this industry have the efficiency to produce a large volume of similar products at medium costs.Thirdly, there is the t hreat of new companies from China. However, these companies from China lack the technology to launch high quality and meek cost products. Therefore, at this point, Samsung does not need to hassle about substitutes from Chinese firms. The semiconductor industry experiences fierce rivalry between the firms. standardised to substitutes, there are six main(prenominal) rivals within the industry. Also, even though the Chinese companies are young/inexperienced, they are decorous a potential rival.No participation has the haughty 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 trouble rearing m social unityy from local government and they are go awaying to sacrifice profit in order to fight for market share. oer time, Samsung has established a strong free-enterprise(a) flummox relative to other firms in the semiconductor industry. Samsungs em phasis on fast and efficient work has let them exe slenderizee projects faster than other firms, giving them a competitive edge.An example of this occurred in the mid 1980s when Samsung was able to complete their first large manufacturing facility, a business that was predicted to take 18 months, in merely 6 months by working approximately the clock. Samsung too has a strength in their location, with Samsungs main R&D facility and all its fab lines dictated at a single position they are able to save an estimated 12% on fab construction costs. This payoff of location in any case allows their engineers to work more or less together to quickly solve jut out and process engineering problems together, furthering their speed and talent advantage over their competitors.Samsung has also do a great job of identifying and take opportunities before their competitors, and taking risks that other firms may be unwilling to take. An example of this occurred in 1992 when Samsung dec ided to invest $1 one million million million in increasing the size of the wafers utilize to cut the DRM chips to eight inches. This investment compensable off and gave Samsung a distinct cost advantage that allowed them to gain the number one market share in the drachm industry for 13 years. Samsung also place and seized he opportunity to gain high profits through product specialization by customizing and catering to niche markets, religious offering over 1,200 different variations of DRAM products. In order to understand the internal environs of the society. VRIO framework will be employ to analyse the internal environment and to help further understand the strategic position in the industry. Relatively low power of suppliers and large payoff factories allow Samsung to obligate their cost low. Their low cost of performance 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 deter additional entrants. Their low cost production ability also allows them to increase revenues and reinvest more money backbone into R&D. Additionally, having all of their engineers on lay allowed for quicker design times and cut 12% of construction fabrication costs. However, distinguishing characteristic 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 value for their products because they behold Samsung to have better performance and winner design, quality, and service. The cross loyalty, brand reputation and quality(reliable product) are costly for the competitors to acquire or develop. The competitors also face a cost damage in cost structures sin ce Samsung has an outstanding low cost production system.Moreover, Samsungs major competitors do not have the acerb edge technology to quickly fly-by the quality of Samsungs product. It would be difficult and costly for their competitors to imitate their technology. Samsung does a fairly good 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 centralize on innovation and productivity (Include HR policies).Answer to question 1. Samsung employees a hybrid perplex 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 proper marketing strategy, Samsung reinforced a high reputation and good brand image for its products allowing them to charge a premium price on most of its products. Answer to Question 2 Samsung has use 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 dictatorial economic profit. These profits can be realized in the large growth in the company from 2000 to 2004.Recommendations Our recommendations are that Samsung enshroud to use their additional revenue from their low cost of production and higher marge to invest in R&D. This will ensure that Samsung has the best product on the market and continue to lower their production costs. By doing this, they will continue to concord it costlier for new firms to enter the market. Investing into R&D is extremely costly/ high risk and could lead to failure if Samsung begins drop in the wrong type of products. However, if through properly, this investment can cement Samsung as the market leader and ensure high profitability for the future.