Samsung Electronics Case Study
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This document discusses the history and strategies of Samsung Electronics. It summarizes that Samsung started in semiconductors and wafer production, growing significantly through acquisitions and developing 8-inch wafer technology. Though it faced industry crises, Samsung survived through competency and branding. Its low-cost strategy achieved large market share in DRAM. Going forward, Samsung aims to strengthen its brand and focus on differentiated flash memory while preparing for Chinese competition through global expansion and continued R&D investment.
Samsung Electronics Case Study
- 1. Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 3. Case Summary Korea Semiconductor company founded, began with Wafer production. And acquired by Samsung latterly Crisis : 2001 – 2002 Semiconductor Industry Crisis Growth : Semiconductor Industry has 16% of growth rate On average, 1960 - 2000 1980s, Samsung Group more focus on Electronics market and found Samsung Electronics, manufacturing in South Korea built 8” Wafer technology developed, dramatically shift to Samsung of production capacity Recovery : Samsung survived crisis with their competency and Branding strategy Samsung Brand being listed as 21st valuable brands in the world by Interbrand Corp. Samsung Group started Electronics industry in television market 1960 1969 1974 1980 1992 Copyright © 2012 by College of Management, Mahidol University. All rights reserved. 2004 2005
- 4. Industry Summary Semiconductor Industry Market Size ตลาด DRAM in 2003 ($19.5 Billion) Avg. Growth rate = 16% Sales = $200 Billions (1996 – 2000) 68.2 521.5 896.4 535.3 Logic Chips 672.8 19% Samsung Micron Infineon Hynix SMIC 3% 33% Sales = $166.3 Billions 20% Memory Chips Production Volume in million unit 256 Mbit equiv. EXHIBIT 4 Sales = $33.7 Billions FLASH 32% Mobile devices SRAM 10% Server & Workstation DRAM 58% Desktop Copyright © 2012 by College of Management, Mahidol University. All rights reserved. 25% Samsung Micron Infineon Hynix SMIC Market Share ตลาด DRAM in 2003
- 5. Industry Summary DRAM Production Electronics design tools; Samsung develop in-house Wafers; Samsung owned technology to produce DRAM with the largest wafer (more production capacity) Materials; Semiconductor (Silicon and Germanium) are costly in production process and has a few suppliers System Firms; Samsung can customize to met customer requirements Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 6. Past Strategy and Challenge Past Strategy • Kun Hee Lee’s Strategy is learn from competitors, Samsung invests in DVD and Video products for billions, Less priority in quality control (sampling for quality check will be done in some parts for a product), concentrate with high volume production • Economies of scale production, propose low price products, Line stretching marketing strategy and Variety of electronics products Overall Low-Cost Provider is the main strategy of Samsung Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 7. Past Strategy and Challenge Challenge Strategy • Samsung focused more on niche market and low price strategy still be a main strategy for protecting their market shares from China's companies • Once Samsung targeted on niche market, new products development needed while a pricing shall be strongly considered to competitive in the market Best-Cost Provider become to the main strategy for next growth of Samsung Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 9. Macro Environment Analysis Political factors (+) The industry is on focusing in several countries, more government supports for technology development (+) South Korea has strong relationship with others General economic conditions Technological factors (+) Technology market is moving fast (+) No trends of new substitute technology Global force (-) Labor cost is trendy higher (-) Economics regression of the world (-) Instability of Exchange rates (-) Interest rates volatility (-) Perfect competitive market coming Social force (-) Environmental Conservatism’s Resistance Natural environment (-) Products is more sensitive with climate Copyright © 2012 by College of Management, Mahidol University. All rights reserved. Difficult to Survive
- 10. Industry Analysis Threat of New Entrants : (+) High Investment required (+) High Production Technology (+) High Switching cost Bargaining Power of Suppliers : (-) Critical materials (-) A few of suppliers (-) the most suppliers is larger company Samsung overcome the factor with good suppliers relationship management Analysis result : Semiconductor industry is unattractive market for new entrant Bargaining Power of Buyers : Rivalry among Existing Competitors : (-) High competition (-) Market moving fast (-) Price is competitive factor Threat of Substitute Products : (+) No substitute technology Copyright © 2012 by College of Management, Mahidol University. All rights reserved. (-) Commodity Products (-) more provider in the market (-) Low switching cost for buyers Samsung differentiate the market by proposes products customization, Products can be customized to meet customer’s preferences
- 11. Competitor Analysis and Comparison Analysis Result Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 13. Primary Activities Support Activities Internal Analysis Firm Infrastructure : Adaptability culture organization Human Resource Management : Acquire Korean global talent Technological Management : Products development competition Procurement : Economies of scale purchasing, Focus on potential suppliers Inbound Logistics : Operations Outbound : Logistics : Marketing & Sales : Focus on time to market, Volume, consistency Focus on quality, high capacity and low defect Variety of products, older-tech. promotion Relationship with Suppliers Focus on time to market, consistency Services : Customize to customer demands Relationship with Buyers Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 14. Primary Activities Support Activities Internal Analysis Human Resource Management : Acquire Korean global talent Technological Management : Products development competition Procurement : Economies of scale purchasing, Focus on potential suppliers Operations : Marketing & Sales : Focus on quality, high capacity and low defect Variety of products, older-tech. promotion Relationship with Suppliers Services : Customize to customer demands Relationship with Buyers Strengths in Samsung’s Value Chain Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 15. Resource, Capability and Competency Resource Tangible • • • • Financial : Cash flow and Capital Organizational : 5 Business units Physical : Fab Manufacturing Technological : High capacity production line Capability • • • • • Innovative products High capacity Varity of products Best quality Customize to customer’s demand Intangible Competency • Human Assets : Recruit promoted successor scholarship • Brands : Value $12.6 billion (21stof the world) • Company : Reward outstanding performance Culture do not punish failure • • • • Excellence HRM Effective procurement by volume Creativity human capital Effective production technologies Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 17. SWOT Analysis STRENGTHS • Process excellence • High competency • Strong researcher team • Good Organization Structure OPPORTUNITIES • Market being growth • No substitute technology • High demands • Government supports WEAKNESSES • Low quality of brand image • International cultural lacking • Inter-cultural crashing THREATS • China competitors • Social resistance, environmental effects Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 18. 20% Strategic Analysis Flash ? Market Growth Flash DRAM • DRAM - Less profits, reduce investment SRAM • Flash - More invests in R&D, gains market share is critical strategy • SRAM - Maintains the market SRAM 0% DRAM 10X Relative Market Share Copyright © 2012 by College of Management, Mahidol University. All rights reserved. 0.1X
- 19. • Continuous product improvement is very importance • Small company needs partners for more competitive advantage to survive in the market • Less competitive advantage / less margin (low price strategy needed) Sized by revenue Low Products Development High Strategic Group Analysis Low Average Selling Price Copyright © 2012 by College of Management, Mahidol University. All rights reserved. High
- 20. Narrow Market Target Broad Market Target Past and Current Generic Business Strategy Analysis Overall Low-Cost Provider Strategy in the Past Broad Differentiation Strategy Best-Cost Provider Strategy in the Present Focused Low-Cost Strategy Focused Differentiation Strategy in the Future Cost Leadership Strategy Differentiation Strategy Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 22. Business Strategy • Sub-branding for penetrate to high-end market, higher positioning as high quality products provider • Build valuable brand / Communicate values to customer and more focus on flash memory products • More promotion and selling campaign for DRAM products, preparing for price war coming of China competitors • Develops new products with green technology, less energy consumption and toxic materials Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 23. Corporate Strategy • Forward vertical integration for expanding business to downstream, utilizes strength of technology expertise, manufacturing resources and a large scale electronic materials provider to be a electronic devices manufacturer • Build up business in China, for blocking growth of China competitors and gain cost advantage from low cost manufacturing (lower labor rate) Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 24. Implementation Strategy • Prepares organization that suitable for international business especially in China, recruits Chinese employee for faster familiar with china’s culture and market behaviors • Clearly formulation of forward vertical integration strategy, what business units should to do (e.g. computer, cellphone, data storage) • Keeps investment on R&D to be leader in innovation, technology and cost advantage production • Communicate vision and missions needed to employee • Align goals of all related business sections to consistent with corporate goal Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
- 25. Copyright © 2012 by College of Management, Mahidol University. All rights reserved.