Strategic Manageme nt: Samsung Electronics

April

200 9
“Understanding the attitudes, needs and preferences of consumers is the cornerstone of the work we do.”
Samsung Global Strategy Group 2008

A report critically analyzing the strategic management of Samsung Electronics with a focus on the LCD market.

Research Report April 2009 Onkardeep Singh Bhatia

As of the end of 2007. highlighting their commitment to maintaining a lead in the industry.5% (Samsung. 2009). the LCD division accounted for 16% of SEC’s total revenue (Figure 2). 2009) Rank 1 2 3 Notebook PC LG Display Samsung AUO LCD Monitor Samsung CMO LG Display LCD TV Samsung LG Display CMO Others AUO Sharp LG Display Total Samsung LG Display AUO . SEC’s LCD TV shipments increased by 54% over 2007 and their global market share increased to 20% in 2008 (Global Markets Direct. 2008). By 1995 SEC had developed LCD technology and achieved a significant place in the market (Borrus et al. The global market for display technologies today is already in excess of USD$82. desktop monitors and mobile products (Samsung. Digital Information Displays. digital media. LTD (SEC). Table 1 shows the top 3 competitors in the LCD market. engineering. 2008) SEC has held the highest global market share in LCDs for over six consecutive years (Samsung. Figure 1: SEC’s Consistent revenue growth (Global Markets Direct.4 billion by 2011 (Vadera. The external and internal environment will be studied followed by an evaluation of the strategies employed by SEC and recommendations for continued success. 2009). Table 1: Overall Samsung is ranked number 1 in the LCD market (Korea IT Times. 2004) Since then SEC has proven to be a flagship with revenues consistently increasing over the last 5 years (Figure 1). Semiconductor and LCD. notebook PCs. It principally operates in Asia.4billion and it is estimated to exceed US$97. Its strategic objective is to create qualitative and quantitative growth and deliver competitive value to customers while maintaining profitability (Evans and Lindsay. and chemicals (Moon. SEC reported a 72% profit slump but still managed to increase sales by 8. Samsung Electronics Co. the cornerstone of Samsung Group. 2009). is the world's largest manufacturer of LCD panels and is the leader in many other consumer electronic products (Moon. telecommunication. Europe and America through four business divisions. The LCD division manufactures panels for TVs. This report will analyse the strategy employed by SEC with a particular focus on the LCD division. 2008). 2008).Introduction The past few years has seen a huge advancement in display technologies with Liquid Crystal Displays (LCDs) taking much of the recent limelight over the once popular Cathode Ray Tube (CRT). 2009). 2008). Samsung Electronics in the LCD Market In 1993 Lee Kun-hee changed the strategy of Samsung Group from imitating cost-leader to the role of a differentiator by downsizing and concentrating on three industries: electronics. 2009) Figure 2: Sales Revenue by Division (Samsung. In Q1 2009.

2008). 2005) Figure 3: Children’s Daily ‘Screen Time’ (Subrahmanyam et al. Subrahmanyam et al.External environment The macro and industry environments will now be looked at to assess the strategic position of SEC. 2005). Political Factors Some governments provide subsidies and tax incentives to the LCD industry. and are beyond its control (CIM. Electronics is playing a central role in people’s lives (Intel. Further. 2003) with ever shortening product life cycles (Mathews. 2009). 2005) that have lead to global revenues for LCD panels of $140 billion (BNET. 2009). Table 2: Global LCD Panel Production (DisplaySearch. .9 Billion. Macro Environment The macro-environment refers to the external factors which affect a company's planning and performance. 2008) as well as leading in new display technologies like OLED. 2008). SEC has lead the industry with inventions like the first double-sided LCD panel (Samsung. 2000) and consumer attitudes towards gaming and mobile devices will increase demand for LCDs (FutureSource. Technological Factors This industry has been one of the most progressive (Sixto. a MoM increase of 29% suggests a recovery in the market with revenues for March hitting US$3. Economic Factors The economic downturn reduced demand for LCD products (Table 3) with YoY shipments reducing in 2009. Social Factors People’s obsession with technology is changing the way we relate to others and ourselves (Lam. 2008).. 2009). However.. the highest it’s been for 6 months (DisplaySearch. 2000) Country Taiwan South Korea Japan China Other Global LCD Panel Production by Country % of Global Panel Production Level of Incentives for LCD industry 41 High 37 High 11 7 4 High Medium (Growing) Low Exemplifying this is how SEC received a US$92. Korean industrial policies have been important for facilitating international competitiveness by requiring foreign firms to transfer technology in exchange for market access (Kim. Table 2 shows countries that provide incentives hold the largest global share (DisplaySearch. The STEEPLE framework will be used for this analysis. 1997). 2007.4million aid package towards building its LCD television plant in Slovakia (ExpansionManagement.

Legal Factors Intellectual property (IP) is very important in any industry constantly innovating. Environmental Factors Customers have become increasingly environmentally conscious. A detailed summary of each of the 5 forces is given in the Appendix (Table 4) followed by an overview of the main points. The downside is that conflicts can occur.4 8.3 Mar 09 11. Understanding these forces provides the groundwork for a strategic agenda of action. 1999).Table 3: Monthly Large-Area TFT LCD Panel Shipments by Application (Millions) (DisplaySearch.7 18.4 7. SEC is highly dependent on the local economy.5 12. likelyprofitability and power distribution of the LCD electronics industry. 1997) .7 1. 2009).9 37. and tax will further influence SEC strategic decisions. In 2006 SEC filed 12000 new patents in Korea alone (Samsung Environment. 2007). 2009.9 0. Moreover. IP. 1997) will be used to understand the attractiveness. 2009).8 29. lower emissions of harmful radiation better waste management (Tarr. EE Times-Asia.4 9. Figure 4: Porter’s Five Forces (Porter. wanting higher energy efficiency. greener products. SEC recently won a patent dispute against Sharp started in 2007 (Wall Street Journal.2 40.9 Month on Month Growth 38% 24% 30% 22% 29% Yr on Yr Growth 0% -17% 14% -24% -5% Demand is also expected to rise due to an increase in emerging markets like China and India.6 15.7 0. 2009) LCD Panel Notebook PC Monitor TV Other Total Mar 08 11. Legislations around local employee rights. The 1997 Asian Crisis is an important example (Mishkin.0 Feb 09 8. Industry Environment Porter’s 5 Forces (Porter.

2006) as well as SEC’s reputation for fighting hard (Williams. 2008).. 2005) makes it difficult for potential new entrants. in particular China. the suppliers benefit from the industry making them willing to help in R&D. 2008). 2006). Conversely. This is exemplified by SEC who has collaborated with more than 1000 suppliers (Lee.Threat of New Entrants – Low Overall. The number of purchasers is large and many competitive suppliers exist. easy access to distribution channels (Chiu et al. The fast moving LCD industry with various display technologies leads to pressure being put on lowering pricing and high R&D costs to continually differentiate products ensuring industry profitability and growth (Mathews. has been encouraging entry into the industry through financial incentives (Thomson and Sigurdson. In 2008 Samsung was ranked 21st amongst world brands (Samsung Brand. price sensitivity is high due to a large number of similar products and the status they bring although the perception of quality allows for a price premium. SEC and Dell entered a US$16billion technology and R&D partnership (Farmer. For example. Bargaining power of Customers . Product differentiation is high but imitations may provide cheaper alternatives and increase buyer power. 2004). Also. 2001). SEC’s developed experience curve. SEC tries to continually innovate and in 2008 they released the world’s largest and thinnest OLED-HD TV (Williams. foreign government policy. Further. Finally. the treat of new entrants is low. Figure 5: The TFT-LCD Industry Cycle Threat of Substitute Products . supplier product differentiation and switching costs are low (Lee. 2003). 2005). Business-to-business customers earn relatively high profits and are able to raise their prices due to SEC’s brand strength making them less price sensitive and therefore reducing their power over SEC (Gao et al. access to the best raw materials and favourable locations provides them with significant cost advantages (Hung.Med Overall customers have medium bargaining power but usually it would be a win-win situation. proprietary technology. research and marketing processes.. Bargaining Power of Suppliers – Low Overall the bargaining power of suppliers is low. 2008). Conversely. . SEC benefits from good product differentiation due to strong brand identification and innovative products.Med Overall. forward integration is unlikely to occur so retailers and distributers have some power in this respect. Barriers to entry are high due to the large capital requirements and economies of scale especially as SEC has proven production. Forward Integration is unlikely as purchasers like SEC collaborate with suppliers and increases in raw material prices are likely to be absorbed or passed on to customers (Samsung. the threat of substitute products is medium. 2008). Highlighting this is SEC’s investment of USD$852million for 2 manufacturing lines without definite production plans (Png and Lehman. Also. 2006). Further. 2006).

valuable to the customer. Also shown is the Overall Importance and level of importance SEC gives to a particular resource. 2008) Chinese competitors have also recently increased rivalry (Mathews. high exit barriers due to specialist resources (Camposa and Lootty. They provide 6 categories suitable for resource identification that will be used to analyse SEC (See Table 5). (2002) will be used to measure this. . 2005). Mills et al. 2009. Simkin (1997) found few companies look at changing factors such as substitutes and new entrants further highlighting the importance of diversification of products and internal processes as well as aggressive and timely R&D.Competitive Rivalry within the Industry – High Figure 6: Main Competitors by Total Market Share Overall. Each measures how the performance generated by the resource is. Finally. (2002) suggest resources can be tangible or intangible. 2004). Internal Environment Superior resources and distinctive internal competencies to that of rivals have been shown as the basis of competitive advantage (Andrews. Barney 1991. A Resource Based View (RBV) will be used to analyse the internal environment and further understand the strategic position of SEC. rivalry is high with many diverse competitors (Figure 6). 2005). This is similar to Barney’s (1991) VRIO framework that will be used later in the report. 2007) also intensify rivalry. Resources Mills et al. Value. lasting over time and useful over different product areas and markets respectively. Three metrics as outlined by Mills et al. Summary of External Environment The analysis highlights the need for SEC to continue leading technologically whilst adapting products in line with social and environmental trends. Sustainability and Versatility. (ECN. Display Search.. Storage costs and capacity is variable and demand is seasonal which can lead to price cutting to shift stock (Mathews. 1971. 2002). Similar products and low switching costs reduce brand loyalty (Png and Lehman. The importance of each resource can be evaluated based the competitive advantage they provide.

and Europe Samsung to spent US$45 billion on R&D from 2005to 2010 (Samsung R&D Spend.Table 5: Samsung Electronics current resources and their importance Resource Category Tangible resources Resource Plants/Factories Valued High Importance of Resource Sustained Versatile Overall Imp Med High High SEC’s Imp High Comments 4 major LCD production plants. Willing to fight and maintain rights on their patents. motivated. Strong links with wholesale and retail (Chiu et al. 2006). According to Bae and Kim (2004) Samsung’s Six Sigma Academy was established to educate the employees and build up teams of quality specialists with problem solving abilities. good work ethic.. Market leaders in LCD panels. 6 design centres in Asia.. 2005) SAIT Samsung Advanced Institute of Technology (SAIT) established in 1987 as Samsung’s central R&D facility. Over 138.000 (2007) Mostly highly skilled. Existed for 40 years. 1 in China April 2008 SEC and Sony agreed on establishing a 8th Generation LCD plant in Tangjeong ‘Crystal Valley’ Complex. empowered. 2007). 3 in Korea. the U. R&D . Experience (learning) curve High Med High High High .S.Campus High High High High High Access to raw materials and distribution channels Employees Intellectual Property (Patents/ Trademarks/ Copyrights) Six Sigma Academy High High Low Med Med High High Low Low High Med Med High Med High High High High High High Knowledge resources. In 2006 SEC filed 12000 new patents in Korea alone (Samsung Environment.

2003). Largely Korean due to language barriers SEC is committed to sustainable environment in all of business activities Not very risk averse. quality focused. and supply chain management processes (Samsung. Open. Formal hierarchical structure but allowing innovation to be driven bottom up. Low bureaucracy. customer focused. LCD Products available in over 10 countries worldwide. Good use of IT systems including recent introduction of an integrated sales document management system (Adobe.Skills and experience System and procedural resources Knowledge gained from R&D Knowledge of foreign markets Formal planning. sharing. Also use SCM (Supply Chain Management). . PDM (Product Data Management). and CRM (Customer Relationship Management) systems and have set up global real-time management information systems. command and control systems Integrated management information systems High High High High Med Med Med High High High High High High High High High High High Med Med Supply Chain High High High High Med Cultural resources and values Culture Diversity Social and environmental initiatives Leadership High High Low High High Med Med Med Med High Med High High High Med High High Low High High Trading knowledge for access to foreign markets. entrepreneurial. To reduce the lead time on supply chain SEC networked customer management. ambitious. 2009). SEC has a complex supply chain due to a huge product range and large geographies. R&D management. committed to growing the company.

In 2008 US$5. Foreign linkages has permitted Samsung to achieve a high level of vertical integration. Focus on win-win strategy. 2002) which will now be discussed. Sony. For example.3 billion cash reserves (Moon. Associated with Quality and Value. 2009).. SEC’s resources provide them with inherent competitive advantage especially when they go beyond the ‘threshold resources’ that fulfil the minimum barriers to entry. Ranked 21st most well known global brand in 2008.Reputation & Brand Loyalty High High High High High Network resources International networks Strategic alliances Internal funds High High Med High High Med High High High High High Med High High High Resources Important to change The Brand Keys Customer Loyalty Award awarded to Samsung for last seven consecutive years. is how these resources translate to distinctive core competencies (Mills et al. NEC and Sharp. More important however. Various joint ventures with key competitors. . Strong sponsor of Sports including the Olympics.

However. The IT systems.. formal and informal supporting organisation supports effective R&D efforts in that they are critical aspects of knowledge management initiatives being run by SEC (Figure 7).. This reputation and brand strength is backed by SEC’s relentless focus on quality. This is illustrated in the LCD TV market for which SEC develops and manufactures its own TV computer chips. The Samsung Advanced Institute of Technology (SAIT) SAIT currently employs over 1. . Leveraging the knowledge of foreign markets and 40 years of experience within the industry allow for costs to be kept to a minimum. They have their own Six Sigma Academy which was established to educate the employees and build up teams of quality specialists with problem solving abilities. 40 percent and 12 percent of who hold doctoral and master’s degrees. building its brand into one of the most recognisable names on earth. SEC has proved to be successful not only in product innovation but also in involving the employees in the process of innovation. Cost Leadership Access to raw materials and distribution channels as well as the relatively low power of suppliers and large production factories allow SEC to achieve economies of scale that translate into lower prices for the customer and higher margins for SEC. A recent consumer survey shows Samsung tops product ratings in four of the six main sizes of LCD TVs (Samsung 2008). Delivering Quality Samsung has been one of the world's biggest advertisers over the past decade. Linked to the well Figure 7: SAIT Knowledge Management framework and components (Suh financed market-driven R&D centres et al. Leveraging these resources provides SEC with a deep understanding of the fast changing market and makes them distinct in their competency to launch products to the market quicker than competitors. 2004) SEC is able to be a leader of its industry.” (Samsung.Constant Innovation SEC’s state of the art LCD panel factories and design centres provide superior production capabilities.3-inch e-paper that uses electrodes made from carbon nanotubes for enhanced “fold-ability. 2004).000 researchers. Leveraging these resources SEC has developed a core competency in delivering quality. Figure 8: SEC continues to lead on price even if it reduces its operating margin (Global Markets Direct. Core Competencies Summary Below are shown the four key core competencies using Barney’s (1991) VRIO framework. An example of SEC’s innovation includes 2. 2009) Quick to Market Strong leadership and focus on growth linked with its international networks and experience within the industry allows an end to end process to be owned and run by SEC. 2008). This is undoubtedly a core competency of SEC. respectively (Suh et al.

innovation. 2009) strategic methods employed are organic growth and strategic alliances. a leading company specialising in growth strategies. its real strengths lie in the distinctive core competencies it generates by leveraging its resources. effective sales and unrivalled competencies in innovating. Finally. An ‘inside-out’ perspective will be taken with theoretical frameworks being used to analyse and evaluate the corporate level strategy of SEC followed by recommendations for future success. Also. According to Forum (2008). mergers or acquisitions (M&A) (Investopedia. Organic Growth Organic growth is defined as the growth rate that a company can achieve by increasing output and enhancing sales as opposed to profits or growth acquired from takeovers. The two key Figure 9: SEC’s Vision and mission statements (About Samsung. This is especially true when entering a new market/country which may require deep local knowledge that SEC lacks. Coyle (2000) argues that organic growth allows a firm to develop market position over the long term. However. Penrose. an appropriate culture for growth as well as excellent bonds with customers. ‘Leading the Digital Convergence Revolution” (Figure 9). (Chandler. SEC tries to balance this problem with strategic alliances. 2009). Evaluation of Strategies The second part of the report will draw on findings from the internal and external environment.Table 6: SEC’s distinctive core competencies Resource Category Constant Innovation Delivering Quality Cost Leadership Quick to Market Value High High High High Rarity Med Med Med High Costly to Imitate? Yes Yes Yes Yes Exploited by Organisation? Yes Yes Yes Yes Summary of Internal Environment The RBV has shown that SEC benefits from competitive advantages intrinsic to its resources. organic growth allows funds to be focused on other areas such as R&D. 1962. although SEC has large cash reserves. 1959). cost leadership and being quick to market. Namely. However. is this sustainable? Based on the internal-environment analysis SEC has leaders focused on growth. So yes. Current Strategy One of the key areas of strategy for any business is how it intends to grow. This seems to fit well with SEC’s current strategic position as it is the industry leader and has the competencies to grow into other markets. . SEC’s growth is sustainable but it may not always be the best strategy to adopt. can help to achieve growth much cheaper than M&A and is well suited to growing markets. the external environmental analysis pointed towards a growth in the LCD market and the electronics industry as a whole thereby reinforcing the suitability of this growth strategy. quality. This is central to SEC as it wants to be a leader as highlighted by their corporate vision. these are critical factors in sustainable organic growth.

Also. However. in most cases the sharing of costs and resources provides a winwin situation as illustrated by the SEC and Sony alliance. to gain skills. the model confuses competitive strategy with corporate strategy because even individual business units may have several different strategies like SEC does. However. Secondly. 1992). SEC has unmatched competencies in innovation and quality of LCD technology as has been shown in the previous section. Firstly it confuses ‘where to compete’ with ‘how to compete’ and does not take account of the segmentation of markets. As can be clearly seen by the strategy of SEC. Figure 10: Porter’s Generic Strategies (Porter. Since 2001 SEC agreed 29 different alliances (About Samsung. Based on this framework. 2009). both Cost Leadership and Differentiation strategies can be used simultaneously. in SEC’s case the combination of a cost leadership and differentiation strategy seems to work well. Finally.Strategic Alliances Strategic alliances are formal relationships between two or more parties to pursue a set of agreed upon goals while remaining independent organisations (Bleeke and Ernst. According to Bleeke and Ernst (1992) alliances are an efficient ways to enter new markets. or products. while charging industry average prices. This highlights that the framework may have some significant limitations. Therefore. Cost Leadership. Bowman (2008) argues that this model has three main problems. this strategy seems appropriate for SEC to follow. technology. 1985) SEC fits the Cost Leadership strategy in that it increases profits by reducing costs. 1985) SEC . For example. Differentiation and Focus. products like OLED TVs currently serve a niche market. and to share fixed costs and resources. The Differentiation strategy also applies to SEC because they are constantly innovating. Cost Leadership is one of SEC’s core competencies as discussed in the previous section and therefore this strategy fits well. It could be said that SEC does not need much skills or technology as they are arguably the most innovative and therefore any alliance would be disadvantageous because less competent competitors could learn from them. This is summarised in Porter's Generic Strategies (Porter. it could further be argued that SEC varies its scope. Further Analysis of Current Strategies Porter (1980) argued that there are three basic strategic options available to organisations for gaining competitive advantage. According to Porter being "all things to all people" or ‘stuck in the middle’ is likely to lead to poor performance. Nonetheless. it excludes other feasible strategy options because it suggests only one strategy should be followed. organic growth can be used alongside alliances when entering new markets to minimise the learning curve and associated costs. the applicability of this growth strategy when expanding operations to emerging markets like China and India is questionable as most firms would be imitators and mutual benefit for SEC would most likely not be achieved.

reinforcing brand loyalty and increasing customer satisfaction. Thus. Finally. faster. based on this model SEC operates various strategic options from Hybrid through to Focused differentiation. This is beneficial as customers will recognise the value being given. Furthermore. Overall Evaluation of Strategic Choices The advantages of adopting a primarily low cost and differentiated strategy is that SEC can achieve significant margins on their products without necessarily charging premium prices. Therefore. As was discussed in the previous framework the strategy could also be described as focused differentiation where a price premium is charged within a niche. there are still areas for improvement so recommendations will now be given. Further. and the same’ (Boar. This framework allows for more flexibility than the over-simplistic generic strategies by Porter. imitations in cost reduction can be minimised through strategic alliances with competitors. On the other hand. creating win-win situations. ‘Your responses should be different and better. This can squeeze margins especially in financially weak times like the present. Based on this framework SEC’s strategy can be argued to be primarily ‘Hybrid’. not cheaper. Also. it is a strategy well suited to hypercompetitive environments as differentiation is key. This means SEC’s products will constantly be adapting to the trends of the external-environment and ultimately the customer. the problem in pursuing a cost leadership strategy is that these sources of cost reduction can be replicated by competitors which make it more important to continuously find ways of reducing cost. it could also be argued that there is an element of differentiation with and without a price premium depending on which markets and products are being referred to. SEC mitigates this by creating new markets through innovation and charging premiums for some key products. the combined strategies employed by SEC allow it to achieve sustainable growth and sustainable competitive advantages. An example of this is SEC’s response to social and environmental consciousness shifts. the strategy fits the internal competencies of the business well which is extremely desirable because it means SEC will be effective in implementing it. However. This refers to a strategy which is low cost to the consumer but still differentiated. It looks at perceived added value by the customer against price. they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments. reflected in their products as well as strategy. Having said this. Another problem with a differentiation strategy coupled with a cost leadership strategy is that customers can come to expect the best value.Figure 11: Bowman’s Strategic Clock (Competitive and Corporate Strategy) Bowman’s Strategic Clock (1997) is another way to analyse strategic options. Else. . However. the consistent focus on differentiation means there is constant innovation in products and within the firm. 1994). whilst pursuing a differentiation strategy SEC needs to remain agile with their new product development processes.

SEC should aim to be the first to launch products at a premium price to maximise profits and continue innovating to ensure first-mover advantage is maintained. ultimately moving SEC towards their corporate vision of ‘Leading the Digital Convergence Revolution’. • Diversify Growth Strategy for Emerging Markets Most emerging market competitors are imitators and SEC’s current strategy of organic growth and strategic alliances is not very effective because mutual benefit is unlikely to occur. This should include both domestic and business to business buyers. Continue Heavy R&D and Innovation Continued investment in R&D especially in newer technologies such as OLED and nanotechnology will allow SEC to widen the cost leadership and differentiation gap meaning that they can produce more differentiated products at lower costs. Producing and promoting more environmentally friendly products should be made an important part of future innovation and R&D to adapt to changes in social and environmental consciousness of customers. It is also recommended that SEC innovate internally and further invest in cutting edge IT resources to streamline processes and effectiveness. This diversification in growth strategy would allow SEC to expand their global presence as well as employ a greater diversity of people. SEC should focus on seeking out and acquiring resources in emerging markets. • Enhance Brand Loyalty Retaining customers for longer by enhancing customer loyalty schemes will help increase switching costs and therefore reduce the costs of customer acquisition and reduce the complications of hypercompetitive environments. Therefore. • . This change however should be driven from SEC being an organisation that is environmentally and socially conscious in the way it conducts business so that the brand itself reflects customer preferences. Mergers are not recommended as they too are unlikely to provide sufficient benefit to SEC who through acquisitions could fully own their own operations. This will also allow SEC to create new markets and thus employ a more focused differentiation strategy so that price premiums can be charged. This would be applicable as it would provide immediate market presence and the essential deep local knowledge to effectively compete. This is especially important in the current economic climate where margins are restricted. SEC should also continue to highlight the quality and unique selling points of products in marketing campaigns to ensure consumers feel products are value for money even at a premium costs.Recommendations Three future strategies for continued success for SEC are given below. This will allow SEC to further reduce costs and increase competitive advantage.

2006) Number of Customers is large but not concentrated. Access to Distribution Channels acts as a huge barrier to entry. SEC has strong links with wholesale and retail channels as Samsung’s products popular with consumers (Chiu et al. proprietary technology. 2008) Capital Requirements are large for entrants to effectively compete especially due to large R&D expenditure (Samsung R&D Spend. For example nanotechnology (Lee. 2006) Forward Integration is unlikely as many of the purchasers like Samsung are more powerful and operate their own manufacturing factories. 2008). 2001). Reaction of Existing Competitors also acts as a barrier as SEC has been known to fight fiercely for market share by cutting prices and possess substantial resources (Williams. For example Dell (Farmer. Cost Disadvantages Independent of Size are large for entrants due to developed experience curve (learning curve). Product Differentiation of SEC is large due to strong brand identification making it very difficult for entrants to compete (Samsung Brand. 2004). 2006) Product Differentiation of raw materials is low and switching costs are low. access to the best raw materials. B2B buyers are more powerful due to bulk purchases. 2005). 2005) Number of purchasers is large and many competitive suppliers exist (Lee. 2006). government subsidies and favourable locations (Hung. assets purchased at preinflation prices. (Lee. The Industry is an Important Customer of Suppliers which means they will be willing to help in R&D efforts to provide better raw materials and technologies. Product Differentiation in Samsung products is large Individual Level Low Low Low Low Low High Low Bargaining Power of Suppliers Low supplier power Low Low Low Med Bargaining Power of Customers Medium customer power Med Low . 2008). 2006).. research and marketing processes based on experience(Png and Lehman. Any upward pressure on raw material prices is likely to be absorbed or passed on to customers (Samsung. Government Policy in Korea doesn’t play a large role in creating barriers for entry but foreign governments especially in China are encouraging entry into the industry through financial incentives (Thomson and Sigurdson.Appendix Table 4: Summary of Porter’s Five Forces applied to LCD electronics industry Porter’s 5 Forces Threat of New Entrants Overall Level Low threat of new entrants Analysis Economies of scale is a clear barrier to entry especially as SEC has proven production.

2005). increasing rivalry (Mathews. 2005). Med – Storage Costs and Capacity is variable and demand seasonal which can lead to price cutting to shift stock. High – Product Differentiation is large but many similar products are offered which don’t really lock in buyers to a particular company (Lee. Chinese competitors producing cheaper imitations has also increased rivalry (Mathews. 2005). 2006).Switching Costs are low so rivalry is intensified (Lee. 2008). High . Competitors are numerous and diverse with LG being the closest in size and power. Forward Integration is unlikely to occur so retails and distributers have some power in this respect. 2007). Med – Fixed costs are high leading to an economies of scale effect and increasing rivalry (Hoovers. 2003). B2B customers earn relatively high profits and are able to influence buyer behaviour due to the popularity of the brand making them less price sensitive and so reducing their power (Gao et al. Fast moving industry with various display technologies leads to pressure being put on lowering pricing and high R&D costs to continually differentiate products ensuring industry profitability and growth (Mathews. 2005). High – Exit Barriers are high with a lot of specialist resources needed to effectively compete (Camposa and Lootty.. Med High Med High Low High High Med Med High .. Price Sensitivity is high due to a large number of similar products and the importance of the product to the buyer as a sign of affluence makes them more price sensitive although the perception of quality may mean that some customers are willing to pay a premium. 2003). For example.Threat of Substitute Products Medium threat of substitute products High Rivalry Competitive Rivalry within the Industry so exact alternatives not always available but imitations may provide cheaper alternatives and increase buyer power (Gao et al. 2006). OLED and Nanotechnology. Low – Industry Growth is very fast so rivalry is €somewhat reduced (Mathews.

html. N.html?industryid=48381. (2004). Ernst. No.com/hk_en/aboutsamsung/companyprofile/digitallvision/CompanyProfil e_DigitallVision. International Production Networks in Asia. 2. C. pp. J. Accessed April 2009. NY: The Free Press. Chen. Vol. Up 10% to $33B” http://www.businessweek. Carbone. IL: Irwin. 3. Bowman. Tzeng. Accessed April 2009. S.com/article/CA6635540.Reference About Samsung. Chandler. (1997).adobe. Accessed April 2009. pp. 145-153.stm. “DisplaySearch Reports Q4'07 Worldwide LCD TV Shipments Surpass CRTs for First Time. Borrus.143-165. J. “Digital Vision”. BNET. B. Andrews. Jr. Z. “Samsung Electronics” http://www. “The Way to Win in Cross-Border Alliances” Harvard Business Review. D. A.htm. Accessed April 2009. New York: Routledge. Y.. and Ernst. Vol. M. R. J.com/buying-guides/lcdtv-buyers-guide/. “LCD TV Buyers Guide” http://www.com/p/articles/mi_m0EIN/is_2008_July_9/ai_n27895039/. “Sony and Samsung in patent deal” http://news. Mergers and Acquisitions. (2009).NY: Glenlake Publishing DisplaySearch. and Lootty. B. ..co. (2009). Business Week. (1971). International Journal of Management and Decision Making Issue. Camposa. Strategy. TV Revenues Reach a Record High.products101. (2007). Strategy and structure. (2007). 31. (2009) “iSuppli: LEDs will outperform overall chip industry” http://www. Accessed April 2009. H. London: Irwin.bbc. (2009).pdf.com/products/acrobat/pdfs/korea_samsung_cs.asp. G. No.samsung. D. Accessed April 2009. (2000). “Marketing strategy based on customer behaviour for the LCD-TV”.uk/1/hi/business/4094087. 346-363. Accessed April 2009. Accessed April 2009. (2003).purchasing. (1991). The Concept of Corporate Strategy. Vol. (2008). CEA/GfK Study Finds” http://findarticles. Bmetzger. Adobe. Chiu. Competitive and Corporate.com/ss/08/09/0918_best_brands/22. 4. (2009). Bleeke. Coyle. 32. Boar. Cambridge: MIT Press.F..com/cps/rde/xchg/DisplaySearch/hs. “Institutional barriers to firm entry and exit: Casestudy evidence from the Brazilian textiles and electronics industries” Economic Systems. No. (2006). (1962). BBC. (2005). D.DisplaySearch. (1994). K. and Haggard. M. http://www. “LED makers expect strong streetlamp shipment growth in 2H09” DisplaySearch. Strategic Thinking in Hyper-Competitive Markets. pp. and Faulkner. D. “The 100 Top Brands” http://images.xsl/6138. 7. “Global Consumer Electronics Industry Will Grow to $700 Billion by 2009. and Shyu..

Farmer. W.futuresource-consulting. “Electronic Components & Semiconductor Manufacture Industry Forecast”.hoovers. “Executing an Organic Growth Strategy” http://www. Pages 349361 Intel. Accessed April 2009. S. Accessed May 2009. Technology in Society Volume 28. “Samsung Leads Flat Panel Industry in Units Shipped. Accessed April 2009.investopedia.com/story/samsung-leads-flat-panel-industryunits-shipped-industry-revenues-still-fell.forum. Global Markets Direct. (2008) “The Changing CE World: convergence. “Dell and Samsung sign $16bn pact” http://news.1000000091. and Lindsay. London. California: Berkeley Korea IT Times (2009). 2009.com/cmd/articledetail/articleid/18619/default. Managing for Quality and Performance Excellence. Dell Grows Stronger in US Retail but Still Drops Share to Samsung” http://www. Evans.00. Accessed 7th May 2009. Accessed May 2009.com/samsung-electronics/--ID__55277. Accessed April 2009. but Industry Revenues Still Fell” http://www. Woetzel.. Accessed May. Can Chinese brands make it abroad?.pdf. . (2008). London: The McKinsey Quarterly.ecnmag. (2009). J. .aspx. (2006) Competitive strategies for Taiwan's thin film transistor-liquid crystal display (TFT-LCD) industry.xsl/052108_QDM_PR. (2003). Ltd. Hoovers.displaysearch. 7th Edition.A. “Opening a Window into the Lives of TV Viewers” http://www.2085185.0/Opening-AWindow. M.xhtml. (2008).aspx. (2007). Accessed May 2009. “Samsung and Slovak Government Sign Deal On LCD Screen Plant” http://www. (2001)..FRIC__--/free-cocompetition.com/cps/rde/xchg/displaysearch/hs. Investopedia. “Samsung Electronics Co. Issue 3.com/ce-world/Futuresource_CEWorld_08. ECN. Accessed April 2009. Gao. connectivity and competition” http://www.htm.intelconsumerelectronics.co.com/Consumer-Electronics-3. Hung. Kim. P. Y. (2008) “Samsung Ranks #1 for Preliminary Worldwide LCD Monitor Market Share for Q1’08. (2008). Y. Berkeley Roundtable on the International Economy.asp. (1997). Expansion Management.com/terms/o/organicgrowth.zdnet.expansionmanagement. August 2006. (2009).com/libraries/white_paper/execorgwthus.DisplaySearch. Ohio: Thomson. (2009).asp.asp. “Large-size TFT-LCD Panel Shipments are Up” http://www.koreaittimes.uk/hardware/0.com/article-Large-size-TFT-LCD-Panel-Shipments-are-Up-031809. J. (2009). http://www. “What Does Organic Growth Mean?” http://www. R.R. Accessed May 2009.pdf. Accessed May 2009 Forum. and Wu. FurureSource.Financial and Strategic Analysis Review”. M.

Accessed May 2009. No. Samsung R&D Spend (2005) http://www. pp. “Samsung posts growth in time of recession. (2008). S.samsung. Samsung Electronics: The Global Inc.com/us/aboutsamsung/ir/ireventpreSECntations/earningsRelease/down loads/2008/20090424_conference_eng. Accessed May 2009. “Is Your Daily Life Enslaved by the Electronic World?” http://www. T.org/mediaculture/83228/is_your_daily_life_enslaved_by_the_electronic_ world_/. “Environmental & Social Report (2007)” http://www. E.com/samsung-electronics/. .Lam. London: Wiley-Blackwell. No. Accessed May 2009. pp.samsung.samsung. Competitive Advantage: Creating and Sustaining Superior Performance.com/ss/08/09/0918_best_brands/22.htm. Samsung (2008). (1985). “How competitive forces shape strategy” Harvard Business Review. pp. I. “Samsung crystal valley” http://www. A. 709– 723 Moon. Porter. 2. html. Simkin. Mishkin.samsung. Accessed May 2009. (1999). 15. Vol.html. Samsung Press (2009). M. Samsung Brand (2008) http://images. D. A. Mathews. “Lessons from the Asian crisis”.alternet. “Strategy and the crystal cycle”.do? news_SECq=13059&gltype=localnews.appliancedesign. pp. Accessed May 2009 Samsung (2009). Penrose. Accessed May 2009. 2. 18.businessweek. (2005). E. Managerial Economics. (1997). Economics. 3. and Lehman. London: YSM Inc. D. A theory of the growth of the firm.6–32.com/us/aboutsamsung/corpcitizenship/environmentsocialreport/downlo ads/greport_2006. Samsung (2009).com/ph/news/newsRead. M.com/uk/aboutsamsung/corporateprofile/ourperformance/annualreports. (2009). 124-134. F. Porter. Accessed May 2009. J. “Earnings Release Q1 2009 Samsung Electronics” http://www.com/global/business/lcdpanel/promotion/Promotion_LCDCluster. Accessed May 2009. Vol. L. Vol.pdf. E. owns world's #1 post in LCD market” http://www. 2. No.pdf.businessweek. NY: Wiley Png. Samsung Environment. (2006).com/Articles/Breaking_News/0c2083054ea38010VgnVCM1000 00f932a8c0. (1959). 47. (2007). 57. No. (2006). “2007 Samsung Electronics Annual Report” http://www. New York: Free Press. Accessed April 2009. 137-145. Vol. (1997). Marketing Intelligence & Planning. California Management Review. “Samsung Electronics” http://bx.samsung. Lee. “Understanding competitors’ strategies: the practitioner-academic gap”. I.

Accessed May 2009. Accessed April 2009. 8.D and Kwak. and Sigurdson.pdf. Suh. (2008). (2005). Kraut. "New Monitor Technologies Are on Display.html. J. “Knowledge management as enabling R&D innovation in high tech industry: the case of SAIT” Vol. Accessed April 2009.fas. Accessed May 2009.twice.edu. J. (2003). (2005). (2004). Vadera. J.Y. Accessed May 2009. S. pp.Shin. “Samsung Fights Back in Battle of Big TVs” http://www. M.uk/files/file45989.sg/ecs/pub/wp-scape/0513.pdf. No. O.pcworld. pp.. Thomson. “China's science and technology Sector and the forces of globalisation”. (2000). “Creating First-Mover Advantages: The Case of Samsung Electronics” http://www. Sixto. pp. No. 125-134. Tarr. No." Computer. “Flat panel displays in the UK | A guide to UK capability” Department for Business Enterprise and Regulatory reform. (2008). 2.. Greenfield. “Samsung Wins LCD Patent Dispute Against Sharp” http://online. M.” http://www. 36. Subrahmanyam. 13-16. R. S. Wall Street Journal. (2008).berr.networkworld.html. (2009) “iSuppli: Green Awareness High Among LCD TV Purchasers” http://www. Accessed April 2009. E.com/article/SB123776825103109701.H. K. “The Impact of Home Computer Use on Children’s Activities and Development” Children and Computer Technology. 10.gov. J. G. F. (2009).com/news/2008/102908-samsungs-40-inch-oled-goes-full.com/article/119155/samsung_fights_back_in_battle_of_big_tvs.wsj.html#articleTabs%3Darticle. J. LA: World Scientific.nus. 2. Vol. W. Sohn. M. E. and Jang. and Gross. . 6.asp? layout=talkbackCommentsFull&talk_back_header_id=6596878&articleid=CA6653388. P.. “Samsung's 40-inch OLED goes full high-def” http://www. Williams. 5-15. Vol. Williams.com/index.

Sign up to vote on this title
UsefulNot useful