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Samsung Electronics Company was established in Taegu, Korea in 1969 by Byung Chull Lee. During that time the company only manufactured black-and-white TV sets. Since 1969, the company has enjoyed steady growth. At the end of 2004, Samsung had around $80 billion in net sales, $60 billion in assets and had 113 thousand employees worldwide. Also, in 2004 Samsung stood up ahead of many their competitors such as Phillips, Kodak, and Panasonic . By that time the company produced TVs, AV equipment, and computers; the Telecommunication Business, which manufactured mobile phones and networking equipment; the LCD Business, which made LCD panels for notebook computers, desktop monitors, and HDTV; and the Digital Appliances Business, which produced and sold refrigerators, air conditioners, and washing machines . Samsung believes that the success of their contributions to society and to the mutual prosperity of people across national boundaries truly depends on how they manage their company. (Samsung, 2008) Kun Hee Lee, current chairman of the Samsung Group always teaches his employees: always demand superiority in product design and process efficiency. Under Lee ’s leadership, Samsung Corporation has become one of the world’s leading memory producers in all types of PCs, digital cameras, game players, and other electronics products. Company Overview the Samsung Group in 2005, which included Samsung Electronics Company, was the largest conglomerate in South Korea. The total net sales of the Samsung Group had reached $135 billion in 2004. In that same year, the Group had 337 overseas operations in 58 countries and employed approximately 212,000 people worldwide. The three core business sectors within the Group were electronics, finance, and trade and services. Samsung Electronics Company, henceforth called “Samsung” in this case, was established in 1969 to manufacture black-and-white TV sets. At the end of 2004, the company had $78.5 billion in net sales, $66 billion in assets, and 113,000 employees. According to Interbrand, the company’s brand value increased from $5.2 billion (ranking 43rd in the world) in 2000, to $12.6 billion in 2004. In 2004, Samsung stood ahead of many brands such as Philips, Kodak, and Panasonic. Sony ranked 20th by comparison. In 2005 Samsung consisted of five business divisions, including the Semiconductor Business that is the focus of this case. Samsung’s other divisions included the Digital Media Business, which produced TVs, AV equipment, and computers; the Telecommunications Business, which manufactured mobile phones and network equipment; the LCD Business, which made LCD panels for notebook computers, desktop monitors, and HDTV; and the Digital Appliances Business, which produced and sold refrigerators, air conditioners, and washing machines. The Industry type for Samsung is consumer electronics and entertainment. The market type is monopolistic competition because there are many producers and many consumers in the given market. Furthermore, when it comes to monopolistic competition, it involves a great deal of non-price competition which is based on product differentiation. Also, the producers have a certain degree of control over price. The electronics industry is a very wide category and it contains many types of products. Samsung competes with other companies in providing customers with a wide array of products that are good quality and affordable price. What they don't do is specialize in a certain product and thus they can't make an expensive superior product. With intense rivalry and competition in the
If they enter a specific category of products such as mp3 players or cameras. it is better for the company. computers and home appliances. This is only possible where the economic demand for the product is "elastic" . the threat of entry is high. Therefore. This is due to the fact that the Samsung Company is very widespread in terms of product offerings and service.in other words there is some demand even when the price is high. This makes it more attractable for new companies to enter the electronics and entertainment industry market. distribution and marketing. or Sony's audio entertainment systems. high technology products usually exhibit elastic demand (Airborn E. Apple's music entertainment products. TV. for Samsung. the industry is very popular and profitable for companies who have access to technology and capital. they will lost likely have to enter a price war. In terms of product differentiation. According to Chaffin. 2008). The new entrants of the electronic entertainment industry have to focus on whether to specialize in one area like music. Thus. the barriers to entry may be high in the industry depending on the economy. The content storage is not limited by physical shelf space and server costs are declining. This means that it may be very difficult for a startup company to produce a new consumer product. Fortunately. cameras. The consumer product market on the other hand can be a little bit less elastic This means that the demand goes down drastically when price is more than the consumer is willing to pay for. mp3/audio. a realistic development path for a startup company will usually involve designing a low volume high price version of their product first. if not. the cost of digital cameras and video editing software is declining. Samsung will have a low threat level of entry from new companies. The threat of entry The threat of entry to this industry depends on what part of the industry the company is trying to enter. or whether to have a wide variety of products for a affordable price. If a company decides to enter the same wide variety of product offering as Samsung then there will be a high threat level of entry. Samsung offers a wide variety of products such as. Samsung focuses on providing quality affordable price products for a wide group of people. Samsung is satisfying consumers who want modern reliable products ranging from cell phones to home electronics. camera etc. The barriers to entry are high but are declining because of new technology and lower costs of production.g. There are already many companies that are offering similar products and it is hard for the company to focus on a specific products. Although with the rise of technology and high consumer interest in electronics. It is difficult for new companies to enter the industry and compete with the larger companies specifying in an section because of already existing outstanding products in the electronic industry e. or Canon's camera products. bandwidth costs are declining. The impact of new technology means that for content creation. New entrants in the industry have to spend a lot of money and time on branding and customer knowledge. If the economy is good and people have more money to spend on electronics.industry. If they choose the latter. there is a lot of specialization and increased value by companies to make their products stand out and gain competitive advantage. there is a high barrier. mobile phones. Technology is very important because the company has to keep up with latest trends and technology in all of its sections. Apple has around 82% of the market share for mp3 . High capital is required to enter into electronic industry due to requirements of large investments on technology. and then moving to high volume designs as the market matures. television. Furthermore. According to Airborn electronics. the growing number of distribution channels and the internet provides global distribution. For product distribution.
Hesterly. If a company does not keep up with trends and new products. Dell focuses their strategy on selling their computers online and providing excellent customer service. They save money on not having a physical store and focus on online distribution instead. Furthermore. landline phones are losing popularity because of lower prices and popularity of cell phones and internet calling programs. In the mp3 industry. As will be mentioned the important factors in every industry of the general electronics market. According to Barney and Hesterly. Worldwide. Cell phones and . At the moment. 2008: pg 46). In the cell phone industry. 2008). Hesterly. This can be seen in the personal computer and DVD industry. they have to compete with intense price rivalry. they will lose their customers and profits.The substitutes in the telecom industry are landline phones and email. high levels of rivalry are indicated by such actions as frequent introduction of new products by firms in an industry (Barney. but companies are following and introducing new phones. Not only does a company have to compete on a level of technology and price. over 120 firms have entered the laptop computer market and no one firm dominates in market share (Barney. This saves them money and they can compete on other levels. According to Barney and Hesterly. With the popular trend of the internet. The threat of Rivalry The threat of rivalry in the consumer electronic market is very high. companies are now competing with providing more services online and expanding their online advertisement. rivalry tends to be high where there are numerous of firms in an industry and these firms tend to be roughly the same size. In the PC laptop industry. A way for a new company to compete right now in the mp3 market is by price and ‘ lower quality ’ alternative products or try to come up with new technology and features. thus it is hard to compete with existing companies. The mobile phone market comes out with new products very often. If a company decided to compete in this industry. companies are focusing more on services that accompany the laptops and the designs of the computers. Samsung has just introduced new line of innovative cell phones for 2008. The substitutes in the electronics market can be divided in to 4 categories. There is a huge competition and rivalry amongst these markets. 2008: pg 46). For new companies to compete with Samsung they have to differentiate and specialize their products which can be very costly. In the DVD industry the products are very similar and perform the same functions. but they also have to keep track of what the competition is doing. Telecom . In TV/DVD markets there are fewer introductions of new products because they are more expensive.players because they differentiate and specialize their mp3 products (Chaffin. The threat of Substitutes Substitutes in the consumer electronics industry are many and the different companies competing in this industry must apply many strategies in order to compete and make profits. rivalry tends to be high when firms are unable to differentiate their products from competitors in an industry. Apple introduces new 'I' products very often. There is a high intensity and constant competition in the electronics industry and usually the main competitors come up with new products very often. Technology is very important in this market. Such is the case with the laptop personal computer industry. Apple's I phone has the latest technology with its Touch screen.
If they buy in bulks and have long lasting partnerships. The main one is using a cell phone or computer. suppliers are more and more forced to cut their . The only substitutes are portable and handheld devices. Apple and Nokia are selling mobile phones with new technology for a high price for customers who are willing to pay more.PDA's have standard features and the only product differentiation lies with adding services such as Bluetooth. Although because of price wars. Many suppliers work on integration and material-substitution projects to drive down costs. portable devices are substitutes. there are two major substitutes. in the HD and Blue ray competition. and the other one is the cell phone camera. HD TV . the threat of substitutes is not very high because there are not many products that can do what a computer or laptop can provide. Digital Cameras . The first one is the film camera. By creating partnerships. Unfortunately. it is important to know that there are several companies who compete based on price in the cell phone industry because it is a product that all kind of customers want. There are not many substitutes for PDA's. gaps and other communication applications and tools that are important for customers in the cell phone industry. TV ’ s will still stay popular and be high in demand.In the PC industry. Because of the limited availability and space on Ipods and the smaller size of a laptop screen. For example. Suppliers also want companies who they know will buy a lot in the long term. The threat of Suppliers For companies. For people who travel a lot.In the digital camera industry. there is not much interest in film cameras because of outdates technology and cell phone cameras don't provide the same quality and storage as digital cameras. laptop to call someone using e. suppliers can choose who they want to supply and what price to take. If they create a good that is very new and trendy. they can chose to supply to companies that will provide them with easier SCM and better price. they want to create partnerships with companies to earn profits in the long run. another substitute for TV ’ s are going to the mov ies or watching videos on your Ipod. they will reduce their costs by being more efficient in their SCM. Furthermore. HD lost because the suppliers determined that they would go with blue ray instead of HD because of partnerships. In terms of writing documents. The substitutes for TV's are computers and laptops. Skype.g. the threat of suppliers can be high depending on how many products they are selling and how differentiated they are.Television have recently become very popular with the new HD technology. Laptops / PC . Technology has a very important factor in suppliers. Creating good supply chain management and a long term personal relationship with suppliers is very important for electronics companies. Samsung provides an affordable PDA with the modern features to satisfy the average telecom user. prefer to watch movies and favorite shows on their laptops because they can download or stream popular tv shows and movies from online sites. The major substitutes for computers are PDA's and cell phones for contacting other people. They are competing on price and trying to increase value based on service and customization.
In the consumer electronic industry. It is up to the customer to decide what features they need.prices as their customers can go to other suppliers who may offer better components at a lower cost. Suppliers are also starting to lose power because more and more firms are starting to produce their own products and components in-house. The threat of Buyers The threat of buyers is very huge. when the buyers are not earning significant economic profits. Since the products are not very standard and differentiated. Most of the electronic entertainment products are created from wants. buyers may be very sensitive to costs and look for the lowest possible cost and highest possible quality of a product. The customer is the most important factor in the buying process. They can chose what to buy and from which company. but companies have to keep the buyer in mind and listen to what they want. not needs. Since there are a lot of buyers in the industry. They decide where to buy the product and how much they want to pay for it. there is a lower threat of buyers. Furthermore. there is not a large threat. there are many products with different prices and different features. Chinese Threat 1. What kind of advantage are the Chinese entrants seeking? How close are they to achieving that advantage? In this case the Major Memory Competitors in 2005 include: Elpida Japan ’ s only remaining DRAM producer Hynix Has many financial problems Infineon Major DRAM player with 25 R&D locations all over the globe Micron Technology Investing in next generation DRAM technology with a $500 million investment from Intel Nanya Technology Producing 256 Mbit DRAM in a Joint Venture with Infineon . Therefore it is important for the companies to create value and set a price that the customer is willing to pay for. therefore the customer does not have to buy the product to survive.
Germany based Infineon was spun off from Siemens in 1999. was China ’ s largest foundry. was founded in 1978. Infineon Technologies AG . Inc . South Korea based Hynix was founded in 1983 as Hyundai Electronics. Taiwan based Nanya was the fifth-largest DRAM manufacturer and it had two manufacturing plants. Semiconductor Manufacturing International Corp. manufacturing logic and memory products including DRAM.SMIC The only Chinese DRAM manufacturer. Idaho. (SMIC) . Micron Technology . are in the pipeline to encourage investment in semiconductors . and it changed its name in 2001 while separating from the financially distressed Hyundai Group. Nanya Technology Corporation . established in 2000 and headquartered in Shanghai. And the Chinese Environment includes: Regulatory A zero tariff rate for importing semi-conductors Tax rebates to dom estically produced semiconductors (avail in 2003 but stopped since April 2004) Other preferential policies although not announced in detail. based in Boise. It is China ’ s most advanced producer and a major competitor for Samsung Elpida is a Japan ’ s only remaining DRAM producer that was established as a joint venture between NEC and Hitachi in December 1999 Hynix Semiconductor.
engineering talent. tax incentives to anyone who was willing to partner with a Chinese company Labor China still enjoys an advantage in labor intensive activities . cheap utilities.Market Access issues still exist Technology China lacks the critical infrastructure necessary to support a cutting – edge semi-conductor industry The US and Taiwan governments have forbidden shipment of cutting edge production technology to China. abundant land. So China went to other countries Alliances Chinese governm ent provided cheap credit.
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