Samsung Electronics Case Study

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


2004

2005

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


25%

Samsung
Micron
Infineon
Hynix
SMIC

Market Share ตลาด DRAM in 2003

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


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


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


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


Difficult
to Survive

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


(-) 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

Competitor Analysis and Comparison

Analysis
Result


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


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


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


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


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


0.1X

• 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


High

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


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


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)


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


Samsung Electronics Case Study

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