SAMSUNG ELECTRONICS

CASE STUDY
Presented by: Group 2, Section D
Under the guidance of: Prof. Rajesh
Pillania

Porter Model + PEST

Supplier Power
Economic
- Very High investment
for setting up R&D
centers and Fabricating
Plants

Entry Barriers
- High Capital
Requirement.
- Govt. Approvals
Very High

- Few Vendors
-Samsung is a very
large buyer

Medium

Industry Competition
- Micron, Infineon,
Hynix, SMIC. As of
now Samsung is the
clear market leader
-

Technological
- Very high use of
innovation and
technology.

Moderate

Threat of Substitutes
- No major substitutes.
-Nanotechnology
based memory still
not ready.
Low

Political
-Chinese Govt.
provides all sorts of
assistance for setting
up a plant
Buyer Power
- Chips sold to PC n
Mobile makers.
- Moderately price
sensitive consumer.
Medium

Social
- Consumers (PC, Mobile
companies) very well
informed
- Customers ready to try
other options

Core Competency Model

Flash
Chips

Samsung
Expertise in
Electronics
Innovation

Memor
y
Chips

Value Chain
SUPPORT
ACTIVITIES

Infrastructu
re
Human
Resource
Manageme
nt

Technology
Developme
nt

PRIMARY
ACTIVITIES

Has a state of art R&D facility and a fabricating unit

in Seol
Strong
vendor
relations
Central
computer
linked with
vendors

Lowest Raw
Material Cost
in the
Industry

Values
human
resources a
lot
Excellent
R&D work

Self
Distributio
n

Competitive
Pay scales

New Products
Introductions

High
Technology
based
operations

Inbound Operatio
Logistics
ns

Recruitment

Very strong
Brand. Known
for its Quality.
Rated in the
top 20 brands
of the world

Outboun
d
Logistics

Marketin
g / Sales

Customer
Oriented

Service

Analysis Samsung
Economies of scale in semiconductor
production
High Investment in R&D
R&D Facility & Fabricating unit at single
site
Innovative human resource policies,
performance based promotions
Wide range of customized end products for
meeting customer demands
Reliable Product- Very high brand value

VRIO
Resource

Is it
Is it
valuab Rare?
le?

Is it
difficul
t to
imitat
e?

Is it
difficult
to
organiz
e?

Competi
tive
Consequ
ences

Performan
ce
Implicatio
ns

Technologi
cal
Expertise

Yes

Yes

Yes

Yes

Sustainab Above
le
Average
Competiti Returns
ve
Advantag
e

Brand
value

Yes

Yes

Yes

Yes

Sustainab Above
le
Average
Competiti Returns
ve
Advantag
e

Samsungs cost advantage

Low labor cost at Korea
Higher capacity utilization, lower
depreciation cost
Raw Material, Labor, Depreciation,
R&D,
SG&Athese
cost
are
substantially higher for competitors

Major Challenges
China is a major upcoming threat
Major chip producers are partnering
with Chinese company i.e. Infenion,
Elpida signed agreement with SMIC
Chinese are desperate in gaining
market share at the cost of losses
Chinese Government is ready to
provide cheap finance to set up JV

Conclusion
Samsung is ahead in Learning curveemphasis more in R&D works
Play on legacy and specialty product
May collaborate with Chinese partners to
expand joint investments
Probably a better option..
Produce low end product in china, high
end product in Korea.
Ensure better control over Intellectual
Property