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Case Summary

Growth : Semiconductor Industry has 16% of growth rate Recovery : Samsung survived

Crisis : 2001 – 2002

Semiconductor Industry Crisis
On average, 1960 - 2000 crisis with their competency and
Branding strategy
1980s, Samsung Group
more focus on Electronics
market and found Samsung
Korea Semiconductor Electronics, manufacturing Samsung Brand being
company founded, began in South Korea built listed as 21st valuable
with Wafer production.
brands in the world by
And acquired by Samsung
Interbrand Corp.
latterly
8” Wafer technology
developed, dramatically
shift to Samsung of
production capacity
Samsung Group started Electronics
industry in television market

1960 1969 1974 1980 1992 2004 2005

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 Industry Summary

Semiconductor Industry Market Size ตลาด DRAM in 2003 ($19.5 Billion)

Avg. Growth rate = 16% 68.2 Samsung
Sales = $200 Billions 521.5 896.4
Micron
Infineon
(1996 – 2000) Hynix
535.3 SMIC

Logic Chips 672.8 19% 3% 33% Samsung

Micron
Sales = $166.3 Billions Infineon
Hynix
20% SMIC
Production Volume in million unit
25%
Memory Chips 256 Mbit equiv. EXHIBIT 4
Market Share ตลาด DRAM in 2003
Sales = $33.7 Billions

FLASH SRAM DRAM

32% 10% 58%
Mobile devices Server & Workstation Desktop
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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

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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

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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

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Macro Environment Analysis

Political factors Technological factors

(+) The industry is on focusing in several countries, (+) Technology market is moving fast
more government supports for technology (+) No trends of new substitute technology
development
(+) South Korea has strong relationship with others
Global force
(-) Labor cost is trendy higher
General economic conditions
(-) Economics regression of the world
(-) Instability of Exchange rates
(-) Interest rates volatility
(-) Perfect competitive market coming

Social force
(-) Environmental Conservatism’s Resistance
Difficult
Natural environment
to Survive
(-) Products is more sensitive with climate

Copyright © 2012 by College of Management, Mahidol University. All rights reserved.

Industry Analysis
Analysis result :
Threat of New Entrants : Semiconductor industry is
(+) High Investment required unattractive market for new
(+) High Production Technology entrant
(+) High Switching cost

Bargaining Power Bargaining Power of

of Suppliers : Buyers :
(-) Critical materials (-) Commodity Products
(-) A few of suppliers Rivalry among Existing (-) more provider in the
(-) the most suppliers is Competitors : market
larger company (-) High competition (-) Low switching cost for
(-) Market moving fast buyers
(-) Price is competitive factor
Samsung overcome
Samsung differentiate the
the factor with good
market by proposes products
suppliers relationship
management customization, Products can be
Threat of Substitute customized to meet customer’s
Products : preferences
(+) No substitute technology

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Competitor Analysis and Comparison

Analysis
Result

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Internal Analysis

Firm Infrastructure : Adaptability culture organization

Support Activities

Human Resource Management : Acquire Korean global talent

Technological Management : Products development competition

Procurement : Economies of scale purchasing, Focus on potential

suppliers
Inbound Operations Outbound Marketing Services :
Logistics : : Logistics : & Sales :
Primary Activities

Customize to
Focus on Focus on Focus on Variety of customer
time to quality, high time to products, demands
market, capacity and market, older-tech.
Volume, low defect consistency promotion
consistency
Relationship with Suppliers Relationship with Buyers

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Internal Analysis
Support Activities

Human Resource Management : Acquire Korean global talent

Technological Management : Products development competition

Procurement : Economies of scale purchasing, Focus on potential

suppliers
Operations Marketing Services :
: & Sales :
Primary Activities

Customize to
Focus on Variety of customer
quality, high products, demands
capacity and older-tech.
low defect promotion

Relationship with Suppliers Relationship with Buyers

Strengths in Samsung’s Value Chain

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Resource, Capability and Competency

Resource Capability
Tangible
• Innovative products
• Financial : Cash flow and Capital • High capacity
• Organizational : 5 Business units • Varity of products
• Physical : Fab Manufacturing • Best quality
• Technological : High capacity production line • Customize to customer’s demand

Intangible Competency
• Human Assets : Recruit promoted successor
scholarship • Excellence HRM
• Brands : Value $12.6 billion (21stof the world) • Effective procurement by volume
• Company : Reward outstanding performance • Creativity human capital
Culture do not punish failure • Effective production technologies

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SWOT Analysis

STRENGTHS WEAKNESSES
• Process excellence • Low quality of brand image
• High competency • International cultural lacking
• Strong researcher team • Inter-cultural crashing
• Good Organization Structure

OPPORTUNITIES THREATS
• Market being growth • China competitors
• No substitute technology • Social resistance, environmental
• High demands effects
• Government supports

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 Strategic Analysis
20%

Flash

Flash

?
• DRAM - Less profits, reduce
Market Growth

investment
DRAM
SRAM
• Flash - More invests in R&D, gains
market share is critical strategy
• SRAM - Maintains the market
DRAM
SRAM
0%

10X Relative Market Share 0.1X

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 Strategic Group Analysis
High

• Continuous product
improvement is very importance
• Small company needs partners
for more competitive advantage
Products Development

to survive in the market

• Less competitive advantage /
less margin (low price strategy
needed)

Sized by revenue
Low

Low Average Selling Price High

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 Past and Current
Generic Business Strategy Analysis
Broad Market Target

Overall Low-Cost Provider

Strategy in the Past
Broad Differentiation
Strategy

Best-Cost Provider
Strategy in the Present
Narrow Market Target

Focused Low-Cost
Strategy
Focused Differentiation
Strategy in the Future

Cost Leadership Strategy Differentiation Strategy

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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

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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)

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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.

Copyright © 2012 by College of Management, Mahidol University. All rights reserved.