Competitive Advantages of Samsung - Essay Example

SAMSUNG - A CASE STUDY. Samsung, which started of selling sugar and textiles 55 years ago and was more of a bit player in the chip markets in the 1980's, is now a global giant with total net sales of $134 billion (2004) and presence in 58 countries with 337 overseas operations with an employee base of 212,000 people worldwide. It has set trends in the memory segments of the market and is a reputed brand for its quality and value for money. The initial struggle the company endured for a share of the emerging markets can be considered to have eventually paid off when we look at the markets and the level of competition in the 80's. The company which always prided in its expertise to customize the product according to the needs of the customer has indeed come a long way from its formative years. The importance it gives to the quality is reflected in the fact that the flawed memory chips worth tens of millions of dollars are burnt in the open field to remind the employees of the belief customers place in their company. It has won several awards for quality during the periods 1995 - 2003 from fiercely competing companies too, which is a hallmark of sorts. The strategies it employed in bringing out the best of its engineers were a novelty then and the same strategies are now implemented across the globe to repeat the same success story Samsung had written. The company is the leading supplier of memory cards to PCs, digital cameras, game players and other electronic devices. Its primary focus was on the memory chips category which has had its own fluctuations over a period of 2 decades. There were established players in the market like Infineon Technologies, Elpida, Micron Technology, Hynix, etc. Most of these companies were as a result of alliances with Global giants like Intel, Siemens, Toshiba and Hyundai. Samsung too acquired technology from Micron on 'cash for technology' basis. It then implemented a unique internal competition for advancements of its acquired technology. After a lot of deliberation, the 'Stacking' method of fitting millions of cells onto a chip was chosen, which would later proved to be a masterful stroke. The companies which invested in the 'Trenching' model had to lose out on millions of dollars and technology years. It graduated to the frontline companies in this category and soon toppled Hitachi as the number one producer of memory chips. The presence of Samsung's main R&D facility in one location, south of Seoul, helped save a substantial amount in construction costs. The development of Samsung's memory chips division closely follows the Porter Diamond model in that the location, available raw materials and labor are crucial factors for comparative advantage. The high employee morale that has been its strength right from its birth has ensured its position stay perched at the top firmly for decades. Samsung was also responsible for 22% of all of South Korea's exports in 2004 and was a major contributor in the $22.1 billion worth semiconductor exports from South Korea. It also represented 23% of the total market value on the Korean Stock Exchange. With this kind of economic impact on the nation, it is important from both the Government's and the company's view, that it sustains the growth level. The net revenue over a period of two decades is as follows. It shows the fluctuations in the market which needs to assessed in fine detail to ensure its leadership positioning in the market. Twice in seven years, there was a dip in profits which is a reflection of the growing competition and emphasizes the need to take appropriate measures to maintain the projected growth rates. It also stresses on the need to work on the rapidly changing technology segment. Its present focus is on the flash memory segment, which looks poised for growth in the coming years but the existing competitors have already captured a major chunk of the market. Samsung has been in the race in inventing itself according to the needs of the customer base, but the entry of Chinese companies will make it more challenging than ever before. The advent of these companies funded by multinational agencies and organizations has had a huge impact on almost all business categories they have entered. Hence, there should be no room for complacency as it might lead to another Chinese company scripting another Samsung story but with Samsung at the receiving end. The Chairman's view that Samsung was lucky to be in the position it is in today, is a true reflection of the concern that complacency might one day lead to a repeat of another Samsung story. The options that can be looked at are the pricing of the products. As a leader in the market, it would not be a bad idea to reduce the prices as several companies vie with each other for a foothold in the segment. The reputation of a brand with quality and cheap price will never be beatable. A look at the chart below depicts the prices of the more famous brands in the market. It is clear that Samsung is costlier of the lot and this can lead to a negative factor in the future if the pricing is not given enough consideration. As discussed before, the Chinese companies will first look to survive in the market by lowering prices. A comprehensive strategy to work on the pricing models will be required very soon. Several companies like IBM who have dominated the markets in their respective fields, are now facing stiff challenges from new companies who have come out with competing prices and better overall support. Hence, the sellout of the desktop segment to a Chinese company Lenovo. The problem with the Chinese markets will be the copyright issue. Because of the poor laws to protect copyrights, companies will be wary of having to face future challenges from associate companies. This can be detrimental as decades of hard labor would have gone waste with one bad move. Hence, it would be better to look at countries with better laws to protect its blueprints. Emerging countries like India, Taiwan and other countries where there is abundant workforce available coupled with the required talent, are now hot destinations to a whole lot of companies looking for cost cuttings and hence remain positive about their positions in the market. As per Porter's model, new companies will not mind lowering prices as long as their place in the industry is guaranteed. Hence, companies which can offer products with highest quality and relatively low prices are never out of contention in the industry. This holds good for Samsung too. If it can build on its strong brand image and marketing expertise, Samsung will continue to retain its position in the market. As is the case with all industries, change is inevitable and especially so, with the technology market. A change in strategy will be a requirement sooner or later with Samsung too and as a pioneer in several ways, it can be expected to set trends as usual. References cited. Michael Porter - Diamond model. "Competitive Advantages of Nations." September 18, 2005. < http://www.valuebasedmanagement.net/methods_porter_diamond_model.html> Michael Porter - SWOT Analysis. "Identifying Strengths, Weaknesses, Opportunities and Threats - SWOT." 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