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Samsung Electronics Group 7 Strategic Management Case Study Samuel Krushnisky
 

Samsung Electronics Group 7 Strategic Management Case Study Samuel Krushnisky

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Samsung vs. Asian DRAM producers competitive analysis.

Samsung vs. Asian DRAM producers competitive analysis.

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  • is this presented to the board of directors? Chairman Lee would give this about 2 minutes of his time before attending to more important matters. What are you saying here? I don't see anything that proves why we will be virtually immune to Chinese entrance to the market? Have you considered the 5 - 10 year trends? WE understand our competitive advantage and our market share but why will this advantage over our competitors stay the same as the industry changes. The article clearly says that analysts predict the industry will change.
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  • High investment in R&D - Invested over 1$ Billion dollars for the first fabSaved an average of 12% on fab construction costsEngineers could quickly solve design and process problems togetherLocated in the mountains on flattened land, clean air and free of dustCreated high brand value CEO: employees must now think of quality firstBurning shoddy Samsung productsWon awards for reliability and performance from customers
  • Customize its products around a core design
  • Meritocracy based Hiring - Hired employees by an aptitude test rather than by schools or hometownCore Competence, such as Prahalad and Hamel, invested in their human capital - Invest in employees’ global business skillsInvest in employees’ global business skillsRegional Specialist ProgramTook care of 90% of employees’ expense Richly reward employees for their accomplishmentsNot firing people for failureHigher average salary ($44,000) than Hynix ($24,600) in 2003

Samsung Electronics Group 7 Strategic Management Case Study Samuel Krushnisky Samsung Electronics Group 7 Strategic Management Case Study Samuel Krushnisky Presentation Transcript

  • Samsung Electronics
    Case 3 Discussion, Group 7
    Chuck Ou
    Greg Wu
    Juin-Der Lee
    Samuel Krushnisky
  • Q-1 Competitive advantages Chinese entrants seeking?
    Lower-costs structure
    Easier access to the large pools of local engineering talents
    Local marketing
    Government subsidies
    Government relations
  • Q-1 How close are they achieving that advantage?
    China is expected to become the world’s second largest purchaser of semiconductor,
    Chinese company has already exhibited large-scale entry by 2005
    Chinese companies had access to low finances
  • Q-2 What is Samsung’s competitive advantage?
    Technologically driven niche products
    Strong Infrastructure
    High investment for R&D
    Wide range of products
    High brand value
    Higher economic scale and economic scope
    Horizontal and vertical integration (ie. Samsung’s own stores, SRAM for their own mobile phones)
    Michael Porter’s 5-Force, Samsung is a large buyer and can use that towards their advantage
    Higher yield than competitors
    R&D facility located at one single site
    Untraditional Human Resource practices based on meritocracy not on seniority
    Attractive pay, bonuses and incentives
    Allowed employees to fail.
    Financially strong, large resources at disposal
  • Q-2 Can Samsung withstand Chinese Threat?
    Yes, so far the results show that they continue to gain market share though their gross profit have decreased
    Multiple products to sustain itself
    High brand value
  • Q2-1: Samsung’s Competitive Advantages
    Superior quality
    Competitive Advantage:
    • Low cost
    • Differentiation
    Superior customer responsiveness
    Superior efficiency
    • Lower raw material, labor, depreciation, R&D, SG&A cost (256Mbit DRAM exhibit 7d)
    • Higher selling price
    • Better financial indicators: lower COGS/Sales, SG&A/Sales, R&D/Sales
    Superior innovation
  • Q2-1: Financial indicators
    Exhibit 7d, 256Mbit DRAM in 2003
  • Q-3 How do Samsung achieve its competitive advantage?
    Lower-cost structure
    Located main R&D facility and fabs at a single site
    High investment in R&D (6%) to maintain technology lead
    Multiple product segments (LCD, Mobile Phones)
    Financial Stability
    Created high brand value
    Reliability of its products
  • Q-3 How do Samsung achieve its competitive advantage? (2)
    Created new uses for DRAMS by putting its manufacturing and R&D in support of design firms such as Rambus
    Products shared a common core design
    Learn new design rules and then apply new rules towards the production of all product types.
    Customized products to customer demands
  • Q-3 How do Samsung achieve its competitive advantage? (3)
    Meritocracy based hiring
    Performance-based promotion rather than seniority-based promotion
    Actively recruited foreign talent
    Created the Global Strategy Group to attract talent from around the world to Samsung
    Invested more in employees than competitors
    Performance Based Incentives
    3 types of performance-based incentives
    Project Incentives, Productivity Incentives, Profit Sharing program
    Created entrepreneurial environment that encourages innovation
  • Q-3: Samsung’s Activity Matrix
    Located main R&D facility and fabs at a single site
    ability to customize product to customer demands
    Reliability of its products
    Superior quality
    Superior customer responsiveness
    Products shared a common core design
    Work with design firms
    Superior efficiency
    Superior innovation
    using performance-based promotion
    Richly reward, Not firing for failure
    3 types of performance-based incentives
    ability to learn new design rules and then apply the new rules
    Invest in employees’ global business skills
    Actively recruited foreign talent
    Facilitated debate and encouraged to agree on a final outcome
    Invested more in its employees than competitors
    Regional Specialist Program
    Higher average salary than Hynix
    Global Strategy Group
  • Threats: Increasing Competition Memory Chip (2009)
  • Samsung multiple revenue sources
  • Q-4 How should Samsung deal with the threat of the Chinese entrants?
    Continue investing in R&D
    Focus on producing niche-products and releasing them
    Invest in factories producing lower end chips in China to be closer to Chinese domestic growing market product
    Attract top Chinese engineers
    Set technical standards
  • Q-4 Deterring entry of new competitors
    - Continue to explore and increase market shares of new niche markets, more specifically in the flash segment.
    • Take advantage of lower total costs by decreasing average selling price , thereby forcing price war and drive competitors out of the market.
    • Threaten to increase output and force down prices until market entry would be unprofitable to competitors and entrants (SMIC).
    • Purchase successful new entrants
  • Cost structure of DRAM Industry
  • Samsung SWOT Analysis
  • Questions and Discussion
    Thanks for listening!