Porter Model + PEST<br />Supplier Power<br />- Few Vendors<br />-Samsung is a very large buyer<br />Medium <br />Political<br />-Chinese Govt. provides all sorts of assistance for setting up a plant <br />Economic<br /><ul><li> Very High investment for setting up R&D centers and Fabricating Plants</li></ul>Industry Competition<br /><ul><li>Micron, Infineon, Hynix, SMIC. As of now Samsung is the clear market leader
Moderate </li></ul>Buyer Power<br /><ul><li> Chips sold to PC n Mobile makers.
Moderately price sensitive consumer.</li></ul>Medium<br />Entry Barriers<br /><ul><li>High Capital Requirement.
Govt. Approvals</li></ul>Very High<br />Technological<br /><ul><li>Very high use of innovation and technology.</li></ul>Threat of Substitutes<br />- No major substitutes. -Nanotechnology based memory still not ready. <br />Low<br />Social<br />- Consumers (PC, Mobile companies) very well informed<br />- Customers ready to try other options<br />
Value Chain<br />Has a state of art R&D facility and a fabricating unit in Seol. <br />Infrastructure<br />Human Resource Management<br />Strong vendor relations<br />Values human resources a lot<br />Recruitement<br />Competitive Pay scales<br /> SUPPORT ACTIVITIES<br />Excellent R&D work<br />New Products Introductions<br />Technology Development<br />Lowest Raw Material Cost in the Industry<br />High Technology based operations<br />Very strong Brand. Known for its Quality. Rated in the top 20 brands of the world <br />Customer Oriented<br />PRIMARY ACTIVITIES<br />Inbound Logistics<br />Operations<br />Outbound Logistics<br />Marketing / Sales<br />Service<br />Self Distribution<br />Central computer linked with vendors<br />
Analysis – Samsung<br />Economies of scale in semiconductor production.<br />High Investment in R&D<br />R&D Facility & Fabricating unit at single site.<br />Innovative human resource policies, performance based promotions.<br />Wide range of customized end products for meeting customer demands.<br />Reliable Product- Very high brand value.<br />
Samsung’s cost advantage<br /> Low labor cost at Korea.<br /> Higher capacity utilization, lower depreciation cost<br /> Raw Material, Labor, Depreciation, R&D, SG&A- these cost are substantially higher for competitors.<br />
Major Challenges<br /> China is a major upcoming threat<br /> Major chip producers are partnering with Chinese company i.e. Infenion, Elpida signed agreement with SMIC.<br /> Chinese are desperate in gaining market share at the cost of losses.<br /> Chinese Govt is ready to provide cheap finance to set up JV.<br />
Conclusion<br /> Samsung is ahead in Learning curve- emphasis more in R&D works.<br /> Play on “legacy” and “specialty” product.<br /> May collaborate with Chinese partners to expand joint investments.<br /> Probably a better option…..<br /> Produce low end product in china, high end product in Korea.<br />Ensure better control over Intellectual Property<br />