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Samsung Electronics

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Ariana Wu

on 8 July 2014

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Transcript of Samsung Electronics

Industry Profits
Firm Effects
Value Position
Cost Position
Business Strategy
Product Quality
Quality control - burning shoddy products in 1990s
Winners of industry competitions for reliability and performance
Supplier of choice, even with rivals
Enhance product duration by making sound decisions concerning future development
"stacking" vs "trenching"
Presented by:
Ge Gao,
Chelsea Gilmore,
Christian Jagodzinski,
Elizabeth Leung,
Ariana Wu

Entry Barriers
Requires high capital investment in plants
Economics of scale
Experience benefits
Large firms already invested in R&D
Compensation packages for employees
High production technology
Have great bargain power
Only few suppliers in the market
Have long-standing relationship with big purchaser
Limitation locality and transportation
Substitute products?
No effective substitutes available
Great bargaining power
Price sensitive
Many providers in the market
Low switching cost
High competition
Small price differences between firms
Chineses firms enter market with price advantage
Technology is rapidly changing
Price of new DRAM products drop significantly a few quarters after launch
Customization adding value to niche products
Major production lines share one core design to lower cost
Single R&D/production facility located in Korea, allocating best talent and better cooperate between departments
High capacity memory chip with reasonable price
Mass production - Economies of Scale
Decision on product design-"stacking" vs "trenching"
High compensation coverage for employee
Promote young talent, high wages compared to industry
Establish global management team - non-Koreans
Inner-organization competition to encourage innovation
Cost Leadership
Before 2003
2003 Going Forward
Experience Curve
Industry Analysis
Business Level Strategy
Value and Cost Drivers
Competitive Advantage
Samsung: massive 22% of Korea's exports in 2004
Integration Strategy:
Price Premium: 14.5%
Cost Advantage: 24.4%
Tailor products to specifications of customer around core design
Example: Simultaneously developed new flash memory chip specifically customized for Sony and Nokia
1,200 variations of DRAM products
Unprecedented in industry
Cutting-edge, legacy, and specialty products
Older legacy products and specialty niche products are most profitable
Samsung: 44% higher Operating Margin in legacy products than competitors

Internal competition across global R&D sites - frontier DRAM
Merit-based promotions (breaking traditional Asian mold)
Global business skill programs
High investment in employees
Culture enhances productivity and innovation - thus value
Innovation & Company Culture
Raw Material Savings
Substantial Buying Power
Large volume - negotiation
Economies of Scale
Largest producer in industry
Spread Fixed Costs over large # of units
Highest Yield Rate: 80%
Best Process Technology
Design Rule - more product types
Larger wafer - more chips
Larger wafer significantly lowered costs - gained #1 market share
Risky, first entrant advantage
Process Technology
R&D and Depreciation cost savings
Single site facility - 12% savings
Collaboration in engineering
Economies of Scope
Lower labor costs
Core design - Produce multiple products on each products line
Lower customization costs
Chinese firms are entering the market with huge amounts of foreign investments and government subsidies
Incentives to collaborate with Chinese firms: engineering talent, tax incentives, cheap credit, abundant land
Risks: Intellectual property rights, potential rival, and unique corporate culture
How should the senior management team react to the threat of Chinese competition?
Strategic Challenge
more paper?
Thank You!
Full transcript