Essay on Samsung Electronics Strategy

2344 Words Oct 10th, 2011 10 Pages
Samsung Electronics

Prepared by: M. O.
Prepared for: Dr. N. C.
Course: Organizational Strategy, MGM 6123, Fall 2009

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Date: October 5, 2009
H. State University

Samsung Group is one of the leading global conglomerates originating in South Korea, termed chaebol in native terms. Their sales in 2004 climbed to $134billion with 337 overseas operations in 58 countries and they employed 212,000 people worldwide. They have myriads of businesses in a wide variety of industry sectors including electronics, finance, trade and services (Siegel and Chang, 2005).

In 1974 a semiconductor company in South Korea started ‘wafer’ production. This was purchased by Samsung Company who merged the semiconductor company with their
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by 2003.

Memory industry: Semiconductors were classified into two broad categories, memory chips and logic chips (Siegel and Chang, 2005). Memory chips would be further classified into DRAM, SRAM and flash memory. Samsung was in the business of designing, manufacturing and marketing all these three category of products. It was a highly specialized industry requiring high start up costs and tacit knowledge in semiconductor technology. It was a technology that was continuously growing more complex.

Rivalry within the Industry: A large number of Chinese firms were about to start competing. These firms were willing to sacrifice profits in order to gain market share as they had investment money pouring in from foreign and local investors.

Buyers: The customers of memory chips were largely original equipment manufacturers (OEM) but none of them controlled more than 20% of the Personal Computer market worldwide (Siegel and Chang, 2005). The OEMs were highly price sensitive because memory comprised a significant percentage of production cost for PCs. Despite this fact, they were willing to pay a premium for products as long as they guaranteed reliability.

Entry Barrier: The entry barriers in the memory industry were high requiring high capital investment, high precision and complicated technology. Average time for building a plant was 18 months and average cost was $200 million in 1985 which climbed to $3 billion in 2004

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