Case Summary S e m i c o n d u c t o r I n d u s t r y C r i s i s
Growth : Semiconductor Industry has 16% of growth rate On average, 1960 - 2000 1980s, Samsung Group more focus on Electronics market and found Samsung Korea Semiconductor
Electronics, manufacturing
company founded, began
in South Korea built
C r i s i s : 2 0 0 1 – 2 0 0 2
with Wafer production.
Recovery : Samsung survived crisis with their competency and Branding strategy
Samsung Brand being listed as 21st valuable brands in the world by
And acquired by Samsung
Interbrand Corp.
latterly
8” Wafer technology developed, dramatically shift to Samsung of production capacity Samsung Group started Electronics industry in television market
1960
1969
1974
1980
1992
2004
2005
Industry Summary Semiconductor Industry
Market Size
Avg. Growth rate = 16% Sales = $200 Billions
ตลาด
DRAM in 2003 ($19.5 Billion)
68.2
Samsung Micron
521.5
896.4
(1996 – 2000)
Infineon Hynix SMIC
535.3
Logic Chips
672.8
19%
3%
33%
Sales = $166.3 Billions
20%
Memory Chips
Production Volume in million unit 256 Mbit equiv. EXHIBIT 4
Market Share ตลาด DRAM in 2003
Sales = $33.7 Billions
FLASH
32% Mobile devices
SRAM
10% Server & Workstation
25%
Samsung Micron Infineon Hynix SMIC
DRAM
58% Desktop
Industry Summary DRAM Production Electronics design tools; Samsung develop in-house Wafers; Samsung owned technology to produce DRAM with the largest wafer (more production capacity) Materials; Semiconductor (Silicon and Germanium) are costly in production process and has a few suppliers System Firms; Samsung can customize to met customer requirements
Past Strategy and Challenge Past Strategy • Kun Hee Lee’s Strategy is learn from competitors, Samsung invests in DVD and Video products for billions, Less priority in quality control (sampling for quality check will be done in some parts for a product), concentrate with high volume production
• Economies of scale production, propose low price products, Line stretching marketing strategy and Variety of electronics products Overall Low-Cost Provider is the main strategy of Samsung
Past Strategy and Challenge Challenge Strategy • Samsung focused more on niche market and low price strategy still be a main strategy for protecting their market shares from China's companies • Once Samsung targeted on niche market, new products development needed while a pricing shall be strongly considered to competitive in the market Best-Cost Provider become to the main strategy for next growth of Samsung
Macro Environment Analysis Political factors
Technological factors
(+) The industry is on focusing in several countries, more government supports for technology development (+) South Korea has strong relationship with others
(+) Technology market is moving fast (+) No trends of new substitute technology
Global force (-) Labor cost is trendy higher
General economic conditions (-) Economics regression of the world (-) Instability of Exchange rates (-) Interest rates volatility (-) Perfect competitive market coming
Social force (-) Environmental Conservatism’s Resistance
Natural environment (-) Products is more sensitive with climate
Difficult to Survive
Industry Analysis Analysis result : Threat of New Entrants : (+) High Investment required (+) High Production Technology (+) High Switching cost
Bargaining Power of Suppliers : (-) Critical materials (-) A few of suppliers (-) the most suppliers is larger company
Samsung overcome the factor with good suppliers relationship management
Semiconductor industry is unattractive market for new entrant
Bargaining Power of Buyers : Rivalry among Existing Competitors : (-) High competition (-) Market moving fast (-) Price is competitive factor
Threat of Substitute Products : (+) No substitute technology
(-) Commodity Products (-) more provider in the market (-) Low switching cost for buyers
Samsung differentiate the market by proposes products customization, Products can be customized to meet customer’s preferences
Competitor Analysis and Comparison
Analysis Result
Internal Analysis
s e i t i v i t c A t r o p p u S
s e i t i v i t c A y r a m i r P
Firm Infrastructure : Adaptability culture organization Human Resource Management : Acquire Korean global talent Technological Management : Products development competition Procurement : Economies of scale purchasing, Focus on potential suppliers Inbound Logistics : Focus on time to market, Volume, consistency
Operations Outbound : Logistics : Focus on quality, high capacity and low defect
Relationship with Suppliers
Focus on time to market, consistency
Marketing & Sales : Variety of products, older-tech. promotion
Services : Customize to customer demands
Relationship with Buyers
Internal Analysis
s e i t i v i t c A t r o p p u S
s e i t i v i t c A y r a m i r P
Human Resource Management : Acquire Korean global talent Technological Management : Products development competition Procurement : Economies of scale purchasing, Focus on potential suppliers Operations : Focus on quality, high capacity and low defect Relationship with Suppliers
Marketing & Sales : Variety of products, older-tech. promotion
Services : Customize to customer demands
Relationship with Buyers
Strengths in Samsung’s Value Chain
Resource, Capability and Competency
Resource Tangible
• • • •
Financial : Cash flow and Capital Organizational : 5 Business units Physical : Fab Manufacturing Technological : High capacity production line
Capability • • • • •
Intangible
Innovative products High capacity Varity of products Best quality Customize to customer’s demand
Competency
• Human Assets : Recruit promoted successor scholarship • Brands : Value $12.6 billion (21stof the world) • Company : Reward outstanding performance Culture do not punish failure
• • • •
Excellence HRM Effective procurement by volume Creativity human capital Effective production technologies
SWOT Analysis STRENGTHS • Process excellence • High competency • Strong researcher team • Good Organization Structure
OPPORTUNITIES • Market being growth • No substitute technology • High demands • Government supports
WEAKNESSES • Low quality of brand image • International cultural lacking • Inter-cultural crashing
THREATS • China competitors • Social resistance, environmental effects
Strategic Analysis % 0 2 Flash
?
Flash
h t w o r G t e k r a M
DRAM
• DRAM - Less profits, reduce investment SRAM
• Flash - More invests in R&D, gains market share is critical strategy • SRAM - Maintains the market
DRAM
SRAM
% 0
10X
Relative Market Share
0.1X
Strategic Group Analysis h g i H
t n e m p o l e v e D s t c u d o r P
• Continuous product improvement is very importance • Small company needs partners for more competitive advantage to survive in the market • Less competitive advantage / less margin (low price strategy needed)
Sized by revenue
w o L
Low
Average Selling Price
High
Past and Current Generic Business Strategy Analysis t e g r a T t e k r a M d a o r B t e g r a T t e k r a M w o r r a N
Overall Low-Cost Provider Strategy in the Past
Broad Differentiation Strategy Best-Cost Provider Strategy in the Present
Focused Low-Cost Strategy Focused Differentiation Strategy in the Future Cost Leadership Strategy
Differentiation Strategy
Business Strategy •
Sub-branding for penetrate to high-end market, higher positioning as high quality products provider
•
Build valuable brand / Communicate values to customer and more focus on flash memory products
•
More promotion and selling campaign for DRAM products, preparing for price war coming of China competitors
•
Develops new products with green technology, less energy consumption and toxic materials
Corporate Strategy •
Forward vertical integration for expanding business to downstream, utilizes strength of technology expertise, manufacturing resources and a large scale electronic materials provider to be a electronic devices manufacturer
•
Build up business in China, for blocking growth of China competitors and gain cost advantage from low cost manufacturing (lower labor rate)
Implementation Strategy •
Prepares organization that suitable for international business especially in China, recruits Chinese employee for faster familiar with china’s culture and market behaviors
•
Clearly formulation of forward vertical integration strategy, what business units should to do (e.g. computer, cellphone, data storage)
•
Keeps investment on R&D to be leader in innovation, technology and cost advantage production
•
Communicate vision and missions needed to employee
•
Align goals of all related business sections to consistent with corporate goal
