Samsung Electronics Case Write-Up Essays -- Business Analysis SWOT

Samsung Electronics Case Write-Up 1. The Memory Industry (5 points). Conduct a five-forces analysis of the memory industry. You will need to rate each of the five forces in this industry as high, medium or low and then explain briefly why you selected this rating. A) Threat of New Entrants(Barriers to entry) (MEDIUM) Samsung, being a global company with net revenues of over $30 billion, had established an integrated supply chain with economies of scale and scope. New entrants were required to come in on a very large scale for effectively minimizing costs, which the Chinese companies succeeded in doing. Samsung had scale of economies in research and chip fabrication and was world leading memory producer for all types of PC’s, digital cameras and other electronic products. Samsung had demand side benefits of scale as it demanded superiority in product quality and efficiency and it was a well established and trusted brand name ($5.2 billion in 2004). High switching costs were associated with the industry as due to established production lines and multibillion dollar commitments, it would be extremely costly and time consuming for a company to divest into different technologies and design commitments. When IBM, Toshiba and NEC discovered problems with their â€Å"trenching† method of incorporating cells into tiny chips, they lost years of development time trying to switch to the â€Å"stacking† method. The cost of production facilities rose to $3 billion and hence created a higher barrier of entry for smaller level competitors. As most of the capital required in the semiconductor industry is used in Research and development, it is unrecoverable and enhances the eff... ...me the administrative barrier and enjoy the same benefits as a regular Chinese firm. They will also receive easier access to finance, tax incentives and other essential resources to help them reduce the Chinese competitive advantage. In doing so they must take precautions to ensure that their technology and intellectual property is not replicated as there are several flaws in the Chinese administrative system. They could also buyout an established local Chinese semiconductor firm that has some brand recognition in the market which could give them a local presence. Lastly, they could cede the lower end of the market to the Chinese firms and invest in higher value, cutting edge memory products that would be hard to replicate. All three options would be viable in different ways and could help Samsung overcome their primary threats.