Samsung Electronics
“Creating new lifestyles for the world”
Wilfredo F. Acevedo
Michael L. Bokor
John C. Kluka
Daniel G. Koetter
David R. Pettengill
Overview
Line of Inquiry
Strategic Positioning
Marketplace Differentiators
Success Factors
Conditions of Sustainability
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Strategic Positioning
South Korea’s cultural advantages are
diminishing due to an effervescing view of the
population against corporate culture.
• Invest in Thailand and/or Philippines
– Give us favorable business incentives
– Cultural attitudes towards corporations are
similar to those in South Korea prior to the
present
– Philippines has been cited as "the world's top
source of knowledge workers"
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Strategic Positioning (cont.)
Taiwanese government has a very generous
tax code.
– Offered to local Taiwan companies
– Prepare joint venture or partnership to take
advantage of these tax breaks
– WTO review of Taiwan’s compliance
Will the Taiwanese government be leery of allowing
outside firms with a strong market share in
Taiwan?
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Strategic Positioning (cont.)
• Diversification of factories and plant
locations would minimize the effect of
fluctuations in the exchange rate.
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Marketplace Differentiators
What makes Samsung stand out?
• According to President Kun Hee Lee;
– Leading companies negligence
– Pure Luck
– Predecessors sacrifice
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Marketplace Differentiators (cont.)
Outstanding brand name recognition
– Samsung is the 17th most recognized
company in the world
– 24,000 researchers at 17 R&D sites around
the world
– Fastest growing in the world for the 3rd
year in a row.
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Samsung’s Current Market share
http://webct.rpi.edu/SCRIPT/MGMT_1100_03_0601/scripts/serve_home
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Success Factors
Samsung has remained one of the most
solvent companies throughout the past four
years.
– Samsung’s assets are the most liquid of its
competitors
– Its quick and current ratios hover around one for
consecutive years
9
Success Factors (cont.)
• Company’s ongoing investments in
manufacturing capacity
• Commitment to advancing technology and the
high barriers to entry in the memory business
• Samsung’s profitable memory business has
enabled a continuous investment in 300mm
wafer capacity.
10
Success Factors (cont.)
• Already successfully transitioned to 90nm
process technologies and has developed a
groundbreaking 70nm process that will begin
producing chips next year
• By the end of 2005, one out of every three
300mm wafers will have been produced within
Samsung FABs.
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Solvency-Current Ratios
Current Ratio - relates to the liquidity of the company
2004 2003 2002
2001
2000
Samsung
.93
1.03
1.03
.38
.35
Hynix
1.35
.82
.89
.65
.33
Micron
2.13
2.06
1.58
2.02
3.58
Infineon
1.41
1.41
1.98
1.35
.81
Elpidia
2.03
1.12
.41
na
na
• The ratio should be at or around the number one to show
optimal liquidity standing.
• Samsung’s 2004 current ratio shows the most liquid as
compared to all other firms. Samsung also leads its competitors
in 2003, and 2002.
• Multiple factors could have affected Samsung’s 2001 and 2000
financials (i.e. acquisition, buy-back of stock, etc.)
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Solvency-Quick Ratios
Quick Ratio
2004
2003 2002
2001
2000
Samsung
1.23
1.27
1.24
1.14
.59
Hynix
1.02
.56
.52
.41
.17
Micron
2.99
2.71
2.05
2.81
4.57
Infineon
1.92
1.84
2.49
1.76
1.31
Elpidia
2.36
1.31
.56
na
na
• Samsung’s quick ratio shows improved liquidity between
2004 and 2003.
• The firm should focus on steadily reducing the current ratio
to improve overall liquidity.
• In 2004, Hynix shows the best liquidity standings, however,
shows overall unstable financial fluctuations.
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Management Style and Culture
Chaebols - South Korean business
conglomerates.
• The Korean word meaning business group
• Large, family-controlled Korean corporate
groups, assisted by government financing
• This familial governance is being heavily
restricted by antitrust laws.
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Management Style and Culture (cont.)
GFRI’s (Government Financed Research Institutes)
– Korea Development Institute
– Korea Institute of Science and Technology
• Think tanks for the government in formulating
economic and technological policy.
• Provided technical know how to commercial
enterprises.
• Provided an essential infrastructure for Korea to
absorb and improve foreign technologies.
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Management Style and Culture (cont.)
• Samsung should attempt to get back some
of its millions or outstanding shares in
order to attain a more balanced network
that does not leave them susceptible to
foreign hostile takeovers.
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Conditions of Sustainability
With technology expanding at such a rapid
rate, we must keep our strategies up to date
as well.
• Who do me make partners with?
– Supplying DRAM for Playstation 3
– Samsung DRAM is integrated into the I Pod
– Also provide DRAM for Nokia, Motorola, and
Microsoft
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Conditions of Sustainability (cont.)
• Samsung has focused on high profit margin
technologies in the past
– Focused on highly specialized machines
– Shied away low profit margin DRAM
technologies
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Conditions of Sustainability (cont.)
• Samsung is an industry leader
– First movers have huge advantages
– First company to set up FAB in U.S.
– Releases new products before competitors
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Threats to Competitive Advantages
Samsung’s Chaebol effectiveness
– Subsidized loss making credit card unit,
Samsung Card
– Pleaded guilty to price-fixing charge
Issues like these, within a company, can halt
relations and corrode a company from the
inside, taking the attention off competitors.
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Research and Development
Only 3 Chinese universities are currently
developing SRAM or DRAM technologies.
– China Academy of Sciences
– Tsing Hua University
– Lishan Electronics
Are there any South Korean universities
researching SRAM or DRAM?
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Research and Development (cont.)
Where does Samsung stand in
relation to evolving technologies?
– SOI’s (Silicon on Insulator)
– Moving past CMOS and MOS
– Role of BK21
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DRAM Expected Market Share
http://www.channelregister.co.uk/2005/11/08/dram_market_q3_05/
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Patents
• Patent infringement lawsuits between
semiconductor companies are not unusual.
• The major semiconductor makers are almost
constantly involved in litigation, often suing a
company while at the same time collaborating
with it on some other area of research or
development.
• 1/29/02 Matsushita Electrical Industrial Co. LTD.,
better known as Panasonic sues Samsung for an
alleged three copyright infringements.
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Patents (cont.)
• Looking a patent involving the input of text
or drawings through a virtual screen.
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DRAM Speed Evolution
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SWOT Analysis
STRENGTHS
OPPORTUNITIES
•Innovation
Strong product line
Brand equity and recognition
Research and Development
Ability to capitalize on opportunities for
improved efficiency
Ability to acquire or develop new
information and distribution technologies,
on a timely basis and without exceeding
budget requirements
Overall financial stability
•Emerging markets, specifically
Russia, India, and China
Online retailing
3G Market
 Strategic alliances with major
consume electronics manufacturers.
Accessories and gadgets
Mass customization
Virtual Retailing
WEAKNESSES
THREATS
Technology is quickly outdated
Corporate structure not indicative of the
current era
Costly product failures
Inconsistent sales growth
High dependence on semiconductor
industry
•Shift away from PC’s
Consolidation of the PC business
Slowing DRAM demand
Foreign currency fluctuations
Changes in the global or local
conditions, including those due to
natural or man-made disasters or
energy costs, that could affect
consumer purchasing, the cost and
availability of raw materials
Real estate rates and availability
Battle for market share
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5 Force Model
Threat of New Entrants – (Low to Moderate)
– Due to the extremely high capital investment
needed for entrance into this industry, the threat
of new entrants is low to moderate. At this time,
the following four companies dominate 75% of the
industry: Samsung, Hynix, Infineon, and Micron.
Brand recognition is a key element that detracts
entrants because from the beginning of entrance,
there is only 25% of market share to battle for.
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5 Force Model
Bargaining Power of Buyers- Low and High
– Retailers- HIGH: In today’s marketplace,
companies are more reliant on key retailers to
distribute their products. The most prominent
example of this new trend is seen with the
contractual agreement between Apple and
Samsung.
– End Users- LOW: Due to the vast number of
consumers in the DRAM industry, the buying
power is low. It is also important to note that the
items categorized in this industry are both
essential and non essential items.
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5 Force Model
Threat of Substitutes- Moderate
– In the DRAM industry, there is a moderate
diversification of DRAM producing companies.
There are only a few key players and they have
pretty much marked off their territory in retail
markets.
Rivalry- High
– Rivalry is extremely high and is continuing to
intensify within this industry, with Samsung being
the dominant player. In order to maintain
substantial market share in the semiconductor
segment, having a competitive advantage to
differentiate your product is essential.
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5 Force Model
Supplier Buying Power- Low
– The companies in the semiconductor
industry, while powerful themselves, have
relatively low supplier power. As previously
noted, product standardization is a sign of
buyer, not supplier, power.
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