DRAM products
Samsung also identified and seized the opportunity to gain high profits through product differentiation by customizing and catering to niche markets, offering over 1,200 different variations of DRAM products. In order to understand the internal Environment of the company. VRIO framework will be used to analyse the internal environment and to help further understand the strategic position in the industry. Relatively low power of suppliers and large production factories allow Samsung to keep their cost low. Their low cost of production will enable them to enter into a price war with any company threatening to enter the market.
They have the ability to lower their price to the point where it will become too costly for any other company to enter the market will deter additional entrants. Their low cost production ability also allows them to increase revenues and reinvest more money back into wal mart's competitive advantage. Additionally, having all of their engineers on site allowed for quicker design times and cut 12% of construction fabrication costs. However, rarity is not really an issue within the industry. There are multiple companies all with similar technology.
Once Samsung can keep the low cost production system and reinvest to their R&D, they could achieve sustainable competitive advantage in the industry. Most customers are willing to pay a higher value for their products because they perceive Samsung to have better performance and superior design, quality, and service. The brand loyalty, brand reputation and quality(reliable product) are costly for the competitors to acquire or develop. The competitors also face a cost disadvantage in cost structures since Samsung has an outstanding low cost production system.
Moreover, Samsung’s major competitors do not have the cutting edge technology to quickly overpass the quality of Samsung’s product. It would be difficult and costly for their competitors to imitate their technology. Samsung does a fairly good job exploiting their capabilities because of them building brand loyalty and a high quality product. With all of those advantages it becomes difficult for their competitors to capture Samsung’s market share. Finally, Samsung invested heavily in its employees more than any other competitor allowing them to focus on innovation and productivity (Include HR policies).
Answer to question 1. Samsung employees a hybrid model of business level strategy which consists of cost leadership advantage and product differentiation. Samsung’s operating cost is $8. 90 per unit and it is well below the industry average $10. 3975 per unit. As of year 2003, samsung offers over 1200 different products. With a proper marketing strategy, Samsung built a high reputation and good brand image for its products allowing them to charge a premium price on most of its products. Answer to Question 2: Samsung has implemented their business strategy very well.
They were able to become not only the industry cost leader but obtain a large degree of product differentiation. Above, we conducted a VRIO analysis of Samsung and identified their competitive advantages. However, the advantages are only temporary because they are not rare and any company can imitate them by spending a large amount of capital. Until this point though, all of the competitive advantages that Samsung has created have created positive economic profit. These profits can be realized in the large growth in the company from 2000 to 2004.
Recommendations: Our recommendations are that Samsung continue to use their additional revenue from their low cost of production and higher margin to invest in R&D. This will ensure that Samsung has the best product on the market and continue to lower their production costs. By doing this, they will continue to make it costlier for new firms to enter the market. Investing into R&D is extremely costly/ high risk and could lead to failure if Samsung begins investing in the wrong type of products. However, if done properly, this investment can cement Samsung as the market leader and ensure high profitability for the future.
They have the ability to lower their price to the point where it will become too costly for any other company to enter the market will deter additional entrants. Their low cost production ability also allows them to increase revenues and reinvest more money back into wal mart's competitive advantage. Additionally, having all of their engineers on site allowed for quicker design times and cut 12% of construction fabrication costs. However, rarity is not really an issue within the industry. There are multiple companies all with similar technology.
Once Samsung can keep the low cost production system and reinvest to their R&D, they could achieve sustainable competitive advantage in the industry. Most customers are willing to pay a higher value for their products because they perceive Samsung to have better performance and superior design, quality, and service. The brand loyalty, brand reputation and quality(reliable product) are costly for the competitors to acquire or develop. The competitors also face a cost disadvantage in cost structures since Samsung has an outstanding low cost production system.
Moreover, Samsung’s major competitors do not have the cutting edge technology to quickly overpass the quality of Samsung’s product. It would be difficult and costly for their competitors to imitate their technology. Samsung does a fairly good job exploiting their capabilities because of them building brand loyalty and a high quality product. With all of those advantages it becomes difficult for their competitors to capture Samsung’s market share. Finally, Samsung invested heavily in its employees more than any other competitor allowing them to focus on innovation and productivity (Include HR policies).
Answer to question 1. Samsung employees a hybrid model of business level strategy which consists of cost leadership advantage and product differentiation. Samsung’s operating cost is $8. 90 per unit and it is well below the industry average $10. 3975 per unit. As of year 2003, samsung offers over 1200 different products. With a proper marketing strategy, Samsung built a high reputation and good brand image for its products allowing them to charge a premium price on most of its products. Answer to Question 2: Samsung has implemented their business strategy very well.
They were able to become not only the industry cost leader but obtain a large degree of product differentiation. Above, we conducted a VRIO analysis of Samsung and identified their competitive advantages. However, the advantages are only temporary because they are not rare and any company can imitate them by spending a large amount of capital. Until this point though, all of the competitive advantages that Samsung has created have created positive economic profit. These profits can be realized in the large growth in the company from 2000 to 2004.
Recommendations: Our recommendations are that Samsung continue to use their additional revenue from their low cost of production and higher margin to invest in R&D. This will ensure that Samsung has the best product on the market and continue to lower their production costs. By doing this, they will continue to make it costlier for new firms to enter the market. Investing into R&D is extremely costly/ high risk and could lead to failure if Samsung begins investing in the wrong type of products. However, if done properly, this investment can cement Samsung as the market leader and ensure high profitability for the future.