Samsung Competitive Analysis

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1. Sources of Samsung’s cost advantage in DRAMs Samsung’s cost advantage is clearly visible from the comparison of costs (and their elements) that were borne by the company and its competitors in 2003 (Tab. 3): Samsung’s overall cost was 24 per cent lower than the weighted average cost of the other four producers; two most significant elements of the cost structure, i.e. raw materials and labour, were 36 and 27 per cent lower respectively. When expressed by means of a relation of average selling price to costs (“productivity” of cost elements), the differences are even more visible (comp. Tab. 4 ): overall superiority of Samsung over its competitors exceeded 51 per cent! The cost advantages related to raw materials may be explained by…show more content…
3. How Samsung should react to threat of large-scale Chinese entry? In my opinion, none of the two options of reacting to the Chinese “menace” that were presented in the case study, should have be chosen by Samsung as the only one. Rather, a mix of the two seemed to be an optimal approach. Samsung’s unique ability to maintain the low-cost and, at the same time, differentiated production should have been maintained, but – simultaneously – certain aspects of the changing industry environment might have been taken advantage of as well. It was not necessary for Samsung to desperately look for ways to decrease its labour costs (which is usually a reason for established companies to move their production to China): its cost advantage over competitors was supposed to remain for some time. On the other hand, in line with an old Chinese saying: “keep your friends close, but the enemies even closer”, it was not advisable to ignore the rising competitors (as the industry had done years earlier with regards to Samsung itself). Earlier of later, China itself was posed to become a significant (if not
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