Samsung Electronics Case Write-Up Essay

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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
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They provided a 5% discount to

high volume buyers as they did not depend very heavily on this industry for revenues.

There was a high cost associated with switching suppliers. As product quality was

primary in the semiconductor industry, trusted suppliers were given a premium and

switching a supplier meant putting the product quality as risk. There were no real

substitutes for DRAM and Flash memory and hence suppliers had a HIGH degree of

bargaining power.

C) Bargaining power of Buyers (HIGH)

Price conscious customers were a key element of the semi conductor industry. The

consumer base was highly fragmented and there was not a single Original Equipment

Manufacturer (OEM) that controlled more than 20% of the global PC market

share(2003). Fewer buyers purchased in higher volumes as they were offered discounts

for the same. Due to pressure on PC producers by consumers to offer lower prices, the

manufacturers found it extremely hard to negotiate prices. Hence the bargaining power of

buyers was extremely HIGH.

D) Threat of Substitute Products (LOW)

In 2005, there were no real substitutes that could effectively challenge DRAMs or Flash

memory. Creating new types of memory was extremely costly and could take years to

effectively

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