Porter Generic Strategies and Samsung Essay Example

style="text-align: justify">Samsung's low cost strategy implemented in lower cost structure – main R&D facilities are located in a single site, which helps solve problems in short time and affects directly on costs. Due to its size and as mentioned in the Porter's five forces section, the firm has highly bargaining power (this fact can assure low costs). Moreover, it has higher yield than its competitors and its products share a common core design.

Differentiation

Samsung is a technology leading firm; it's investing significant amount of money in R&D and creating a comfortable platform for innovation. Its strategy based on encouraging its employees by granting bonuses for high achievements. Moreover, it is preserving a high brand value do to its product reliability. In that field, we would like to mention that margins are much higher for differentiated products because they don't negatively affect overall cost-structure.

Additional strategy related ideas

Due to the high capital costs and learning required in the semi-conductor industry, Samsung sets high barriers for entrants. The firm strategy emphasis its importance in developing in human resources, due to high investment in employees and recruiting experts from all over the world. Moreover, the firm uses DRAM by supporting design firms, and in this manner creating new uses for its main product.

The Chinese Entrants and the advantage they are seeking The Chinese firms are using mainly the low-cost strategy and seeking for the price as their advantage. Moreover, the Chinese are willing to sacrifice immediate profits in order to increase their market share. They were able to do that thanks to easily raised money from local and international sources

and talented engineers. The Chinese firms struggled at the beginning suffering mainly from lack of necessary organizational experience and tacit knowledge required, but the financial back helped and still helping them to pass the first period of evolvement. The Chinese firms have already succeeded in applying their strategy and entering few low-cost products to the market. However, they have still a way to go becoming the price leader and a rival to Samsung, mainly due to Samsung's efficiency and technological dominance.

Samsung's reputed performance As we've noted earlier, Samsung take a mixed strategy of low cost and differentiation. If quantify is needed, we believe that 60 percent of their reputed performance based on its low-cost advantage, while the other 40 percent derives from the differentiation. The fact that Samsung's products are not only low-cost, but also very reliable is in fact what built their reputation among buyers and other firms. The emphasis on quality and the massive burning of flawed products back in the 90's gave Samsung a massive credit and positioned the firm as a trustworthy, creditable supplier.

Samsung's low cost advantage and the Chinese threat on cost As mentioned earlier, Samsung's low cost strategy implemented in lower cost structure – main R&D facilities are located in a single site, which helps solve problems in short time and affects directly on costs. Due to its size and as mentioned in the Porter's five forces section, the firm has highly bargaining power (this fact can assure low costs).

Nevertheless, the firm is worried about mainland Chinese companies that we're beginning to attack it in the same way that the firm itself attacked

the Japanese companies 20 years earlier. It is important to remember that Chinese companies enjoys a high level of support by its government, which subsidizing all infrastructure needs, providing cheap credit and lands and provides tax incentives that are crucial for the firms. Samsung is facing a dilemma with regarding to the rise of Chinese semi-conductor firms: it can choose to collaborate actively with Chinese partners, or it can increase its investment in cutting-edge memory products, particularly for new niche markets. The first option suffers from a major risk: due to unprotected intellectual property rights, collaborating with the Chinese may lead to the partner becoming a rival someday.

On the other hand, Samsung can choose not to teach the Chinese its professional secrets, and instead cede the lower end of the market to the Chinese while trying to develop more high-value niche products. We believe that choosing the second alternative would be more profitable for Samsung, leaving its competitors behind. In our opinion, adopting this strategy can assure Samsung withstand the Chinese threat on cost.