Economics of Strategy
INTRODUCTION The Samsung Group is a multinational conglomerate corporation headquartered in Samsung Town, Seoul, South Korea. It is the world's largest conglomerate by revenue with annual revenue of US$173.4 billion in 2008 and is South Korea's largest chaebol. The meaning of the Korean word Samsung is "TriStar" or "three stars". As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future." This new vision reflects Samsung Electronics’ commitment to inspiring its communities by leveraging Samsung's three key strengths: “New Technology,” “Innovative Products,” and “Creative Solutions.” -- and to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all. Samsung Group formed several electronics-related divisions, such as Samsung Electronics Devices Co., Samsung Electro-Mechanics Co., Samsung Corning Co., and Samsung Semiconductor & Telecommunications Co., and grouped them together under Samsung Electronics Co., Ltd. in 1980s. SAMSUNG’s aim is to develop innovative technologies and efficient processes that create new markets, enrich people’s lives and continue to make Samsung a trusted market leader. Today, Samsung Electronics global presence includes a total of 111 subsidiaries in the form of production subsidiaries, sales subsidiaries, distribution subsidiaries, research laboratories and eight overseas business divisions representing North America, Europe, China, Southeast Asia, Southwest Asia, Central and South America, CIS, the Middle East and Africa.
Porter’s Diamond Analysis for Korea/Samsung
Product Dimension To build a unique competitive advantage, Samsung followed a well laid out product growth strategy. These strategies can be examined under (a) product life cycle (b) product price level and (c) product diversification. Samsung followed a reverse order if we look from the product life cycle perspective. It started its operation in 1971 with manufacturing monochrome televisions which were in the declining stage in the advanced market. It then went on to manufacture colored televisions in 1977 which had already reached the mature stage in the PLC in other markets. It tapped the videocassette recorder (VCR) and microwave ovens (MWO) in its growth stage in the market by bridging the technology gap and reaped revenues. In early 1990’s SEC manufactured niche products such as DRAMs and digital videodisk (DVD) and entered this market in its introductory stage through agility, innovativeness and creativity. In 1992, Samsung became the market firm to many companies by being the largest producer of memory chips and second largest chip maker in the world only after Intel. Through innovation Samsung manufactured its first liquid screen display in 1995 and within ten years became the world’s largest liquid-crystal display panel. Tapping the smart phone market in the growth stage, Samsung became the world’s largest phone maker by unit sales in the 2012. From the price perspective Samsung started manufacturing products that were low end of the price range and then gradually moved up to the niche end products using innovation and high end technology. Starting from low end products was a strategic choice as there was low national income and the market had limited purchasing power, the JV partners were unwilling to share their technology and the availability of a niche market in US for the low end models. Samsung product path choice has moved from commodity product to high end niche product market as it now captures the global market. Samsung has strategically limited its diversification in the electronics-related area only. It follows a related product diversification strategy. It started with consumer electronics and home appliances, and then moved to personal computers and...