Founded in 1938 in Taegu, Korea, Samsung was a small export business. In 1980, the company entered the telecommunications market and is now worth $224.7 billion. As of 2011, Samsung was ranked the 24th largest company in the world by revenue. Samsung focuses on four areas; digital media, semiconductors, telecommunication network, and LCD digital appliances. The semiconductor-business area includes semiconductor chips such as SDRAM, SRAM,NAND flash memory; smart cards; mobile application processors; mobile TV receivers; RF transceivers; CMOS Image sensors, Smart Card IC, MP3 IC, DVD/Blu-ray Disc/HD DVD Player SOC and multi-chip package; and storage devices such as optical disc drives and formerly hard disk drives (Samsung, 2010). Bargaining Power of Buyers
The demand for new technology is always high so, Samsung, as the leading supplier of DRAM, must be innovative in developing new technology for the semiconductor market. Samsung DRAM is not a standardized product because they have the most advanced technology in DRAM production, for example their Green DDR4 DRAM. They use their ultralow-power memory technology, achieve memory power savings of up to 67% and operate at voltages as low as 1.2V while enabling twice the bandwidth (Samsung, 2012). This makes Samsung’s product unique and more preferred over other DRAM producers due to their innovative technology. This makes the bargaining power of buyers low.
In Samsung’s case, it is not worth selling DRAM in small volumes, since it does not bring large profits to the company and requires the company to open new distribution channels. They only contract and sell to those companies that purchase in large volumes for example, Apple, Edge Electronics, Dell, HP, Sony and Lenovo (Howard, M 2011). These companies develop computers, phones, GPSs, printers, cell phones, DSLR cameras, DVD players, smart TVs, automobiles etc. (Samsung, 2011). For Samsung there is a very low chance of backwards integration because they are worth USD 224.7 billion. Companies such as Apple do own that much money and is possible for them to buy out Samsung, but because apple does not specialize in semi conductors, telecommunication network, and LCD digital appliances, Apple would most likely not buy a company like Samsung. Switching costs for buyers are medium because Samsung is the most technologically advanced semi conductor manufacturer, so companies can either stay ahead of the game with Samsung or stay in the game with a less advanced company. This means that if companies want the latest products, staying with Samsung would benefit them. Buyers are well informed about the Samsung’s costs and expenses because many case studies and post on the web and are available to the companies that are buying. It costs Samsung US $1.50 to make one unit of DRAM because they manufacture many units making the economies of sales low. This attracts businesses to buy Samsung DRAM opposed to other competitors in the semiconductor market, but because of this buyers have high power because the company can buy a unit of DRAM and take it apart easily and see what the DRAM is made up of and how much each piece would cost. The demand for Samsung DRAM is strong and highly regarded by many companies. They are successful with 45% of the market share in the DRAM market. Samsung takes a low cost position, has product uniqueness and puts emphasis on production efficiency. By taking the risk in investing in the development of new technology, unlike other companies, Samsung took the lead in the semiconductor market. Samsung’s competitive advantage is that they have technologically driven niche products; they have a strong infrastructure, their wide range of products, high investments for R&D and financially strong (Krushnisky, S 2010). Bargaining Power of the Suppliers
The power of the suppliers is quite high due to the quality of the equipment used to produce the DRAM, and the efficiency of the suppliers. These are all...
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