Case: #10 Samsung Electronics
Samsung Electronics (Korean) faces the prospect of large-scale Chinese entry into its DRAM chip business. Before deciding how to respond it should establish the sources of its competitive advantage. Does the company have a distinct dual advantage of being both low-cost and differentiated? This case provides detailed cost and pricing estimates across all significant DRAM product generations and product architectures. After analyzing the multiple sources of Samsung's competitive advantage you are invited to make recommendations about how Samsung should respond to the growing Chinese threat of entry. It should be noted that for the father of Competitive Strategy, Michael Porter, it was axiomatic that firms could not pursue both lowest cost and differentiation strategies simultaneously. His research showed that firms that tried to bridge this contradiction became "stuck in the middle", doomed to lower than average profits. That was twenty six years ago. Have technological and economic developments changed that principle?
Case Preparation Questions
1. What recommendation would you make to Chairman Lee regarding Samsung's response to the threat of large-scale Chinese entry? 2. What were the sources of Samsung's cost advantage in DRAM's in 2003? 3. What were the sources of Samsung's price premium in DRAMs in 2003 4. What kind of advantage are the Chinese entrants seeking? How close are they to achieving that advantage? 5. How much of Samsung's performance is based on the reputed low-cost advantage? 6. Can Samsung's low-cost advantage withstand the Chinese threat on costs? 7. If Samsung is both low-cost and differentiated, how does it do both? 8. Why can't more firms in other industries do the same