Student: Guilherme Filho
Penn ID: 85730403
1. What are the sources of Samsung’s competitive advantage? Validate your arguments regarding competitive advantage with evidence from the case.
Differentiation – There are two main sources of competitive advantage that increase the WTP for Samsung customers. The first one is the Product Mix. Samsung offer to its customers a huge variety of products, ranging from the cutting-edge technology to more basic products. It also offers customized products to focus on niche markets. With this strategy, Samsung is able to compete in a broad range of segments in the market, usually offering superior products. In 2003 for example, Samsung offered over 1,200 different variations of DRAM products. Given that DRAM products were conventionally thought of as commodities, the ability to produce 1,200 different varieties was unprecedented in the memory industry. If we analyze the table with the DRAM Production volume by product line in 2003 (Exhibit 5), we can see that Samsung is the only company with a significant volume in all the products categories, while the competitors are more focused on only two or three product lines. Another factor that differentiates Samsung from its competitors is the quality of the products and the ability to offer customized solutions. The company routinely won key industry competitions for reliability. Many customers, even rivals of one another, named Samsung their supplier of choice. For instance, the company simultaneously developed a new Flash memory chip for Sony Ericsson and a Flash memory chip customized for Nokia. The fact the Samsung was famous for its superior quality had a direct impact in their customer’s WTP and allowed Samsung to charge a higher price. If we compare the price of a DRAM 256Mb (Exhibit 7a) for example, we can see that Samsung charges 12.7% more than the weighted average price of its competitors.
Low Cost – The fact that Samsung...