Samsung China

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SAMSUNG CHINA
September 12, 2002

BUS 610 (Man. Econ.)
J. Suyderhoud, Instr.

Castaways
Alex H.
Brandon M.
Chandra H.
Rajesh B.
Stuart W.

RuralUrban
Low-Med endBarriers to Entry:Barriers to Entry:
Economies of ScaleHighEconomies of ScaleHigh
Product DifferentiationLowProduct DifferentiationMed
Capital RequirementsHighCapital RequirementsHigh
Access to distribution ChannelsHighAccess to distribution ChannelsHigh
Cost disadvantages Independent of ScaleMedCost disadvantages Independent of ScaleMed
Government PolicyMedGovernment PolicyMed
Expected RetaliationHighExpected RetaliationHigh
The Entry Deterring PriceMedThe Entry Deterring PriceHigh High-EndBarriers to Entry:Barriers to Entry:
Economies of ScaleHighEconomies of ScaleHigh
Product DifferentiationHighProduct DifferentiationHigh
Capital RequirementsHighCapital RequirementsHigh
Access to distribution ChannelsHighAccess to distribution ChannelsHigh
Cost disadvantages Independent of ScaleHighCost disadvantages Independent of ScaleHigh
Government PolicyMedGovernment PolicyMed
Expected RetaliationLowExpected RetaliationHigh
The Entry Deterring PriceLowThe Entry Deterring PriceLow I.Threat of Entry

DeterminantsRatingSignificance
Economies of ScaleHighNecessary to produce high volume in order to be profitable Product DifferentiationHighThe brand and quality perceived with the brand are important in this market Capital RequirementsHighNeed significant amount of investment to enter the market Access to distribution ChannelsHighThe Chinese market is structured in a way that makes it difficult to gain access to distribution channels. You need a high distribution rate in order to succeed in this market Cost disadvantages Independent of ScaleHighTechnology and the learning curve creates high barriers Government PolicyMedGovernment policy is rated medium, as although they encourage foreign investments, the mandatory five-day workweek would create over-employment. Expected RetaliationHighSony and Matsushita, controlling 75% of the segment with experience, are expected to retaliate fiercely. The Entry Deterring PriceLowForeign brands command a premium over the domestic. The entry price is attractive to new entrants because of high profit margins. Based on the table above, the barriers to entry for the high-end/urban market seem very high. To illustrate, in the table above, the high-end/urban portion of the matrix refers to 29-inch model color TV. In this area, the majority of the determinants are rated as a high entry barrier. Government policy is rated medium, as although they encourage foreign investments, the mandatory five-day workweek would create over-employment. Sony and Matsushita, controlling 75% of the segment with experience, are expected to retaliate fiercely. The only positive, the entry-deterring price, is attractive as foreign brands currently command a premium and the urban dwellers have the necessary income levels. In view of the cons outweighing the pros, we find that the prospects of profitability for making and selling the 29-inch TV in China are low based on Porter's Threat of Entry force. The grid below is a breakdown of the threats to entry for the High-end Urban segment of the market.

RuralUrban
Low-Med endBargaining Power of Suppliers: Bargaining Power of Suppliers:
WorkersMedWorkersMed
CapitalLowCapitalLow
Raw MaterialsMedRaw MaterialsMed
High-EndBargaining Power of Suppliers:Bargaining Power of Suppliers:
WorkersMedWorkersMed
CapitalLowCapitalMed
Raw MaterialsMedRaw MaterialsLow

II.Bargaining Power Suppliers

Our group found that information relating to the bargaining power of Suppliers was limited. However, we assumed that for all segments, the worker's bargaining power, capital and access to raw materials were medium to low. We arrived at this conclusion because...
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