Question 1: What are the sources of Samsung's cost advantages in DRAMs in 2003? You need to run the numbers to get the answer. Analysis by cost breakdown Exhibit7b- 9, we could see Samsung’s cost advantage is visible from the comparison of costs. There are two most important points raw materials and labor; overall superiority of it over its competitors more than 50%. The cost advantages related to raw materials may be explained by better negotiated agreements with suppliers and possibly less shipping and distribution costs. Also there are other factors which include higher yields, HR side, etc. It has the way the firm built and maintained intellectual capital, stimulated innovativeness and creativity among employees. It had established an incentive-based remuneration system, it sponsored employees for PhDs and MBA education, and it created a friendly working environment, so employee can devote to solving problems at work. A long-term approach and investing in human capital eventually pays off resulting in higher productivity, better and cheaper products said by a HR director. The Samsung’s successful product mix strategy, it realized through wide differentiation of products that the company manufactured, in DRAM memory segment it was over 1,000 different types. To decrease the costs due to availability of attractive subsidizing from the government, lower labor costs. It enlarging sales to customers in the opening and growing market also which one of the market strategy. There are many important strategies, all new product development had to be kept in the Korean headquarters; technological leadership through cutting-edge R&D. Samsung started DRAMs business in the early 1980s, it raised up to the top of the industry since 1990s.
Exhibit 7a comparison of operating profit of DRAM in 2003(256Mbit equivalent)
| competitors' weighted average
| average selling price
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