Improvement in credit rating.
In June of 2002 Moody’s increased the company’s credit rating to Baa1, while Standard & Poors raised its rating to A- in November 2002. This represents the highest ratings since Samsung’s previous high in 1996. This improvement suggests that the company has now recovered from the effects of the Asian financial crisis, and the higher credit rating positively impacts upon its corporate image.
Diversification as a source of competitiveness
A key source of the company’s competitiveness is the continuous transformation of the business through diversification. Samsung achieved surprisingly strong results due to competitive pricing and a broadening portfolio of products catering to premium demand. This development differed from that of its competitors which had a difficult year and allowed Samsung to expand its market share.
Strength of telecommunications businesses
In 2002-2003 the firm’s advanced mobile phones with color-screens, voice dialing and cameras have strongly boosted its sales. Its handset business generated a 48% increase in sales in 2002. Samsung has now doubled its market share of mobile phones in two years, and has become the third largest mobile phone manufacturer globally.
Decline of Memory Chips Business
The company faces falling prices for its memory chips. As these constitute a substantial proportion of the company’s revenues, price decline is a major concern. In late 2002 the firm announced a major $1.2bn investment in its memory chip business by building new semiconductor facilities, however this may not halt a short term decline in sales.
Fluctuations in telecommunications demand
The Samsung Group attributes its financial success over the past year to its telecommunications business which sold over 46 million units in 2002. This positively impacted upon revenues, although it remained the only activity preventing Samsung from revenue decline. A slump in demand is a realistic...