he Samsung Electronics Company has become the largest conglomerate in South Korea over the past decade. Net sales of the Samsung Group totaled $135 billion in 2004 and has 337 overseas operations in 58 countries. Electronic, finance, and trade and services are the three core sectors within the Samsung Group. Semiconductor products are classified into two different categories of chips, which are memory and logic. The net value of Samsung experienced rapid growth from 2000 to 2004, growing from $ 5.5 billion to $12.6 billion.
We will use Porter’s five forces to analyze the industry structure and performance which will help gauge Samsung’s growth against its competitors. Entry into the semiconductor industry can be very costly and difficult because of high barriers to entry. These barriers include, economies of scale, high entry costs, and the difficulty in obtaining industry knowledge. In addition, firms like Samsung have established a strong reputation for quality and reliable products which serve as powerful barriers to new firms hoping to enter the industry. The decreased chance of new entrants indicates a less competitive and more profitable industry.
There are many buyers within the semiconductor industry, each controlling a relatively small share of the market. Samsung has a huge range of products they produce and can afford to do so at a low cost. Since the buyers control the industry and what is produced they have a significant amount of bargaining power. Furthermore, even though the amount of producers in the industry is fairly low, they offer many of the same products forcing them to compete on price. Samsung has a little above medium bargaining power with its suppliers. The semiconductor industry faces powerful suppliers but because defective memory is difficult and costly to identify, and could potentially destroy the entire value of Samsung’s product, it is very important for Samsung to establish a strong relationship with its suppliers. In doing...
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