Then, they will be able to identify if anything is going wrong within the firm and take necessary steps to solve it. This case study analysis focuses on finding best strategies for Samsung Electronics to overcome the threats, thrown by Chinese competitors. To meet the goal of the study, I have done in-depth analysis on Samsung Electronics operational, marketing, human resource and technology management policies and tactics.
In chapter-4, with the help of management models which are designed to resolve common problems and challenges, I have tried to find out the reasons why Chinese firms are believed to occupy Samsung’s market shares in coming years. These models have worked as mechanism towards reaching each of the objectives of the study and the objectives are designed to make sure Samsung retain and increase market share. Finally, chapter-5 has been designed with possible solutions to the problem and a business plan which demonstrate a guideline for Samsung Electronics to hold on to their dominance in the future.
Acknowledgement This course work could not have been completed without the help of my teachers. First of all, I would like to thank all of my teachers who were being very co-operative and tolerant throughout my BA and MBA curriculums. Secondly, I acknowledge excellent library facilities and technological advancement of City of London, which allowed me to access ample amount of information related to my study. Then, I have to mention about brilliant support I have got from my parents. Last but not least, very special thank goes to my teacher, motivator and case study supervisor Dr.
Table of Figures: Figure 1: Cost of new Fab15 Figure 2: Competition in 199716 Figure 3: Competition in 200317 Figure 4: Chinese firms sale in 2002 and 200318 Figure 5: Plan of analysis22 Figure 6: Types and sources of secondary data25 Figure 7: List of Strengths, weaknesses, opportunities and threats. 29 Figure 8: SWOT Strategies30 Figure 9: Competitive Analysis32 Figure 10: The BCG Matrix34 Figure 11: BCG Matrix and Product Life Cycle36 Figure 12: 4Ps of marketing37 Figure 13: Marketing mix in different stages of product life cycle. 39 Figure 14: Curry’s Pyramid40 Figure 15: The Branding pentagram42
Figure 16: Hofstede’s cultural dimensions45 Figure 17: Competing Values of Organizational Effectiveness47 Figure 18:Innovation Circle49 Figure 19: Henderson and Venkatraman’s strategic alignment model51 Figure 20: Blue Ocean Strategy (Assen, M. V. et al. 2009)53 Figure 21: Four Action Framework54 Figure 22: Market driven organization55 Figure 23: Strategic HRM model57 Figure 24: Samsungs statement on greener technology59 Figure 25: Managing innovation60 Figure 26: Projected business plan for Samsung Electronics in semiconductor industry61 Figure 27: Strategic planning62 Chapter 1: Introduction
To win a battle, a general must have effectiveresources and in-depth information on opponent’s capability. First of all, herecognizes the weapons the opponent has got are and understand how the enemywoulduse them in order to ensure defense. Then, he tries to determine opponent’sweakness so that he can create an advantage over it. Finally, the good general, who is also aware of his ownlimitations, settle on finest battle approaches to ensure the best use of his weapons, especially on enemies weak points in order to createopportunity to destroy them and cover his own weaknesses to guarantee minimum causality.
The business world can be compared with a big war scenario where organizations are battling to survive. Since the competition has rocketed, firms are keen to boost their brand reputation, develop a better relationship with consumers through improved product and service, and get benefited from technological development, lower cost of operation and so on in order to stay competitive in the market. In order to find what other movement would add value to the organization, internal and external factors of business environment are widely examined to find out the present situation of a business and results are compared with its goal and objectives.
Successful firms are well updated about own strength and dedicated to turn the opportunities as strength. They also keep a close eye on rival’s strengths which they consider as threat and their weakness which are considered as opportunity to create competitive advantage. These are the basic dynamics modern business must consider while they settle on their business strategies. These strategies are often changed or alternative strategies are taken according to demand of changed circumstances to make sure the firm reaches its goal adequately.
As the general of Samsung Group, Chairman Kun Hee Lee monitors his challenger’s strategies, market situation and internal performance. He tries to find out Samsung’s location in the battle field and compare it with the situation he wanted to see. Then he takes adequate steps to guide Samsung towards achieving its goal and objectives. 1. 1: Background of the study: Samsung Electronics is a part of Samsung group which is the largest business organization of South Korea. The company was formed in 1969 to produce black and white television sets.
These days, Samsung has become one of the largest electronic product manufacturers in the world with wide product range of semiconductors, television, mobile phone, computers, camera etc. With a great mixture of talented people and innovative idea, Samsung managed to expand its business dramatically over last twenty years globally. In 2001, the company had 337 branches in 58 countries in the world. From the year of 2000 to 2004, Samsung managed to increase its brand value from $5. 2 billion to $12. 6 billion which was 21st in world ranking compared to 43rd in 2000.
The company has done remarkably well in recent global economic setback, where many company went bankrupt, Samsung managed to hold its profit margin and expand operation all the way through modernization of product and service and skilled workforce (Siegel and Chang, 2009, p. 2). Samsung was involved in semiconductor business in 1974, which is the centre of attention of this case study. Kun Hee Lee, the present chairmen of Samsung Electronics, brought Korean Semiconductor Company with his private funds because he understood the great potentiality of this particular industry.
As the use of hi-tech product was increasing everywhere, investing in semiconductor business offered better growth possibility than spending in other industries. Afterwards, Kun Hee Lee merged Korean Semiconductor Company and Samsung Electronics with the view of taking command of semiconductor industry. His Father and the founder of Samsung group, ByungChull Lee recognized the significance of the investment and sanctioned all support to Samsung Electronics. In mid 1980s, although semiconductor industry was in great trouble because the production cost was about $0. 0 higher than market price, Samsung kept investing in developingbetter production facilities. With the courage of losing money in first few years of production, Samsung Electronics become one of the strongest competitors in the industry and turned into the most important affiliate of Samsung Group in early 1990s. Kun Hee Lee was rewarded with the role of chairmanship of the company for his success when his father retired (Siegel and Chang, 2009, pp. 5-7). 1. 2: Significance of the study: The surroundings of semiconductor industry had changed significantly in 2005 when the Chinese companies started to attack DRAM market.
They utilized same strategies as Samsung used during their early days. Chinese companies started to concentrate on gaining market share and did not care if they were making lose. With the role of partnership with some other experts in the industry like Infineon, Chinese companies managed to gather latest information of the industry. Beside this, Chinese government moved up with all possible aid for the entrants and encouraged foreign experts to help them. Thus, newly built Chinese cutting-age factories soon became big threat to Samsung’s memory chip business.
Samsung was benefited from their early strategies which provided competitive advantage. But, as those competitive advantages are not sustainable anymore, Samsung have to look at the present situation of the market very carefully. As the leader of the market, they may need to implement new strategies and adapt them in order to hold their strength in the market. Careful investigation on their internal and external environmental factors would help them to determine what need to be done to overcome the challenge thrown by Chinese entrants.
With the help of different management tools, I shall examine different areas of the market and firm, which would help me to come up with possible solution to the problem. 1. 2: Research questions: Developing research questions is extremely essential which are interrelated to the extensive aim and objectives of the research. There are hundreds of issues on strategic management, strategic marketing, international marketing and human resource management to focus on and it would be easier to conduct an in-depth research if I try to answer some focused questions.
Therefore, I shall try to answer some purposeful questions which are centre of attention of my research aim and objectives. * What are the business strategies Chinese firms are using that ensure competitive advantage over Samsung? * What are some of the challenges faced by the firm in implementing effective marketing strategies? * What is the role of leadership at Samsung in managing and directing effective human capital policies? * What is the role of effective operations strategies in building the firm’s competitiveness? * What are the competitive strategies used by Samsung to conduct business operations? . 3: Research aim and objectives: 1. 3. 1: Aim of the study is- * To guide Samsung Electronics all the way throughovercome the challenges thrown by Chinese competitors and remain as a leader of semiconductor industry. 1. 3. 2: Primary objectives of the study are- * Present a proactive approach tostrategic managementto gaineffective resources and guarantee best use of existing and potential supplies. * Suggest methods to ensure excellent grasp inglobal market share and remain as a market leader through effective marketing strategies. Lay emphasis on self-fulfillment and stay competitive through technological innovation and proper information system. * Encourage to build multi-skilled workforce and gain strategic capability through proper treatment to the human capital of the company. 1. 3. 3: Secondary objectives of the study are- * Strategic management is all about creation, calculation and application of business strategies and tactics. It helps to provide a strategic vision of business, understand internal and external environment, response to any change and create strategies stand on sustainable competitive advantages(Acer, 2001, p. ). So, I shall carefully examine present management strategies of Samsung, in order to make sure if they are on the right path towards their mission and suggest any change, which would add value to the process. * Marketing is nothing but making a profit through customer satisfaction. Proper understanding of business culture, environment and customer behavior would help Samsung to decide strategies on price, product, promotion and so on which would confirm existing buyers and tempt potentials to buy their product.
Therefore, I shall evaluate both Samsung’s and Chinese firms marketing strategies in order to find out what are the pitfalls of Samsung’s present marketing strategies and what change can create a competitive advantage over the Chinese rivals. * The business world is moving fast with grace of technological advancement. In particular, memory business completely relies on technology. Additional money is being invested in research and development by the competitors. So, Samsung must know what new technology would add value all the way towards technological lead.
Beside this, it is very important to ensure a stable information system, which would help them to store and process all relevant information in order to stay ahead of competition. * Samsung Electronics must have skilled workforce in order to make sure all the resources are being used correctly. Talented people of a firm can make a difference in highly competitive market. In order to build a talented workforce and increase their productivity, Samsung must follow effective human resource policies.
In the case study analysis, I shall try to identify superior and problem areas of the firm’s human resources and recommend issues which would help them to be the best workforce in the industry. Chapter 2: Description of the Situation: It is essential to look on present situation of the case study prior to conduct any analysis. A clear illustration of the case will help me to find different scopes to investigate. In this Chapter, I shall illustrate major elements of the case such as:memory market as whole, players of the market, buyers of memory chips and Samsung’s activities in the market. . 1: Description of the market: Productsof the semiconductor industry are divided into two coretypes: memory chip and logic chip. Memory chip market, which is the focal point of the case, is growing up fast as the use of high-tech products is increasing day by day. Memory chip is again categorized into Dynamic Random Access Memory (DRAM), Static RAM (SRAM) and flash memory. 2. 1. 1: Market size and growth: In 2003, over $33 billion worth memory chip were sold globally which was about 16% higher than previous year. DRMS was dominating the memory cheap industry at the beginning.
However, as better technology was available for personal computers, the use of DRMS in PC declined from 80% in 1990 to 67% in 2003. But, increased use of mobile phone and other small electronic product, for example camera, allowed enhance in DRMS consumption. The use of these small electronic products is likely to increase in the future. DRMS lose data when the power is turned off where flash memory can store all data at any time. So, production of flash drive was likely to increase in the future (Siegel and Chang, 2009, p. 2). 2. 1. 2: Cost structure and profitability:
Raw material supplier’s power was high as there were only two or three main suppliers dominating raw material market. But, they were offering up to 5% discount for bulk buyers which must be an advantage for Samsung, because Samsung was one of the largest producers of memory chip. In the mean time, cost of installing a new plant went up to $3 billion in Figure [ 1 ]: Cost of new Fab 2004, compared to $200 million in 1985. Chinese firms started to attack the industry in 2005 with the aim to gain market share and they were ready to give up profit.
So Samsung had to declare a slump in market price in order to increase their industry capability. This decision was also consequence by a natural recession of the market. Chinese firms enjoyed little difficulty over finance, but they had to concentrate on old fashioned chips due to lack of proper organizational knowledge and experience, where Samsung was able to produce technologically advanced chips (Siegel and Chang, 2009, p. 2). 2. 2. 3: Distribution and sales: Customers of memory chip were more inconsistent, for example no single personal computer producer dominated more than 20% of market share in 2005.
PC producers bargained hard on price because the competition in PC industry was concentrated. Nevertheless, they were concerned about the quality of memory products because a faulty chip could destroy the whole value of a PC, they paid 1% extra price premium for trustworthy seller like Samsung (Siegel and Chang, 2009, pp. 2-3). 2. 2. 4: Market trend: Both Samsung and Chinese competitors understood the potentiality of global memory chip industry very well. Increased use of high-tech product around the world motivated them to invest huge amount of money in installing new factories and R&D.
Apply of DRAM product in communication products such as hand phones and hubs was predicted to increase from 3. 5% in 2003 to 7. 9% in 2008. But the competition was likely to increase as the Chinese firms had the capability to gain relevant experience and knowledge over the next few years. As the technology in this industry is complicated, it was predicted that the production incumbents would be hooked on traditionalmean and assembly line and would be difficult to respond in case of any technological change (Siegel and Chang, 2009, p. 2). 2. 2: Description of existing competition:
In 2005, Samsung’s most intense competitors in memory business were Japan based Elpida Memory Inc, South Korea’s Hynix Semiconductor Inc, Germany’s Infineon Technologirs AG, Taiwan’s Nanya Technology Corporation and Micron Technology of United States. Only Micron was Samsung’s only competitor until 1996. Firms like Infineon and Hynix entered the market after 1996 (Siegel and Chang, 2009, pp. 3-5). Figure [ 2 ]: Competition in 1997 Chart-2 illustrates information about the competition in memory industry in the year of 1997 in terms of total assets, net income and money invested in research and development.
Samsung Electronics was the largest firm in terms of net assets, but interesting to note that Micron enjoyed about 400% more net income than Samsung where Samsung total asset was about 5 times bigger. It happened because of Samsung wanted to gain market share rather than concentrate on profit where Micron had relevant knowledge and experience of the industry. Hynix lost about $559 million despite of being second largest company in the industry. Their investment in research and development was the lowest among these four companies, which led them into a failure in technological lead (Siegel and Chang, 2009, p. 12).
Figure [ 3 ]: Competition in 2003 Chart-3 emphasizes the competition among the same firms in the year of 2003. Samsung continued to increase total asset and venture it in research and development. Their investment was about 400% more than the closest rival. As aresult of their concern about future technology and continues invest in R&D, they were in fact, only one major firms who mad profit. Micron and Infineon increased their investment in the business but they failed to make a profit. In 2003, Micron received USD 500 million from its parent firm Intel to invest in DRAM production where DRAM accounted 96% of their total sales.
In the mean time, Hynix had to reduce its asset in the business due to continuous lose, but , they have signed a joint venture agreement with a Chinese firm, which provided strategic challenges to Samsung Electronics (Siegel and Chang, 2009, p. 12). 2. 3:Description of Chinese competition: Chinese firms, mainly Semiconductor Manufacturing International Corp (SMIC), which was the largest producer of DRAM in china, penetrated the semiconductor industry in the year of 2000. At the beginning, SMIC focused on gathering blue print of existing chips from different established companies rather than designing new chips.
In 2003, SMIC managed to sign deals with Infineon and Japan based Elpida to produce same products in Chinese factories. They have also brought Motorola’s manufacturing facilities in the same year. The firm was blessed with easy finance, land, and skilled people and not but the least, all possible help from Chinese government. SMIC enjoyed revenue of $365. 8 million in 2003, which was surprisingly about 700% higher compared to $50. 3 million in 2002. This astonishing success forced Samsung Electronics to reconsider their strategies in order to survive in the market. Figure [ 4 ]: Chinese firms sale in 2002 and 2003
Beside this, some other Chinese firms were doing very well in logic chip market. With the benefit of easy resources and Chinese governments help, they managed to selltheir product at a low price and increase their share in semiconductor market which included memory industry. Their total revenue was $771 million in 2003 which was more than double compared to just $354 million in 2002. Because of the potentiality of the memory business, these smaller Chinese firms could enter the market at any time which is a potential threat to Samsung Electronics (Siegel and Chang, 2009, p. 5).
Last but not least, South-Korea based Hynix’s decision to produce memory products with China’s ST Microelectronics in China and Infineon’s plan to invest in Asia, more likely in China also add value to Chinese revolution in memory industry and create threat to Samsung Electronics. 2. 3: Samsung’s role in the industry: As the leader of memory industry, Samsung was concerned about the complicated future of the business. Thus, they always left a good amount of money in research and development which ensured technological lead in the industry. They were also trying to create new scopes of DRAM use in different new products through R&D team.
While they were producing latest DRAM, competitors including Chinese firm were forced into manufacture older generation memory products. This fact provided a competitive edge over the rivals and allowed them to earn good profit in global economic recession. In 2003, they had 1200 different varieties in memory products and it was nearly impossible for the rivals to offer that kind of diverse products. However, as Samsung was focused on developing cutting age products, rivals used the chance to market older products which resulted in losing market share (Siegel and Chang, 2009, pp. 5-7). 2. 4: Concern about human resource policies:
Samsung human resource policies were innovative from the beginning of its history. They looked at potential employee’s relevant work skills rather than looking at their university or place of origin. Promotion was also depended on consistence performance which motivated an employee to be consistent and achieve those benefits. As Samsung operated globally, local language skill and good knowledge about culture were some of the important requirements from the candidates. Samsung Electronics was also keen to find and recruit global talents through global strategic group, which was also owned by Samsung.
The firm never hesitated to use good amount of money to train an employee as better worker and used positive methods to motivate them. For example, performance based incentive allowed workers financial benefits. All the strategies were taken in order to maintain and increase productivity of the workforce (Siegel and Chang, 2009, pp. 9-11) Chapter 3: Problem Statement and Plan of Analysis: 3. 1: Problem statement: Problem statement is nothing but a description of surrounding issues that need to consider and overcome towards finding a solution to the problem.
The given case study of Samsung Electronics focused on different issues surrounding semiconductor industry, for example: customer, competition, market growth, cost advantage etc. These, need to be examined carefully to identify present situation of the firm and find out possible strategies to overcome potential threat of Chinese competitors. Despite of downturn in semiconductor industry, Samsung Electronics continued to exist as the best performer of the industry. But, many people believed the entry of Chinese companies would change the picture in coming years. Smaller, faster and cheaper” should be the statement of belief in semiconductor business. All the firms are concerned to make their product faster, stronger, smaller and of course, cheaper. Chinese firms have potentiality to be strong players in the industry with the help of flexible resources. Samsung need to find and adapt better technology, finance, plants, and engineers and so on to make their product smaller, faster and cheaper. If they manage to do so, they will have competitive advantages and remain as the leader of the industry.
In order to suggest competency for Samsung Electronics in semiconductor industry, I shall carefully examine Samsung’s present operational, marketing, human resource and technological strategies and appraise them with rival’s approaches. It would help me to identify present and potential problem areas which may provide competitive advantage to the competitors. Identified complicated issues can be resolved with present strength of Samsung. These ready for action advantages must also be used to engage opportunities of growing memory chip market in order to improve the firm’s capability. 3. : Plan of analysis: 3. 2. 1: Identify scopes of study: To find suitable solution to the given problem, it is essential to identify possible scopes of study which would allow me to concentrate on particular expects of the business. First of all, screening the present situation of the study would help me to identify problem areas which need to be solved towards achieving aim of the study. Primary and secondary objectives of the research allow me to select the areas I would consider. Each of the objectives is a set of key piece of information which would guide me towards the aim of the research.
Research questions are interrelated with aim and objectives of the study and focus on answering centre of the attention concerns (Sunders, et al. 2003, pp. 22-27). Figure [ 5 ]: Plan of analysis 3. 2. 2: Strategy and organization: This part would help me to identify different issues on Samsung’s strategy formulation process and organizational structure. * SOWT analysis would look on firms internal and external environmental issues and reflect its present situation in light of strength, weakness, opportunity and threat. * Porter’s competitive analyses explain 5 basic competitive forces of the market and establish its attractiveness. BCG Matrix is a product portfolio planning tool which considers the relation between market share and market growth (Assen, M. V. et al. 2009). 3. 2. 3: Marketing and sales: Different marketing model are used to examine Samsung’s marketing and sales policies develop new ideas. * Kotler’s 4Ps of marketing is a strategic marketing model to determine Samsung’s strategic position on products and service in the industry. * Branding Pentagram is a tool to translate corporate strategy into branding policy. * Curry’s Pyramidwill help Samsung to visualize and analyze buyer’s behavior, loyalty and value, and egmentation towards developing better relation. 3. 2. 4: HRM, leadership and change: Models are used to examine Samsungs current human resource policiesand, design and implementation of new strategies. * Strategic HRM model is organised move towards creating HR strategy and guide reaching strategic goal. * Competing Values of Organisational Effectiveness would help to understand effectiveness of human capital and recommend possibilities to increase productivity. * Change Quadrants is a tool to understand that the change strategy depends on, if the firm is cold or warm, and whether motivation for change is cold or warm (Assen, M.
V. et al. 2009). 3. 2. 5: Information system analysis: Information system of a firm is all about collecting, storing and processing data in order to have the latest information on all expects they need to stay ahead of the competition. Models are used to find possibilities to increase productivity through innovation and technological lead. * The Innovation Cycle is an effective model to analyze and manage new innovations. * Henderson and Venkatraman’s Strategic Alignment model would create relationship among firm’s strategy, operations and information technology (Assen, M. V. et al. 009). 3. 2. 6: Solution to the problem: The last part of the study is to propose solution to the given problem. Strategic model and tools would be used thoroughly to determine and recommend competencies in different parts of Samsung Electronics. Finally, a business model would reflect a summary of proposed solutions and forecast where the firm could stand in 3 to 5 years time. 3. 3: Secondary Data Collection: Research data must be able to help answering research questions and meet aim and objectives. For the given case study, most of the essential data are given in different forms.
These are data called secondary data and it consists of both unprocessed data and available summaries. Most of the firms save data in order to conduct their operations, summary of sale and pay role are some of the examples. Apart from this, newspaper, journals, government departments, research organizations are also very good source of secondary data. It will be the main source of data for me to carry out this case study analysis (Sunders. et al. 2003, p. 188). 3. 4: Type and source of Secondary Data: Different researchers have given different classifications of secondary data; however, they do not detain whole selection of data.
But Sunders et al. (2003, pp. 190-191) pictured three main groups of secondary data. They are illustrated in following figure-2. Secondary Data| | | | | Documentary| | Multiple Source| | Survey| | | | | Written Materials| Non-Written Materials| Area Based| Time Series based| Censuses| Continues and Regular Survey| Ad hoc Surveys| Example| Example| Example| Example| Example| Example| Example| Firms record,Web-site,Newspaper,Journals,Books,E-mail, Letter. | TV and Radio,Taped Interview| Journals,Government publications. | Market reports and statics,Government publications.
Books,Journals. | Government’s censuses of population and employment. | International trade group,Firms employee attitudes. | Government surveys,Academic survey. | Figure [ 6 ]: Types and sources of secondary data (Sunders. et al. 2003) * Documentary data: Most of the documentary data are included at the end of case study. Given charts and figures on financial reports, organizational structure would be very useful to conduct analysis on different perspectives * Survey based data: Survey based data are generally collected through questioner.
Government surveys provide unique data because participation is mandatory outcome may not be 100 % true as general people have a tendency to hide some information from the government (Hakim, 2000 as stated in Sunders. et al. 2003). * Multiple-source data: Multiple-source data can be a combination of both documentary and survey based data or totally based on any one of the sources. Secondary data from multiple foundations can be combined if they match on geographical basis (Hakim, 2000 as stated in Sunders. et al. 2003). 3. 5: Advantage of Secondary Data: Advantages of secondary data are- Less resource required: As most of the data are easy to collect, researchers may save time and money and use the resources in other parts of the research to find a better conclusion (Ghauri and Gronhaugh, 2002). * Modest data:Secondary data sources are very useful in case of anyone require quick data. Secondary data within the firm may also provide a benefit to the researcher as the data are already been collected and give modest measure (Stewart and Kamins, 1993 as stated in Sunders. et al. 2003). * Qualified and appropriate data: Any one can compare own findings with secondary data as they are comparative.
It allows a person to place his own data within an additional common context (Sunders, et al. 2003). * Stability of data: Secondary data sources are generally permanent and can be checked easily by others (Denscombe, 1998 as stated in Sunders, et al. 2003). Using secondary data can assure a research finding more reliable to public. 3. 6: Limitation of Secondary Data: Limitation of secondary data are- * Wrong purpose: Secondary data may be collected for a wrong purpose which does not match research questions and objectives. In this case researcher needs to find an alternative source or collect data by himself.
Timing of the data is also important as data may need to be changed over time (Denscombe, 1998 as stated in Sunders, et al. 2003). * Difficult access: Secondary data collection may be costly and not easy to find if the research is a commercial research. If the data are not available in my library, it is very rare to borrow it on inter-library lone (Sunders, et al. 2003). 3. 7: Ethics: Research ethics is nothing but the concern about the firm or people, who is affected by the research work. It refers to the fairness of researcher’s behavior towards the elements involved in the research process.
Researcher must be aware and consider ethical issues throughout the research process to those, who may seek help from the outcomes and those who provide help (Wells, 1994, p. 63). According to Sunder, et al. (2003), various ethical issues arise throughout the research process which can be summarized as- * Privacy of contributors. * Participant’s right to withdraw from the process at any time. * Approval and probable deception of contributors. * Retain confidentiality of data and anonymity of person. * Respect individuals while seeking data. * Attitude and neutrality of the researcher. . 8: Reliability: Reliability means steadiness of a calculation. A research is considered reliable when we get same or almost same result over and over again. According to Smith (2002), reliability is measured by highlighting on these issues or questions: * If the result will be same on other occasions; * If comparable remarks will be reached by different observer, * Was it transparent in how logic was prepared from unrefined information? 3. 8. 1: Threats to Reliability: Robson (2002, as cited in Sunders, et al. 2003, p. 101) argued about four particular threats to reliability.
They are: * Subject or Participate Error: Difference in time may produce different result. For example, if we take interview about passion at work, two different results may come on Friday evening and on Monday morning. * Subject or Participant Bias: Participants may feel pressure from their bosses to response in a way which will not hamper organizations image. In this case, researchers have to assure anonymity to the participants. * Observe Error: Difference in approach of different participant may cause threat to reliability. * Observer Bias: Difference in understanding the replies may also cause trouble to reliability. . 9: Validity: Validity is nothing but check whether the results are really what they appear to be about. Validity confirms if a research data or finding is reliable and the point to which the conclusion are defensible (Sunders, et al. , 2003, p. 101). 3. 9. 1: Threats to Validity: Robson (2002), as cited in Sunders, et al. , (2003, p. 101), has also stressed about the possible threats to validity. They are; * History:If the research is conducted after any incident within the organization, the outcome of the research is likely to be different. Testing:Sometimes, people may find that the outcome of the result may cause trouble to them. * Mortality: Researchmay take long time and people withdraw them from the process. * Ambiguity About Casual Direction:Problem in identifying the real reason behind any research problem Chapter 4: Analysis and findings: 4. 1: SWOT Analysis: Strengths: Internal Investment in research and development. | Better technology in production line. | 1200 different variation in memory chips. | Effective marketing policies. | Ability to get up to 5% discount from suppliers as a bulk buyer. Ability to get over 1% price premium as a dependable dealer to OMEs. | Safe production incumbent. | Ability to invest more money in growing market. | Alliance with some other expert firm to reduce production cost. | Presence in global market. | Ability to create scopes for memory chips as an electronic consumer producer. | Strong image of its parent firm Samsung Group. | Innovative HR policies. | | Weaknesses: Internal Increasing threat of supplier’s power as they turned into more concentrated. | Variable function and lowered net profit. | Opportunities: External Higher growth rate of memory business. | Chinese firms lack of knowledge and experience. | Ability to offer better substitute products. | Rivals slow response to technological shift. | Increasing use of consumer electronic products. | | Threats: External Alliance among rival firms. | Competitor’s willingness to gain market share at any cost. | Easy finance for Chinese firms. | Chinese governments help towards new firms. | Availability of skilled engineers in China. | Increasing bargaining power of OME producers. | |
Figure [ 7 ]: List of Strengths, weaknesses, opportunities and threats. The main propose of identify Samsung Electronics strength, weaknesses, opportunities and threats is to give a clear idea about the firms resources and capabilities in the memory industry. It is a good way to find and select strategies. Identified strengths can be used to utilize opportunities (SO Strategies). It is possible to make those opportunities as firm’s strength (WO Strategies), which can be used to minimize weaknesses (ST strategies) and less weaknesses would help to prevent rivals to take advantage (WT strategies). Strengths (S)| Weaknesses (W)| Opportunities (O)| Capitalize strength to make use of opportunities. (SO)| Capitalize benefit of opportunities to defeat weakness. (WO)| Threats (T)| Apply strength to stay away from threats. (ST)| Decrease weakness to keep away from threats. (WT)| Figure [ 8 ]: SWOT Strategies 4. 1. 1: SO Strategies: * Increase Market share: As the demand of memory chips is likely to increase in the future, Samsung may use their profits (strength) in growing market (opportunity). High-tech Production: Better knowledge and experience in the industry (strength) could create competitive advantage over rivals where rivals rely on older methods (opportunity). * Substitute Product: Samsungs cutting edge manufacturing facilities (strength) can be used to fulfill increasing demand of substitute products (opportunity). * Aim TechnologicalLead: Increased investment in research and development (strength) can guide to hold a technological lead in the industry where rivals are slow to response in technological shift. . 1. 2: ST Strategies: * Improved Workforce: Samsung may focus on recruiting best people in the industry through their Global Strategy Group (strength) in order to overcome the threat of availability of skilled people for Chinese firms (threat). * Increase Production of older products: With the help of excellent production facilities (strength), Samsung may increase production of older versions of memory chip where Chinese firms are keen to gain that market and strength their position in the overall market (threat). Political Alliance: Samsung may use their reputation (strength) to build up relation with different governments in the world in order to overcome barrier from rules and regulations, where Chinese firms enjoy enormous assistance from Chinese government (threat). * Flexible Finance: The firm may ask for easy money from its parent firm Samsung Group (strength) to increase business activities, which would provide a competitive advantage, where Chinese firms get easy money from local and international sources. 4. 1. 3: WT Strategies: Start Producing Raw Material for Memory Chips: As pressure from the suppliers is increasing every day, Samsung may think to start produce those raw materials. Samsung have the financial and technological capability to build a new plant for raw materials. If they do so, they will be able to produce memory chips at lower cost and even sell excessive production to other memory chip producer to get extra money. 4. 2: Competitive Analysis: Porter’s five Forces: Michael Porter (1998) has identified five fundamental competitive forces to determine attractiveness of an industry.
It would help Samsung Electronics to take and judge strategic decisions on defendable and attractive position (As cited in Assen, et al. 2009, p. 14). Figure [ 9 ]: Competitive Analysis 4. 2. 1: Threats of new entrants: * For the new entrants, it is always hard to compete with the market leaders. As new in the business, Chinese firms faced various problems to compete with Samsung and they dropped the market price. * Building a new plant required huge amount of money. So it is never easy for the new entrants to invest that much money at the first place unless they have easy source of finance.
Some of the Chinese firms were helped by the Chinese government in this regards. * Switching cost is high unless a firm hasorganized manufacturing facilities. As an existing player of the market, Samsung had an advantage over the rivals as the switching cost is high in memory industry. * Most of the Chinese firms were helped by the Chinese government, where non-Chinese firms were not welcomed by the government. * In the existing market, retaliation among the competitors was low which attracted new Chinese firms to entry in the market. 4. 2. : Threats of substitute products: * As the technology was improving and more players were involved in the industry, end users were able to get substitute products and Samsung was forced to develop substitutes to memory chips in order to stay competitive in the market. 4. 2. 3: Bargaining power of suppliers: * Bargaining power of supplier was high as there were few firms supplying raw materials. * Switching supplier was expensive in high-tech industry. * Raw material suppliers can enter in the market as they have relevant knowledge in the industry. Supplier’s power was high because they had different industry, channel and customer to sell their products. * Fewer suppliers mean fewer choices for Samsung to choose from. 4. 2. 4: Bargaining power of buyers: * As the competition in OEM PC industry was high, they negotiate high on price. * Semiconductor industry was open to the buyers, so they enjoyed flexibility to choose their supplier. * Switching cost was getting low for the buyers as more firms were involved in the business, which increased their power. * Large volume buyers negotiated high on price with Samsung
Electronics. * However, Samsung enjoyed around 1% price premium from some of the buyers as a reliable supplier. 4. 2. 5: Existing competition: * As there were so many differences between Samsung and rivals strategies, it was hard to predict competitive shifts. * Samsung enjoyed most of the market share and difference with the closest firm was remarkably high. * As the fixed cost was high, competitors were keen to turn reserve and fill up capability. * Because of high competition in the industry, price was relatively low and buyers had more options to switch supplier. Exit barrier was high because of cost, strategy and legal reasons. Fixed and variable assets were difficult to sell and it was difficult to exit because of partner firms and brand image. 4. 3: BCG Matrix: BCG matrix consider inter-relation between market growth and market share, based on the theory of product life cycle. Possibility of market growth and market share drive a firm to decide what to amount to produce (Assen, et al. 2009, p. 8). Figure [ 10 ]: The BCG Matrix (https://weblogs. sdn. sap. com/weblogs/images/251762343/BCG. JPG, accessed on 25 November, 2011) 4. 3. 1: Star:
Stars are the product with high market share in a growing market. In 2003, 256Mbit SDRM was 17. 9 % of total production. It was expected to grow because of better capacity and reliability. Apart from this,flash memory market was expected to grow at a double digit rate for next few years. Samsung may invest more in better capable SDRM and flash memory production (Siegel and Chang, 2009, pp. 2-11). 4. 3. 2: Cash Cow: Samsung’s production of DDR SDRM memories in 2003 was 585. 3 million units, which was 65. 3% of their total DRAM production. DRAM market was the largest among all types of memory chips.
Micron and Infineon’s all DRAM products totaled 672. 8 million and 535. 3 million units respectively, where Samsung produced 896. 4 million and enjoyed very good market share in a growing market. However, this market was expected to decline due to the availability of better technology in the future, but good sale guaranteed strong presence in the market (Siegel and Chang, 2009, pp. 2-11). 4. 3. 3: Question Marks: 128Mbit DRAM accounted 16. 9% of total production in 2003. As the expectation of capacity and reliability of memory products was growing up, buyers ware looking for better products than 128Mbit DRAM.
Although the market was growing for this particular product, but it did not guaranty good market share in the future. So, Samsung need to consider very carefully whether they need increase or decrease production of this kind of product (Siegel and Chang, 2009, pp. 2-11). 4. 3. 4: Dog: 128Mbit Rambus DRAM and 128Mbit DDR2 SDRM accounted 0. 61% and 0. 79% of total production in 2003. Due to lower capacity and old technology, these products contributed very little to the total revenue and expectation was very law in the future.
As a result, Samsung may plan to cut them off from the production line in the future (Siegel and Chang, 2009, pp. 2-11). Figure-11 illustrates different memory products in different stages of product life cycle. Strategies are always different in different stage. For example, flash memory did well at the beginning of production and it is expected to grow and it will help Samsung to gain strong market share. When the market share is high at growth and maturity stage Samsung would be able to produce these flash memory products at lower cost and increase profit margin.
In the future, better product will take place and Samsung have to consider its strategies over flash memory chips. Figure [ 11 ]: BCG Matrix and Product Life Cycle 4. 4: Kotler’s 4Ps of Marketing: This model will help to justify Samsung’s marketing decisions on memory chip industry. According to Kotler and Keller (2000), marketing decisions are controlled by four main expects: * Product * Price * Place * Promotion Figure [ 12 ]: 4Ps of marketing In order to develop the best marketing mix for a target market, Samsung need to answar some questions on each expects and decide 4. . 1: Product: * What does the memory chip buyers want from the product? * What aspects it need to have to meet the demand? * How and where the customers will use it.? * How to ensure quality and safety? The consumer electronic products are getting complicated, they call for lot of requirments and memory chips must complay with the growing expectations. Samsung must produce cutting edge chips which would meet demends for example: better capacity, spreed, reliability and sicurity. It is very important to develop a good product before considering other espects of market. 4. 4. 2: Price: What is the value of the chip to the customer? * Is the price competitive in the market? * Are the buyers price sencitive? * Is there any discount to offer for bulk buyers or early payment? Samsung need to assume how much money buyers ready to pay for particular memory chips. It depands on what value the chip can provide. Firm also need to go for a competitive price, but often, they do not have control over it, as aggressive firms like Chinese entrants concentrated on gaining market share at any cost. In addition, because of great competition, buyers have more options to choose from.
So the firm need to offer discounts to attract chip users. 4. 4. 3: Place: * Is there enough channels to to sell the product? * How the orders will be handeled? * How the transportation will be managed? * Where the product will be stored and displayed? As a global player, Samsung have good channels to distribution centers in many countries. So they have the advantage to sell their products easily with the help of relative firms. Relevant knowledge and experience in the business world would provide a competitive advantage to handle orders and deliver them on time. 4. 4. 4: Promotion: What are the channels to be used to advertise the product? * If the sales force need more training or motivation? * How to create a good public relation? * How much to spend on promotion? As new technologies are coming in the market, Samsung must let the buyers know about the developments. Various channles of advertisement for example: commercials on TV, radio, seminar, fair etc can be used effectively to promote the products. Sales force also need to updated about the features of different products and trained as an effective bunch of people who can create advantage in the competition.
The decision of right mix also depends on different stages of product life cycle: Stages| Introduction Flash Memory| Growth256Mbt DRAM| MaturityDDR SDRM| Saturation128Mbt DRAM| Market Objective| Gain Awareness| Stress Differentiation| Brand Loyalty| Harvest| Competition| Few| More| Many| Reduced| Product| One| More version| Full product Line| Best Seller| Price| Penetration| Gain Market Share| Defend Market Share| Stay Profitable| Promotion| Inform| Stress Points of Difference| Reminder Oriented| Maximum Promotion| Place| Limited| More Outlet| Maximum Outlet| Fewer Outlet|
Figure [ 13 ]: Marketing mix in different stages of product life cycle. 4. 5: Curry’s Pyramid: Customer Marketing and Relationship Management: If Samsung can recognize its most valuable buyers, get hold of them, retain them and try to increase sell to them, they will certainly be able to retain market share and increase revenue. This modelwill help Samsung to visualize and analyze buyer’s behavior, loyalty and value, and segment them. Customer Relationship Management (CRM) is a tool to build a relationship with memory chip customers, where Curry’s Pyramid will help Samsung execution of CRM.
It focuses on importance of buyers in terms of revenue generation. Then, buyers are treated differently in each stage of the pyramid, where strategies are different and different marketing resources will be applied (Jay and Cuyyr, 2002, as cited in Assen, et al. 2003). Buyers should be segmented according to turnover and profitability. It is said that 20% of customer account 80% of total sale where other 80% contribute left over 20% (Assen, et al. 2009). However, this may be different in reality, but the important thing to notice is, all the customers are not profitable.
So Samsung must identify top customers and go through following steps: Figure [ 14 ]: Curry’s Pyramid (http://www. expertprogrammanagement. com/wp-content/uploads/2011/06/currys-pyramid. png, assessed on 01 December, 2011) 4. 5. 1: Gather and analyze information about top customer: Due to rapid change in technology, new markets of memory chips are being created. Telecommunication and consumer electronics market was growing over the last few years. It was predicted to grow from 3. 5% in 2003 to 7. 9% in 2008 of the DRAM’s market. In the same period of time, use of the same product in PC declined 80% to 67%.
So, producers of telecommunication and consumer electronics are likely to be to buyers in the future and Samsung may allocate most of its marketing resources on them (Siegel and Chang, 2009, pp. 2-11). 4. 5. 2: Set goal and choose media to gain customer loyalty: Samsung must be loyal to the customers especially to the loyal customers. Quality of products and guaranteed service would ensure customers faithfulness. Availability of relevant technology and organizational experience would provide a competitive edge on doing so. Then, Samsung must choose and develop media, system to work together with the loyal customers. . 5. 3: Develop rules of engagement: Customers should be treated differently at different stage of the segmentation. Samsung may offer a discount for the high-volume buyers to encourage them to buy more. They may also offer different packages to attract potential users of memory chips in the industry. On the other hand, less marketing resources should be used for inactive customers as they do not contribute much to the total revenue of memory chip business. 4. 6: The Branding Pentagram: This modelwill help Samsung to visualize and analyze buyer’s behavior, loyalty and value, and segment them.
Customer Relationship Management (CRM) is a tool to build a relationship with memory chip customers, where Curry’s Pyramid will help Samsung execution of CRM. It focuses on importance of buyers in terms of revenue generation. Then, buyers are treated differently in each stage of the pyramid, where strategies are different and different marketing resources will be applied (Baker and Hart, 2002, as cited in Assen, et al. 2009, p. 206). Figure [ 15 ]: The Branding pentagram Samsung is already a strong brand in the industry and always keen to improve it. This model can help them to define the brand and their marketing strategies.
The pentagram consists of five points which may direct Samsung Electronics to incorporate branding activities into daily practice. They are as following- 4. 6. 1: Principle of branding: Samsung Electronics branding principles can be judged through their- * Brand Mission. * Core value. * Choice of brand portfolio. Their vision for the next 10 years is “Inspire the world, create the future”. They are planning to reach the target through their key strengths: technological lead, innovation and creative solution and creating new value for the business surroundings (WWW. samsung. com, assessed on 29 November, 2011). . 6. 2: Positioning: The positioning of Samsung is decided on following issues- * Segmentation: Segmentation should be done based on turnover and profitability. Top and potential buyers must be recognized, given priority on allocating marketing resources. * Target Group: Telecommunication and consumer electronics producer should be main concerns as they are likely to be top users of memory chips in next 10 years. * Positioning: Relevant resources and business experience create competitive advantage for Samsung Electronics where new Chinese entrants battle for information on technological development. . 6. 3: Consistency: Samsung offers excellent product mix, 1200 different versions of DRAM for example, and fantastic service to its clients. The brand image is consistence as surroundings of the memory business are quite happy because, Samsung communicate with them in a professional manner. 4. 6. 4: Embedding the branding: It can be argued that Samsung has managed to embed their brand through the consistency of their performance. However, they must align the consistency with basic functions and responsibilities. 4. 6. 5: Planning and control cycle:
Samsung Electronics brand policy can be described as SMART (Specific, Measurable, Achievable, Relevant and Time-specific), because they have focused on retaining their strength in the memory chip market through technological improvement and new value creation. 4. 7: Hofstede’s Cultural Dimensions: Hofstede’s (2001) cultural dimension model can be an effective tool to identify cultural differences of people from different countries of the world. In 2004, Samsung Electronics was operating in 58 different countries and employed roughly 113,000 people from different culture.
The challenges and the problems of these cultures seemed to be same but possible solution was different per country. According to Hofsted (2001, as cited in Assen, et al. p. 125), the types of dissimilar standards present five dimensions of culture. 4. 7. 1: Power distance: In some countries like Malaysia, organizational culture is more centralized. They are likely to take and expect less responsibility compared to employees from European countries. As difference in power distance index is high, productivity of global workforce as whole may be in danger.
Through proper training and motivational program, Samsung may try to improve the situation as diversity of workforce is increasing because of firm’s global operation. 4. 7. 2: Individualism and collectivism: Individualism refers to more self interest and less interest in team performance. As Asian people are believed to be more productive team worker and Samsung mostly operate within Asia, they may have an advantage. However, in order to comply with the competition, Samsung have to recruit more foreigners in their international brunches.
As American employees are believed to be collective, they need be offered some incentives in order to increase their productivity. Chairman Kun Hee Lee realised rightly that more than 90% of Samsung’s workforce are concerned about their own health, family and their welfare. He offered to take about 90% of their burden so that they concentrate more on their performance. 4. 7. 3: Masculinity and femininity: In the future, Samsung may need to invest more in China, which is believed to have a masculine natured working culture.
They are more concerned about their ambition, competitiveness, material control rather than relationship and quality of working life. Most of the other countries like North Korea and Japan have the same culture. If Samsung has to do well against possible Chinese threats, they should concentrate on developing a culture where people will think less about masculinity and femininity and focus more on welfare of the organization. Figure [ 16 ]: Hofstede’s cultural dimensions 4. 7. 4: Uncertainty avoidance: If the workforce feel threatened by the ambition of a situation, the productivity is likely to be reduced.
This problem can be sorted through strict rules, safety and security measure. Samsung’s Productivity Incentives Reward program allowed up to 300% more money on top of basic salary. It can be judged as a very good tonic to the situation where people are likely to take more risk to reach particular goals. 4. 7. 5: Long-term orientation: Long term orientation is about thrift and perseverance of a workforce. South Korea, China and most of the other Asian countries score relatively high on long term orientation index where western countries attain low.
Samsung’s strategy of rewarding outstanding performance and not punishing failure, opposed traditional Asian culture which may provide greater value to the firm’s human resources over local Chinese working culture. 4. 8: Competing Values of Organizational Effectiveness: This model will help visualize Samsung Electronics organizational effectiveness as well as assess and define human resource development programs. This model will also help better understanding of Samsung Electronics organizational effectiveness criteria, within three dimensions (Quinn and Rohrbaugh, 1983) – * Internal versus external focal pointsof the Samsung Electronics. Flexibility versus stability of the firm. * Process versus goal orientation. The first dimension symbolizes a crucial organizational dilemma where one side of the scale, the Samsung Electronics is viewed as a socio-technical unit, and at the other end as a reasonable instrument for accomplishing industry goals. The second dimension states that command and control do not combine well with modernization and change. Finally, the last dimension declares that the firm’s effectiveness cannot be completed without examination of the tendency of means, processes and regulations in order to become operationally independent (Quinn and Rohrbaugh 1983).
The mixing of these three aspects result in four main models of Samsung Electronics organizational effectiveness- 4. 8. 1: Internal process model: The organizational structure of Samsung is hieratical where a strong chain of command exists. This provides stability and good control over documentation, measurement and information management. But, this model is believed to be the best when time is not an issue. As the Chinese firms started to attack the business, Samsung may not have good time to rely on organizational structure.
So they may distribute responsibilities among potential good managers, who may come out with better ideas to compete in the tight market. (http://www. cda-acd. forces. gc. ca/cfli-ilfc/lea/conc/ch2-eng. asp, accessed on 28 Novemebr, 2011) Figure [ 17 ]: Competing Values of Organizational Effectiveness 4. 8. 2: Open system model: This model is based on an organic structure. The company may be get benefits through flexibility, willingness, expansion and external support. Samsung’s Global Strategic Group is a great way to add value to the process.
This skim is used to attract global talents and ideas around the world to the organization, which helps to solve business level problems prepare international managers for important positions. 4. 8. 3: Rational goal model: This model stands on profit and believes that planning and goal setting results in productivity. Samsung offers project incentives to the employees where a particular task is given and employees are rewards according to their performance. In 2005, the firm offered different incentive programs with the range from a few thousand dollars to more than million dollars for different project teams.
Beside this, Profit Sharing programs allowed a employee to earn up to 50% extra on top of basic annual salary. 4. 8. 4: Human relation model: It is essential to focus on cohesion and morality on human resources and their training and development. Samsung did well in this regards and proudly announced that they have spend more in its employees than any other competitor in the industry. The employees were not isolated as individuals but as important members of a productive system. As a result, Samsung offered to take over 90% of employees personal burdens through different benefit skims. Samsung did well in all these four dimensions compared to he performance of the rivals. It would certainly retain and increase productivity of the workforce and provide a competitive edge in the competition. 4. 9: Innovation Circle: Because of increasing use consumer electronics throughout the world, demand of brand new concept of memory chip is increasing day by day. Many companies in the world are offering new technologies however risk of reliability of the product remained high. So, people are looking for reliable sources and Samsung may take the chance to create new market. The innovation circle is a successful tool to manage the life cycle of a new innovation.
Successful innovation would provide long term competitive advantage to Samsung Electronics. The innovation circle consists of three main phases- formation, execution and capitalization (Assen, et al. 2009, p. 132). 4. 9. 1: The creation phase: This is the primary stage of the innovation circle which consists- * Receive incentives: Market growth, brand image, decline of customer satisfaction and availability of new technology are considered here. The growth of memory chip industry is likely to increase in the future and customers are looking for better products due to technological advancement.
Figure [ 18 ]:Innovation Circle * Generate ideas: At this stage, firms focus on creating new value in the market through continuous research of R&D department. The focal point is the demand of the end users of the product. Samsung’s main R&D facility, which is located south of Seoul tried to create new use of DRAM products in laptop computers and game players through modifying them around a core design. * Function creation: In this stage, the ideas are tried put into actions and hazards are identified, so that they can be controlled in the future. 4. 9. : The implementation phase: New ideas of semiconductor products are further developed at this stage. The phase is divided into two steps- * Product creation process: New products, flash memories for example are created at this stage according to the ideas generated from the function creation process. New chips are also tested to justify its capability and reliability. * Market introduction: When new products like 256Mbit DRAM and flash memories were ready to be launched in the market, all the features of marketing was planned for the next steps. 4. 9. 3: The capitalization phase:
At the last stage of innovation circle, new values for Samsung are confirmed through new products. The phase is divided into three steps- * Order realization process: This step concerns about a good combination of firms logistics and production of new products. Samsung has an competitive advantage as they can use their existing logistics and produce new product along with existing products. 4 * Service realization process: Additional services may be required for a new product like flash memory. New services are integrated with old service process at this step. Utilization: At the last stage of innovation circle, the firm start to get revenue from the new product. As time goes on, the production and marketing cost get lower and some adjustment are done to the new product which ensure the preservation of margin. 4. 10: Henderson and Venkatraman’s Strategic Alignment Model: Henderson and Venkatraman’s strategic alignment model can be applied to map the relationship between Samsung Electronics organizational strategy and information technology, and between firm’s operations and the IT infrastructure (Henderson and Venkatraman, 1993, as cited in Assen, et al. 009, p. 121). The model differentiates two dimensions- * Strategic Fit: Combination between Samsung’s internal infrastructures and external strategies which clarify effective support to business strategies by information technology. * The functional integration: Combination between technology planning and business planning, and suggest a suitable IT infrastructure that comes from firm’s strategic choice. Figure [ 19 ]: Henderson and Venkatraman’s strategic alignment model (http://holeerf. xanga. com/, accessed on 11 November, 2011)
Figure-19 illustrates four major strategic perspectives. They are- 4. 10. 1: Strategic development: From the conventional perspective of Samsung Electronics management strategy, top level managers define business strategies and which are therefore translated into IT infrastructure. As a technology business, Samsung is keen to have technological lead through implementation of newer technologies, which reflect core business strategies. 4. 10. 2: Technological potential: Management view of technology drives the choice of the firm’s choice in IT strategy.
The IT strategy is then transferred into proper IT infrastructure within Samsung Electronics which is reliable with the IT strategy. 4. 10. 3: Competitive Potential: Samsung’s business strategies are changeable to meet the demand in line with IT strategies. Newer technologies would allow them to develop and market new products, create better channels of relationship management and create new elements of business strategy. 4. 10. 4: Service level: It is difficult to understand the business strategies at the operation level of Samsung Electronics. Firm’s organizational structure has been designed, based on their IT capability.
It is very important to allocate all the resources correctly as information technology requires huge investment. So, it is understood that both business strategies and IS strategies are decided by the top management of Samsung Electronics. However, IT projects may go wrong, because the management often judge them from the perception of IT strategy alone. Chapter 5: Proposed Solution to Problem: 5. 1: Create a Blue Ocean: Blue Ocean Strategy (BOS) highlights on creating a new market at product development stage. Most of the strategic models focus on getting ahead of the competition.
But with help of blue ocean strategic model, Samsung Electronic may focus on increase production of high-tech memory chips which are currently not available or very new in the market (Kim and Mauborgne, 2005 as cited in Assen, et al. 2009). Red Ocean| Blue Ocean| Participate in existing DRAM market. | Create high-tech/flash memory market which is untapped. | Try to win the competition among present competitors who produce general memory chips. | There is no or very less competition in flash memory products market as there is no rival. | Take advantage from present demand of memory chips. Construct and detain potential demand of flash memory products. | Create the cost trade off| Beat the cost trade off| | Figure [ 20 ]: Blue Ocean Strategy (Assen, M. V. et al. 2009) Samsung may concentrate on increase production of flash memory chips. In 2004, the market was supposed to grow at a double digit rate for next five years. As the firm has the financial and technological capabilities to increase production, creation of a blue ocean will certainly put them ahead of overall competition. Samsung would not have to use other players as benchmark and may go for new opportunities to create new value for the memory chip users.
To create a blue ocean, Samsung Electronic must complay with the following four requirments- * Factors that memory chip production takes for approved to be eliminated. * Factors to be reduced well under the paradigm. * Factors to be raised well above the industry standard. * Factors to be build that the memory industry has never proposed. Eliminate| Raise| Threats of rival alliancePrice competitionHostile government rules and regulationsBargaining power of buyersThreats of substitute roductsProduction of not-profitable productsIndividualism of human capitalShort term HR orientation| Research and developmentTechnological leadDiscount for bulk buyersFlexibility and reliability of product, serviceNew investment in the industryStrategic allianceGlobal presenceProduction of profitable productsBrand awarenessConformity of human capitalLong term HR orientationDepartmental co-operation| Reduce| Create| Bargaining power of supplierVariable functional costProduction of less profitable productsComplexity of human capital relationVariable marketing cost| Cutting edge productsInformation systemScopes of new use of memory chipNew marketing channels Potentiality of market growthAlternative products|
Figure [ 21 ]: Four Action Framework 5. 2: Create a market driven organisation: Marketing and sales plan of Samsung Electronics must draw from their corporate strategy. This model proposes Samsung Electronics to interpret corporate strategies into customer related activities through a multidisciplinary process. Figure [ 22 ]: Market driven organization The tag, ‘market driven’ means the buyers of memory chip products are the centre of attention of all organizational activities. All the arrangements and movements are planned from buyer’s prospective. Market Driven Organization framework would guarantee that all these methods are associated with Samsung’s corporate objectives.
The model is also very effective to justify the effectiveness of Samsung Electronics marketing and sales strategies. According to Assen (2009), efficiency of these strategies can be justified when the model is applied in some specific situations. They are- 5. 2. 1: Segmentation of the market: The firm must consider developing and improving relation with those buyers who are likely to buy more chips in the near future. Consumer electronics manufacturer and mobile phone makers are likely to be two main buyers of memory chips in the near future. In the mean time, OME PC producers are going to rely more on reliable suppliers due to reliability of the product.
So Samsung may also focus on them and spend a good proportion of resources from total marketing allocation. 5. 2. 2: Differentiation of the proposition: It is very important to go through an organized way to approach these customers. After segmentation is done, the firm should not use same measure for all the buyers. Current bulk buyers and potential bulk buyers should be treated differently than inactive users of semiconductor products. Samsung may offer discount for both current and potential buyers to retain and attract business. 5. 2. 3: Target Setting (Sale, Profit and Market share): Future Sale, profit and future market share have to be targeted and steps should be taken to reach these targets.
As the forecast of competition is high, Samsung should focuses on retaining current and gaining more market share. To do so, the firm may need to sacrifice profit margin as they did at the beginning of their semiconductor business. In early 1980s, Samsung did not earn any profit through memory chip selling. But, it was important for them to be known and gain market share and they were benefited for the sacrifice afterwards. As, Chinese firms have taken the same strategy as Samsung used in the past, the firm need to attack the market through lowering market price. 5. 2. 4: Lowering marketing cost: The firm should consider on lowering cost of marketing and sales department. Proper segmentation would help marketing managers to decide where to spend what.
Increased productivity of sales people through training and motivation can also add value to the process and cut unnecessary cost. This will certainly give a competitive advantage over the Chinese rivals. 5. 2. 5: Better internal co-operation: To develop a customer focused organization, Samsung should look to improve relations among different functional departments. Research and Development department can provide information on future technologies. R&D and marketing department of the firm can be more integrated, which would help them to pass on information to the customers and formulate best marketing tactics. 5. 3: Implement strategic HRM model:
The model recommends Samsung Electronics a planned move in the direction of developing HR strategies and subsequent plans. The foundation of this proposed model is that the HR planning of Samsung Electronics is a top down process leading to substantial and countable results (Assen, et al. 2009, p. 56). Step-1 Present Company Desired Company Profile Profile Strp-2 Main HR Factors Step-3 People Process Structure Technology
Step-4 Action Plan Step-5 Implementation Figure [ 23 ]: Strategic HRM model The model should be able to help Samsung find some issues and solve them, related to their massive workforce throughout the world- * Required population for present and future. * Anticipated capability of the population. * Anticipation on adding value to the process. * Strengthen culture regarding leadership and teamwork. * Shortage of skilled engineers in the semiconductor industry. * Crisis management. * Creating competitive advantage through skilled workforce. Various steps of the model are- Step-0: Preparation:
As the capacity of the firm towards change is considered high, managers from all levels of organization should work together creating new values to the process. A team may be selected from HR department which will be responsible for developing new HR strategies. Step-1: Analysis of present and potential organizational profile: First of all, managers need to understand the present situation of the workforce and determine where they need to go in order to enjoy competitiveness. The mission of Samsung Electronics human resource should be inspiring the technology world through innovation and change. Step-2: Determining key issues for human capital:
The gap between present and desired company profile should be clustered into HR issues. For example, in order to improve plant facilities in the future, Samsung must recruit and train appropriate population of the workforce. This may drive the firm towards out-sourcing, reduction human capital, and cultural change to add value to the overall process. Step-3: Organization of HRM: When important question are answered at the primary stages of the model, Samsung may concentrate on building the desired human capita. Activities at this step can be differentiated in to these categories- * Process: Samsung must recruit best engineers in the industry and motivate them through continuous improvement and compensation. Organization: The firm may go for a mix of centralized and decentralized approach where top managers will be able to take control and, middle and lower managers will be able to use their talents towards mission. * Technology: Samsung must provide cutting-edge office equipments and facilities in order to acquire most from the workforce. Step-4: Action plan: All the results from previous steps should come into action to get benefit. All the tasks should be distributed according to merits, willingness and commitment of people. Step-5: Implementation: Outcome should be examined at this stage and some adjustment may be required to sort out problems and increase the productivity of the process. 5. 4: Greener Technology:
As the environmental awareness is increasing in business world, firms must start to think of producing greener products with no or very low carbon emission rate. It will help Samsung to improve its image in the industry and attract new customers as environment friendly memory products are likely to be more productive than performance of ordinary products. Last but not least, future of technology business depends much on adaptation of greener technologies as all competitors in the industry are aware of the issue. Figure [ 24 ]: Samsungs statement on greener technology (http://www. samsung. com/global/business/semiconductor/Greenmemory/Products/DDR3/DDR3_Overview. tml, accessed on 15 November, 2011) 5. 5: Manage innovation: As the semiconductor industry populated technology firms, it is believed that the success of Samsung Electronics in the business depends much on proper handling of innovation and technology. It will help the firm to increase its market share and generate cash flow through early market offering of new products. With the blessing of modern Research and Development department, technological knowledge and experience, Samsung focuses on developing memory chips which would be completely new in the market. As the leader of the industry, Samsung has invented and marketed many new products in the past.
The firm must focus on doing the same to retain their strength in the market. Figure [ 25 ]: Managing innovation (http://www. emeraldinsight. com/journals. htm? articleid=842896&show=html , accessed on 14 November, 2011) 5. 6: Projected business plan: Figure [ 26 ]: Projected business plan for Samsung Electronics in semiconductor industry Figure [ 27 ]: Strategic planning (http://seekingalpha. com/article/254416-road-map-for-managing-a-dividend-growth-portfolio, accessed on 14 November, 2011) 5. 7: Limitations of the study: * Timing of secondary data can make a research finding less reliable because changes happen very quickly in all part of business very quickly.
So older data may not reflect present situation of the business. * Making incorrect assumption when assessing SWOT elements often create hesitation in manager’s mind which may result unnecessary delays on choosing from alternative strategies. * Competitive analysis with Porter’s five forces model focused only on external environment of the business. * Investing money on a particular product or service never guaranty profit which oppose the judgment of BCG matrix. * Success of marketing does not necessarily depend on installing CRM only. Firm can lose potential customer while spending more time on developing relation with existing customers, which can be argued to critic Curry’s pyramid model. Because of globalization and advanced communication technologies, gaps between cultures have decreased. So, many people would argue thatHofstede’s cultural dimension model slowly losingits usefulness. * To criticizeKotler’s 4p model, it can be said that change in promotion and product design cannot be done over night as it is expensive and time consuming. I would like to conclude this course work with a famous quote of late Steve Jobs- ‘the cure of Apple is not cost cutting; the cure for Apple is to innovate its own way out of it current predicament’ (Linzmayer, 2004). Apple Inc, which is currently the largest technology business firm in the world, has reached to the certain position through contentious innovation.
They did not want to pull back their position in last global economic difficulty. Samsung may follow Apple’s example and continue to invest in all business functions, especially in cutting-edge memory products, which would ensure them to overcome the threats of Chinese competition in semiconductor industry. List of References: Aaker, D. A. (2001) Strategic Market Management. 6th ed. Danvers: John Wiley & Sons. Assen, M. V. et al. (2008) Key Management Models: The 60+ Models Every Manager Needs to Know. 2nd ed. Harlow: Prentice Hall. Assen, M. V. et al. (2003) Key Management Models: The 60+ Models Every Manager Needs to Know. Harlow: Prentice Hall. Baker, M. and Hart, S. (1999) Product Strategy and Management.
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Assume that you were working on a group project and that one of your teammates
Assume that you were working on a group project and that one of your teammates was nervous about speaking in front of the class during the presentation. what exactly could you do to make your classmate feel more confident and motivated?
and please answer to two of your friends