Samsung: Sources of Competitive Advantage
Samsung has grown to become one of the largest conglomerates in the world by revenue in recent years through its continuous pursuit of reliability and excellence in its products through innovation and design. Much of the success of Samsung in recent decades can be attributed to its key strategic, and often bold, decisions that allows Samsung to capture market share in times of economic uncertainty. This paper will focus on the competitive advantages held by Samsung that facilitated its rise to prominence.
From Exhibit 3, the cost advantage of Samsung over the four major competitors is clearly visible (Case Study). Samsung maintained not only a larger market share from Q1 2000 to Q1 2004 over all main competitors (Micron, Infineon, Hynix, Worldwide) but also a higher average price premium (57% over Micron, 38% over Infineon, 38% over Hynix and 49% over Worldwide competitors). Due to a combination of the price premium and a cost advantage, Samsung was able to achieve a significantly higher average operating margin of 53% over these competitors. Given that Samsung was able to achieve a significantly higher level of operating profitability during this period, we can conclude that Samsung achieved and held a competitive advantage during this period.
How was Samsung able to achieve Price Premium?
Samsung had an average selling price of $5.68, 14.5% higher than the weighted average of its competitors (exhibit 7a). It was able to achieve this largely due to two reasons, quality of product and its wide product mix.
The memory industry (semiconductors) is characterised by limited product differentiation and price sensitive demand. Through its key focus on the quality and reliability of the products, Samsung was able to justify the price premium. In addition to this, Samsung had a highly recognised brand in electronics which further assisted in justifying the price premium.
How was Samsung able to achieve Cost Advantage?