Samsung Case Analysis
Strategy Formulation
Fall 2014
Professor Bruce KogutMidterm Group Project
By Learning Team A8:
Carl Case
Matthew Cox
Bilon Geiger
Justin Mah
Gregg Rivkind
Matthew Stack
Executive Summary
Samsung enjoys a competitive advantage due to leadership and strength in four key areas: cost leadership, superior products, research and development, and unique company culture. While these fundamental ingredients have led to Samsung’s domination of the memory industry, Chinese companies are threatening this position and attempting to enter the legacy product market by offering low prices to capture market share. In response to this threat, Samsung should: (i) cut prices on legacy products, (ii) invest in cutting edge memory products and (iii) consider a cooptation strategy with a competitor.
Samsung’s Competitive Advantage
Samsung enjoys a competitive advantage by being able to charge a higher price than its competitors due to its customers’ higher willingness to pay (“WTP”). While it is unclear from the facts of the case whether Samsung’s suppliers in fact have a lower willingness to supply (“WTS”) to Samsung, it is clear that Samsung maintains a cost advantage over its competitors due to its ability to produce more products in a given run. Both the WTP and the price for Samsung memory products are higher relative to its competitors, thereby creating value.
Samsung’s customers’ WTP is higher because of the reliability of Samsung’s products. In fact, customers would pay upwards of a 1% average price premium for a reliable product due to the risk that defective memory could destroy the entire product’s value. Also, Samsung has the ability to customize products to customer demands, thereby differentiating itself from its competitors. Due to the reliability of the products, the risks associated with defective memory, and Samsung’s ability to differentiate from competitors, consumers have a higher WTP for Samsung memory products. Samsung offered 1200
Fall 2014
Professor Bruce KogutMidterm Group Project
By Learning Team A8:
Carl Case
Matthew Cox
Bilon Geiger
Justin Mah
Gregg Rivkind
Matthew Stack
Executive Summary
Samsung enjoys a competitive advantage due to leadership and strength in four key areas: cost leadership, superior products, research and development, and unique company culture. While these fundamental ingredients have led to Samsung’s domination of the memory industry, Chinese companies are threatening this position and attempting to enter the legacy product market by offering low prices to capture market share. In response to this threat, Samsung should: (i) cut prices on legacy products, (ii) invest in cutting edge memory products and (iii) consider a cooptation strategy with a competitor.
Samsung’s Competitive Advantage
Samsung enjoys a competitive advantage by being able to charge a higher price than its competitors due to its customers’ higher willingness to pay (“WTP”). While it is unclear from the facts of the case whether Samsung’s suppliers in fact have a lower willingness to supply (“WTS”) to Samsung, it is clear that Samsung maintains a cost advantage over its competitors due to its ability to produce more products in a given run. Both the WTP and the price for Samsung memory products are higher relative to its competitors, thereby creating value.
Samsung’s customers’ WTP is higher because of the reliability of Samsung’s products. In fact, customers would pay upwards of a 1% average price premium for a reliable product due to the risk that defective memory could destroy the entire product’s value. Also, Samsung has the ability to customize products to customer demands, thereby differentiating itself from its competitors. Due to the reliability of the products, the risks associated with defective memory, and Samsung’s ability to differentiate from competitors, consumers have a higher WTP for Samsung memory products. Samsung offered 1200