April

Strategic
Manageme
nt:
200
Samsung
Electronics 9
“Understanding the
attitudes, needs
A report critically analyzing the strategic and preferences of
management of Samsung Electronics with a
focus on the LCD market. consumers is the
cornerstone of the
work we do.”
Samsung Global Strategy Group 2008
Research Report
April 2009
Onkardeep Singh Bhatia
 Introduction
The past few years has seen a huge advancement in display technologies with Liquid
Crystal Displays (LCDs) taking much of the recent limelight over the once popular Cathode
Ray Tube (CRT). The global market for display technologies today is already in excess of
USD$82.4billion and it is estimated to exceed US$97.4 billion by 2011 (Vadera, 2008).

Samsung Electronics Co. LTD (SEC), the cornerstone of Samsung Group, is the world's
largest manufacturer of LCD panels and is the leader in many other consumer electronic
products (Moon, 2009). It principally operates in Asia, Europe and America through four
business divisions; digital media, telecommunication, Semiconductor and LCD. The LCD
division manufactures panels for TVs, Digital Information Displays, notebook PCs, desktop
monitors and mobile products (Samsung, 2008). Its strategic objective is to create qualitative
and quantitative growth and deliver competitive value to customers while maintaining
profitability (Evans and Lindsay, 2008).

This report will analyse the strategy employed by SEC with a particular focus on the LCD
division. The external and internal environment will be studied followed by an evaluation of
the strategies employed by SEC and recommendations for continued success.

Samsung Electronics in the LCD Market

In 1993 Lee Kun-hee changed the strategy of Samsung Group from imitating cost-leader to
the role of a differentiator by downsizing and concentrating on three industries: electronics,
engineering, and chemicals (Moon, 2009). By 1995 SEC had developed LCD technology
and achieved a significant place in the market (Borrus et al, 2004)

Since then SEC has proven to be a flagship with revenues consistently increasing over the
last 5 years (Figure 1). As of the end of 2007, the LCD division accounted for 16% of SEC’s
total revenue (Figure 2).
Figure 1: SEC’s Consistent revenue growth Figure 2: Sales Revenue by Division (Samsung, 2008)
(Global Markets Direct, 2009)

SEC has held the highest global market share in LCDs for over six consecutive years
(Samsung, 2008). SEC’s LCD TV shipments increased by 54% over 2007 and their global
market share increased to 20% in 2008 (Global Markets Direct, 2009). In Q1 2009, SEC
reported a 72% profit slump but still managed to increase sales by 8.5% (Samsung, 2009),
highlighting their commitment to maintaining a lead in the industry. Table 1 shows the top 3
competitors in the LCD market.
Table 1: Overall Samsung is ranked number 1 in the LCD market (Korea IT Times, 2009)

Rank Notebook PC LCD Monitor LCD TV Others Total

1 LG Display Samsung Samsung AUO Samsung
2 Samsung CMO LG Display Sharp LG Display
3 AUO LG Display CMO LG Display AUO
 External environment
The macro and industry environments will now be looked at to assess the strategic position
of SEC.

Macro Environment
The macro-environment refers to the external factors which affect a company's planning and
performance, and are beyond its control (CIM, 2009). The STEEPLE framework will be used
for this analysis.
Figure 3: Children’s Daily ‘Screen Time’
(Subrahmanyam et al., 2000)
Social Factors
People’s obsession with technology is changing the way we relate to
others and ourselves (Lam, 2008). Electronics is playing a central role in
people’s lives (Intel, 2007; Subrahmanyam et al., 2000) and consumer
attitudes towards gaming and mobile devices will increase demand for
LCDs (FutureSource, 2008).

Technological Factors
This industry has been one of the most progressive (Sixto, 2003) with
ever shortening product life cycles (Mathews, 2005) that have lead to
global revenues for LCD panels of $140 billion (BNET, 2009).

SEC has lead the industry with inventions like the first double-sided LCD panel (Samsung,
2008) as well as leading in new display technologies like OLED.

Political Factors
Some governments provide subsidies and tax incentives to the LCD industry. Table 2 shows
countries that provide incentives hold the largest global share (DisplaySearch, 2005).
Table 2: Global LCD Panel Production (DisplaySearch, 2005)

Global LCD Panel Production by Country

Country % of Global Panel Production Level of Incentives for LCD industry
Taiwan 41 High
South 37 High
Korea
Japan 11 High
China 7 Medium (Growing)
Other 4 Low

Exemplifying this is how SEC received a US$92.4million aid package towards building its
LCD television plant in Slovakia (ExpansionManagement, 2008).

Further, Korean industrial policies have been important for facilitating international
competitiveness by requiring foreign firms to transfer technology in exchange for market
access (Kim, 1997).

Economic Factors
The economic downturn reduced demand for LCD products (Table 3) with YoY shipments
reducing in 2009. However, a MoM increase of 29% suggests a recovery in the market with
revenues for March hitting US$3.9 Billion, the highest it’s been for 6 months (DisplaySearch,
2009).
Table 3: Monthly Large-Area TFT LCD Panel Shipments by Application (Millions) (DisplaySearch, 2009)

LCD Panel Mar 08 Feb 09 Mar 09 Month on Month Yr on Yr

Growth Growth
Notebook PC 11.7 8.5 11.6 38% 0%
Monitor 18.4 12.4 15.4 24% -17%
TV 8.7 7.7 9.9 30% 14%
Other 1.2 0.8 0.9 22% -24%
Total 40.0 29.3 37.9 29% -5%

Demand is also expected to rise due to an increase in emerging markets like China and
India.

Moreover, SEC is highly dependent on the local economy. The 1997 Asian Crisis is an
important example (Mishkin, 1999).

Environmental Factors
Customers have become increasingly environmentally conscious, wanting higher energy
efficiency, greener products, lower emissions of harmful radiation better waste management
(Tarr, 2009; EE Times-Asia, 2009).

Legal Factors
Intellectual property (IP) is very important in any industry constantly innovating. In 2006 SEC
filed 12000 new patents in Korea alone (Samsung Environment, 2007). The downside is that
conflicts can occur. SEC recently won a patent dispute against Sharp started in 2007 (Wall
Street Journal, 2009).

Legislations around local employee rights, IP, and tax will further influence SEC strategic
decisions.

Industry Environment
Porter’s 5 Forces (Porter, 1997) will be used to understand the attractiveness, likely-
profitability and power distribution of the LCD electronics industry. Understanding these
forces provides the groundwork for a strategic agenda of action. A detailed summary of each
of the 5 forces is given in the Appendix (Table 4) followed by an overview of the main points.
Figure 4: Porter’s Five Forces (Porter, 1997)
Threat of New Entrants – Low
Overall, the treat of new entrants is low. Barriers to entry are high due to the large capital
requirements and economies of scale especially as SEC has proven production, research
and marketing processes. Highlighting this is SEC’s investment of USD$852million for 2
manufacturing lines without definite production plans (Png and Lehman, 2004). Further, SEC
benefits from good product differentiation due to strong brand identification and innovative
products. In 2008 Samsung was ranked 21st amongst world brands (Samsung Brand, 2008).

SEC’s developed experience curve, proprietary technology, access to the best raw materials
and favourable locations provides them with significant cost advantages (Hung, 2006). Also,
easy access to distribution channels (Chiu et al., 2006) as well as SEC’s reputation for
fighting hard (Williams, 2005) makes it difficult for potential new entrants.

Conversely, foreign government policy, in particular China, has been encouraging entry into
the industry through financial incentives (Thomson and Sigurdson, 2008).

Bargaining Power of Suppliers – Low

Overall the bargaining power of suppliers is low. The number of purchasers is large and
many competitive suppliers exist. Also, supplier product differentiation and switching costs
are low (Lee, 2006). Forward Integration is unlikely as purchasers like SEC collaborate with
suppliers and increases in raw material prices are likely to be absorbed or passed on to
customers (Samsung, 2008). Finally, the suppliers benefit from the industry making them
willing to help in R&D. This is exemplified by SEC who has collaborated with more than 1000
suppliers (Lee, 2006).

Bargaining power of Customers - Med

Overall customers have medium bargaining power but usually it would be a win-win
situation. For example, SEC and Dell entered a US$16billion technology and R&D
partnership (Farmer, 2001). Product differentiation is high but imitations may provide
cheaper alternatives and increase buyer power. Further, price sensitivity is high due to a
large number of similar products and the status they bring although the perception of quality
allows for a price premium.

Business-to-business customers earn relatively high profits and are able to raise their prices
due to SEC’s brand strength making them less price sensitive and therefore reducing their
power over SEC (Gao et al., 2003).

Conversely, forward integration is unlikely to occur so retailers and distributers have some
power in this respect.
Figure 5: The TFT-LCD Industry Cycle
Threat of Substitute Products - Med
Overall, the threat of substitute products is
medium. The fast moving LCD industry
with various display technologies leads to
pressure being put on lowering pricing
and high R&D costs to continually
differentiate products ensuring industry
profitability and growth (Mathews, 2005).
SEC tries to continually innovate and in
2008 they released the world’s largest
and thinnest OLED-HD TV (Williams,
2008).
Competitive Rivalry within the Industry – High
Figure
Overall, rivalry is high with many diverse competitors 6: Main
(Figure Competitors by Total Market Share
6).
(ECN, 2009; Display Search, 2008)

Chinese competitors have also recently

increased rivalry (Mathews, 2005). Similar
products and low switching costs reduce brand
loyalty (Png and Lehman, 2004). Storage costs
and capacity is variable and demand is seasonal
which can lead to price cutting to shift stock
(Mathews, 2005). Finally, high exit barriers due to
specialist resources (Camposa and Lootty, 2007)
also intensify rivalry.

Summary of External Environment

The analysis highlights the need for SEC to
continue leading technologically whilst adapting products in line with social and
environmental trends. Simkin (1997) found few companies look at changing factors such as
substitutes and new entrants further highlighting the importance of diversification of products
and internal processes as well as aggressive and timely R&D.

Internal Environment
Superior resources and distinctive internal competencies to that of rivals have been shown
as the basis of competitive advantage (Andrews, 1971; Barney 1991; Mills et al., 2002). A
Resource Based View (RBV) will be used to analyse the internal environment and further
understand the strategic position of SEC.

Resources
Mills et al. (2002) suggest resources can be tangible or intangible. They provide 6 categories
suitable for resource identification that will be used to analyse SEC (See Table 5).
This is similar to Barney’s (1991) VRIO framework that will be used later in the report.
The importance of each resource can be evaluated based the competitive advantage
they provide. Three metrics as outlined by Mills et al. (2002) will be used to measure
this; Value, Sustainability and Versatility. Each measures how the performance
generated by the resource is, valuable to the customer, lasting over time and useful
over different product areas and markets respectively. Also shown is the Overall
Importance and level of importance SEC gives to a particular resource.
Table 5: Samsung Electronics current resources and their importance

Importance of Resource
Resource Resource Valued Sustained Versatile Overall SEC’s Comments
Category Imp Imp
Tangible Plants/Factories High Med High High High 4 major LCD production plants. 3 in Korea, 1
resources in China
April 2008 SEC and Sony agreed on
establishing a 8th Generation LCD plant in
Tangjeong ‘Crystal Valley’ Complex.
6 design centres in Asia, the U.S., and
Europe
R&D - Campus High High High High High Samsung to spent US$45 billion on R&D from
2005to 2010 (Samsung R&D Spend, 2005)
SAIT
Samsung Advanced Institute of Technology
(SAIT) established in 1987 as Samsung’s
central R&D facility.

Access to raw High Med High High High Strong links with wholesale and retail (Chiu et
materials and al., 2006).
distribution channels
Employees High Med Low Med Med Over 138,000 (2007) Mostly highly skilled,
motivated, empowered, good work ethic.
Intellectual Property Low High Low Med High In 2006 SEC filed 12000 new patents in
(Patents/ Korea alone (Samsung Environment, 2007).
Trademarks/ Willing to fight and maintain rights on their
Copyrights) patents.
Six Sigma Academy High High High High High According to Bae and Kim (2004) Samsung’s
Six Sigma Academy was established to
educate the employees and build up teams of
quality specialists with problem solving
abilities.
Knowledge Experience (learning) High Med High High High Existed for 40 years. Market leaders in LCD
resources, curve panels.
Skills and Knowledge gained High Med High High High Trading knowledge for access to foreign
experience from R&D markets.
Knowledge of foreign High Med High High High LCD Products available in over 10 countries
markets worldwide.
System Formal planning, High Med High High Med Low bureaucracy, quality focused, customer
and command and focused. Formal hierarchical structure but
procedural control systems allowing innovation to be driven bottom up.
resources Integrated High High High High Med Good use of IT systems including recent
management introduction of an integrated sales document
information systems management system (Adobe, 2003). Also use
SCM (Supply Chain Management), PDM
(Product Data Management), and CRM
(Customer Relationship Management)
systems and have set up global real-time
management information systems.
Supply Chain High High High High Med SEC has a complex supply chain due to a
huge product range and large geographies.
To reduce the lead time on supply chain SEC
networked customer management, R&D
management, and supply chain management
processes (Samsung, 2009).
Cultural Culture High High Med High High Open, sharing, entrepreneurial.
resources Diversity High Med High High Low Largely Korean due to language barriers
and values Social and Low Med Med Med High SEC is committed to sustainable environment
environmental in all of business activities
initiatives
Leadership High Med High High High Not very risk averse, ambitious, committed to
growing the company.
 Reputation & Brand High High High High High The Brand Keys Customer Loyalty Award
Loyalty awarded to Samsung for last seven
consecutive years.
Associated with Quality and Value.
Strong sponsor of Sports including the
Olympics.
Ranked 21st most well known global brand in
2008.
Network International High High High High High Foreign linkages has permitted Samsung to
resources networks achieve a high level of vertical integration.
Strategic alliances High High High High High Various joint ventures with key competitors.
For example, Sony, NEC and Sharp. Focus
on win-win strategy.
Resources Internal funds Med Med High Med High In 2008 US$5.3 billion cash reserves (Moon,
Important 2009).
to change

SEC’s resources provide them with inherent competitive advantage especially when they go beyond the ‘threshold resources’ that fulfil the
minimum barriers to entry. More important however, is how these resources translate to distinctive core competencies (Mills et al., 2002) which
will now be discussed.
Constant Innovation
SEC’s state of the art LCD panel factories and design centres provide superior production
capabilities. Linked to the well
Figure 7: SAIT Knowledge Management framework and components (Suh
financed market-driven R&D centres et al., 2004)
SEC is able to be a leader of its
industry. The Samsung Advanced
Institute of Technology (SAIT) SAIT
currently employs over 1,000
researchers, 40 percent and 12
percent of who hold doctoral and
master’s degrees, respectively (Suh
et al., 2004). The IT systems, formal
and informal supporting organisation
supports effective R&D efforts in that
they are critical aspects of knowledge
management initiatives being run by
SEC (Figure 7). An example of SEC’s
innovation includes 2.3-inch e-paper
that uses electrodes made from
carbon nanotubes for enhanced “fold-ability.” (Samsung, 2008). However, SEC has proved
to be successful not only in product innovation but also in involving the employees in the
process of innovation.

Delivering Quality
Samsung has been one of the world's biggest advertisers over the past decade, building its
brand into one of the most recognisable names on earth. A recent consumer survey shows
Samsung tops product ratings in four of the six main sizes of LCD TVs (Samsung 2008).
This reputation and brand strength is backed by SEC’s relentless focus on quality. They
have their own Six Sigma Academy which was established to educate the employees and
build up teams of quality specialists with problem solving abilities. Leveraging these
resources SEC has developed a core competency in delivering quality.
Figure 8: SEC continues to lead on price even if it
Cost Leadership reduces its operating margin (Global Markets Direct,
Access to raw materials and distribution channels as 2009)
well as the relatively low power of suppliers and large
production factories allow SEC to achieve economies
of scale that translate into lower prices for the
customer and higher margins for SEC. Leveraging the
knowledge of foreign markets and 40 years of
experience within the industry allow for costs to be
kept to a minimum. This is undoubtedly a core
competency of SEC.

Quick to Market
Strong leadership and focus on growth linked with its
international networks and experience within the
industry allows an end to end process to be owned and run by SEC. This is illustrated in the
LCD TV market for which SEC develops and manufactures its own TV computer chips.
Leveraging these resources provides SEC with a deep understanding of the fast changing
market and makes them distinct in their competency to launch products to the market
quicker than competitors.

Core Competencies Summary

Below are shown the four key core competencies using Barney’s (1991) VRIO framework.
Table 6: SEC’s distinctive core competencies

Resource Value Rarity Costly to Exploited by

Category Imitate? Organisation?
Constant High Med Yes Yes
Innovation
Delivering Quality High Med Yes Yes
Cost Leadership High Med Yes Yes
Quick to Market High High Yes Yes

Summary of Internal Environment

The RBV has shown that SEC benefits from competitive advantages intrinsic to its
resources. However, its real strengths lie in the distinctive core competencies it generates by
leveraging its resources. Namely, innovation, quality, cost leadership and being quick to
market.

Evaluation of Strategies
The second part of the report will draw on findings from the internal and external
environment. An ‘inside-out’ perspective will be taken with theoretical frameworks being
used to analyse and evaluate the corporate level strategy of SEC followed by
recommendations for future success.

Current Strategy
One of the key areas of strategy for any business is how it intends to grow. (Chandler,
1962; Penrose, 1959). This is central to SEC as it wants to be a leader as highlighted by
their corporate vision; ‘Leading the Digital Convergence Revolution” (Figure 9). The two key
strategic methods employed are Figure 9: SEC’s Vision and mission statements (About Samsung, 2009)
organic growth and strategic
alliances.

Organic Growth
Organic growth is defined as the
growth rate that a company can
achieve by increasing output and
enhancing sales as opposed to
profits or growth acquired from
takeovers, mergers or acquisitions
(M&A) (Investopedia, 2009). Coyle
(2000) argues that organic growth allows a firm to develop market position over the long
term, can help to achieve growth much cheaper than M&A and is well suited to growing
markets. This seems to fit well with SEC’s current strategic position as it is the industry
leader and has the competencies to grow into other markets. Also, although SEC has large
cash reserves, organic growth allows funds to be focused on other areas such as R&D.
Finally, the external environmental analysis pointed towards a growth in the LCD market and
the electronics industry as a whole thereby reinforcing the suitability of this growth strategy.

However, is this sustainable? Based on the internal-environment analysis SEC has leaders
focused on growth, an appropriate culture for growth as well as excellent bonds with
customers, effective sales and unrivalled competencies in innovating. According to Forum
(2008), a leading company specialising in growth strategies, these are critical factors in
sustainable organic growth. So yes, SEC’s growth is sustainable but it may not always be
the best strategy to adopt. This is especially true when entering a new market/country which
may require deep local knowledge that SEC lacks. SEC tries to balance this problem with
strategic alliances.
Strategic Alliances
Strategic alliances are formal relationships between two or more parties to pursue a set of
agreed upon goals while remaining independent organisations (Bleeke and Ernst, 1992).
Since 2001 SEC agreed 29 different alliances (About Samsung, 2009). According to Bleeke
and Ernst (1992) alliances are an efficient ways to enter new markets, to gain skills,
technology, or products, and to share fixed costs and resources. It could be said that SEC
does not need much skills or technology as they are arguably the most innovative and
therefore any alliance would be disadvantageous because less competent competitors could
learn from them. However, in most cases the sharing of costs and resources provides a win-
win situation as illustrated by the SEC and Sony alliance. Also, organic growth can be used
alongside alliances when entering new markets to minimise the learning curve and
associated costs. Nonetheless, the applicability of this growth strategy when expanding
operations to emerging markets like China and India is questionable as most firms would be
imitators and mutual benefit for SEC would most likely not be achieved.

Further Analysis of Current Strategies Figure 10: Porter’s Generic Strategies (Porter, 1985)
Porter (1980) argued that there are
three basic strategic options available
to organisations for gaining
competitive advantage; Cost
Leadership, Differentiation and Focus.
This is summarised in Porter's Generic
Strategies (Porter, 1985) SEC

SEC fits the Cost Leadership strategy

in that it increases profits by reducing
costs, while charging industry average
prices. Cost Leadership is one of
SEC’s core competencies as
discussed in the previous section and
therefore this strategy fits well.

The Differentiation strategy also applies to SEC because they are constantly innovating.
SEC has unmatched competencies in innovation and quality of LCD technology as has been
shown in the previous section. Therefore, this strategy seems appropriate for SEC to follow.
Based on this framework, it could further be argued that SEC varies its scope. For example,
products like OLED TVs currently serve a niche market. According to Porter being "all things
to all people" or ‘stuck in the middle’ is likely to lead to poor performance. However, in SEC’s
case the combination of a cost leadership and differentiation strategy seems to work well.
This highlights that the framework may have some significant limitations.

Bowman (2008) argues that this model has three main problems. Firstly it confuses ‘where
to compete’ with ‘how to compete’ and does not take account of the segmentation of
markets. Secondly, the model confuses competitive strategy with corporate strategy
because even individual business units may have several different strategies like SEC does.
Finally, it excludes other feasible strategy options because it suggests only one strategy
should be followed. As can be clearly seen by the strategy of SEC, both Cost Leadership
and Differentiation strategies can be used simultaneously.
 Figure 11: Bowman’s Strategic Clock (Competitive and
Bowman’s Strategic Clock (1997) is Corporate Strategy)
another way to analyse strategic options. It
looks at perceived added value by the
customer against price. Based on this
framework SEC’s strategy can be argued
to be primarily ‘Hybrid’. This refers to a
strategy which is low cost to the consumer
but still differentiated. However, it could
also be argued that there is an element of
differentiation with and without a price
premium depending on which markets and
products are being referred to. As was
discussed in the previous framework the
strategy could also be described as
focused differentiation where a price
premium is charged within a niche.
Therefore, based on this model SEC
operates various strategic options from Hybrid through to Focused differentiation.

This framework allows for more flexibility than the over-simplistic generic strategies by
Porter.

Overall Evaluation of Strategic Choices

The advantages of adopting a primarily low cost and differentiated strategy is that SEC can
achieve significant margins on their products without necessarily charging premium prices.
This is beneficial as customers will recognise the value being given, reinforcing brand loyalty
and increasing customer satisfaction. Also, the strategy fits the internal competencies of the
business well which is extremely desirable because it means SEC will be effective in
implementing it. Further, the consistent focus on differentiation means there is constant
innovation in products and within the firm. This means SEC’s products will constantly be
adapting to the trends of the external-environment and ultimately the customer. An example
of this is SEC’s response to social and environmental consciousness shifts, reflected in their
products as well as strategy. Finally, it is a strategy well suited to hypercompetitive
environments as differentiation is key; ‘Your responses should be different and better, not
cheaper, faster, and the same’ (Boar, 1994).

On the other hand, whilst pursuing a differentiation strategy SEC needs to remain agile with
their new product development processes. Else, they risk attack on several fronts by
competitors pursuing Focus Differentiation strategies in different market segments. SEC
mitigates this by creating new markets through innovation and charging premiums for some
key products. Another problem with a differentiation strategy coupled with a cost leadership
strategy is that customers can come to expect the best value. This can squeeze margins
especially in financially weak times like the present. Furthermore, the problem in pursuing a
cost leadership strategy is that these sources of cost reduction can be replicated by
competitors which make it more important to continuously find ways of reducing cost.
However, imitations in cost reduction can be minimised through strategic alliances with
competitors; creating win-win situations.

Thus, the combined strategies employed by SEC allow it to achieve sustainable growth and
sustainable competitive advantages. Having said this, there are still areas for improvement
so recommendations will now be given.
Recommendations
Three future strategies for continued success for SEC are given below.

• Diversify Growth Strategy for Emerging Markets

Most emerging market competitors are imitators and SEC’s current strategy of
organic growth and strategic alliances is not very effective because mutual benefit is
unlikely to occur. Therefore, SEC should focus on seeking out and acquiring
resources in emerging markets. This would be applicable as it would provide
immediate market presence and the essential deep local knowledge to effectively
compete. Mergers are not recommended as they too are unlikely to provide sufficient
benefit to SEC who through acquisitions could fully own their own operations. This
diversification in growth strategy would allow SEC to expand their global presence as
well as employ a greater diversity of people, ultimately moving SEC towards their
corporate vision of ‘Leading the Digital Convergence Revolution’.

• Continue Heavy R&D and Innovation

Continued investment in R&D especially in newer technologies such as OLED and
nanotechnology will allow SEC to widen the cost leadership and differentiation gap
meaning that they can produce more differentiated products at lower costs. SEC
should aim to be the first to launch products at a premium price to maximise profits
and continue innovating to ensure first-mover advantage is maintained. This will also
allow SEC to create new markets and thus employ a more focused differentiation
strategy so that price premiums can be charged. This is especially important in the
current economic climate where margins are restricted.

Producing and promoting more environmentally friendly products should be made an

important part of future innovation and R&D to adapt to changes in social and
environmental consciousness of customers. This change however should be driven
from SEC being an organisation that is environmentally and socially conscious in the
way it conducts business so that the brand itself reflects customer preferences. It is
also recommended that SEC innovate internally and further invest in cutting edge IT
resources to streamline processes and effectiveness. This will allow SEC to further
reduce costs and increase competitive advantage.

• Enhance Brand Loyalty

Retaining customers for longer by enhancing customer loyalty schemes will help
increase switching costs and therefore reduce the costs of customer acquisition and
reduce the complications of hypercompetitive environments. This should include both
domestic and business to business buyers. SEC should also continue to highlight the
quality and unique selling points of products in marketing campaigns to ensure
consumers feel products are value for money even at a premium costs.
 Appendix
Table 4: Summary of Porter’s Five Forces applied to LCD electronics industry

Porter’s 5 Overall Analysis Individual

Forces Level Level
Threat of Low threat Economies of scale is a clear barrier to entry Low
New of new especially as SEC has proven production, research
Entrants entrants and marketing processes based on experience(Png
and Lehman, 2004).
Product Differentiation of SEC is large due to strong Low
brand identification making it very difficult for
entrants to compete (Samsung Brand, 2008)
Capital Requirements are large for entrants to Low
effectively compete especially due to large R&D
expenditure (Samsung R&D Spend, 2005).
Cost Disadvantages Independent of Size are large Low
for entrants due to developed experience curve
(learning curve), proprietary technology, access to
the best raw materials, assets purchased at pre-
inflation prices, government subsidies and
favourable locations (Hung, 2006).
Access to Distribution Channels acts as a huge Low
barrier to entry. SEC has strong links with wholesale
and retail channels as Samsung’s products popular
with consumers (Chiu et al., 2006).
Government Policy in Korea doesn’t play a large role High
in creating barriers for entry but foreign governments
especially in China are encouraging entry into the
industry through financial incentives (Thomson and
Sigurdson, 2008).
Reaction of Existing Competitors also acts as a Low
barrier as SEC has been known to fight fiercely for
market share by cutting prices and possess
substantial resources (Williams, 2005)
Bargaining Low Number of purchasers is large and many competitive Low
Power of supplier suppliers exist (Lee, 2006)
Suppliers power Product Differentiation of raw materials is low and Low
switching costs are low. (Lee, 2006)
Forward Integration is unlikely as many of the Low
purchasers like Samsung are more powerful and
operate their own manufacturing factories. Any
upward pressure on raw material prices is likely to
be absorbed or passed on to customers (Samsung,
2008).
The Industry is an Important Customer of Suppliers Med
which means they will be willing to help in R&D
efforts to provide better raw materials and
technologies. For example nanotechnology (Lee,
2006)
Bargaining Medium Number of Customers is large but not concentrated. Med
Power of customer B2B buyers are more powerful due to bulk
Customers power purchases. For example Dell (Farmer, 2001).
Product Differentiation in Samsung products is large Low
 so exact alternatives not always available but
imitations may provide cheaper alternatives and
increase buyer power (Gao et al., 2003).
Price Sensitivity is high due to a large number of Med
similar products and the importance of the product to
the buyer as a sign of affluence makes them more
price sensitive although the perception of quality
may mean that some customers are willing to pay a
premium.
B2B customers earn relatively high profits and are
able to influence buyer behaviour due to the
popularity of the brand making them less price
sensitive and so reducing their power (Gao et al.,
2003).
Forward Integration is unlikely to occur so retails and High
distributers have some power in this respect.
Threat of Medium Fast moving industry with various display Med
Substitute threat of technologies leads to pressure being put on lowering
Products substitute pricing and high R&D costs to continually
products differentiate products ensuring industry profitability
and growth (Mathews, 2005). For example, OLED
and Nanotechnology.
Competitive High Competitors are numerous and diverse with LG High
Rivalry Rivalry being the closest in size and power. Chinese
within the competitors producing cheaper imitations has also
Industry increased rivalry (Mathews, 2005).
Low – Industry Growth is very fast so rivalry is Low
€somewhat reduced (Mathews, 2005).
High – Product Differentiation is large but many High
similar products are offered which don’t really lock in
buyers to a particular company (Lee, 2006).
High - Switching Costs are low so rivalry is High
intensified (Lee, 2006).
Med – Fixed costs are high leading to an economies Med
of scale effect and increasing rivalry (Hoovers,
2008).
Med – Storage Costs and Capacity is variable and Med
demand seasonal which can lead to price cutting to
shift stock, increasing rivalry (Mathews, 2005).
High – Exit Barriers are high with a lot of specialist High
resources needed to effectively compete (Camposa
and Lootty, 2007).
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