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Samsung Electronics Case Write-Up
1. The Memory Industry (5 points).
Conduct a five-forces analysis of the memory industry. You will need to rate each of
the five forces in this industry as high, medium or low and then explain briefly why
you selected this rating.
A) Threat of New Entrants(Barriers to entry) (MEDIUM)
Samsung, being a global company with net revenues of over $30 billion, had established
an integrated supply chain with economies of scale and scope. New entrants were
required to come in on a very large scale for effectively minimizing costs, which the
Chinese companies succeeded in doing. Samsung had scale of economies in research and
chip fabrication and was world leading memory producer for all types of PC’s, digital
cameras and other electronic products. Samsung had demand side benefits of scale as it
demanded superiority in product quality and efficiency and it was a well established and
trusted brand name ($5.2 billion in 2004). High switching costs were associated with the
industry as due to established production lines and multibillion dollar commitments, it
would be extremely costly and time consuming for a company to divest into different
technologies and design commitments. When IBM, Toshiba and NEC discovered
problems with their “trenching” method of incorporating cells into tiny chips, they lost
years of development time trying to switch to the “stacking” method. The cost of
production facilities rose to $3 billion and hence created a higher barrier of entry for
smaller level competitors. A ...