South Korea’s Samsung Group of Companies
South Korea’s Samsung Group of Companies is the country’s largest conglomerate in terms of revenue. Samsung leads a plethora of industries in the world. The firm is composed of a myriad of business all amalgamated under the Samsung label. The Samsung group is comprised of Samsung Electronics, Samsung Heavy Industries, and Samsung Engineering & Construction. Each division of the Samsung Group of Companies leads its industry by a vast market share. Arguably, Samsung Electronics is the world’s largest electronics company. Samsung Heavy Industries and Samsung Engineering and Construction are both major international shipbuilder and construction companies. The triad of Samsung embodies the very origin of the firm’s name “Samsung”, which is Korean for “three stars”. In 2005, Samsung overwhelmed its fiercest industry rival Japan’s Sony as the world’s leading consumer electronics brand; Making the Samsung brand is the most recognizable Korean brand in the planet. Samsung has been a consistent fixture in the top twenty global brands. The firm leads a bevy of industries such as entertainment, financial, retail, and chemical industries.
Samsung is currently at the leadership of Lee Soo-bin. Soo-bin is CEO for Samsung Life Insurance as well. The Samsung Group of Companies boasts of its 25% of employees, which are PhD holders. With this in mind, the firm is considered as the most prestigious business organization in South Korea. Other than its famed triad of companies, Samsung owns a South Korean private university known as Sungkyunkwan University. Due to its vast holdings and acquisitions, the government has become wary of splitting some of the firm’s acquisitions such as the Hansol Group, CJ Corporation, and the Shinsegae Group. Eventually, former employees of Samsung will soon found other major firms in the South Korean market namely Naver and Iriver. Naver was established as South Korea’s premier search engine by former Samsung employees. On the other hand, Iriver is South Korea’s best MP3 player manufacturer. Samsung manufactures essential electronics supplies as well.
A vast number of firms have been adhering to Samsung in order to make their end-products. Samsung manufactures raw materials such as LCD panels and semiconductor chips. In order to generate revenues from its sales of raw materials, the firm has moderated its prices, which lead to the apparent bankruptcy of independent enterprises. Samsung has been criticized for doing this, but has continued to overwhelm a plethora of industries. Samsung has been receiving significant support from the South Korean government, which makes it possible for the firm to launder vast amounts of funds from banks in South Korea. Samsung’s monopoly of overwhelming a particular market makes its net profits and revenues commensurate to the GDP of some countries. The firm has almost bested the apparent economy of Argentina in 2006, which would make it the 34th largest economy in world. With this in mind, Samsung has been likened to an empire, which seizes and overwhelms small-sized enterprises.
Koreans are proud of the Samsung brand, which is why they are more than loyal to the firm and its products. Koreans perceive Samsung as a symbol of Korean pride and excellence. The Samsung Group of Companies has significant influence among South Korea’s business and government sectors such as media and culture, politics, and economic development. Samsung took up 18.1% of all exports with USD 31.2 billion and 20.7% with USD 52.7 billion from 2000 to 2004. (Businessweek, 2007). In 1998, the Great Workplace Program was launched by the semiconductor sector of Samsung Electronics in order to augment the holistic workplace environment of the firm’s foundation.
Cost Advantage and Price Premium Analysis
Samsung manufactures memory chips that classified as Dynamic Random Access Memory or DRAMs. DRAMs is part of the global memory chip industry that garnered a $33.7 billion in sales during the annual auditing for the year 2003. Telecommunication firms and general consumers were the primary clients for the increasing consumer base for DRAMs. However, the sales of DRAMs experienced a significant letdown due to the decline for the demand in PC’s. DRAMs used to be one of the essential parts in complementing the memory systems of personal computers. From 1990 to 2003, the demand for DRAMs has declined from 80% to 67%. Eventually, DRAMs were used in manufacturing telecom products such as mobile phones, switches, and hubs were expected to grow from 3.5% to 7.9% for DRAMs in 2008.
The average retail price for a 64mb DRAM is $8.63, which accounts for an operating profit of $5.64. The only competitors for Samsung’s 64mb DRAM are Micron and Hynix, which sells for $7.88 and $8.10 respectively. Obviously, Samsung’s DRAM 64mb is far from being cheap yet it sells due to the 1.8% production volume. The production volume for Samsung’s DRAM is low compared to its competitors due to the fact that most DRAM users are telecommunications firms that manufacture mobile phones and other communication peripherals. However, Samsung’s overall production volume for all of its DRAM demand overwhelms its competitors. Samsung’s production volume of 896.4 bested Micron’s 672.8, Infineon’s 535.3, and Hynix’s 521.5 respectively. Samsung’s high production volume for its DRAM is due to its loaded cost of a measly $2.99. With this in mind, Samsung is leading in terms of the proliferation of DRAMs.
The proliferation of DRAMs and other memory chips have urged a plethora of manufacturers to join the fray in order to produce as many chips in a single production in order to halt the increase in defective chips. The memory chip industry is a highly-competitive market in which firms sustain their net profit margins. Firms ensure that their chips are sophisticated in design and efficient in systems processes. Furthermore, firms place a premium on its research and development department in order to improve the quality of their memory chips. With this in mind, Samsung faces a stiff competition against a myriad of firms that specialize in manufacturing memory chips as well. The following are Samsung’s competitors: Japan-based Elpida is a merger between NEC and Hitachi. Elpida experienced a bevy of financial setbacks as the Japanese firm refused to invest in its research and development for the improvement of its products. This urged Elpida to manufacture memory products for mobile phones and other telecom equipment for its Japanese client base.
Hynix is founded by Hyundai Electronics. The firm became an independent business entity in order to withstand the financial setbacks that the Hyundai Group was experiencing. In the early ‘90’s, Hynix was considered as Samsung’s fiercest Korean rival. However, Hynix had to invest more in order to gain the inevitable technological advantage over Samsung. Infineon is Siemen’s memory chip manufacturing firm. The German firm was established in the late ‘90’s collaborating Siemen’s semiconductor unit with other industry competitors in order to reduce the increase in investment risks. Such strategic alliances have placed the firm the forefront of industry rankings. Micron is the only American firm that engaged in manufacturing and selling of DRAMs.
Idaho-based Micron acquired Toshiba’s Dominion Semiconductor in order to augment its external operations. Like its market rivals, Micron underwent financial letdowns, in order to reduce operational costs, Micron has emphasized on its vast DRAM production, which accounted for 96% in sales. Taiwan’s Nanya ranks as the fifth-largest DRAM manufacturer. In order to bolster its revenues, Nanya acquired DRAM technology from the IBM Corporation. Nanya collaborated with Germany-based Infineon in order produce a firm called Inotera, which will produce a large volume of DRAM in Taipei.