The advancing technology has narrowed the knowledge boundary amongst the organizations, necessitating innovative approaches that would provide their goods and services with differentiating elements to give them cutting edge leverage. Analysis and identification of the changing trends of the customer requirements are essential ingredients to gain leverage against their rivals (Grant, 2007). In such a scenario, the five forces analysis of producer business becomes critical factors of a competitive advantage, which are: industry rivalry, bargaining power of suppliers, bargaining power of buyers; competition from substitute; and the threat of entry.
The industry rivalry amongst the producer businesses is an essential criterion for introducing cutting edge differentiating elements in the products to gain leverage. This is one of the primary motivating factors for Samsung Inc to be highly innovative in its products and development processes.
The quality and creative input within the product gives a huge advantage to the suppliers and puts him in a bargaining position. Samsung producing high-quality memory chips at relatively low cost has been able to bargain with its customers.
The bargaining power of buyers is reduced when there is a short supply of quality goods that have a high demand. In the case of Samsung, the buyers increasingly prefer them because of their quality products and their credibility of supplying goods timely.
Technological advancements have brought forth an explosion of information that is easily accessible to the public through the internet and other media like television, radio, mobile phones, etc. The competition from substitute become highly likely, and the company needs to adopt an innovative approach to its marketing. Samsung has successfully met this aspect by evolving flexible strategies like an innovative product like and introducing elements of surprise within the products as well within the marketing of the products and services.
Last but not least is the threat from new entrants of the business. Globalization has provided facilitating grounds for new entrants. Therefore, the existing firms must ensure that speed and flexibility become an intrinsic part of their strategy as they become essential ingredients for the products so that the organizations can timely and efficiently meet the fast-changing preferences of the customers.
Under the dynamic leadership of Kun Hee Lee, the company enjoyed a competitive advantage over its rivals in the world market, primarily because of the sharp business foresight and risk-taking capability. The Chairman’s long-term vision and ability to harness the potential of the customers’ shifting tastes have given them leverage in the highly competitive sector of semiconductor and electronic gadgets. The company became known for their revolutionary product lines of fairly low-cost quality. It was able to give stiff competition to electronic majors like Sony, Nokia, Phillips, etc. by the continuous development of new features in all its products.
Many factors contributed to the company’s continued leadership position in the world market. The foremost was its business model focusing on creative goods focused on speed. The business has concentrated on its research and development skills strategy to develop and improvise innovatively on Sony’s electrical and digital products, Phillips, Matsushita, and Nokia. Samsung’s ability to launch its products with added features with high speed was a huge success with the target population. Samsung had set up his professional teams to keep a close eye on the pulse of the people and was thus able to predict their demands and used to come up with new products and features that were envied by its rivals.
Samsung’s business strategy was its focused approach towards R&D and utilizing his human resource as capital investment. His team was able to develop a vast range within the same product because they were able to customize new products around their core design. He also introduced the concept of competing for product development teams, which were located at diverse locations, thus promoting competition with the group for innovation. Within the party, the merit-based promotion ensured that the best earned their dues. High potential employees were encouraged to MBA and Ph.D. in a foreign country on the company’s expenses so that the expert team could be indigenously developed and fostered for improved business performance.
Samsung has a great future because, in the changing paradigms of the business environment, it continuously strives to identify factors and issues that would help meet the challenges with efficiency and unmatched proficiency. There are two major areas where Samsung is able to stay ahead of the Chinese companies. The first one is its state of the art R&D, which significantly facilitates the development of new products through specialized product development teams. The latest products ensure that the constantly changing preferences of the customers are met timely, thus making sure that they maintain their leadership position. One can, therefore, conclude that one of the main factors that have facilitated the company to keep abreast with the changes and maintain a competitive edge over their rivals, in its market plan, it’s been able to check new strategies.
Samsung was a market leader in the semiconductor, electronics, and telecommunications accessories business in 2005. With 337 international operations spread in 58 countries and 212,000 safe workforces, overall revenue of the company reached $135 billion in 2004. The major cost drivers for Samsung have been its policy of innovation and state of the art R&D programs. The second most crucial factor has been the intrinsic belief of its CEO on the capabilities of its workforce and merit-based promotions that motivate the employees of all ages.
The fact that the Chief operating officer intrinsically believed in the potential of its rivals and through continuous vigil on its rivals’ business strategy and product line, he was able to anticipate their future course. Porter argues that a ‘company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both’ (Porter, 1980). This was the main reason that the CEO of Samsung was able to keep ahead of the Chinese firms and maintain its competitive edge in the area of semiconductors, microchips, and electronic goods.
Yes, because Samsung has understood that it needs to look at the various options of competitive advantage to respond appropriately so that it could maintain its leadership position within the semiconductor market. The sustainability of the product shelf life has lost relevance because the brands ensure the sustainability of their products through creative changes in the product that brings them at par with the latest technology and caters to the universal appeal for the product, making it perennially popular. Backed by a capable R&D team, the company has the requisite infrastructure and capabilities to design and produce innovative products. The Chinese firms have yet to acquire expert knowledge about core semiconductor units design and manufacturing technology. This gives a massive advantage to Samsung to go in for new products and create a niche market for them in the emerging modern economies like India, China, Brazil, etc. It is assumed that despite huge government concessions to Chinese firms in China, lack of adequate intellectual property laws would be a significant deterrent for other big companies to transfer technology. Samsung, therefore, would be right to continue innovative products and add-ons for existing as well as for new markets.
- Grant, Robert M. (2007). Contemporary Strategic Analysis. (6th edition). Blackwell.
- Porter, Michael, E.(June 1, 1980). Competitive Strategy: Techniques for analyzing industries and competitors. NY: Free Press 1998
- Siegel, Jordon, and Chang, James Jinho. (2009). Samsung Electronics. Harvard Business School.