1. Develop a cause map depicting Samsung’s situation at the end of the case.
See Exhibit 1

2. Strategy:
a. Research & Development (R&D):
b. Human Resource:
c. Finance/Capital:
d. Production:
e. Marketing/Sale:

3. Cost and differentiation advantage:
Samsung had both cost and differentiation advantage over its rivals. Kun Hee Lee, chairman of the Samsung Group, stern advice to his employees were to always demand superiority in product design and price efficiency which were directly related to cost and differentiation advantage. As a high-volume buyer, Samsung benefited discounts offered from raw material suppliers which had resulted Samsung’s cost to manufacture a DRAM chip to be lower than its competitors. Samsung’s ability to produce over 1,200 different variations of DRAM products was a huge advantage which was unmatched by its competitors. Samsung also provided “Specialty products” using customized architecture for niche markets.

4. Describe the resources and capabilities that form the basis of Samsung’s cost or differentiation advantage.
a. Resource:
Samsung had three types of resources: tangible, intangible and human resources as shown in Exhibit 2. Samsung’s R&D facility and its fab lines were collocated at a single site as opposed to its competitor’s facilities which were located at various locations. Samsung had the capital to invest in its R&D to master new technology, design and marketing of advanced technologies; and which contributed to produce multiple product architecture on each product line and gaining market share. Samsung human resource implemented different ways of acquiring talents, promotion strategy and health competition which resulted innovation and productivity. Samsung invested in its employee’s education and rewarded individuals for their accomplishments.

b. Capabilities:
Samsung innovated new uses of DRMs by putting its manufacturing and R&D in support of design firms. By predicting likely impact on competition and profitability, Samsung used it capital to timely invest in new products and new product capacity to take advantage of market development. Samsung has the capital to build large manufacturing facility and had the ability to learn new design rules towards the production of reliable and customized product types which enabled them to offer over 1,200 different variations of DRAM. Samsung actively engaged to customize its products around its core design and focused on superiority in product design which helped to gain market share and brand recognition. Many customers and its rivals named Samsung their supplier of choice. Samsung human resource policy helped to motivate its employees so that they can focus on the job at hand.

5. Discuss how difficult it is for competitors to replicate these resources and capabilities and thus address the sustainability of Samsung’s competitive advantage(s)?

Samsung was faced with many competitors in the semiconductor and memory chip industry. Samsung had a huge advantage over its competitors due to its resource and capabilities. The competition was difficult to match Samsung’s capital, innovative technologies and brand. However, competitors present a threat, specially from the Chinese as they posed a significant challenge to Samsung’s ability to compete in a low-cost market. Samsung has to continue in investing in cutting-edge products, particular for new niche market and keeps its flexibility in its business strategies to focus on innovation in product design and price efficiency.

6. Based on these assessments, discuss what strategy changes Samsung needs to make in response to the threat of Chinese entry into the semiconductor industry. For this part use the format for the problem solving paper to delineate your strategy and analysis of why your strategy solves the the problem.
a. Impact of Chinese threat
- Competitive advantage of Samsung
- Samsung’s profitability
- Partnered with competitors to produce their DRAM and build state-of-the-art production facilities
- Chinese government was firmly committed and provided incentives to anyone who wanted to build a cutting-edge semiconductor facility with a Chines partner
- Plan to sale their products at low prices and grow their market share at the expense of profitability
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b. A disadvantage to the Chinese threat
- lacked the necessary organizational experience and tacit knowledge to master the design and production process
- China lacked critical infrastructure to support a cutting-edge semiconductor industry
- China had short-term obstacles as some countries like US government and Taiwanese government forbade their respective country producers from shipping semiconductors equipment and cutting-edge production technology to china respectively.
- The risk in working with the Chinese producers was that intellectual property rights were not protected fully and could lead to the partner becoming a rival someday