Samsung Electronics: Group 7

Group Members-
Dipti Jha(017)
Himanshu Mittal(020)
Priyanka Chauhan(032)
Raghu Vamsi(035)
Shruti Mandal(050)

Density and production line analysis:
Purpose of this analysis is to find out if any particular SKU / Product contribute to the maximum
production. If one SKU / product contributes high then cost and revenue analysis will be based on
that SKU / product only. The results as per the density and product line analysis sheet
256 MBit contributes to 80% of total production
In products DDR SDRAM contributes to 72% of total production
We will do cost & revenue analysis on 256 MBit and DDR SDRAM as it will represent the companys
analysis.
Cost Analysis:
We have performed cost analysis from exhibit 7d & 7g. The results of the analysis are
Except R&D cost Samsung has cost leadership advantage in raw material, labour and SG&A
cost.
The depreciation cost is lower for Samsung because of its first mover advantage in 8-inch
wafer technology. Fully loaded cost is also lower for Samsung than its competitors.
Samsung exceeds almost by 40% in terms of operating profit margin by its competitors.
Selling Price (Revenue Analysis):
From selling Price analysis worksheet following are the results.
The decrease in the price of DRAM (5 Year CAGR) is at par with competitors.
In spite of the same price drop Samsung is able to charge a minimum of 20% premium on its
products which shows the reliability and quality of its product.
From 2000-04 Samsung has charged the highest selling price which has lead to higher
revenues.
Conclusion:
Samsung has maintained cost leadership advantage majorly because of higher selling price than its
competitors. If we see the absolute value of the costs Samsung is at par but because of higher selling
price it is able to maintain the higher profit margins. Therefore Samsungs competitive advantage can
be attributed to not only cost but its brand image and reliability in the industry.
Differentiation advantage:
It has differentiated itself in terms of process technology by using 0.11 micrometer design rule. This
design rule contributes to the highest yield rate of 80 %( from Exhibit 10C) which is far higher than
its competitors this leads to significant savings in raw material costs. Samsung has used 8-inch wafer
size and stacking technology instead of trenching technology at right time. This has kept Samsung
ahead in development and process improvement. Moreover earlier investment in 8-inch technology
has resulted in low fixed costs in terms of deprecation.