Samsung
2. We now turn to the future. Articulate three alternative strategies for Samsung going forward, i.e., state which products/markets and which competitive advantages Samsung should emphasize, with particular emphasis on the threat from China. Compare and contrast these strategies, and choose one as a strategic recommendation.
After thoroughly analyzing all the data we consider three strategies that Samsung could take in order to face the increasing Chinese competition are:
• Partner with a Chinese company
• Go to China and build plant
• Status Quo (i.e. stay in Korea and don’t worry about Chinese competition)
The first strategy stems from the low labor cost that China has. The advantages of this strategy are twofold. First, partnering with a Chinese producer could further reduce Samsung’s average cost by exploiting a cheaper labor (Chinese labor is on average 57% cheaper, see Exhibit 7a). Second, partnering with a Chinese company could potentially enable Samsung to get government subsidy which could then use to increase its R&D budget. However, this strategy has its disadvantages. To start, IP rights in China are not well protected so there is a great risk of giving away information for free in the case that the partnership didn’t work out or there was some information leakage. Another disadvantage is the effect on its corporate culture. One of the company’s competitive advantages has been its ability to shed its traditional Confucian culture with its emphasis on hierarchy, position, and age for more democracy. The clash with the more dogmatic chine culture could generate communication problems which could translate into problems of all sorts
The second option is to go to china and build plants there to make use of the cheap labor. This strategy avoids the licensing of technology like the first but it has some disadvantages. First, it is uncertain if the company can settle in China without a Chinese partner. If it can’t, the Intellectual Property
After thoroughly analyzing all the data we consider three strategies that Samsung could take in order to face the increasing Chinese competition are:
• Partner with a Chinese company
• Go to China and build plant
• Status Quo (i.e. stay in Korea and don’t worry about Chinese competition)
The first strategy stems from the low labor cost that China has. The advantages of this strategy are twofold. First, partnering with a Chinese producer could further reduce Samsung’s average cost by exploiting a cheaper labor (Chinese labor is on average 57% cheaper, see Exhibit 7a). Second, partnering with a Chinese company could potentially enable Samsung to get government subsidy which could then use to increase its R&D budget. However, this strategy has its disadvantages. To start, IP rights in China are not well protected so there is a great risk of giving away information for free in the case that the partnership didn’t work out or there was some information leakage. Another disadvantage is the effect on its corporate culture. One of the company’s competitive advantages has been its ability to shed its traditional Confucian culture with its emphasis on hierarchy, position, and age for more democracy. The clash with the more dogmatic chine culture could generate communication problems which could translate into problems of all sorts
The second option is to go to china and build plants there to make use of the cheap labor. This strategy avoids the licensing of technology like the first but it has some disadvantages. First, it is uncertain if the company can settle in China without a Chinese partner. If it can’t, the Intellectual Property