Samsung China
By: Jack • Research Paper • 2,063 Words • March 17, 2010 • 1,203 Views
Samsung China
SAMSUNG CHINA
September 12, 2002
BUS 610 (Man. Econ.)
J. Suyderhoud, Instr.
Castaways
Alex H.
Brandon M.
Chandra H.
Rajesh B.
Stuart W.
Rural Urban
Low-Med end Barriers to Entry: Barriers to Entry:
Economies of Scale High Economies of Scale High
Product Differentiation Low Product Differentiation Med
Capital Requirements High Capital Requirements High
Access to distribution Channels High Access to distribution Channels High
Cost disadvantages Independent of Scale Med Cost disadvantages Independent of Scale Med
Government Policy Med Government Policy Med
Expected Retaliation High Expected Retaliation High
The Entry Deterring Price Med The Entry Deterring Price High
High-End Barriers to Entry: Barriers to Entry:
Economies of Scale High Economies of Scale High
Product Differentiation High Product Differentiation High
Capital Requirements High Capital Requirements High
Access to distribution Channels High Access to distribution Channels High
Cost disadvantages Independent of Scale High Cost disadvantages Independent of Scale High
Government Policy Med Government Policy Med
Expected Retaliation Low Expected Retaliation High
The Entry Deterring Price Low The Entry Deterring Price Low
I. Threat of Entry
Determinants Rating Significance
Economies of Scale High Necessary to produce high volume in order to be profitable
Product Differentiation High The brand and quality perceived with the brand are important in this market
Capital Requirements High Need significant amount of investment to enter the market
Access to distribution Channels High The Chinese market is structured in a way that makes it difficult to gain access to distribution channels. You need a high distribution rate in order to succeed in this market
Cost disadvantages Independent of Scale High Technology and the learning curve creates high barriers
Government Policy Med Government policy is rated medium, as although they encourage foreign investments, the mandatory five-day workweek would create over-employment.
Expected Retaliation High Sony and Matsushita, controlling 75% of the segment with experience, are expected to retaliate fiercely.
The Entry Deterring Price Low Foreign brands command a premium over the domestic. The entry price is attractive to new entrants because of high profit margins.
Based on the table above, the barriers to entry for the high-end/urban market seem very high. To illustrate, in the table above, the high-end/urban portion of the matrix refers to 29-inch model color TV. In this area, the majority of the determinants are rated as a high entry barrier. Government policy is rated medium, as although they encourage foreign investments, the mandatory five-day workweek would create over-employment. Sony and Matsushita, controlling 75% of the segment with experience, are expected to retaliate fiercely. The only positive, the entry-deterring price, is attractive as foreign brands currently command a premium and the urban dwellers have the necessary income levels. In view of the cons outweighing the pros, we find that the prospects of profitability for making and selling the 29-inch TV in China are low based on Porter’s Threat of Entry force. The grid below is a breakdown of the threats to entry for the High-end Urban segment of the market.
Rural Urban
Low-Med