Samsung China
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
Economies of Scale
Product Differentiation
Product Differentiation
Capital Requirements
Capital Requirements
Access to distribution Channels
Access to distribution Channels
Cost disadvantages Independent of Scale
Cost disadvantages Independent of Scale
Government Policy
Government Policy
Expected Retaliation
Expected Retaliation
The Entry Deterring Price
The Entry Deterring Price
High-End
Barriers to Entry:
Barriers to Entry:
Economies of Scale
Economies of Scale
Product Differentiation
Product Differentiation
Capital Requirements
Capital Requirements
Access to distribution Channels
Access to distribution Channels
Cost disadvantages Independent of Scale
Cost disadvantages Independent of Scale
Government Policy
Government Policy
Expected Retaliation
Expected Retaliation
The Entry Deterring Price
The Entry Deterring Price
Threat of Entry
Determinants
Rating
Significance
Economies of Scale
Necessary to produce high volume in order to be profitable
Product Differentiation
The brand and quality perceived with the brand are important in this market
Capital Requirements
Need significant amount of investment to enter the market
Access to distribution Channels
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
Technology and the learning curve creates high barriers
Government Policy
Government policy is rated medium, as although they encourage foreign investments, the mandatory five-day workweek would create over-employment.
Expected Retaliation
Sony and Matsushita, controlling 75% of the segment with experience, are expected to retaliate fiercely.
The Entry Deterring Price
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