Is Samsung Both Low Cost and Differentiated If Yes, How Does It Do Both?

Samsung is low cost and differentiated. According to exhibit 7a-7i, it can be seen that Samsung has a lower operating cost of $8. 50 as compared to industry average of $11. 03 as well as higher profit margin 6. 6 multiplication that of its competitors. This reflects Samsung ability to deliver desired value to customers using lean and effective design and production. Samsung is able to maintain the low cost largely because of lower labor, R&D and raw material cost.Samsung has a relatively lower labor cost for each production unit because its meritocratic hiring and evaluation system, reward policies, employees upbeat and benefits to employees family allow employees to focus on innovation and productivity. Hardworking employees are always ready to work overtime, thereby eliminating wastage of resources needed to source for additional help or last minute hire. Also, its strategic location in Korea translates into some savings in labor cost compared to companies that operate in Japan an d US.Samsungs juxtaposition of its main R&D facility and fab lines is estimated to have saved an average of 12% on fab construction costs. Living together at the Samsungs primary campus, R&D and production engineers solve design and production engineering problems together and, indirectly encouraged good rapport. This may apologize the lower R&D cost that Samsung incurs. Samsungs innovative technology contributed to lower raw material costs and higher yield rate.Samsung currently uses the smallest crop technology of 0. 11m which enables them to have a higher net dice per wafer compared to their peers who uses 0. 13m. Samsung needs less materials than others to produce the same product, reducing general production cost. Its innovation not only reduced cost, but as well formed its differentiated core competency. Noticeably, its innovation has reduced defects in its product also help to lower wastage and hence lower cost of production.Samsung is also innovative in customizing to their customers needs by designing different offer for each segment. The strategic fit of the different activities formed Samsungs differentiated core competency that is definitely valuable, rare, costly to imitate and nonsubstitutable. The activities include the presence of a productive and innovative human resource, strategic location, social complexity, good leadership and trusted band name. With these synergistic factors, Samsung is both low cost and differentiated.