Management Economics

Contents

INTRODUCTION........................................................................................................... 3
HISTORY OF THE COMPANY ''SAMSUNG''....................................................................3
MARKET STRUCTURES AND COMPETITION.................................................................4
PERFECT COMPETITION........................................................................................... 4
MONOPOLY.............................................................................................................. 4
MONOPOLISTIC COMPETITION................................................................................. 4
OLIGOPOLY.............................................................................................................. 5
MARKET STRUCTURE OF SAMSUNG............................................................................5
INTERDEPENDENCE................................................................................................. 5
BARRIERS TO ENTRY................................................................................................ 6
PREVIOUS MARKET STRUCTURE OF SAMSUNG...........................................................6
GOVERNMENT INTERVENTION.................................................................................... 6
CONCLUSION.............................................................................................................. 7
REFERENCES.............................................................................................................. 8
INTRODUCTION

Samsung, South Korean company which is one of the famous producers of

electronic devices. Samsung specializes in the manufacturing of huge
variety of electronic which includes memory chips, semiconductors,
appliances, digital media devices and integrated systems (Quelch and
Harrington, 2009). Samsung has become one of the most identifiable names
in technology and produced about a 5th of total exports of South Korea.
Samsung is transforming its worlds of smartphones, tablets, digital
appliances, cameras, medical devices and LED solutions. Samsung company
holds about 11 percent of market share (Ramiz et al., 2014).
The report highlights the history and establishment of Samsung from 1938
till now. The report will further highlight the market structure in which
Samsung is operating currently and the market structures in which it
operates previously and its effects on the market reputation including
semiconductors, mobile devices, home electronics, computing products,
home appliances and digital displays etc.

HISTORY OF THE COMPANY ''SAMSUNG''

Samsung, one of the largest south Korean multinational trading company. It

was first founded in 1938 by Lee Byung-chul. In the beginning, the company
only launched dish washers, black and white televisions and refrigerators.
Over the periods of next three decades, the group divided into areas which
includes textiles, insurance, food processing and retail. In 1960s, Samsung
entered the industry of electronics and further it entered in the shipbuilding
and construction industries in 1070s. In 1987, Samsung was divided into four
different groups. These groups are:
 Samsung group
 Shinsegae group
 Hansol group
 CG group
In 1988, Samsung merged with semiconductors and communications. In
early 1990s, the activity of Samsung has been increasingly globalized and its
electronics which includes semiconductors and its mobile phones which
rapidly become its one of the most important source of income and leads it
towards its objectives and aims. In January 2016, Samsung launched
smartwatch which was called a Gear fit 2 with a brand of wireless earplugs
called Gear Icon X. The global market has been increased widely by
producing more than 60 products which includes semiconductors such as, SD
RAM, DRAM, hard drives and flash memory, digital displays such as DVD
players, home cinema systems, Blu-ray, projectors, mobile devices such as
mp3 players, mobile phones, camcorders, digital cameras, computing
products such as monitors, laptops, fax machines, DVD drives and homes
appliances such as washing machines, refrigerators, oven, and Air
conditions. In 2017, Samsung has achieved the 6th highest global brand
value. On march 2017, Samsung released its new Samsung galaxy S8 and
S8+ smartphones. Nowadays, Samsung has 25 producer’s bases. Their
global strategies include eight main regions central Asia, Africa, Southeast
Asia, China, Europe, Middle East and Latin America. Samsung has a powerful
impact on the economic development of South Korea, culture, media and
politics.

MARKET STRUCTURES AND COMPETITION

Market structures is explained as the organizational and several

characteristics of a market (Sabat, 2002). These are the type of structures
which highly influences the firm's behavior, its profit and efficiency levels.
The four main market structures are Perfect competition, Monopolistic
competition, Monopoly and Oligopoly.
PERFECT COMPETITION

Perfect competition is that market structure which involves many firm's

competition (Finn, 2000).
It includes the following criteria:
 All firms must sell products that are identical
 All firms should be a price taker
 There must be no impact of market share on price

MONOPOLY

At the other extreme is monopoly, which comprise only one firm in the industry and
hence that has no competition within the industry. Only single firm can supply a
service or good and that firm can charge the prices it requires, since customers
have no alternatives and it is difficult for market competitors to enter the market
place (Mussa and Rosen, 1978).

MONOPOLISTIC COMPETITION
Another market structure involves monopolistic competition which have a lot
of firm's competition and there is also a freedom for a new firm in order to
enter and to exit the industry (Parenti, 2017).
OLIGOPOLY

Oligopoly, when there are few firm's competition and an entry of new firm is
highly restricted. It involves small numbers of firms, none of which can keep
the others to have remarkable influence (Mazzeo, 2002).

MARKET STRUCTURE OF SAMSUNG

The market structure in which Samsung operates is ''OLIGOPOLY''. It is one

the most profitable and largest companies all over the world. One of the
major constituents to this firm is clearly seen in its cell phones (Holzer and
Ondrus, 2011). An oligopolistic competition has huge amount of companies
that are producing smartphones in industry all over the world. The main
characteristics of oligopoly market structure that impact on Samsung and
other brands. It has
 Few sellers.
 Few firms control the market
 High barriers to entry
 Lack of available substitutes
 Control over supply
 Competition and advertising
 interdependence
All these characteristics has a high impact on Samsung brand. Samsung
brand was first operating in monopoly market structure when there are only
few firms available. Later on, Samsung starts to operate in oligopoly.
INTERDEPENDENCE

Mutual dependence with each other are shown when firms are within an
oligopoly. If there is a firm that changes the specifications and prices of its
product, the sales of its rivals will be highly affected. A slight move will also
make by the rivals in order to overcome the effect on their prices. As
Samsung is operating in oligopoly. In the past time, there was a price war
occurred in between Samsung and Apple. It was started when apple Inc.
given out $128 discounts for trade customers in order to purchase an iPhone
4 (Bostic, 2013). Apple countered by Samsung's move when it provides 15%
refund on the selection of Samsung galaxy products. As the rival's moves
were countered by Samsung, it clearly shows an interdependence between
both the firms as the change in price by one firm caused its rival to make a
move.
BARRIERS TO ENTRY

There are also barriers to entry are shown in oligopoly of Samsung working in
smart phone industry. The main barriers to entry is indicated as the brand
loyalty. As Brand Loyalty within an oligopoly plays a vital role because the
firms that are eager to enter the industry would definitely have to compete
with the other firms that are already running out their products in the
industry. Costumers have to play a role in order to choose their desired
operating systems according to their choices. As an Android OS among
Samsung are the top customer choices in a previous year since the products
have shown remarkable sales in Android operated devices.
The oligopoly is more likely to maximize profits, the barriers to entry are
high- and very high in the case as well, it has the ability to fix prices.
Samsung firm in oligopoly is highly profitable, when the prices of
smartphones are lower by one firm, the demand will highly increase and
ultimately profit will also increase. Samsung is able to launch a huge labor
force for many things from assembly of products towards research and
development of new ways to market, design and ultimately sell it to
customer’s base.

PREVIOUS MARKET STRUCTURE OF SAMSUNG

The mobile phone market is very condensed since the starts of the informational
era which initiates around the 90s. The first leading mobile phone company was
Nokia. It monopolized the phones market industry – Android than can be installed in
Samsung mobile phones easily.

The market structure in which Samsung operated previously was monopoly.

At the beginning, when Samsung launched its products as in monopoly
market structure, one firm controls the vast majority of a market, and the
firm can also manipulate the prices by changing the quality of their products,
it also involves the single seller but a larger number of buyers (Wei, 2001).
The Samsung operated in monopoly for a short period of time as it broke
down into oligopoly as in oligopoly market structure, only few big firms are
competing as Samsung Is competing with apple as its selling and buying
demand is increasing day by day (Neto et al., 2017).
After the monopoly break down in oligopoly, Samsung smartphones became
the revolutionized form of mobile phones. Samsung focused on
manufacturing and providing the better hardware for the phones (M'chirgui,
2006). When operating in monopoly, Samsung's hardware and software are
very far from the technology of iPhone, but the main advantage of Samsung
is that it offers lower price than iPhone. As Samsung holds 21.6% of total
share of mobile phone market, whereas apple only hold as a little about
6.9% of mobile phone market share while Nokia holds 19.9% of mobile phone
market share (Vergara, 2012). This result in increased elasticity in income of
demand for Samsung smartphones as compared to apple iPhones.

GOVERNMENT INTERVENTION

To assume the refund process for smartphones is successfully execute, this

allows the possibilities in order to purchase smartphones for the poor. People
tends to have a great interest in buying their desired smartphones at low
prices as they search for their ideal smartphones according to their budgets.
When the prices on the products are low and the quality remains same, more
people attracts towards the company products as the demands increased.
Once the smartphone refund process is fully initiated, it will affect the
microeconomics aspects of country (Sharma, 2004).
With the refund mechanism, for example, a Samsung Galaxy Mini smart
phone which cost about 800RM will now only cost the customers RM600. This
allows the increased quality demand for Samsung Galaxy Mini smartphone.
This is mainly due to the low cost of smartphone.
The customer safety product commission has finally weighed in on Galaxy
note 7 cause issue in its own statement that the users just not to be careful,
as the FAA previously did, but in order to power them down and stop
charging or using the device. The Government body is working immediately
in order to determine that the replacing Galaxy Note 7 is an acceptable
restorative for Samsung or their mobile phone carriers to provide to
customers.

CONCLUSION

To conclude the report, Samsung is one of the largest company all over the
world. Samsung is running its products excellently and continuously
launching new and useful products. Samsung sales network in 61 different
countries. Samsung always launch its latest phones. The Galaxy 7 which is
launched by Samsung is a particular product which is well designed and
innovative that it allows Samsung to become one of the most important
sellers of mobile phones all over the world. This is because the dominant
share of the brand ''Samsung'' give directions towards its main objectives.
The market structure in which Samsung operates previously is monopoly as
it involves only one firm and that firm can supply good or can change the
prices on their products, it demands. As monopoly breakdown into oligopoly
which includes few firms that are competing with each other as Samsung,
one of the largest company is competing with Apple Inc. Oligopoly market
structure also includes interdependence and barriers to supply. Barriers to
supply mainly involves brand loyalty. Samsung currently holds about 57% of
total market share.

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