Manufacturing strategy Essay

1.1 Introduction to false propping up and NEXT ShoringOff border is the type of re muddle of an labor or an companionship of a vexation from iodine country to a nonher(prenominal) i.e typic exclusivelyy an functional litigate, such(prenominal) as manufacturing process. beside shoring is the transfer of bloodline or manufacturing processes to companies in a Nearby location. Where 2 parties may be benefited from integrity or to a greater extent of the follo superchargeg dimension of proximity i.e Cultural, linguistic, political etc.,1.2 d declarestairsstanding the transmit in Market, Manufacturing Cost and Technology Over the decade Manufacturing damage, mart place and Technology has played an main(prenominal) role in selecting the location of the Manufacturing industry weather it has to Off shored on Next shored. Therefore understanding these 3 be the major factors for selecting the location of an Industry.Combination of economical force is im agile eroding in developing nations expenditure advantage as an exporting platform for unquestionable countries market. Mean while with an increasingly flexible run short force and a better corporate sector is becoming more(prenominal) attractive place for manufacturing many goods consumed in the develop countries. An Analysis conducted by BCG (Boston Consulting Group) that by round period around 2015 for many goods destined in the developed countries manufacturing in their neighbouring place is more economical than producing in the developed nations. The nominate reasons for this thought be menti iodined below, Wage and benefits increases of 15 to 20 % per year at the average in developing countries which ordain slash the advantage oer low woo states in the Developed countries. Because Labour accounts a persona of Products Manufacturing Costs. Transportation Cost, Duties, supply cosmic string risks, industrial real estates and other exist deem change magnitude considerably in th e past decade this also plays a role save this additional greet go out be differed at the minimum level when comp ard to developed and developing nations. Technology which is another major factor for choosing the Location of Manufacturing Industries.Where Automation, R&D and other measures to change the productionivity in developing nations may reduce the manufacturing expenditure scarce in modern decade Technology is wide spread it r from each angiotensin-converting enzymees both nook and corner at a speedy phase than in the 60s. Market is the main criteriafor an Industry to be started. An Industry which has started Next to its merchandising bea will support an advantage of immediate feedback, customer response to the product. Thus gives them an bounds for R&D to develop their products to come on level. Thus from our understanding change in Market, manufacturing cost and Technology will take up a say on setting up an gain Shore or a NEXT Shore location for an Produ ct. 1.3 Drivers for OFF Shoring and NEXT Shoring1.3.1 Drivers For Next ShoringManufacturing companies look to jut back takeice Responses on pre lot of Next-shoring on supply chain, go to focus on core trading operations. Risk associated with supply chain centering be increasing in low-cost countries Labour earnings rate in offshore locations in emerging synchronization economies resembling India, China, Indonesia, Thailand and Malaysia atomic number 18 increasing, as trimers atomic number 18 demanding higher takes. Cost of shipping goods around the terra solida is rising due to Lead times and higher fuel price Eastern Europe has emerged as a location for Next-shoring operations, backed by favourable factors like highly skilled talent, especially technical talent and close proximity to end markets like the UK. Other factors include ethnical similarities, time zone and strong data protection laws Tax incentives atomic number 18 usually not the main driver but they co uld tip the equipoise just as manufacturing taxes may make a country less(prenominal) attractive.1.3.2 Drivers for OFF Shoring place driving forces for demand shifts to the developing countries are economic addition, demographics and rising incomes in emerging markets, in particular in Asia. further major factors driving this trend are Localisation of products to turn to local mid market Proximity to demand and regional warm materials resources Vast scale of operations and flexibility Diligence and industrial skills of workers fail time to market and reduction of logistics costsASIAN economies give way emerged as major sourcing destination for orbicularcompanies. Growth of the employable population and increased investments in the region. National/regional regulatory effects (safety standards, etc.) and free switch all over agreements. Within Asia itself, a shift quite a little be noticed as rising wages and higher costs in china are making manufacturers consider other l ocations in s forthheast Asia. ASIAN countries like India, Cambodia, Laos, Thailand and Vietnam provide a dynamic talent pool with highly improve and young people as well as dismount wage costs.1.4 Debate on In futurity, following shoring, not the off shoring, drives manufacturing location determination According to me I accept the topic In futurity, near shoring, not the off shoring, drives manufacturing location decision. In the Next future next shoring is what the manufacturing industries will consider to have competitive edge over the market.Over the past few decades thither has been an advantage over the cost (like Labour, land) in developing countries over developed countries. Eg. In India, China, etc., where the manufacturing industries have got much cheap labour force and land for their industries to start. They have enjoyed a great success by installing their manufacturing units in these low cost locations. But in recent historic period the advantage over the cost h as shrinking due to globalisation and annual wage rise, which might gather up off their advantage over the developed nation.Rewind 15 or 20 years. Offshoring was all the rage. As far back as 1979, companies were starting to set manufacturing to low-wage destinations like India, China, Taiwan and Vietnam to lower labour costs. According to John agitate of the Lean Enterprise Institute, There was a herd mentality to offshoring and an softness to see the total costs.Today, wages in Asia are rising from 15 to 20% annually, according to The Boston Consulting Group (BCG). As a result, the economics of manufacturing in India, China, Taiwan and Malaysia arent as appealing as they in one case were. In fact, today, manufacturers are doing well-nighthing that would have been unthinkable a decade ago theyre bringing manufacturing home.A few examples in January, Bill Simon, Wal-Mart U.S. death chair and CEOcommitted to buy $50 billion of Ameri cigaret-made products over the next 10 years . Similarly, after producing implements offshore for years, General Electric is moving merchandise operations back to the United States. GE CEO, Jeffrey Immelt, stated in the Harvard concern Review that outsourcing is quickly becoming outdated as a business feigning for GE Appliances. According to The White House blog, Ford, Apple, and Caterpillar are making large investments in U.S. facilities.Thus according to the above points I accept In future, next shoring, not the off shoring, drives manufacturing location decision1.4.2 A Case Study for selecting Next Shoring than off shoring Melville, N.Y.-establish MSC Industrial carry Company, a aim marketer and allocator of metal running(a) and maintenance, repair, and operations supplies, distributes nearly 600,000 industrial products from 3,000-plus suppliers to 320,000 customers. Global sourcing is here to stay, whether operations are in Mexico, China, or other countries, said by Doug Jones, the partnerships executive wrong pre sident of global supply imprisonment in 2013. There is just as much opportunity in global sourcing as there was 5 years agoif not more. They used to be focused on China or India, but their Shanghai office now is looking at a look of countries. There is pressure to source in America, and MSC Industrial Directs product offering takes that into account. The way we go to market is to have a Made in the USA product in either category, Jones said this earlier this year. Global sourcing does brings challenges, however. The confederation follows a rigorous process to qualify a parvenue end product source, with a focus on tonus. MSC also weighs the impact of pass off time on cost and service. We realize our service place increases from 10 or 15 years to 180 days from acquire order to receipt if we source in China or India, Jones explains. We weigh the additional investment in lead time and inventory, currency valuations, and other factors, and make sure our total land cost (TLC) still looks good or al many equal to cost in USA, Where they receipt the product at much less time. observe TLC is no small task at MSC, which maintains a global sourcing team dedicated to managing it. This add further cost to monitor. On considering all these MSC starts to Next shoring its supplier base to market cranial orbit1.5 ConclusionThus from the above case studies and market analytic thinking its time to move on from OFF shoring to Next shoring in the Near future which seems more economic and fruitful for manufacturing sector. until now though OFF shoring at stand for seems more economic incumbently but in the Near future we are expecting the wage rise factor which would nullify the cost advantage in developing nations and will make the manufactures to rethink on their strategies of OFF shoring and tends to change their dodging for Next Shoring. Thus In future, next shoring, not the off shoring, drives manufacturing location decisionPART-B2.1 Role of Korean Culture in Samsungs winnerIt has become increasingly important for employees to have vested stake in the growth potential of its troupe. People expect a participatory work surround where they female genitalia feel a sense of dignity, pride, and ownership of the organizations vision. Samsung Mobiles strives to build a yeasty organizational burnish, and acknowledges that the investment we make in strengthening the core postulatencies of our employees will have a direct impact on our competitiveness. We actively promote a flexible organizational culture that allows employees to tag a healthy work- smell balance, in a dynamic, creative and challenging work environment that is not risk-averse. As an international company we borrow persons with antithetic background and abilities.Korean Culture - Work & Life relief through with(predicate) Work SmartSamsung Mobiles has not and contributed to balancing work and life but also to improving productivity by adopting a flexible work schedule in Korea to help eliminate unessential overtime and to maximize work performance through effective time management. We introduced a pi muckle, flexible work schedule inour TV, busy auditory sensation, and consumer electronics sectors seed in 2009 and expanded it to all divisions in 2010.Under this new effort, employees incur at work between 6.00 a.m. and 1.00 p.m. and to work eight hours per day. As of troop 2012, approximately 65,000 Korean employees have taken advantage of this agreement out of a total of 100,000 Korean employees.Samsung believed it is important for everyone to be able to come in personal responsibility for their time. This will continue to contribute to a working atmosphere that allows employees to focus on their job in an autonomous and creative atmosphere.Thus they instigatored this as Work smart strategy. This helped Samsung a lot in its success.Work Culture that Encourages Learning and studySamsung Mobiles has schematic a Creative Development Rese arch Institute System to provide employees with opportunities to pursue creative new ideas that take full advantage of their talents and passe-partout passions in a way that encourages taking risks. This new initiative encourages employees to be more entrepreneurial in developing creative ideas that can become new businesses. Once an employees plan is accepted, they may concentrate on the run across as a member of a task force for up to one year. During this period, they will be free from their usual responsibilities and may invite a dedicated work space, development expenses and necessary equipment as appropriate. favored outcomes are encouraged through an incentive program however they are not subject to penalty if they dont achieve their goals.The freshman outcome of the Creative Development Institute, eyeCan, was launched in February 2012. The eyeCan is a special sneak for the disabled, which allows its user to use a computer using eye movement. Samsung Electronics will co ntinue to support similar technology projects that ourtalented workforce introduces to incite those in need.2.2 Analysis of Samsung Mobiles using P.E.S.T and Poters 5 Force presentAs the main objective of this thesis is to take care the European and the U.S. unstable hollo markets, the selected framework supports this aim by approaching the markets on deuce diametrical levels. Primarily, the analytical framework focuses on micro-environment i.e. looking at the markets from the viewpoints of the actors (suppliers, distributors, customers) and from that of opposition. To analyze the contribution of each of these actors and other sources of competition, another well- establish model, doorkeepers five forces, will be utilized (Section 2.3). Where necessary, the observed phenomena are also interpret from a wider, large instruction environmental perspective although more detailed analytic thinking of macro-environmental factors will be omitted. The exclusion is justified by th e fact that competition, so far though influenced by the macro environment, takes place within the micro environment. In addition, concentrating on the micro-environment allows a broader and more in-depth treatment of the most relevant actors present in the micro-environment.On another dimension, the framework applies two different conceptual approaches, namely, international business (IB) environment and industrial organization (IO) economics. These approaches together serve to supplement the potently microeconomics focused framework with suitable concepts grounded in the strongly 7 link IB and IO disciplines. While the industrial organization focuses on the company/market boundary from the perspective of corrupt competition, international business focuses on the qualities of international markets and companies operating across country boundaries. These approaches will be discussed in detail in Section 2.4. The analytical approach of the thesis is summarized in .Figure 1. Analy tical framework of the study2.2. Macro-environmentBy definition, the macro-environment involves factors outside of the directcontrol of the business. These factors, then, include the economy, government policies, social changes etc. A squiffy may, for example, be influenced by new legislation or changes in receipts policies but the firm ra deposit has power to shape them itself. Thus, macro factors have the superpower to fundamentally change the environment of an organization but the blood is typically one way. (Gillespie, 2007) One of the most utilized frameworks to analyze the macro factors is the PEST analysis.The PEST framework stands for Political, Economic, Social, Technological, Environmental and Legal and is used for analyzing the macro-environment in which companies operate and which also significantly affects each business independent of its coat (Johnson et al., 200665) in each case including (or excluding) some factors and giving more cant to some in comparison to others. However, it always aims at capturing the essential of the macro-environment under a few broad categories to facilitate understanding and management of each factor within the business and to identify the key drivers of change (Johnson et al., 200669). hedge 2.1. Components of the PEST analysis (Gillespie, 2007)Even though the macro-environment will not be analyzed in detail in this thesis its influence in a companys decision making processes is evident as well as its ability to change to conditions under which competition takes place. For example, the Finnish governments decision to allow bundling of rambling crys had a direct impact on both handset manufacturers and mobile street girls business. Thus, references to the macro environment and changes in it will be made alongside the analysis on companies and their micro-environment.2.3. Micro-environmentThe micro-environment can be defined as populateing of stakeholder groups that a firm has regular dealings with (Gillespi e, 2007). For the purpose of this thesis, the focus will be on suppliers, distributors, customers and competition as illustrated in Figure 1 following the terse definition of micro-environment by Gillespie (2007).SuppliersIn love to its suppliers, any company chiefly needs to address questions such as Can they provide the quality we require at a good price?, Can they ordinate to changes in the supply volume? and What is out power relative to our suppliers and vice versa? Increasingly, however, large multinational companies in particular are concerned virtually the ethicality of their suppliers operations. Recently, for example, Samsung was alleged to have used so called blood metals in their mobile phones, to which Samsung responded by implementing yet more stringent systems to track the origin of its black materials (Yle, 2010). Especially in the business of mobile phone manufacturing, suppliers and supply chain management (SCM) play a crucial role. Since mobile phones, smart phones in particular, contain numerous highly specialized agents and modules, handset manufacturers broadly speaking deliver the goods most of the components, software and even assembly from their suppliers and subcontractors (see the mobile phone assess system in Figure 9). Samsung, for example, lists 35 countries as its main supply locations and applies its so called codification of conduct to all its business partners. In the Code of conduct (Samsung,2011f) Samsung states thatSamsung encourages its partners, subcontractors, or suppliers to strive beyond legal compliance in areas such as governance, human rights and the environment. Samsung incorporates ethical, social and environmental criteria in its procurance agreements and commits to monitoring the performance of its partners and to taking immediate and thorough remedial travel in cases where the ethical performance of its business partners comes into question.- SamsungThus, mobile phone manufacturers rely on suppliers to varying but largely great extent and can even be held responsible for choosing suppliers that use e.g. child labour or non-recyclable materials. To construct an iPhone, Apple, for example, sources its Retina display from LG, the A4 processor from Samsung, gyroscopes from STMicroelectronics, touch sensitive panels from Wintek and TPK, and chips from Skyworks Solutions and TriQuint Semiconductor (Apple Insider, 2010). However, some conglomerates, e.g.Samsung manufacture most of the modules in-house which enables cutting down the number of suppliers and facilitates integration in the production process. Even if the recent business wisdom has advised companies to disinvest non-core functions and focus on a few core competencies, Samsung has proven that conglomerates may be highly profitable while retaining their non-core parts. Unlike Motorola, Samsung kept its component manufacturing in-house and focused on synergies from producing both components and end products. (Hyty, 2011250 -252)DistributorsThe second essential constituent of a companys micro-environment is distributors. The choice of distribution channels is searing for a number of reasons. Firstly, the distributors strongly influence the final sales price of each product and thereby at one time affect the sales quantity. Second, the distributors and subsequently retailers play an important role in how the product is presented to the customer and, to some extent, how it is positioned relative to competing products. Finally, the choice of the distribution channel affects how customers perceive the brand. While Samsung, for example, utilizes a wide range of sales channels for its Samsung branded products, it sells its luxury phone brand Vertu (typically gold and diamond decorated, ranging from $6000 to $300 000) only in Vertu and Samsung flagship stores (Vertu, 2011 Dialaphone, 2007) In the mobile handset business, the distribution channel plays a crucial role. While in Europe most mobile phone manu facturers rely on a large number of individual distributors and retailers, in North America the bulk of handset sales is carried out by mobile network and virtual operators (see Figure 22). The long-lasting dominance of mobile operators over distribution in the United States has allowed them to introduce additional requirements related to e.g. tailoring and branding of phones, and together with subsidies a commanding position in the industry. Still, the choices related to distribution come down to the same basic questions, i.e. what are the total costs, how is the brand communicated, how flexible is the distributor etc.CustomersThe third instalment of the companys micro-environment is customers. In thisrespect, it is common to separate between individual consumers and organizational (or industrial) customers (or buyers). While consumers are traditionally considered less rational and driving in their decision making process, companies tend to be viewed as professional buyers follo wing strict budget, cost and profit considerations. (see e.g. Webster & Wind, 1972 Baumgartner & Steenkamp, 1996) These kind of clear differences in purchasing behaviour have been questioned (Wilson, 2000) and todays B-to-B marketers widely espy that emotions play an important role also in business purchasing decisions (Kotler & Armstrong, 2006178).In the mobile phone business, consumers represent an enormous variety of tastes, preferences and affluence. In developing countries, the sales of low-end mobile phones (often under $50) dominate, while in developed markets of e.g. Europe and North America, consumers often opt for more advanced models incorporating cameras, GPS navigation, meshwork browsing etc. Moreover, most of these consumers appreciate hold dear added features and post-purchase services provided by the manufacturer (e.g. Apple App Store, Nokia Ovi Store and Google Android Market) and often base their purchase decision on the combination of the phone and the availa bility of these services (see e.g. Singh & Goyal, 2009). Industrial buyers, on the other hand, tend to value services related business use of the phone (e-mail, data security etc.) and suppliers ability to provide a communications solution to the company instead of only handsets.Finally, with regard to the mobile phone industry in Europe, Asia and the United States, there are some significant differences in customer profiles. While in Europe & Asia a handset manufacturer can sell both directly to the consumer and via distributors and retailers, in the United States the only major customer is the operator that, then, functions as a distributor and retailer. This, obviously, has its effect on what kind of market is needed to reach the end customer.CompetitionThe Merriam-Webster dictionary defines competition as the effort of two or more parties acting independently to guarantee the business of a third party byoffering the most favourable terms. (Merriam Webster Online, 2011) Corresp ondingly, The New Palgrave Dictionary of Economics states that competition arises whenever two or more parties strive for something that all cannot obtain. (Stigler, 2008) In this thesis, these competing parties are handset manufacturers who act to secure the business or strive for the limited resource, i.e. the money, of their customers.In terms of developed economic theory, competition is one of the most researched areas of economics. Economists generally differentiate everlasting(a) and imperfect competition, concluding that no other system is more Pareto efficient than perfect competition.According to Organisation for Economic Co-operation and Development (OECD, 1999) perfect competition is defined by four conditionsa) There are such a large number of buyers and sellers that none can one at a time affect the market price. This means that the demand submit facing an individual firm is perfectly elastic.b) In the long run, resources moldiness be freely mobile, meaning that ther e are no barriers to entry and exit.c) All market participants (buyers and sellers) must have full access to the knowledge relevant to their production and consumption decisions.d) The products should be homogenous.Imperfect competition, thus, occurs when any of the criteria for perfect competition is not satisfied, e.g. when there is information asymmetry between buyers and sellers, either buyers or sellers are able to influence prices or products are not homogenous.In regard to the mobile phone industry, there is a clear case of imperfect competition. Firstly, the three largest manufacturers Samsung, Samsung and Nokia held round 64 % of the global unit sales in Q1/2010 while the tenth largest Huawei had 1,3 %. (Gartner, 2010) This kind of a market situation is generally referred to as an oligopoly in which producers are so few that the actions of each of them have an impact on price and on competitors (Merriam Webster Online, 2011). Second, there are plum high barriers to entry due to the capital intensive nature of the business. In addition,gaining market share generally requires significant investments in marketing and established manufacturers can benefit from advantages of scale.Poters 5 Force ModelThe porters beers five forces model has been criticized, for example, for its underlying assumptions. Firstly, an industry is assumed to consist of an unrelated set of buyers, sellers and substitutes and competitors that interact at arms length. Second, companies can gather wealth that allows them to erect barriers against existing competition and new entrants thereby creating structural advantage. Finally, the prevailing uncertainty is assumed low enough to bear predictions about the participants behavior and choose a strategy accordingly. In addition, one should also note that the model was developed more than 30 years and, since then, new industries have been born and the old ones taken new shapes. In an argument that the classical model such as the Fiv e Forces and value chain analysis were designed for the analysis of traditional industrial firms and do not apply well to todays knowledge-intensive companies.Figure 2.2 Porters Five Forces modelThe rationale for choosing the Five Forces framework was as follows. The model was to be well-known and tested. Even though Porters model has been criticized for its applicability to certain industries and for its assumptions, few models have gone through such thorough testing and prevailed. While no model is perfect the limitations of the Porters framework are, nevertheless, well-known and documented. Finally, the use a widely accepted framework facilitates reading and interpretation of the results as opposed to some other model with less prevalence and academic/practitioner interest. hedge 2.2 Opportunities and Threats for Samsung Mobile2.3 Suitable Business strategy to overcome threats and grab opportunity in Samsung Global R&D (Research & Development)In 2003, Samsung invested 3.5 trilli on won ($3 billion) or 8% of total revenue enhancements in R&D. It acquired 1,313 US patents in 2003, ranking it 11th inthe world in US patent awarded. (Exhibit 9) Samsung has about 19,700 researchers working in R&D. Researchers account for approximately 34% of its total employees. Every year, R&D engineers developed about 100 new technologies and they work on the development of core technologies in the fourth genesis (4G) mobile communications and in next generation memory chips.Samsungs Information and Telecommunication R&D pump is in Suwon, where the companys headquarters are located. This R&D Center was designed to incorporate all of its business specialtiessemiconductors, electronic components, multimedia, and telecommunicationsto maximize technological synergies among them. The Suwon R&D Center also interconnects with other R&D centers, both in Korea and in other countries.In the mobile business, Samsung has applied for 12,000 patents in Korea and 25,000 patents overseas si nce 1998. The main focus of R&D is the development of new technology standards for 4G communications and the mobile Internet. Samsung holds approximately one hundred patents related to 3G and 4G technologies. Recently, Samsung sold its cdma2000 1x EV-DO system to Japan and Southeast Asiatic countries.Global tradeSamsungs clever marketing strategies played an important role in lifting Samsungs image from that of a low-end manufacturer to that of a global digital technology leader. For effective global marketing and branding, Samsung established a new organization to deal with its integrated global marketing activities. Eric B Kim, who used to work at IBM, was recruited to lead the Global Marketing Department. One of his most important decisions was to cease all existing contracts with 55 advertising agencies and to sign a $400 million contract with one ad agency, FCB Worldwide. Since then, Samsung has unveiled a series of corporate branding campaigns and the slogan, Samsung DIGITal l Everyones invited.One of Samsungs major global branding strategies is prodigious sponsorship. In1996, Samsung was an unofficial sponsor of the Atlanta 1996 Olympics, having sponsored the Samsung Expo in the Pavilion of the main(prenominal) Stadium. In the same year, Kun Hee Lee was selected as an IOC member, and Samsung received an opportunity to get in in TOP (The Olympic Partners).The IOC proposed that Samsung participate in sponsoring the home appliance category for the Olympics. However, Samsung wanted to utilize the opportunity to promote a advanced image, and felt that the home appliance category was not enough to emphasize Samsungs technological advances. Samsung set its sights on the telecommunications category and believed that, through the Olympic sponsorship, it could shed its image as a low-end home appliance shaper and reposition itself as a high-tech mobile communications company. To win the sponsorship negotiations, Samsung concentrated its marketing resources on the mobile phone business.Samsungs Key Issues to rectify their threatsThough Samsung has continued its success in the mobile phone business, it faces a number of challenges to keep the growth momentum in the future.First, competition in the mobile phone market will become more intense. Lower entry barriers will bring in more competitors to the market, and the digital convergence will accelerate the competition even further. Companies from other industries such as PCs or network services will compete directly with Samsung. As such, it will have to devise more creative win-win strategies in the highly uncertain digital convergence landscape.Second, the sustainability of Samsungs high-end strategy, which was attributed to Samsungs brand building, may be in question. Samsung has achieved high profit margin, which is comparable to that of Nokia, mainly based on its high price, while Nokia has done so based on its cost dynamics. In terms of per-unit cost, Nokia spends less on R&D and marketing. One might doubt whether the high-end strategy can sincerely be sustainable.As the mobile communications market becomes saturated, future revenue sourceswill come mainly from emerging markets (China, Brazil, India, Eastern Europe, etc.). First-time buyers in emerging markets tend to prefer affordable phones. This could hurt Samsung unless it begins to cover the low and middle-end markets. Nokia and Motorola, as well as many newcomers from China, have already targeted those emerging markets. How to compete in the low and middle-end markets, while preserving its premium brand image, will be important questions in Samsungs future growth.Third, Samsung is highly dependent on foreign companies for core technologies and modules. For example, it sources core CDMA base-band chips from Qualcomm and sophisticated camera-phone modules from Japanese firms. Consequently, the proportion of royal family payment in total manufacturing cost is likely to increase unless Samsung develops its own technologies. Some industry experts argue that most of Samsungs patents are on applied technologies, which are developed based on others patent-protected core technologies. Recently, Samsung see a shortage in the supply of Qualcomm chips and camera-phone modules. This suggests that Samsungs high dependance on core technologies and product modules would threaten not only its future profitability but also its competitive position.Product Life bi make pass of Samsung galax For my analysis it will be useful to understand how Samsung has introduced its Galaxy Smartphones. The introduction ramification of a product is one of the most important, because in this stage a company positions its products in the market. In order examine the strategical choice of the company I need to understand the strategic possibilities in the introduction stage of a product. According to Kotler and Keller, companys positioning and differentiation strategy must change throughout the life of its pr oducts. I will give a brief description of the stages of the product life one shot and strategic possibilities in each of these stages. According to Kotler and Keller to be applicable to a product the assumptions behind the life-cycle are that the product must have limited life sales go through different stages, with different challenges, opportunities and problems profits change at different stages products require different manufacturing, financial, marketing, purchasing and human resource strategies in each lifecycle stage. The Smartphone products fulfill these assumptions. Kotler and Keller recognize 4 different Life-cycle stages for a product.Introduction detailIntroduction is a period of slow sales growth as the product is just introduced. It is also recognized with heavy advertising. According to Shaw (2008) in the introduction stage a company can choose by penetration strategy or niche strategy. A penetration strategy involves aggressive marketing mix and product for the m ass market offered at a low price. A niche strategy according to Shaw (2008) involves a narrow market segment and a higher price. In this stage Shaw (2008) recognizes only two possibilities targeting the mass market with low price and a niche strategy involving higher price. Looking at the smartphone market it is thinkable for the companies to target mass market with higher price as for subject iPhone & Nokia does. This is also due to the affordable terms of the mobile operators where people can buy the Smartphone on leasing.6.2 Growth StageThis is a period of rapid growth and market acceptance. Here the profits are higher. According to Shaw (2009) in the growth stage companies can choose between two strategic options these are segment expansion and brand expansion. In segment expansion, the company can add new target segments, with their own marketing mixes. strategic alternative to segment expansion might be brand expansion. This strategy adds new products or variations to the e xisting line. The strategy delivers to the customer segment big choice, or greater value. Some of these strategy ideas might be delivery, gift-wrapping (Shaw, 2012).6.3 adulthood StageIn maturity stage the sales are lower as the product is already bought from most of the Potential buyers (Kotler and Keller 2009 p.490). According to Shaw (2010) in Maturity stage it is common for a company to employ s stable marketing mix. As the Product moves further on the curve harvesting strategy becomes necessity.6.4 Decline StageHere sales bloodline and profits erode (Kotler and Keller 2009 p.490). In this stage Shaw (2011) recognize only divesting strategy as an option.The following picture shows the life cycle of Samsung Galaxy (first model in Smartphone ) by Samsung which was launched in 2008. Where in the introductory period it was peak since it was on affordable cost. This model was soon hit in the market. In 2009 its has started its tremendous growth. In around 2010 it reached its matu rity state. Where Samsung enjoyed a lot on its success. This encouraged Samsung to do R&D in Galaxy model and they started to develop a lot newer version. Due to introduction of new models and everyone had the current model, Galaxy has started to decline in 2011.Figure 2.2 Product Life cycle of Samsung Galaxy