Friday, May 21, 2010

No. 4: On the cluster phenomenon

Samsung Electronics of Korea has been growing remarkably by focusing its management resources on the LCD TV that incorporates light-emitting diodes for backlight. Because the LCD TV is positioned as a high-end product, it is rarely subject to discount besides being rather profitable. In the North American market, the LCD TV allows Samsung Electronics to have a higher average sales price than Sony in the North American market in the flat-screen TV business. When we Japanese see advertising on the TV, we presume that Japanese makers are dominant in the world market. However, the fact is that Samsung is the market leader with 24% share. It is followed by Sony with 15%, LG Electronics of Korea with 12%, and Sharp with 8%. The leading four makers account for nearly 60% in the world market.

Panasonic is behind Samsung in the world market, and its two strategies aiming at the world market, “Focus on the world as one market” and “Provide all electronics to every household,” are not working well. In fact, Panasonic’s ratio of foreign sales is 46%, while Sony and Samsung secure more than 80% of sales from the foreign market. At the present time, it is clear that Samsung strategy to sell selected items in the world market is working better. As element technology grows more sophisticated and its base grows wider, it grown more conspicuous that a specific area specializes in a certain technology, and companies involved in the industry cluster. For example, the software industry clusters in the U.S., and the flat screen TV clusters in Japan and Korea. As competition of technology development intensifies, focusing on specific technological field grows more important and the cluster phenomenon will grow more conspicuous.

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