An Economic study on Samsung

Economics & Firm: Economics is the study of allocation of scarce resources to satisfy wants . The ten economic principles are the backbone for achieving an economic flow which starts with the production of goods/services by a firm, One good example of a firm would be Samsung Inc. which has established itself as a leading player in the electronics market, It has shown that a firm can bring down its cost and increase profits by manufacturing all the components of production itself and having a tightly coupled production cycle which enables it to scale up very quick to any new production requirement Demand: Law of Demand states that Ceteris Paribus the quantity demanded of a good falls when the price of the good rises or vice-versa. In case of the mobile market the iPhone held a majority in the smartphone market, but was able to penetrate just 17% of the global smartphone arena, why? The price was a deterrent to demand. Looking at this Samsung positioned their phones at a lower price bracket for similar technology to drive demand for themselves , also to generate demand from each price point, Samsung brought out a multitude of phones ranging from 20$ to 600$ to satisfy the entire demand curve and gain the maximum customers at each price point. Equilibrium: Now this steady rise of smartphone prices has been on a boom since 2007 but it will reach equilibrium and stabilize when the market reaches saturation and then Samsung might face a tough time if it continues to focus only on a few products like LEDs and smartphones of which it is the leader now. Any increase in supply might lead to increase in Quantity
Supplied

and decrease

Quantity demanded leading to a drop in price and thus margins . To avoid this chairman Lee Kun-hee believes in leading the company to new innovations at times when they are doing well. In 2000-2001 they brought a revolution to battery, flash memory and LCD which led to creation of devices such as iPhone. In 2011 the company is taking a new direction into green technology and healthcare as a 2020 vision, the outcome of this is yet to be seen.

Elasticity of Demand: Price elasticity of demand measures the price-sensitivity of buyers demand. In smartphone market there are a multitude of players like Sony, HTC, Nokia but according to market share Samsung and Apple can be considered proper substitutes, so based on the study that Apple provides lower hardware than Samsung and other competitors at a higher price and that the iPhone is losing its brand value in the global market. Apples demand is very elastic, if there is a increase in price for the same hardware then the quantity demanded will decrease much more than what would change for Samsung (inelastic) or the other players who provide superior technology and experience at a lower price point.