Samsung electronics seoul, Korea Japan / Korea Trip 2001


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SAMSUNG ELECTRONICS Seoul, Korea

  • Japan / Korea Trip 2001

  • Fabio Armani

  • Julian Carey

  • Jennifer Goodwin


Agenda

  • Samsung Group – History & Structure

  • Samsung Electronics

    • History
    • Company Focus
    • Financial Overview
    • Strategy
    • Organizational Structure
    • Challenges


Samsung Group

  • Founded in 1938

    • exporter of dried fish, vegetables, and fruits
    • flour mill and confectionery machines
  • 1950’s Economic Stabilization

    • Korean War - Samsung lost all assets
    • aimed to help rebuild Korean economy; entered the manufacturing industry (sugar,fabrics)
    • became a leader in modern business practices (recruiting from outside)
  • 1960’s Expansion of Key Industries

    • entered electronics and chemical industries
    • 1969 established Samsung Electronics Co.


Samsung Group



Samsung Electronics

  • Established in January, 1969

  • 1970’s: Bet the future on electronics

  • 1980’s: A more comprehensive electronics company

    • established plants in Portugal and US
    • established Semiconductor and Communication corporation
    • began memory chip business
  • Early 90’s: Integration and Globalization

  • Mid-Late 90’s: Implementing new management strategies

  • New Millenium: Digital Vision



Focus: 4 Core Markets



Samsung Electronics



Financial Overview

  • Revenue growth and Operating Income suffered in 1996

  • 1997: New CEO Jong Yong Yun

    • major turnaround
      • new business focus
      • new management practices
    • very positive results in 1999, but…


Stock Performance



Strategy

  • 1997 Turnaround:

  • Cut a third of workforce, cut debt

  • Sold and spun off divisions

  • Set “firewalls” to other Samsung Divisions

  • New business proposition: profits

  • Streamlined inventories

  • Diversification



Strategy

  • New Economy:

  • Exodus of engineers and managers to startups

  • Top 4 conglomerates: $1.2B in startups (Samsung: $520M)

    • Stakes of up to 29.9% in 80+ startups
  • Startups benefit from links to global networks and financial expertise

  • You simply can’t survive without adapting to the fast-changing Internet era, and one solution is linking up with startups



Strategy

  • Digital Vision: “A Company that leads the digital convergence revolution

  • Brand power, logistics, IP:

    • High-margin products
    • Create value chain that integrates competencies of all areas
    • Customer and market oriented
  • Global network by function

  • Performance evaluation and compensation system



Strategy

  • Digital Vision:

  • Innovation, meeting challenges and creativity

  • Target debt-to-equity ratio: 50%

  • R&D: 7% of total revenues

  • Overseas partners:

    • Joint R&D projects
    • Technology transfer arrangements
    • Joint investments


Organization Structure

  • 4 main groups with 14 divisions



Management & Employees

  • 59,000 employees

  • Development of employees strategic to success

  • “Making rounds” encouraged as a key management practice



Recruiting and Training

  • Heavy investment

  • Focus on creating agents of change

  • Expertise in technology and marketing



Culture

  • Entrepreneurial

  • Profit focused

  • Decisive

  • Different from other firms in Korea and within chaebol



Current Challenges

  • Internal: “You must maintain a sense of crisis to stay competitive”

  • Profits vs. Growth

    • Financial discipline
  • Foster creativity

  • Executives jumping ship for startups



Current Challenges

  • External:

  • Abandon dependence on cheap commodity products

  • Emphasis on goods developed in-house

    • Rivals are outsourcing production and design
  • Guide the company into the global electronics elite



Current Challenges

  • Corporate Governance:

  • Cross-shareholding among affiliates

    • Shifth funds among subsidiaries
    • Manipulate debt-to-equity ratios
  • Outside directors appointed by family

  • Lack of accountability to outside shareholders




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