A popular BusinessWeek article “The Samsung Way’ http://tiny.cc/stix9 was analyzed and presented by our strategy class at Tasmac on 13 Aug 2010. The awesome power and speed of the Samsung brand was unleashed on the audience thru’ a video clipping of a Samsung ad http://tiny.cc/qwk64 “Whether you’re a consumer in America, Europe, or Asia, it’s pretty darn hard to escape anything made by Samsung Electronics Co” is what the case all about.
The Samsung Group
Samsung toward the end of 1990s was financially crippled, and its brand associated with cheap, me-too TVs and microwaves. By 2003 it’s remarkable reincarnation as one of the world’ coolest brand brings out some interesting lessons. Its success in a blizzard of digital gadgets and in chips wowed consumers and scared rivals around the world. Sony President Kunitake Ando stated “I ask for a report on what Samsung is doing every week”.
The Samsung Group is a conglomerate most of its affiliated businesses are united under the Samsung brand including
Samsung Electronics, the world’s largest electronics company, Samsung Heavy Industries, the world’s second largest shipbuilder, Samsung C&T, a major global construction company, and Samsung Life Insurance, the largest insurance company in Korea.
It is one of South Korea’s largest chaebol (are Korea’s huge business-industrial complexes such as Daewoo, Hyundai, LG, Samsung and others) and the world’s largest conglomerate with annual revenue of US $173.4 billion in 2008. The word Samsung (三星) means “Tri-Star” or “three stars”. The company has a powerful influence on the country’s economic development, politics, media and culture. Many companies use its international success as a role model.
Strategic approach of Samsung
Change in strategic direction - Samsung was a product-driven company that focused on commodity products at lower costs than its competitors. Once costs were under control Chairman Kun Hee Lee in 1993 changed the company direction of growth from a focus on low-end commodities to high-end premium goods. By deciding on customization even in memory chips, the ultimate commodity Samsung commands prices 17 percent above industry average.
Strategic intent - In 2003 Samsung leadership had announced a bold strategic intent to unseat Sony and became the world’s biggest maker of digital mobile phones using CDMA technology. Samsung also gained leadership in high-definition TV in the competitive US market.
“If we get out of manufacturing we will lose” says CEO & VC Yun Jong Yong challenging the basic tenets of strategy followed by the industry majors. In high tech the assumption is proprietary software gives you higher margins. Yet it defiantly refuses to enter the software business.
Vertical integration versus outsourcing – Samsung remains diversified and vertically integrated – Samsung chips and displays go into its own digital products. Rather than outsource manufacturing the company sinks billions into huge new factories. Vertical integration enables control on upstream and downstream activities it also creates constraints. Complacency may set-in the up-stream units as due guaranteed internally generated revenues. Possibility of displeasing own dealers and wasted time and effort associated with internal transfer price battles.
Samsung by challenging internal manufacturing units to compete with outside companies for supplying components for production of finished goods it prevents a slowdown in tempo.
Samsung’s China strategy - In the 1990s Chairman Lee Kun Hee emphasized Samsung’s long-term interest in China as one inextricably entwined with its own survival. When Samsung and other Korean companies started moving into China the aim was to access low cost manufacturing centers. The companies in China began catching up with their Korean counterparts much faster than predicted.
In response Samsung altered its strategy by viewing China as a strategic market rather than manufacturing and differentiated itself by focusing on products and services and targeting the premium niche. Samsung aggressively advances to capture the top five percent of the market. Read more details in http://tiny.cc/eut4m
Strategic leadership - Samsung strategy was pretty basic, but to win CEO Yun Jong Yong executes the strategy with a ferocious drive that proves leadership is the key to success in implementation.
Organizational capabilities - speed and intelligence is intrinsic to Samsung’s success in implementation. It takes less than an average of five months to go from new product concept to rollout. Whereas Motorola completely changes its product line every 12 to 18 months, Samsung refreshes its lineup every nine months.
Restructuring - To streamline the companies’ 24000 workers were laid-off and $2 billion in noncore businesses sold. Samsung managers say they go through fewer layers of bureaucracy to win approval for new products and budget speeding up their abilities to seize opportunities.
Porter’s diamond of national competitive advantage – strengthens Samsung due to:
• South Korea ports and close proximity to China and East Asian Countries,
• Samsung’s main R/D facility and all its units located in Seoul provide an ecosystem that fill complementary needs of each other speedily.
• Samsung’s own University is a feeder for PhDs and IT talent for R&D & innovations.
• 70% of South Korea homes are wired for broadband serves as a test market base.
The Samsung Brand
Samsung has created a strong brand around innovation, cutting edge technology and world class design. Samsung resorted to a design competition to excite customers and involve the brand’s community – to boost the brand’s hip image amongst the younger crowd, Samsung asked students to offer their concepts for a MP3 design. The idea resonated strongly among the student community to such an extent that Samsung received a whopping 2000 designs for this contest.
The Samsung brand now has become the best known South Korean brand in the world overtaking Japanese rival Sony in 2005 as the world’s leading consumer electronics brand and became part of the top twenty global brands overall.
Samsung – Vision for the future
Samsung vision for the new decade is, “Inspire the World, Create the Future.” It reflects Samsung Electronics’ commitment to inspiring its communities by leveraging Samsung’s three key strengths: “New Technology,” “Innovative Products,” and “Creative Solutions.” — And promote new value for Samsung’s core networks — Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world.
I wish to thank our student group for the lively presentation. It is evident from the points enumerated above that their analysis was thorough and insightful.
A final lesson that emerges is that sound implementation driven by great leadership becomes the winning factor.