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 HQ

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

Implementation

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.

Group presentation

 

Simran, Sachin, Jenzeer, Dilip

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.

About these ads

About dilipnaidu

An open mind! Love to share inspirational thoughts and a keenness to learn. My interests are growing culinary herbs and playing golf. I enjoy my teaching assignments and interaction with students.

18 responses »

  1. Ketaki Ranade says:

    Dear Dilip Sir,

    As very rightly mentioned by you in our SM Class , the higher Authority of the company is very crucial in taking the right decisions for the whole organisation’s benefit , it is truely a very difficult job ,

    similarly in case of Samsung,
    the Chairman Lee Kun Hee , and
    the CEO and vice chairman Yun Jong Yong have done a Stupendous job in managing the company,
    which has been able to reach, so close to apple and is actually competing with apple in terms of per month sales by volume…

    Vertical Integration is one of the greatest strengths of Samsung as the manufacture all the small components such as Batteries, D-RAM Chips, Semiconductors, Flash memories, Display panels of all sizes etc , these are the components required to assemble almost any king of product the manufacture right from
    High Definition TVs , Laptops, Washing machines, Tablets ,Smart phones.

    They supply almost 70% components to Apple in order to manufacture i-pads and i-phones etc. It the biggest supplier of Digital Display Panels, and D-RAM chips .

    They came so late in the market ,and just because of vertical integration they have been able to pull up maximum profit margins and due to reasonable costs ,they are able to price their products reasonably.

    I am so glad that, i got Samsung as a Case study, and made me understand the detailed Structure and strategies of samsung , it was very very interesting.

  2. ram natrajan says:

    great stuff on samsung
    a sinking ship saved and rescued taken to great heights shows positive thinking shows how the human mind when challenged to take you to great heights
    the koreans have succeeded and the reason is due to something my korean friend told me decades ago…….WE HAVE NO ENEMIES…THE JAPANESE INVADED US……NOW WE WILL INVADE THEIR PRODUCTS AND SEE WHAT WE DO WITH OUR PRODUCTS
    PROF RAM NATRAJAN

  3. Bonifacio Mercado Jr. says:

    Dear Friends,

    Thank you for sharing this information.

    I am currently enrolled in Strategic Management taking a PhD course. As my last course work assignment, my professor assigned me a research on Samsung Strategy. May I ask a favor to share some materials as my reference, HR, Marketing, and other functional areas. You can send in my email @ mercadobn@yahoo.com.

    Thank you in advance.

    Regards,

    Jon

  4. al says:

    Great article about Samsung strategy

  5. Cristina says:

    Dear sir and friends,

    I can see and appreciate the Samsung strategy, but in my personal opinion a very important key factor in its success is the hard worker character and willingness to learn more and more of South Corean people. I have met many of them, and some of them have had worked in Samsung, and honestly, it is amazing how hard they work. They work such a long hours, and they train themselves constantly. They are completely dedicated to the company.

    I think all these employees deserve a very special mention in here.

    Regards,

    CRISTINA

  6. Subash Korada says:

    Nice to read about Samsung and their strategy going forward.

    On a humorous note, I have worked on Samsung built ships and been to their shipyards. Trust me these vessels are not fun to work on. Me and my crew used to having a saying that Samsung should stick to building TV’s and not ships. On a serious note their build quality though poor to the Japanese yards is improving and they are fast catching up. In terms of the technology tree they are just behind Japanese manufacturers and will soon overtake them.

    Reading the blog makes me think back of my Tasmac days which brings a smile to my face!

    Regards,

    Subash

  7. dilipnaidu says:

    Dear Sashi,

    Thoughtful of you to appreciate and encourage. It feels good to hear from my ex students – they have given me – much inspiration.

    Warm regards & thanks.

  8. Hi Sir,

    First I must thank you the presentation group of this topic. It has given a better live example of
    thorough implementation of the strategic tool in upbringing a drowning boat.

    You have done a fabulous job by posting it on your blog. We students like out of class are getting
    learning exposure of strategic management which is keeping us updated.

    Really grateful to you.

    Warm regards,

    Your dear Sashi.

  9. Dilip says:

    Hi dear folks,

    @ Jenzeer – You and your team were really great. Smooth flow and insightful points. The audience listened with rapt attention.

    @ Hitesh – your inputs on Samsung are super. Trust your website “Techlisher’” is going great guns!

    @ Parthiv – The new look of my blog is inspired by your feedback :) Thanks for your kind words.

    @ Dilip – ha ha thanks for declaring my blog theme as – “Go Green”. And your observation is ‘Kool’!

    Thank you guys for your encouragement.

  10. Dilip Sharma says:

    Dear Sir

    I also agree with janzeer about our preparation for the case and i really like the new face of the BLOG sir
    its like GO GREEN!!!!!!

    Regards

    Dilip Sharma

  11. Parthiv Dave says:

    Dear Sir,

    Firstly, I really like this new look of your blog.

    Secondly, I have read all the posts and they’re really knowledgeable. The blog site is really evolved into a knowledge repository.

    Thank you very much for sharing all SM cases and other posts.

    Regards,
    Parthiv Dave

  12. Hello Sir,

    Samsung Electonics brings about 70 percent of the Group revenues of around $175 billion which is truly phenomenal. What drives company to such a pinnacle is its excellent ability to innovate at regular intervals.

    Infact in 2006, Business Week rated Samsung as 20th on its list of global brands, 2nd in the electronics industry. Business Week also ranked Samsung as 20th in innovation. Also in Samsung surpassed Siemens of Germany and Hewlett-Packard of USA with a revenue of $117.4 billion to take the No.1 place as the world’s largest technology company.

    Truly a fantastic brand!

  13. Jenzeer Ahmed says:

    I’d go with Dilip Sharma as of how much in a hurry we had to prepare for the presentation, but still a good try by the whole team. Dilip sir did an excellent work in bringing out few points we had missed out on,very insightfull. Even thought the case looked too technical, it worked out just fine.

    @Dilip Sir – I think your concept of blogging and making students interact on such a platform is nice and creative.

  14. Dilip Sharma says:

    Dear Sir

    The case is quite interesting when we were going through it and we found many strategies adopted by SAMSUNG.

    The best strategy is that they believe in manufacturing not outsourcing – thus preserving and building core competencies to makes them global leaders in electronic industry.

    It was complicated but later we found it to be interesting when we started identifying the strategies.

    Thanking you sir

    Dilip Sharma

  15. Dilip says:

    Dear Raju, Dilip and Vivek,

    Thanks plenty you guys for stopping by – it feels good.

    @ Raju a compliment from you means a lot. Thanks.

    @ Dilip my friend from Goa – you and your group did a lovely presentation.

    @ Vivek I am thrilled to hear from you after so long – and that also thru’ the blog. You’d be on a packed schedule but hope you will share the key points that are not included. It will enrich the post. Wow your observation on Chinese & Korean script is sharp – thanks for pointing it. I remember you were always so keen on concepts related ‘strategy’ when in Tasmac.

    With warm regards and cheers,

    Dilip Sir

  16. Vivek Seelin says:

    Dear Dilip Sir,

    It is really nice to see you so active in blogging world…

    I just couldn’t help but post on this topic, simply because I am now working on a project which gives me an opportunity to travel to Samsung land (South Korea) often. And have seen one of the Samsung plants (I must admit it is gigantic in proportion)

    The article in general touches on some key points, but personally believe it misses out on a lot of key points which are key to Samsung’s drive to the top.

    Not sure if it was intended, but 三星 is in Chinese script, while in Korean it is written as 삼성 (managed to learn to write a few words in hangul).

    Regards,
    Vivek

  17. Dilip Sharma says:

    Dear Sir,

    I am glad that you gave us an opportunity for the presentation. And i am delighted to see it on your BLOG.
    The presentation took total 6 hours for preparation ,and i loved the case as it was technical ,strategical and we had in detail study on SAMSUNG and sir truly saying we all four cannot get the work in advance but can finish it at last moment in a better way. ( Most pressuring time).
    I will definately miss your classes in future sir, i will always remember you sir because i have the same name, Sir anytime if you visit GOA plz contact me sir i will be very happy.

    Yours Truly as well as Sincerely

    Dilip Sharma

  18. raju nair says:

    Really brilliant…well presented…top to down approach…and shows the difference in strategy between samsung and others

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s