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Samsung Electronics: From National Champion' To Global Leader'

This document discusses the history and rise of Samsung Electronics from a humble beginning in South Korea to becoming a global leader in electronics. It details how Samsung grew from a small trading company in 1938 to one of the largest conglomerates in the world by 2012. It also explains how Samsung benchmarked other companies, acquired new technologies, and shifted its strategy to target new product markets like luxury TVs which helped it overtake Sony and Nokia in various product categories.

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349 views2 pages

Samsung Electronics: From National Champion' To Global Leader'

This document discusses the history and rise of Samsung Electronics from a humble beginning in South Korea to becoming a global leader in electronics. It details how Samsung grew from a small trading company in 1938 to one of the largest conglomerates in the world by 2012. It also explains how Samsung benchmarked other companies, acquired new technologies, and shifted its strategy to target new product markets like luxury TVs which helped it overtake Sony and Nokia in various product categories.

Uploaded by

With PM Meeting
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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9

Samsung Electronics: From


‘National Champion’ to
‘Global Leader’
Sang-Chul Park, Claes G. Alvstam, Harald Dolles,
and Patrik Ström

9.1 Introduction

Samsung Electronics, headquartered in Samsung Town, Seoul, is the flag-


ship company of the largest and oldest of the Korean chaebol, the Samsung
Group. It is one of the world’s leading conglomerates, with revenues in
2012 of US$ 248 billion and 369,000 employees (Samsung Electronics,
2012a). Samsung Electronics alone is ranked 20th in the Fortune Global
500 list, with revenues of US$ 184 billion and 222,000 employees (Fortune,
2013). The group started with the founding of Samsung Corporation, a
trading company, established by Lee Byung-Chull in 1938, selling fish,
vegetables and fruit to China. Within a decade Samsung had flour mills and
confectionery machines. The trading function continued to be important,
but from what was, according to Chang (2008), a humble beginning, soon
embarked on a strategy of rapid diversification into sugar, textiles, various
financial services, petrochemicals, shipbuilding, heavy machinery equip-
ment and aerospace. By 1950 Samsung had become one of Korea’s top ten
firms.
Samsung has recorded remarkable achievements in product development,
market penetration, strategic acquisitions and sales. As late as in the 1990s,
most of its products were categorized as low-cost or medium-cost consumer
goods in the advanced economies, although it had been the ‘national cham-
pion’ in its home market for several decades. When the company was hit by
the Asian financial crisis in 1997, its chairman, Lee Kun-Hee, was severely
criticized for the general management strategy, in particular for the newly
started automobile business, Samsung Automobile Co. Ltd. As a result, the
owner commenced a major restructuring of the entire group by divesting
this part of the conglomerate to the French carmaker Renault, also meeting
the requirements of the government to reduce excessive industrial produc-
tion capacity as well as to compensate for large losses. Another measure was
to sell Samsung Heavy Equipment Co. Ltd to the Swedish Volvo Group in

179
C. G. Alvstam et al. (eds.), Asian Inward and Outward FDI
© Palgrave Macmillan, a division of Macmillan Publishers Limited 2014
180 Sang-Chul Park, Claes G. Alvstam, Harald Dolles, and Patrik Ström

1998. This deal accounted for US$ 700 million, and was at that time the
single largest inward FDI in South Korea.
In the mid-1990s Samsung Electronics chose the Swedish company
Ericsson to be one of its benchmarking companies along with General
Electric and Sony, in order to strengthen its image as a state-of-the-art
technology-based company. It adopted Ericsson’s business strategy of aspir-
ing to be the leader in its own field, mobile communication technology
equipment. By importing bluetooth technology from Ericsson at the end
of the 1990s, the company managed to launch its own mobile telephone
business and had become the second largest mobile phone producer in the
world by 2005. Finally, in 2012 it overtook Nokia’s fourteen-year-long ten-
ure as the world’s biggest seller of mobile handsets (Milne, 2013). Samsung
Electronics had set its target in the field of home appliances as taking over
Sony’s position in the global market. Sony produced luxury TV sets and
held its largest market share in the 1990s and 2000s. Samsung’s TV sets,
compared with Sony’s, were regarded as medium-range price products in the
advanced nations, although it was the world’s largest producer in the 1990s.
Entry into the luxury TV market at the beginning of the 2000s seemed
therefore to involve a high risk, given the high technological barriers and
Sony’s strong market position. The majority of the Board of Directors were
sceptical about the adoption of this strategic target, but were persuaded by
Chairman Lee Kun-Hee, who pointed to the opportunities to increase the
brand’s power in private households. Since Samsung supplied more than 20
per cent of total IC chips and had become the largest producer in the world,
it was more known as a business-to-business-actor. The move to become
a global player within the high-end consumers’ market was in addition a
measure to strengthen the brand image. This strategy proved to be success-
ful as Samsung Electronics took over Sony’s place in 2005.
Since then, the company’s vision for worldwide activities has been to be
the leader in the global digital convergence movement. In order to con-
tinuously strengthen its position, it aims to develop efficient and innovative
technologies in its products portfolio. The present mission to become the
best ‘Digital eCompany’ affects its overall corporate strategies and opera-
tions. Indeed, the success of Samsung Electronics to first become a ‘national
champion’ in South Korea, and later to reach global leadership, is closely
linked to the industrial policy of the domestic government as well as an
aggressive investment strategy based on the strong entrepreneurship of its
founder within a conglomerate, family-dominated structure. This is a pattern
that is typical for Asian business in general, but may be particularly apparent
in the Korean corporate culture. In this context we refer for broad surveys
of the fundaments of the Korean business culture and its underlying insti-
tutional structure, including Amsden (1989), Chen (2004), Chung, Lee and
Jung (1997), Ungson et al. (1997) and, more recently, Hemmert (2008, 2012).
In this chapter we focus on how a company in an emerging economy can
succeed in becoming a ‘global leader’ in the industry, where the main aim

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