SAMSUNG ELECTRONICS Seoul, Korea

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SAMSUNG ELECTRONICSSeoul, Korea

• Japan / Korea Trip 2001
• Fabio Armani
• Julian Carey
• Jennifer Goodwin

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Agenda

• Samsung Group History Structure
• Samsung Electronics
• History
• Company Focus
• Financial Overview
• Strategy
• Organizational Structure
• Challenges

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Samsung Group

• Founded in 1938
• exporter of dried fish, vegetables, and fruits
• flour mill and confectionery machines
• 1950s 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)
• 1960s Expansion of Key Industries
• entered electronics and chemical industries
• 1969 established Samsung Electronics Co.

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Samsung Group

• home appliances
• wireless communication
• semiconductors

• distribution
• hotels
• amusement theme parks
• trading
• construction
• textile
• advertising
• baseball team
• security

• cameras
• aircraft
• ships
• dump trucks
• oil trucks

• life insurance
• credit card services
• securities trading
• finance and trust management services

• polymerized compounds
• plastics
• specialty chemicals

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Samsung Electronics

• Established in January, 1969
• 1970s Bet the future on electronics
• laid the groundwork for electronics in Korea
• helped the domestic economy grow
• paved the way for exports
• 1980s A more comprehensive electronics company
• established plants in Portugal and US
• established Semiconductor and Communication
  corporation
• began memory chip business
• Early 90s Integration and Globalization
• Mid-Late 90s Implementing new management
  strategies
• New Millenium Digital Vision

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Focus 4 Core Markets
Home Multimedia
Mobile Multimedia


Personal Multimedia
Core Components
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Samsung Electronics
Sales (27B)
Operating Profit
Digital Media 6
Telecommunications 12
Semiconductors 40
Digital Media 29
Home Appliances 3
Telecommunications 23
Home Appliances 8
Semiconductors 79
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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

Revenue (billion Won)
Operating Income (billion Won)
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Stock Performance
Samsung is feeling the effects of the downturn
in the high-tech market
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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

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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 cant survive without adapting to the
  fast-changing Internet era, and one solution is
  linking up with startups

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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

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Strategy

• Digital Vision
• Innovation, meeting challenges and creativity
• Target debt-to-equity ratio 50
• RD 7 of total revenues
• Overseas partners
• Joint RD projects
• Technology transfer arrangements
• Joint investments

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Organization Structure

• 4 main groups with 14 divisions

Samsung Electronics
Digital Media
Information Communications
Semiconductors
Home Appliances
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Management Employees

• 59,000 employees
• Development of employees strategic to success
• Making rounds encouraged as a key management
  practice

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Recruiting and Training

• Heavy investment
• Focus on creating agents of change
• Expertise in technology and marketing

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Culture

• Entrepreneurial
• Profit focused
• Decisive
• Different from other firms in Korea and within
  chaebol

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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

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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

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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