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

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.

Samsung Group
% of Sales ($72B)

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

Electronics
28%

home appliances
wireless
communication
semiconductors

Other
38%

Machinery
& Heavy
Equipment
6%

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

Financial
Services
26%

cameras
aircraft
ships
dump trucks
oil trucks

Chemicals
2%

polymerized compounds
plastics
specialty chemicals

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

Focus: 4 Core Markets

Home
Multimedia

Personal Multimedia

Mobile Multimedia

Core Components

Samsung Electronics
% Sales ($27B)

% Operating Profit
Digital Media 6%

Semiconductors
40%

Home
Appliances 8%

Digital Media
29%

Telecommunications
23%

Telecommunications
12%
Home
Appliances 3%

Semiconductors
79%

Financial Overview
Revenue growth and
Operating Income
suffered in 1996

Revenue (billion Won)

1997: New CEO Jong

Yong Yun
major turnaround
new business focus
new management
practices

very positive results in

1999, but

Operating Income
(billion Won)

Stock Performance
Samsung is feeling the effects of the downturn
in the high-tech market
Common Stock
Preferred Stock

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 cant 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
Samsung Electronics
Information
&
Communications

Digital Media

Semiconductors

Home
Appliances

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