Forbes Lee is chairman of the world's largest electronics manufacturing company (nearly $188 billion in revenue in 2012).
He wields significant influence in Asia -- Samsung is arguably Asia's best known brand -- and Silicon Valley. The South Korean manufacturer makes chips for Apple while the two tech giants are also locked in bittier patent-related legal battles. Lee is Korea's No. 1 richest person and this February he won an inheritance court case initiated by his two older siblings. Lee took over the chairmanship of the company in 1987 after his father died.
http://graphics.thomsonreuters.com/AS/pdf/samsung.pdf Samsung started its rise as a global brand after Byung-chull’s death in 1987 when Kun-hee took the reins of the chaebol. His father’s formula has helped turn Samsung into a top global brand over the past decade or so, boasting a market value of $143 billion, bigger than Intel and Hewlett Packard and equal to the combined value of Sony Corp, Nokia, Toshiba and Panasonic Corp. “Samsung’s management is based on a complementary relationship between the founding family and professional managers. On the one hand, Chairman Lee Kun-hee provides long-term business visions and the basis for sustainability. On the other, professional managers bring to bear their day-to-day management skills without being unduly pressured by short-term and quarterly results.” What’s good for Samsung is good for South Korea, Lee Kun-hee might well argue. His conglomerate after all accounts for around 20 percent of the country’s exports and a big chunk of its GDP. Yet he is constantly exhorting his employees to act as if the company was on the verge of extinction, warning them Samsung products could all be obsolete in 10 years if they don’t keep up with the times. “Change everything but your wife and children,” he is fond of saying. Lee Kun-hee is likely to take a more subtle approach to restructuring Samsung, as he transfers ownership to his three children, the third generation of the “Three Stars” company. The restructuring will begin with companies where Jay Lee is the top shareholder, analysts say. He owns 25 percent of unlisted amusement park operator Everland, which is at the center of a spiderweb of crossholdings among companies in the Samsung chaebol. Some companies will be listed, others will be merged to simplify the structure. Samsung Group has also elevated Lee Kun-hee’s daughter, Lee Boo-jin as president of Hotel Shilla and Everland. The strength of the chaebol, analysts in Korea say, has always been their ability to make these kinds of decisions -- act quickly and move money around when the company is in trouble without fussing with a board or shareholders.
in a company where the chairman's authority coexisted with a need for consensus in the managerial ranks. including financial services. Jaeyong.
By 1987. audio equipment. Samsung was the leader in Korea in most of its markets. For those qualities Lee looked to the West. and creativity to succeed in the new digital market. The aim was to markedly improve marketing. and plant operations. when Lee Kun-Hee succeeded his father as only the second chairman in the company's history. Samsung Electronics (SEC). Song. information technology services. innovativeness. By: Khanna. In the early 1990s. o Intervention by Lee to protect long-term investments from short-term financial pressures.The Paradox of Samsung's Rise. But its overseas position as a low-cost producer was becoming untenable in the face of intensifying competition from Japanese electronics makers. Tarun. which were setting up manufacturing plants in Southeast Asia. Lee spotted an opportunity in the reluctance of Japanese companies--the analog market leaders--to adopt digital technology. So. and implement the most appropriate Western best practices. Execution of this mix-and-match strategy took three broad forms: o A formal process to identify. This careful approach to importing Western business practices reduced disruption but also slowed progress. Lee. So. This he did in two ways: by bringing new thinkers in from outside and by sending insiders abroad. and compensation into Samsung's existing business model. and chemicals. and design while retaining core strengths in manufacturing. R&D. machinery. and rising domestic wages in South Korea's newly liberalizing economy. and other electronic products. shipbuilding. the Samsung Group is the largest corporate entity in South Korea Best known for its flagship. In 1993. the group's highly diversified businesses span a wide range of industries.
. This careful approach to importing Western business practices reduced disruption but also slowed progress. o Steady efforts to make Samsung's culture more open to change by bringing outsiders in and sending insiders abroad. which consumers were flocking to in cameras. he launched the New Management initiative to import Western best practices related to strategy formulation. adapt. This he did in two ways: by bringing new thinkers in from outside and by sending insiders abroad. Kyungmook
Founded in 1938. talent management. This opened the door for Samsung to surpass its rivals if it developed the agility. continuous improvement. in a company where the chairman's authority coexisted with a need for consensus in the managerial ranks. Lee sought to increase receptivity to ideas from elsewhere. Lee sought to increase receptivity to ideas from elsewhere.
first in SEC and eventually throughout the Samsung Group In fact. Nike. And when they reach new plateaus. That meant introducing practices inconsistent with the status quo. Fewer still would have predicted the success of the path it has taken. Samsung's experience suggests that it may be time for Western companies and business schools to place more emphasis on developing strong regional connections and expertise Samsung's globalization efforts have taken substantial investments of time. The two sets of business practices could not have seemed more incompatible. Lee knew. today's emerging giants--Haier in China. too. must reinvent themselves in ways that may seem contradictory. the company delayed adoption. putting some young people in positions of authority over their elders. and they advocate for and experiment with best practices. The tightly integrated business systems that have worked in their home markets are unlikely to secure their future in global markets. Infosys in India. Samsung introduced outsiders who could not speak the language and were unfamiliar with the company's culture. these employees fill key positions and. Into an organization focused on continuous process improvement. To move to the next level. Lee did not underestimate how unsettling that would be. Accordingly. Samsung would need to move beyond its wellintegrated system to engage with non-Koreans in non-Korean contexts. and design. for instance--face a paradox: Their continued success requires turning away from what made them successful. Samsung introduced a focus on innovation. If resistance was too strong. Twenty years ago. or American Express. become important change agents. with a brand more valuable than Pepsi. combining its traditional low-cost manufacturing prowess with an ability to bring high. high-margin branded products swiftly to market.
In this way. For two decades now. and executive will In those roles they disseminate information about how successful foreign companies operate. Samsung introduced merit pay and promotion. and Koç in Turkey.quality. money. Samsung has built its hybrid management system as a series of experiments. modified the practice. The company established new organizations to seek out and adapt best practices from abroad. On returning home. they. or--as was the case with stock options--abandoned it. Like Samsung. he took great care to change only what needed to be changed and to ensure that Samsung adopted the most appropriate practices in a way people could understand and embrace.
To compete outside its home markets.
. Results were carefully measured. Into a homogeneous workforce. Lee advocated directly for the practices he deemed most critical and solicited employees' input in the development of each. It has been a path marked by both disorienting disequilibrium and intense exhilaration. few people would have predicted that Samsung could transform itself from a lowcost original equipment manufacturer to a world leader in R&D. Into a Confucian tradition of reverence for elders. marketing. slowly and steadily but not always smoothly. Samsung has been grafting Western business practices onto its essentially Japanese system. in implementing what they have learned. they will need to do so again.
The group is involved in almost every sector of the economy. CEO Oh Kwon. and hotels. both among group affiliates and with outside companies. rather than at the subsidiary level. The company's management culture is distinct and this is a key driver of seamless execution across divisions. shipbuilding. Generally. generating the bulk of the group's profits. The group consists of 19 listed and 63 non-listed entities. once called the "Office of Secretaries" and then "Strategic Planning Office" and now the "Future Strategy Office. and manages the relationships among affiliates as well as company-specific strategies. large investments. executive appointments. Overall. Internal divisions have to compete for business and are not artificially sheltered
Within the Samsung Group. and human resource management are controlled at the group level at this office. Samsung Electronics is the crown jewel. with four key senior people: Chairman Lee. Strategy Group Head GS Choi. and entry into new businesses require approval from the executive suite. Samsung Electronics is the crown jewel. Thus. generating the bulk of the group's profits. Internal divisions have to compete for business and are not artificially sheltered As the de facto owner and direct descendent of the founder of the Samsung Group.
Unlike Western firms where the CEO is the ultimate leader. finance. and COO Jay Lee. the Samsung Group generated KRW 274 trillion in revenue and KRW 20. chairman Lee has been highly motivated to drive the long-term success of the Samsung companies. whose leadership is well aligned to long-term success. The company is controlled by the Lee family. finance. auditing. In a business where there is both uncertainty and a need for speed. textiles. a leadership structure that allows for responsibility and swift decision making meant Samsung was able to make a number of important decisions that has positioned it so well today. while large moves such as significant M&A deals. The company is controlled by the Lee family. His 20-30-year time horizon has enabled Samsung to invest in cyclical downturns for its long-term benefit.3 trillion in net income in 2011 (see Exhibit 19). chemicals. construction.
Within the Samsung Group. the CEO takes more of a traditional CFO or COO role. including electronics. there is a dual management structure. This structure can slow down decision-making and reduce innovation but allows for multiple checks and balances and hence reduces risk. along with several major joint ventures. whose leadership is well aligned to long-term success.
Samsung Electronics in the Context of the Larger Samsung Group SEC is part of the larger Samsung Group of companies. Samsung is run by Chairman Lee through his special suite of chosen executives.
. The company's management culture is distinct and this is a key driver of seamless execution across divisions. Thus.Bernstein Black Book .Samsung : Just the Beginning." This team is selected from various affiliate companies. public relations.
since Samsung is a "chaebol" . SEC is the main focus of Chairman Lee and son/future chairman and COO Jay Lee. that they have become a hot potato issue in the upcoming elections. particularly of SEC. and price internal clients fairly to outside market prices. are well aligned with long-term shareholders. It started as a home appliance and television business. revenues. which have often artificially sheltered their component businesses from external competition by acting as a captive customer. Chaebols like Samsung. and especially both Set and Component businesses procure outside components and customers. The Consumer Electronics and IT & Mobile businesses together account for the "Sets" part producing integrated systems such as TVs. and ever since it has distanced itself from competitors. representing the majority of market cap. manufacturing out-of-date black and white TVs in the 1970s. IT & Mobile. As mentioned earlier. LG or Hyundai permeate South Korea.
SEC comprises four major businesses: Consumer Electronics. notorious for its privacy and all-encompassing societal reach. This has been critical to Samsung's success in both sides of its business.The Samsung Group is intertwined in a series of circular cross-ownership structures that allow Chairman Lee and his family to control the entire group. Semiconductors. From these humble beginnings as a relatively low-end brand in consumer electronics and a new entrant in semiconductors.
We say thankfully. Given SEC's predominance to the broader Samsung Group. This is one of the major differentiators of Samsung's strategy versus Japanese OEMs (such as Sony). overtaking the Japanese consumer electronics makers that it had once copied. and PCs. and Display Panel. Thus. which produces key components such as DRAM. Chairman Lee's incentives to maximize the value of the group. The Semiconductor and Display Panel businesses comprise the "Components" side now called Device Solutions. Component businesses do not directly assist the Set businesses by providing below-market prices. and its everyday life with so much influence.
. Samsung became the leading DRAM maker. acts as the de facto holding company for the group
Samsung Electronics was founded in 1969. handsets.a family-run conglomerate. we believe that shareholders are generally well served despite the apparent lack of transparency and convoluted ownership structure. The company became a leading mobile phone and TV manufacturer in the 2000s. An interesting and unique aspect of SEC's management is that the four businesses operate quite independently. as it has meant that its Set businesses can have access to the best and most cost-efficient components and its Component businesses are always competitive rather than being an internal-only supplier. an unlisted entity owned entirely by the Lee family and affiliates. during Korea's rapid economic development. nor do the Set businesses act as a "captive client" that absorbs low-quality output. Samsung Electronics is the flagship company of the Samsung Group. NAND. and operating profit. the company emerged as a leader in the 1990s. It began its entry into DRAM in the early 1980s. its business culture. In 1993. Mobile Application Processors (APs) and LCD panels (see Exhibit 24). Samsung Everland.
make up about a quarter of the Kospi share index. who ruled until 1979. which builds oil tankers. while restricting the prospects of the small companies that supply and compete with them. As you see. Enormous conglomerates were nurtured as national champions under the dictatorship of Park Chung-hee. as huge as it was.  By 2012. compares chaebol to tall trees beneath whose canopy nothing else can grow. While the global success of chaebol like Samsung. not now when Samsung is raking in record profits. which began as a small noodle business in 1938. and said the famous quote: "Change everything but your wife and kids!"
Chaebol is a family-run conglomerate in South Korea. construction. In the early 90s. which runs a theme park and a zoo. on the other hand.So how do you evolve from selling noodles and dried seafood in 1938. and is now mentoring his kids to take over. Apple's lawsuit is not the only legal trouble on the Samsung Electronics Chair's radar. He carried his father's push that Samsung must be the leader or one of the best in every new field it enters. motor company. who was pinpointed as the business heir in 1987.Lee the founder branched out into many areas such as insurance. In 2010 it found 3.the older brother and sister are suing Lee Kun-hee for shares in Samsung valued at a combined $850 million. Samsung Everland. say the father was clear who had to run the business. from supermarkets to heavy weapons. into a company battling a Silicon Valley juggernaut like Apple for world dominance? The answer is chaebol . But. and the issue should have been raised 25 years ago when he took the helm. at home their economic dominance has prompted concerns that they have developed a nearmonopoly on the country’s most talented workers. and this is particularly paying off with the smartphone business now. this group is the largest chaebol which accounts for about a fifth of South Korea’s exports.  Some Koreans blame chaebol for exacerbating the wealth gap by squeezing suppliers too hard. and Samsung Life Insurance. author of Korea: The Impossible Country. and tower over almost every area of business: from stockbroking to theme parks. That helped South Korea’s warp-speed development. shipbuilding and yes. built on the founder's success by nurturing and encouraging innovation and independent thinking. risked becoming a low-cost volume peddler. when Lee Byung-hul started Samsung. electronics. It's not all puppies and flowers in the family. the current Chairman Lee Kun-hee realized that the company. which is well on the way to increase Lee Kun-hee's $8 billion personal wealth significantly.500 cases of price-fixing. and Hyundai. Daniel Tudor. has boosted South Korea’s standing abroad. a forthcoming book. of course . Such groups have been at the heart of its rapid industrial development over many years. Companies linked to the group. that “a
. which can presumably insure you against the possibility of being mauled by one of Samsung Everland’s lions. of which Samsung Electronics is just one. His lawyers. is now a behemoth.  Example Samsung. Mr Tudor argues. There’s Samsung Heavy. whereas Lee the son. South Korea’s Fair Trade Commission says their dominance also harms consumers.
would be a prime target of Park's campaign. He dropped out before completing his degree and returned to Seoul and did nothing for a few years. Cheil Sugar was highly profitable and in 1954 Lee setup Cheil Wool Textile Company. Later Lee returned to Seoul and struck a deal with Park that became the model for South Korea's chaebol. Also he agreed to gain the cooperation of other businessmen in promoting Park's development projects. Park was somewhat of a puzzle when he siezed power. which means "three stars. By the end of the 1950's Lee had acquired control of several commercial banks and insurance companies. as the richest man in South Korea. The venture was not particularly successful and he moved to Taegu and started a trucking and real estate business which he named Samsung. His university education was at Waseda University in Tokyo. but when he was ten he was sent by his family to a primary school in Seoul. He had a classical Chinese education in his early years. Park had a fondness for collectivist-type slogans such as "Enrich the Nation and Strengthen the Army!" and "Steel is National Power. He grew up in a Korea occupied by Japan. which he called Cheil ("first") Sugar. In 1961 Park Chung Hee carried out a military coup d'etat and immediately staged an anticorruption campaign. He added domestic and international trading to the trucking and real estate business that he had started in. Lee was in Japan at the time and initially refused to return to South Korea because he knew he. Domestic producers were encouraged and imports were discouraged. Samsung would be allowed to remain in business but it would have to be the vehicle for carrying out the development projects that Park wanted. the son of a wealthy landowner. The business grew by leaps and bounds due to the war. At 26 he used inherited money to start a rice mill in his home town. Samsung's companies benefited from the import-substitution policy that the government pursued. When American government officials found that Park in his younger days had not only joined a communist cell. Lee escaped from Seoul after the North Korean invasion and set up operations in Pusan." The business went bankrupt in a credit squeeze that resulted from the Japanese invasion of Manchuria. It was created by Lee Byung Chull.totally chaebol-dominated economy” is no longer suited to a country with higher per capita wealth than the European average on a purchasing power parity basis
Samsung was once the largest of the chaebol. they thought that the Communists had taken control of South Korea." Lee offered to donate most of his wealth to the government and accept expropriation of his bank shares. but had been. But Lee went back into business and by the end of the war in 1945 Samsung was flourishing.
. in fact. In 1953 Lee started the first sugar refining company in Korea. Samsung Trading Company was one of the ten largest trading companies in Korea when the Korean War broke out. the organizer of the cell.
The success of Samsung or any of the other chaebol in selling products cannot be taken to be proof of their success in profit making. he will be harder for the company's shareholders to oust than his peers at GE. Samsung began as a small noodle business in 1938. Sony and Nokia.php?ud=20130425000540&dt=2)
.koreaherald. In 1979 Samsung started making VCR's and in 1980 microwave ovens. China sends emissaries to study what makes the firm tick in the same way that it sends its bureaucrats to learn efficient government from Singapore. for all its modern technology.The chaebol benefited greatly from this arrangement but the nature of the economic system of South Korea was closer to a centrally planned socialist state than the capitalism that it purported to be. packed full of individual successes that managers (and not just ones in Asia) should study. It makes more televisions than any other company. By the late 1960's Lee chose electronics to be the focus of Samsung's manufacturing.com/common_prog/newsprint. the American conglomerate so beloved of management gurus. from microchips to insurance. which has made good use of an indulgent state.
Samsung (“Three Stars”. It sprawls into dozens of unrelated industries. who is being groomed for the top job. It ignores the Western conventional wisdom. and may soon displace Nokia as the biggest maker of mobile-telephone handsets. implying a business that would be huge and eternal). Lee Kun-hee. Lee Byung-chull. In 1977 Samsung put Korean engineers to work dismantling color television sets from the United States. But if the founder's grandson. But inevitably it has not always got everything right—who now drives a Samsung car? And its overall success is not easily replicable. Since then it has swelled into a network of 83 companies that account for a staggering 13% of South Korea's exports. it is rapidly becoming emerging Asia's version of General Electric. To that extent. The hottest chilli in the Samsung kimchi bowl is Samsung Electronics. with a strong culture and a focus on the long term. Europe and Japan to see how they could be copied. To some. This is fine so long as the boss is as brilliant as the late Lee or his son. it is an admirable company. which started out making clunky transistor radios but is now the world's biggest technology firm. Samsung however has been a well managed and economically successful business. prizes market share over profits and has an opaque and confusing ownership structure. at least in terms of making incremental improvements to other people's ideas: only IBM earns more patents in America. (http://www. It is family-controlled and hierarchical. Having outstripped the Japanese firms it once mimicked. Yet it is still prodigiously creative. the current chairman. wants it to be. fails to measure up. As for Samsung. Small wonder others are keen to know the secret of Samsung's success. measured by sales. Samsung is patient and bold because the family of its late founder. It took about three years for Samsung to to go into production of color television sets. It could just as well be a result of the South Korean government subsidizing in one way or another a money-losing venture. Samsung is the harbinger of a new Asian model of capitalism. Samsung's story is an old one writ new—the well-run family firm. such as Sony. Family control is guaranteed by a complex web of crossshareholdings.