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Management of Technology,

Innovation and Change


Technology and Innovation at Samsung

Submitted to: Submitted by:

Professor A.K Saini Mayank Singh
USMS 04616603917
MBA (Gen.) AB-Section
Samsung Electronics Co., Ltd. is a worldwide electronics company founded in 1938,
with its headquarters in South Korea. Along with its subsidiaries, Samsung Electronics
is responsible for the production, distribution and sale of a wide range of devices and
electronic products throughout the world. The products that Samsung Electronics
produces are developed both for individual consumers as well as for industries, and
the company is also responsible for the development of network systems. In 2009,
Samsung Electronics had been in business for 40 years, and was ranked number one
in terms of sales for all global information technology (IT) companies for the first
time. Currently, Samsung Electronics boasts around 20% of the global market share
for smartphones and has seen growth in other markets also.

Samsung Electronics is also renowned for its innovation, receiving 30 Innovation

Awards at the Consumer Electronics Show in 2012, which is considered to be the
largest consumer technology tradeshow. The company is focusing on continued
growth and hopes to become the leader in the global IT industry (Samsung, 2012d).
Samsung Electronics faces significant challenges in the present, as well as in the
future, including patent litigation from Apple, and a highly competitive IT market. As
such, it is essential the Samsung Electronics develops a technological position and
strategy that effectively makes use of innovation to maintain a strong position within
the market and to navigate challenges that it is faced with.

Technological Position and Strategy

The technology strategy of any organisation is based on two key types of information.
These are external information and internal information. External information is based
on the potential of technologies and what technologies are worthwhile for the
business to acquire and develop. The internal information is focused on the capabilities
and resources of the business and considers what potential that a business has to
acquire and master particular technologies. This section considers some of the external
and internal information that is available on Samsung Electronics, and examines what
this information means for the technological position and strategy of the organisation.

Market Share and Approach

Samsung Electronics breaks its mobile communications division into two distinct types
of products; these are mobile phones and smart phones. The company maintains a
relatively consistent market share of mobile phones, moving from a market share of
19.8% in 2009 to 21.2% in 2011. In contrast, Samsung Electronics represented only
3.7% of the smart phone market share in 2009 but was responsible for 19.9% of the
market share by 2011, which is the top market share out of any company. This indicates
the strong focus that Samsung Electronics has placed on smart phones as a business

The organisation aimed to develop a business that was vertically integrated, so that
the products were developed from components and product that the organisation
created, rather than those sourced from suppliers. Samsung Electronics' approach to
the market significantly changed in the 1990s, and the business went through
significant organisational reform and internalisation, which involved the development
of research and development (R&D) within the organisation, as well as developing
strategic alliances. This approach was a significant step away from the initial strategy
of the organisation, which was to mimic the products of rival companies. In doing this,
Samsung Electronics was able to differentiate itself from competitors, and begin to
develop products that were innovative in their own right.

Research and Development

Samsung Electronics strongly focuses on the use of R&D in order to ensure the
company retains a competitive advantage in the market. At the end of 2011, the level
of investment that Samsung Electronics placed into R&D was $165 Trillion KRW (~ $18
Billion NZD), which represented 6.2% of the consolidated sales for that period. This
figure represents an increase from 5.6% in 2009. This approach helps Samsung to
remain an innovative company, and to stay on the cutting edge of new technology
and products. A second component of R&D that Samsung Electronics has been
focusing on is bringing together all the disparate components of R&D within Samsung
Electronics to within a single area, providing a way to concentrate the efforts of R&D
and prevent redundancy between different components of the business.

A final aspect of Samsung Electronics' strategy for R&D is the development of a

comprehensive R&D staff to aid in the development of new technologies. To achieve
this, Samsung Electronics has focused on the recruitment of new staff members into
the R&D department. As a result of this, the R&D department at Samsung Electronics
contained 55,320 staff members in 2011, an increase of more than 10% from 2010.
This figure represents 25% of all employees at the organisation. Samsung Electronics
has also focused on the development of a comprehensive academia-based support
program, which aims to align the R&D needs of the organisation with the development
of promising students within academic fields (Samsung, 2012c). While this approach
does not immediately increase the R&D of Samsung Electronics, it does provide the
potential for increased R&D and innovation in Samsung Electronics in the future, as
the sponsorship of Samsung Electronics makes it a well-known name among students
expressing skills in the required areas.
Patent Capacity
Samsung has recognised the issues that are central to the patent disputes and
litigation that is occurring with Apple and argues that patent disputes are likely to
become more common and fiercer, as the global market for smart devices continues
to develop. To address this problem, Samsung Electronics has reorganised its
intellectual property portfolio, developed an active process of patent application to
attempt to maintain a competitive edge, and developed a dedicated patent team
Samsung. The patent application process has focused primarily on Korea and the
United States, and Samsung Electronics had around 100,000 patent applications at the
end of 2011. This approach helps to protect the company against litigation and
develops a secure base for the development and utilisation of new technology.

Increasing the number of patents is only one aspect of Samsung Electronics strategy.
Another component that Samsung has been working extensively with is the
development of partnerships to help secure the cross use of patents. These alliances
have included Toshiba, Qualcomm, Microsoft and IBM (Samsung, 2012b). This allows
the organisation to acquire the rights to a wide range of technology, which is an
important strategic approach for the organisation.

Samsung Electronics may also benefit from rulings that suggest one of the patents
that Apple has been awarded should not have been given. This has occurred in part
because the allocation of patents for software is often difficult, as innovation occurs in
a step-wise manner, with one invention building on the previous one. Furthermore,
the boundaries between different innovations can often be difficult to determine. In
the case of Apple's patent, a re-examination by the patent office declared that the
patent, which copyrights the 'bounce' feature that Apple devices use, makes use of an
innovation that was previously developed, even though the original innovation was
not used for the types of devices that are developed by Apple and Samsung today.

Competitive Strategy
Samsung Electronics has been growing in strength as an organisation, from a position
where it was not a significant threat within the market, to its current position today,
where it is an important competitor with Apple, the leader within the smartphone and
device market. In 2001, the company was ranked 42 on the list produced by Interbrand,
which ranks global brands according to their value. By 2003, Samsung was ranked 25th
on this scale and in 2011, it was ranked 17th. This increase shows the way in which
Samsung has effectively broken into a highly competitive electronics market.

A considerable challenge that Samsung has faced as an organisation is the way that it
is perceived as a brand. Although the company has been growing within the
electronics market, and recognised as a significant competitor, producing quality
products, this has not always been the case. Previously, Samsung was perceived as
producing products that were simply cheap copies of what was currently available in
the market. Samsung products have moved from being the middle of the range, to
premium products that are often some of the most expensive products that are
available. The high level of competition within the global market has meant that it is
no longer effective for organisations to compete with one another on the basis of price
alone. Differentiation has become a critical aspect of developing and maintaining a
competitive advantage, and this is particularly true fields where patents prevent
products from being too similar. The rise in sales in Samsung Electronics' smart phones
is strongly related to brand development, the presence of strong software and
hardware designs, as well as an extensive network of global distribution.

As an organisation, Samsung Electronics is at a considerable disadvantage compared

to its main competitor Apple, as Apple has dominated the market for a long time and
has a large number of patents in place. However, in 2011, Samsung Electronics took
the leading market share in the sales of smart phones, and in 2012, the sales of the
Samsung handset Galaxy S3 overtook the sales for Apple's fourth generation iPhone.
While this data provides an indication that Samsung is gaining a foothold over Apple,
the competition between the two companies remains strong. It is believed that a
significant part of the reason why Samsung has seen increased sales over Apple is that
the sales of fourth generation Apple iPhones had decreased while consumers were
waiting for the next generation of the phone to be released.

Technological Position and Strategy

The previous sections show that Samsung Electronics has developed from an
organisation that was perceived to produce inexpensive and low-quality products to a
high-quality producer of electronic products that competes head-to-head with one of
the giants of the industry. Samsung Electronics' technological position and strategy
has been strongly centred on the development of smart phones, making use of
Android's operating system and creating a product that is superficially similar to the
products developed by Apple. By making use of strategic alliances and R&D within the
organisation, Samsung Electronics has been able to differentiate itself from its
competitors, and develop a strong patent base, that allows it to continue to innovate
and develop new products. Furthermore, the vertical stratification of the organisation
gives it a competitive advantage in the marketplace, as the organisation does not need
to rely on suppliers as much as other organisations.
A significant part of Samsung Electronics' technology strategy is the use of innovation
and the way that the organisation manages innovation. Samsung is a South Korean
company and although it has now expanded throughout the world, its roots remain in
South Korea and the cultural influences of this region are important for the company's
previous and current development. Many successful brands that have developed from
within this culture, including Samsung Electronics. One significant cultural philosophy
that has influenced companies has been the philosophy of moving from imitation to
innovation. This perspective is evident in many of the products that Samsung
Electronics has produced, especially in the similarities that can be seen between many
of Samsung Electronics' smart phones and the Apple iPhone and iPad devices.

Innovation has been a significant part of Samsung Electronics' strategy and aims to
offer consumers a wide range of choice. This approach has been particularly prevalent
within the televisions that are produced by Samsung Electronics, as well as other pieces
of technology. For example, Samsung Electronics has developed Smart TV models,
which contain a slot at the back that enables consumers to remain up-to-date with
technology as it improves without the need to purchase a new television model each
time. Another aspect of these televisions is the use of a web browser on the television,
which users are able to control with their hands, rather than use a physical mouse.
However, this same level of innovation has not been observed within the smart phone
market, where Samsung Electronics has remained mostly within the approaches used
by other companies, particularly Apple.

Despite a strong focus on innovation, Samsung Electronics does still have

organisational factors that limit the effectiveness of innovation. One issue that the
company focuses, is that the departments involve in the production of products are
not often involved in the early stages of any new product. Furthermore, the products
that the company develops are often chosen for the impact that these will have in the
short-term, rather than any long-term outcomes.