BUSM4696 POLITICAL ECONOMY OF INTERNATIONAL BUSINESS

COVER SHEET

Term Sem A -2021

Title of Assignment Research on the International Dimensions of Business

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Huynh Duy – s3759212
of all students

Location Sai Gon South Campus

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Canvas)

Lecturer Nguyen Quang Trung

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1753
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page, etc.)

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 Samsung Group

I) Introduction
The globalization process has started in 1492 when Christopher Columbus found
America and this process kept continues until nowadays (Kevin & Jeffery, 2000). In the last
century, the globalization process had developed and easier to trade between countries thought
the policies or agreement they had signed. This also push up the internationalization process of
MNC in last three decades. This paper will expand internationalization process and focus on
analysis different dimensions of internationalization of Samsung. The first part of the paper will
provide some information and background of Samsung. After that, the paper focus on evaluated
the process of Samsung become an international business by different dimension and theories.
Lastly, there are various challenge that the company will facing when they enter the
internationalization process.
II) Company Information and Background
Samsung was established in 1938 by Lee Byung – Chull, at first, it just a grocery store
and began to expand their operation into textile after Korean war. Samsung become the largest
and powerful cooperation in South Korea, known as Chaebol, under government protection
policy. In 1969 and begin 1970s, Samsung began entering the electronic industry under a
subsidiary call Samsung Electronic Co Ltd. Beside electronic, Samsung enter different industries
such as shipbuilding, construction, food and beverage, insurance, and more under their
subsidiaries. From 1980s to 1990s, witness the rapidly development and globalization of
Samsung, especially in technology and electronic industry (Peter, 2020).
From 2000s, Samsung was developed and introduced a new smartphone line call
Samsung Galaxy, which become one of the best seller products of Samsung (Peter, 2020), which
make Samsung is the main competitor of Apple in smartphone market. In 2010, Samsung was
joined venture with Biogen Idec and investment about 300 million USD to develop,
manufacturing and market biosimilar (Bio Space, 2011). In 2020, the profit of Samsung is more
than 23 billion USD and generating more than 300 billion USD asset value (Samsung annual
financial report 2020). According to Forbes, in 2020 Samsung rank in 8th place in top 10 brand
value in the world and rank 20th place in the best MNC’s.
 III) Internationalization of Samsung
1. International Dimension
Due to the changing of international business environment in the last two decades, the
internationalization process was accelerated in emerging market of MNEs (Juichuan, Rajesh
2010). Any enterprise can keep up with the speed of changing will gain the competitive
advantage to the rivals. Base on a study from Universidad Rey Juan Carlos, there are three basic
method that helps enterprise operation across nation are exporting – direct and indirect ways,
contractual system and FDI, which help them achieve different result and objective (Diana,
Noelia & Carmen 2016). Beside those method, Uppsala model also using a lot by business when
it guaranties the higher success when the internationalization process is slowly, they business
will need a strong base in the domestic market, then they will internationalize to a foreign
country (Juichuan & Rajesh, 2010). On another hand, some firm choose to internationalize base
on the competitive advantage of a country compare to another countries base on four attributes
which call Porter’s Diamond Model (Charis 2019).
2. Samsung internationally dimensions
Samsung is one of the largest multinational conglomerates have headquarter in Seoul,
South Korea. Electronics, Machinery & Heavy Industries and Financial services are three main
industries, beside those, Samsung also provide insurance services, construction, or resort to
customer (Samsung business report 2018, p.221). Even though the effect from Covid-19,
Samsung still make about 200 billion USD just from Samsung Electronics (Samsung financial
statement 2020) and hold about 14.3% of total consumer electronic worldwide (Euromonitor). In
Asian-Pacific regions, Samsung is one of the big four domain the regions with the total market
value about 279,000 billion USD (Fortune Business Insights, 2021).
According to financial statement report, Samsung have 241 subsidiaries in 74 countries,
include sale office, R&D center, and manufacture. Due to the big community, Samsung has
287439 employees (Samsung newsroom) and about one third is working for Samsung in South
Korea, compare to 2018, Samsung was lost about 40,000 employees (the investor, 2018). This
can understand as an effect from the Covid 19 pandemic, Samsung must downsize to maintain
their operation. Broad of Directors of Samsung include 11 members and Lee Jae-Young is
chairman of the Board when he has the highest share with 42,020,150 stocks. Kim Ki-Nam, Kim
Hyun-Suk and Koh Dong-Jin are three CEO of Samsung Electronics (Samsung Newsroom &
Samsung business report 2019, p.210).
Samsung have 38 R&D centers in the world, expense of Samsung more than 20 billion
KRW. The R&D department play important role in leading the company into future when they
provide direction for promising growth, exploring the growth engines, and strengthening the
competitiveness of the core business (Samsung business report 2019, p.51). R&D department of
Samsung Electronics has a high contribution to Samsung successful and right now they are focus
on developing next generation software, user experience, services such as AI, 5G/6G
communication network or digital healthcare (Samsung Research).
Due to a large operation activity such as manufacturing, development, marketing, and
sales in Korea, North America, Europe and Asia, Samsung need to investment in land, building
and structures, machinery, and equipment, to maintain or upgrade their operation for high
efficiency. The total capex of Samsung in 2019 was 26.9 trillion KRW, which include upgrading
Semiconductor production lines and Display Panel business. In 2020, Samsung investment base
on market condition where Samsung focus to meet mid-to-long-term demand in emerging
business such as artificial intelligence, 5G/6G network, display, or system semiconductors
(Samsung business report 2019, p 39-40). In Vietnam, Samsung has invested 17.3 billion USD
which include eight factories and one R&D center in Ha Noi worth 200 million USD (Lan 2018).
IV) Business Model and challenging of entering internationalization
1. Porter’s Diamond Model
Samsung using the Porter’s Diamond Model for their internationalization process and
help Samsung expand their business globally. Vietnam is one of the best examples of applying
the Porter’s Diamond Model when Samsung has investing 17 billion USD since they enter in
2008 (Chi, 2018).
As factor condition, Vietnam constantly improving business environment and higher skill
labor forces. In 2017, Vietnam have more than 53 million labor and 50% of total workforce is
between the age of 15 and 39, but only 10% are consider as highly skill labor (Koushan 2018). In
March 2018, Vietnam government provide the accreditation of vocational education under
Decree No. 49/2018/ND-CP (Koushan 2018). Compare to another countries, the cost of
transportation, energy or land in Vietnam are low. The improving in infrastructure such as
highway, ports and airports help Vietnam increasing the import and export sector. Vietnam
spend average 5.7% GDP for infrastructure and there will be 44 projects with total investment
120 billion USD in road and power sector in Vietnam (Infrastructure Vietnam 2019).
For Related and Supporting Industries, there are 29 domestic firm in Vietnam consider as
tier-1 vender in Samsung’s supply chain and aim to raise to 50 suppliers by 2020 (Nhan Dan,
2017). To aim the target, in 2015 Samsung has carried out a consultation program to help local
firm improving quality and they expand the program in 2017 after cooperated with the Ministry
of Industry and Trade (Nhan Dan, 2017). Vietnam government provides cooperation tax
incentive for companies working in the high-tech sector with can be up to 15 years. Besides that,
investor will also be eligible for additional tax for their first time invest (Trinh, 2020).
Samsung strategy is maintaining their competitive advantage and expansion their
operation by proving unique product to customer, which help Samsung to compete against
technology firms like Apple, Google, Sony, and LG. Samsung top priority is invest in R&D
department to develop new product (Victoria, 2019). There for, Samsung will build a R&D
center in Ha Noi to compete with LG, Apple, or Nintendo as their biggest rivalry in Vietnam
market when all of them has shifting their production line to Vietnam (Trinh, 2020). Samsung
development strategy always consider Vietnam is a global base of both production and R&D
activities (Lan, 2018). Samsung sustainability management are created integrated values. Beside
the maximizing profits and shareholder values, Samsung also take responsibility to global citizen
as their social value. Samsung have 17 objectives for their social value (Samsung sustainability
strategy).
Reputation of Samsung is undeniable not only in Vietnam but in worldwide. In 2020,
approximately 2.3 billion retail volume of consumer electronics in the world and Samsung hold
14.3% of the market share (Euromonitor). This number show us see the high demand for
Samsung from the customer and Vietnam was not an exception when Samsung hold 23.3% in
total consumer electronic retail volume in 2020 (Euromonitor). According to Euromonitor,
smartphone brand form China such as Oppo, Huawei, Xiaomi, Vivo and Realme launch new
product to compete with Samsung in mid-price segment (Euromonitor). Due to the affect from
Covid 19, most of smart phone brand in Vietnam are struggling to maintain their business and
market, Samsung is continue increasing their market share in quarter II in 2020 by 33% which
help them become the largest smartphone brand in Vietnam (Quy 2020). Samsung Galaxy A51 is
the second best-selling smartphone in first half 2020 with total volume is 11.4 million, but it is
the top seller in Vietnam (Euromonitor). Therefore, Samsung decide to invest 220 million USD
for a R&D centers in Ha Noi to improve products and satisfy customer demand (Joseph 2020).
2. Challenge for Samsung
Even though Samsung had been internationalization very long time, they still facing lots
of challenge such as culture different, foreign policy, currency rate, Exploitation of labour,
worldwide environmental issue, or rivalry (Catherine, 2020). Due to trade war between USA and
China, Samsung Electronics export from China to USA has been decreasing 12% from quarter 1
to quarter 3 in 2019 compare to last year in the same period (Alex, 2019). Under the new
sanctions on the Chinese tech company from Washington DC, Samsung is suspended supply of
semiconductors to Huawei. This brings the relationship between Samsung and Huawei more
intense (Beak, 2020). Samsung had shut down the last factory in China and move to Vietnam and
India (Park 2019). Samsung will compete with LG in Vietnam market when this company
already move all their operation to Vietnam and located in Hai Phong (Trinh 2020). In 2020,
Covid 19 become global issue that impact a lot to Samsung profit. Samsung must shut down TV
plant in Hungary for the safety of employee and help to prevent the spread of Covid-19 (Kim,
2020).
V) Conclusion
This research and analysis paper give us understand the process of Samsung become
internationalization base on dimension, model, and activities such as Porter’s Diamond Model,
Uppsala, and Global Value Chain. Samsung has success in turning their firm into international
business when Samsung have more than 250 subsidies such as manufacture, R&D and sale
offices in 74 countries. Even though Samsung still have to face different challenge when
conducting international business such as culture different, currency exchange, new competitor
or exploitation of labour.
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