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)
home appliances
wireless
distribution Electronics communication
hotels
28% semiconductors
amusement
theme parks Other
trading
construction 38%
textile
advertising cameras
baseball team aircraft
security ships
Machinery dump trucks
& Heavy oil trucks
Equipment
6%
Chemicals
2%
Financial
life insurance
credit card services Services polymerized compounds
securities trading 26% plastics
finance and trust specialty chemicals
management services
 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 Mobile Multimedia
Multimedia

Personal Multimedia Core Components

 Samsung Electronics
% Sales ($27B) % Operating Profit

Digital Media 6% Telecommunications

Semiconductors 12%
Digital Media
40% 29%
Home
Appliances 3%

Home Telecommunications Semiconductors

Appliances 8% 23% 79%
 Financial Overview
Revenue growth and Revenue (billion Won)

Operating Income
suffered in 1996

1997: New CEO Jong

Yong Yun
Operating Income
major turnaround (billion Won)

new business focus

new management
practices
very positive results in
1999, but
 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
Digital Media &
Communications

Home
Semiconductors
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