South-Korea

Managing Global Business

Group 7
Vishal Kumar | Sharad K Pawar | Himani Jasuja
Ruchi Choudhary | Rachit Kumar | Veera Archana Roy | Saurabh Paul
Introduction
• The South Korean Economy
• 2% contribution to world GDP
• Per Capita Income (Nominal) ~ 31K p.a.
• South Korea has sustained growth potential
• ‘Germany of Asia’ by economists
• Macroeconomic Indicators and Economic activity data

Main Indicators 2018 2019 2020 (e) 2021 (e) 2022 (e)
GDP (billions USD) 1.00 1.00e 1.00 1.00 1.00
GDP (Constant Prices, Annual % Change) 2.9 2.0 -1.9 2.9 3.1
GDP per Capita (USD ‘000) 33e 31e 30 32 34
General Government Balance (% of GDP) 2.7 0.6 -1.0 -1.0 -1.7
General Government Gross Debt (% of GDP) 40.0 41.9 48.4 52.2 55.8
Inflation Rate (%) 1.5 0.4 0.5 0.9 1.1
Unemployment Rate (% of the Labour Force) 3.8 3.8 4.1 4.1 4.1

Breakdown of Economic Activity By Sector Agriculture Industry Services

Employment By Sector (in % of Total Employment) 4.8 25.0 70.2

Value Added (in % of GDP) 1.7 33.0 56.8

Value Added (Annual % Change) 2.4 1.0 2.7

 Macroeconomic Analysis
Economic Development • Rapid and Consistent Development
Factors • Relatively Low Income Inequality.

Transformation in • South Korea had agriculture as its main activity till 1962; 36% of GDP.
Industrial Structure • Stress on Education and Skilled Labour and ease of business led to rise of technology favouring industry

Government- • In South Korea, Private sector businesses are bound to follow the guidelines of the government.
led Development: • Government plan and policies leads to new growth alliance resulting in assorted losers & winners. 

Export-Oriented • 1960s, shortage of capital & technology; resuled in Govt focussed on labor-intensive light industries for export.
Development: • Increase in exports boosted economy, a gradual shift in light industries to heavy industry and chemical sectors.

Government Size: • Government spending has amounted to 32.8 percent of the country’s output (GDP) over the last 3 years
• Budget excesses have averaged 2.3 percent of GDP. Public debt is comparable to 40.7 percent of GDP.

Regulatory Efficiency: • South Korea’s complex regulatory framework became old-fashioned, Govt intervened.
• Inflexible labor regulations forced employers to make resolutions focussed towards GDP of the S.Korea

Open Markets: • The total amount of exports and imports of goods plus services comprises 83.0 percent of GDP.
• The financial sector has experienced consolidation, and clarity and efficiency have been improved.
 COVID-19’s Impact on South Korean economy:
Impact:
• GDP Shrinkage: GDP shrunk by 3.3%, a technical recession for the first
time since 2003.
• The fall in exports: Major reason for decline includes weak demand for
south Korean exports. Significant impact on manufacturing, which
declined 31.5 percent.
• Central Bank Impact: Bank of Korea forecasted GDP to decline by more
than 2 percent, while the OECD estimated that it will fall by 2.5 percent.
• Impact on Tourism: Other major factor is decline in number of tourists
as high as 70%. Chinese tourists contribute more than $11.5bn to the
Korean economy.
• Coronavirus impact on industries and companies: Korean automaker
Hyundai Motors was hit by coronavirus. Shortage of auto components
caused by its suppliers in Chinese manufacturing hub.
• Impact on Aviation: Korean airlines have suspended flights in the
coronavirus-affected countries and cities and reduced frequency due to
lower demand.
• Coronavirus impact on retailers: A number of duty-free retailers closed
their stores temporarily during the outbreak period due to visits by
coronavirus-affected people
Measures Taken:
• Economic Package: Reserve 136.7 billion won for local governments to
support coronavirus prevention and control
• Financial Aid: Emergency financial aid of 50 trillion won ($39bn) to
SMEs to prevent them from going bankrupt
• Easy Loan Rates: Financial support of up to 12 trillion won ($9.3bn) for
SMEs to enable them to borrow money at 1.5% interest rate from all
financial institutions.
• Deferred loan payment: A special loan guarantee programme worth
5.5 trillion won ($4.3bn) to enable SMEs to refinance loan principal and
postpone interest payment.
• Health Programme: Support procurement of masks and COVID-19 test
kits through private contracts
• Private business support: Close cafeterias operated by the government
twice a week in order to support restaurant businesses
• Monetary Funds: South Korea’s central bank, Bank of Korea, has
accepted 5.25tn won ($4.23bn) in bids from financial institutions in an
auction for repurchase (repo) agreements at a rate of 0.78%.
 Electronics Industry in South
Korea Factor conditions:
• Locations: high Income developed
Factor Conditions
Factor Conditions country Ports, Near from china and
Firm’s strategy structure and Rivalry: South – East Asian countries.
• Competitive environment • Labour : High Concentration of skilled
• The Korean model of “Chaebols” engineers.
• Cultural influence
• High Investments in R&D

Firm’s Strategy
Firm’sand
Strategy Demand Conditions
structure Rivalry Demand Conditions
structure and Rivalry

Demand Conditions:
• High local demand in electronic
and digital devices
• South Korea has early adopters
• High Foreign demand (East Asia)
Related and Supported Industries:
Related and
Related
supporting and
Industries
Government
• LCD supporting Industries • Supports Family companies “Chaebols”
• Mobile phones • Supports competitive education system
• PC (computers) • Specific financial & international policies
• Research & Development • Export oriented
Impact of COVID on Electronics Industry
The COVID – 19 pandemic has been reshaping the normal trends
seen in consumer electronics.
• Reduction in offline marketing.
• Disruption in Overseas supply-chains
• Leading electronic companies continued to introduce their
advanced technology products to market in 2020 although many
of them were not backed by in-store promotions.
• Samsung Electronics continued to hold it strong position in
consumer electronics market of South Korea.
• Samsung’s performance boosted by new products like it’s flagship
smartphone S20, Galaxy Z, QLED TVs, etc.
• Major distribution channel continues to be electronic and
appliances.
• After 3 years of declining sales consumer electronics is showing
positive recovery however, peripheral industry like computers are DS: Device solutions IM: IT & Mobile communications CE: Consumer
showing slow growth. Electronics
 Overview of the Company
• Samsung is one of the world’s largest producer of electronic devices
• It is a South Korean company and specializes in the production of various
consumer and industry electronics like memory chips, semiconductors etc.
• Their vision is to inspire the world and create the future using innovative
ideas which contributes to social prosperity and enrich people’s lives
• It also produces a fifth of South Korea’s total exports
• Until the mid-1990s, they competed mainly by developing technical
components and low-cost manufactured products for bigger brands, such as
Dell, Hewlett Packard, and GE.
• Until the 1997 Asian market crash, the low cost-driven competitive strategy
worked well for them.
• Samsung has a powerful influence on South Korea’s economic
development, media and culture
• Samsung has continuously globalized its activities and electronics specially
mobile phones and semiconductors
Global Business Plans
• Samsung extensively use their joint ventures, wholly owned subsidiaries and vertically integrated subsidiaries to increase their
global presence
• Manufacture products at a low cost: This strategy gives Samsung a competitive advantages, in areas where tariffs would hurt
profitability, to market and sell their goods effectively worldwide
• Samsung invested heavily technical innovation and R&D: During the economic crisis of 2008-2009, Samsung spent over 7
Billion dollars for nearly 6% of the unit’s revenue into research and development.
• Shifted focus to product development and design: Samsung also focused on product development and design. Their goal was
to create products that deliver benefits that at least some segment of consumers will consider to be worth the price
• Brand Building campaigns: Samsung’s marketing strategy focused on creating a promotional campaign to build Samsung’s
brand image. To ensure consistent marketing communications across all markets, they also consolidated their roster of advertising
agencies from 55 down to one global advertising group.

Regional Global Product Global Business

Headquarter System Manager Manager

• Five Regional HQs &
three smaller Regional
HQs
• Decentralized structure
& synergy effects
• Centralized structure & • Focus on business rather
high responsibility than product
• Product efficiency & • Maximizing profits &
saving material costs optimizing global
management system
Motives For Global Expansion
• Risk Reduction: Presence in most of the countries, Samsung can
compensate the risks of a failing market, balancing activities
across the markets
• Cost Reduction: Company was able to create various synergies
such as sharing local knowledge, saving labour costs, joint
purchase for components, quickly diagnosing management
problems etc.
• Revenue Growth: Different types of strategic alliance with some
of the globally recognized actors will provide the company a way
to tap into new business possibilities but also increase the firm’s
ability to generate revenue growth in newer landscapes.
• Brand Recognition: Samsung through large investments in
advertisement and sponsorship, such as the Olympic Games,
created a strong brand image throughout the world
• Economies of Scale: The large size of its production over the
world offers the company the ability to achieve economies of
scale in terms of procurement and production.
• Diversification of Supply Chain Risk: Setting up of
manufacturing across the globe helps in reduction of various risk
unique to specific region which halts the production line
 Factor Evaluation
• Choice of factors based on: No. of users in millions
• Market size 900

• Competition 800
700
• Possible strategies Samsung can adopt 600

• Improve presence in newer market 500

400
• Increase operation in high potential market 300
200
Industry 100
Factor Demand Related Structure Role Of R&D Local 0
Factors Condition Condition Industry And Rivalry Subsidiary Facilities Adaption a
in ndi
a l
US razi ssia esia pan xico an
y
UK ce n y a
Ira urke ore ista des
n h
Ch I Ja Me rm an
B Ru don Fr T K ak l a
Impact In Ge ut
h P ng
So Ba
factor 0.15 0.11 0.21 0.09 0.19 0.15 0.09

Supply Software &

Skilled Samsung users
High Chain Entry mode Hardware labours
companies Industry 70.00%

60.00%
No. Of Easy 50.00%
Economic Joint 50.00%
Users, availability Component Product Government
Medium Adopting Growth,
Capita
Per
of batteries,
manuf. Developmen
Support, 40.00%
40.00%
New semi Work 30.00%
Income t Linkage
Technology, conductor Culture 30.00%
20.00%
20.00%
10.00%
Medium 10.00%
Language 0.00%
Low Segment Adoption na ia l
US razi ssia esia pan xico an
y y
UK nce Iran rke orea stan esh
Price Range 0.00%Chi Ind B l Ru on Ja Me rm ra u K aki lad
a a d e y F T yh g
in ndi US razi ssIina esia pan xicGo an UK nce Iran rokuet oreaP staann esh
Ch I B Ru on Ja Me rm F ra uS
T h K kiB la
d
In
d Ge u t Pa ng
a
So B
 Country Ratings
Demand Industry structure Role of
Factors & Impact Factor condition condition Related industry and rivalry subsidiaries R&D facilities local adaption Rating
China 5 5 4 3 4 5 3 4.23
India 3 4 4 3 4 4 3 3.63
US 4 2 4 4 5 4 4 3.96
Brazil 3 4 3 3 2 3 3 2.92
Russia 2 2 3 2 3 3 2 2.55
Indonesia 4 4 3 3 2 3 3 3.08
Japan 3 2 4 4 4 4 4 3.62
Mexico 3 3 3 4 3 3 3 3.09
Germany 3 2 4 4 4 4 4 3.62
UK 3 2 3 4 3 4 4 3.23
France 3 2 3 4 3 4 3 3.13
Iran 1 2 2 2 2 2 2 1.85
Turkey 2 2 2 3 2 3 3 2.34
South Korea 4 3 4 4 4 4 4 3.89
Pakistan 1 2 1 2 1 2 1 1.36
Bangladesh 2 3 2 3 3 3 3 2.64
 Samsung’s International Strategy
Technology Development
• Enhanced R&D Across Markets
• Invested in high-tech firms such as AST
Research and LUX (Verbeke 2009)
• Built an R&D lab in Silicon Valley
• Hired experienced engineers from leading
companies and Universities around the
world
Market Growth Strategy
• Created new business model for Energy
storage system Market
• Divided projects for developed &
developing countries based on key
indicators like Govt. support, Infrastructure
and energy Grid Stability etcetera
• Entered fast growing market for better
revenue growth
Global Partnership
• Partnership with United Nation
development programme
• Worked with Global strategy group to
identify right partners
• Customized collaboration for value
proposition
Market Entry Strategy
• Enters when products are in growth life
cycle stage
• Choose market where minimum efficient
scale can be reached soon
• Target countries where high returns are
possible
• Invest heavily in marketing to overtake
competitor
Samsung’s Market Positioning
• Segmentation Positioning
• Geographic: Pan India
• Psychographic: Tech-Savvy
• Demographic: Age( 18-45),
Income Group: Rich, Middle
Income

• Targeting
• Working Professionals
• Young Generation
• Nuclear Families
 Samsung’s Expansion in India
• Marketing Strategy
• Wide Product Portfolio
• Competitive Pricing Strategy – Both in economic
and Premium segment
• Introduced Discounts, Sponsored Events, and
engaged with national and worldwide festivals for
brand recognition
• Samsung Campaign:
• Marvel’s Avengers : To attract young
generation
• Samsung Make In India Initiative: To get
manufacturing Tax benefits
• Samsung Service Centres: Showcased their
strong door to door customer service
• Samsung Care for Clean India Initiatives
• Operational Strategy
• Started Its Operations in India in 1995 in
colour TV segment. Annual Turnover of
$3.5 billion
• Regional Headquarter for South West Asia
Operations 10,000 employees
• Software R&D Centres in Noida, Bangalore
• Sales & Marketing Team Headquartered in
Delhi, 19 branches and 16 ASO’s
• Manufacturing Facilities in Noida for TV
sets, Mobile Phones, Washing Machines &
Refrigerators
CHALLENGES
Challenges for Samsung
Thank You!!