Analysis of South Korean company Samsung Electronics

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1st Jan 1970 Marketing Reference this

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Samsung Electronics Company (SE) was established in 1969 in South Korea and its head quarter bases in Seoul. SE with 188,000 employees, is one of 67 units of Samsung Group and fuels 60% of its parent’s revenue. The Company has market capitalisation of $143 million as at Dec 2010.

CORE BUSINESS

The major products

Samsung Electronics Co., Ltd. provides consumer electronic products and operates in two business divisions:

Digital media and communication (DMC) division provides:

Digital media products: such as televisions (TVs), air conditioners, refrigerators, washers, ovens, vacuum cleaners …

Communication products: consisting of cell phones, network systems and computers.

Device solution (DS) division provides:

Semiconductors: including memory chips, dynamic random access memory (DRAM), NAND flash memory and Solid State Drives (SSDs), hard disc drives (HDDs) and system large scale integrated circuit (LSI) products

Liquid crystal display (LCD) products: such as panels for TVs, digital information displays (DIDs), notebook PCs and desktop monitors.

Figure 1. Samsung Electronics organisation structrure

Source: Samsung Electronics annual report 2008

The business generates the most revenue & The business generates the most profit

Figure 2. Sales and sales growth from 2006 – 2010

Source: Samsung Electronics annual report 2005 – 2009 and unaudited financial statement 2010

LED TV sales significantly increased mainly in developed markets

Figure 3: Sales contribution by core products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

The four product groups mentioned above account for comparable contribution to SE’s revenue from 2006 – 2010. Amongst them, digital media products make the largest part, approximately 35% of total sales; telecomunication goods rank second making more than a quarter attribution to SE’s revenues. Semiconductor is the third largest contributor with 24% of the Company’s sales in 2010, increase from 18% – 19% in 2008 – 2009. LCD comprises of 20% of the Company’s revenue.

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There are a exchange between semiconductor and telecom division to be the top position in SE’s operating profit. Telecom division took the leading post in 2007 – 2009 when the major products of semiconductor division (DRAM and NAND) prices dropped significantly due to weak market demand. In 2010 semiconductor margin surge remarkably to the highest recorded five recent years: 27% thanks to SE technological prowess and cost competitiveness. Hyun-joon Shin (2011). Company report: Samsung Electronics 005930 KS. Tong Yang Securities Inc, ‘operating profit climbed 391% y-y to W10.1tn, widening SEC’s gap over rivals’ [1] . The business contributes 24% in the Company revenue but account for 58% of the Company’s operating profit, the largest contributor.

Although leading in sales, digital division contribute least in SE’s profit. The operating margin of digital division, in contrast, remains weak and become deteriorated due to fierce competition, high raw material and distribution cost.

Figure 4. Operating profit contribution by products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

Table 1. Operating margin by products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

 

2010

2009

2008

2007

2006

2005

Operating margin

11%

8%

5%

9%

11%

9%

Semiconductor

27%

9%

0%

11%

22%

27%

LCD

7%

6%

11%

12%

6%

7%

Telecom

10%

10%

9%

11%

10%

12%

Digital

1%

6%

1%

4%

3%

1%

The business will drive growth in the next decade

Samsung Electronics President & CEO, Choi Gee-sung has said ‘SE aims to rank among the global top 10 companies in 2020 with $400 billion in revenue’ [2] , 2.5 times of that of 2010. In the earning release of Q4 2010 in January 2011, the company announced spending 21.6 trilion won in 2010 and plan 23 trillion won in 2011 in semiconductor, display, TV and handset units and on research for the next wave of eletronices. However, it is becoming a more and more concern of Samsung management that the fierce competitive and fast moving consumer electronics industry will narrow down the margin. In the message from CEO in 2009 annual report, Mr Choi said ‘ we plan to shift focus from hardware to software and content, and to redirect our business structure toward delivering high-value services and solutions for our products.’ [3] He also stated the company’s target ‘is driving Samsung’s expansion into solar batteries, medical diagnostic bools and biopharmaceuticals.’ [4] 

According to a statement in which Samsung Group unveiled plans to invest 23.3 trillion won by 2020 in five new businesses, including light-emitting diodes and batteries for hybrid cars [5] . In which, ‘SE probably invest about 9.3 trillion won of that total.’ [6] On 25 Feb 2011, Samsung Group announced ‘its units including Samsung Electronics will parner with bio and pharmaceutical services provider Quintiles, part of a plan 2.1 trillion won in investment in the sector.’ [7] 

How successful this company has been since 2007

Table 2. Revenue and profit of Samsung Electronics from 2005 – 2010

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

 (KRW trillion)

2010

2009

2008

2007

2006

2005

Sales

154.6

139.0

121.3

98.5

85.4

80.6

Yoy growth

11.3%

14.6%

23.1%

15.3%

5.9%

Operating profit

17.3

11.577

6.031

8.973

9.007

7.575

Yoy growth

49.4%

92.0%

-32.8%

-0.4%

18.9%

Net profit

16.15

9.649

5.526

7.421

7.926

7.64

Yoy growth

67.4%

74.6%

-25.5%

-6.4%

3.7%

The company is affected by worldwide economic crisis in 2007 and even worse in 2008, making profit and margin of Samsung dropped significantly. Semiconductor and digital are the most affected business with almost zero and modest operating profit in 2008. In the meanwhile, telecom division achieved stellar growth of smartphones and aggressive expansion market share in emerging market, solidifying Samsung global no. 2 mobile phone maker, after Nokia. However, the company quickly got out of the crisis impact with impressive turn around in 2009 with 14.6% increase in revenue and 74.6% increase in profit. Miyoung Kim from Reuters said about Samsung to be the company ‘which has had better net earnings than any other global tech firm except Microsoft and IBM over the past decade’ and ‘2010 will be another record profit year’ [8] . Miyoung Kim (2011). Special report: Can Samsung change with the tech times?. Reuters

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[Caroline Garbiel (2011). Smartphones will be Samsung’s main growth this year] ] The cellphone company was the only one where results improved both on Q409 and the earlier periods of 2010, and executives said they were counting on continuing growth in handsets to be the highlight, and the profit leader, for most of 2011.

CORPORATE RESPONSIBILITIES

How has the company responded to the increasing demands of society for greater corporate responsibility?or to the challenge of sustaninability? Or climate change?

In responded to the greater corporate responsibility, Samsung have made a lot of efforts to reduce greenhouse gas emissions

What evidence is there that the company engages with external stakeholders?

CRISIS MANAGEMENT

Samsung has faced negative public sentiment caused by two case. The first is occurred in 1996 when Kun-Hee Lee gave his son Jay-Yong Lee 6 billion won from stock profit to purchase Everland’s convertible bond at below-market price. With that, Jay-Yong gain sufficient holding to help Lee family to control the group. The case was exposed in the media in 1997. ‘A court, accordingly, convicted two Samsung executives for arranging the deal of illegal convertible bond from chairman to his son in October 2005’ [9] 

The second involved illegal financial supports for presidential candidates in 1997, which led to the accession of former president Kim Dae-Jung. In addition, on July 22 2005, MBC disclosed the tape recording conversation between Samsung vice president to distribute bribes in 1997 to presidential candidates, law and politicians. Chairman Lee and his top aide were sued, but the prosecutorial office decided not to charge him after several months of investigation last December.

In June 2004, Samsung is accused to be in violation of the financial restructuring law was enacted in 1997 to prevent conglomerates from using their financial units to increase control

over their non-financial affiliates. Two financial arms (Samsung Life and Samsung Card) acquiring controlling shares in other

subsidiaries, in excess of the 5% legal limit (Myeong, 2005).

Eventhought the mentioned – above cases are related to congromate Samsung group as a whole and the Chairman Kun-Hee Lee family. However, the effect of crisis effect directly to Samsung affiliates and Samsung Electronics as well. On 7 February 2006, Samsung announced that Chairman Kun-Hee Lee to donate 800 billion won from his personal wealth to society as a full apology. Donator, however, did not mention the designated orientation of the money. The announcement met different response from Korea society, media evalutated was not a sincere apology, or even negatively aingratiation or an excuse, Samsung then decided to use this money for scholarship programs for underprivileged

students in September of 2006, and handed over the management to the Ministry of Education (S. B. Lee, 2006) [10] . This is a valuable lesson for Samsung in communication, especially when the media become powerful in the society and play an information gatekeeping role (Shoemaker & Reese, 1996; White, 1950) and agenda setting role (Wanta, 1997).

During the time, Samsung kept focus to interprete its activity as a full apology and used corrective action for expressing its stance. Samsung mentioned, ‘The Samsung Group deeply repents and apologizes to the public for causing public concern over the

issues of political funding and property inheritance.’ and ‘together with the

donation, the group has also begun to change its management style to enhance corporate transparency, and it plans to drop two lawsuits filed against the government regarding

inheritance tax and accept a financial revision bill.’ [11] 

Leadership.

Samsung Group and Samsung Electronics with 72 and 41 years of success respectively with the leadership of 2 Lee chairman to be father and son. Chang (2007) said that SE relies too heavily on its owner, exposing it to risk. There is no guarantee that a capable person will continue to lead Samsung Group, whose management control has been passed down to family members [12] . Lee’s eldest son, Lee Jae-yong has no proven track record of success. This generation of grand child, could they continue with management control by by family member in the increasing competitive environment.

In addition, SE is striving to moving beyond being a hardware company, clever at copying ideas, to becoming more creative, better adept at software when the market are getting crowded and marginal thin. After returning to SE after a while, Mr Lee expressed his serious concern about SE future and its core business because_____. However, Lee’s well-known top-down management style has been effective in manufacturing businesses, enabling the company to develop and produce goods quickly and cheaply [13] , Chang said. it faces a management challenge [14] .

Skeptical concern about Samsung’s ability to change for creativity and innovation to better compete with Apple, Google and other global competiters.

STRATEGY

What markets has it focused on?

[WIKIPEDIA] Only ten years ago, Samsung’s only goal was to catch up with Japanese rivals. But now it is outperforming major Japanese electronics makers in many categories: in terms of global market share, Samsung is in the world’s top maket of flat-panel TVs and memory chips and ranks second in mobile handsets; it is one of the top suppliers in other home appliances.[24]

To become the top brand in the electronics business, Samsung has spent enormous sums on marketing and branding. Samsung appears in most of the major markets in the world as an international brand. As early as 1993, Mr Lee told Samsung to poll people in emerging markets to find out what products they wanted [15] . Korea domestic market although remained sales value unfluctuated but did decrease in percentage from 2006 to 2009. In the meanwhile, Americas and China increased in value and percentage gradually from year to year as a consequence of the company marketing efforts in the markets with high population and increasing demand for the high technology products. Together with Aisa, the 3 markets have made up more than a half of the companys’s revenue since years.

Figure 5. Samsung Electronics revenues contributed by market

2009 – KRW138.9 trillion

2006- KRW85.4 trillion

However, the majorty of Samsung’s profit contributed by Korea domestic and export. It appeared that income from Korea market keeping high operating margin through years, above 30% (except 2008) whilst other market made a modest margin of 1% – 5%. It could be a result of marketing expensed for penetrating deeply the these market or a result of making advantage of an international company to benefit from the tax incentive from price transferring.

Figure 6. Samsung Electronics operating profit contributed by markets

2009 – KRW11.6 trillion

2006- KRW9.0 trillion

What are its core strengths?

Samsung focus on growing corporate knowledge as its strengths. The company has invested aggessively and consistently in R&D, in both finance and human resources.

Last year, the company trailed only IBM in U.S. patents last year, getting 3,611 to beat Microsoft Corp. and Canon Inc., Wilmington, Delaware-based IFI Claims Patent Services says [16] . Innovation is one of the core strength. In addition, Samsung hase been known as a ‘fast executioner’ [17] . At Samsung, the way of thinking has always been, ‘We can do it faster, better and cheaper’.

Consequently, in 2005, SE has surpassed Sony for the first time, a far more entrenched rival that once owned the electronics category [18] , becoming the world’s top maker of TVs, memory chips and flat-panel screens, and ranks no. 2 in the handset market.

Would you describe the company as innovative?

Samsung had emphasized innovation in its management strategy since the early 2000s and it again highlighted innovation as part of core strategies when it announced the Vision 2020 in which the company set an ambitious goal of reaching the $400-billion sales revenue within 10 years. In order to cement its leadership in the areas of memory chip and TV production, Samsung has invested aggressively in research and development. About 50.000 employees, ¼ of SE’s staff, work everyday in 42 R&D centers around the world.

Samsung was also ranked 11th in the “50 Most Innovative Companies 2010” list put out by Business Week, a five-notch increase from the previous year’s 16th. In the 2010 Business Week innovation ranking, Apple Computer and Google retained the leading positions as in the 2009 list, followed by Microsoft, which gained one notch from 2009’s fourth place. (Read “The 50 Most Innovative Companies 2010” Business Week, April 15, 2010) Table

Sung-sik, in fact, epitomized the qualities Samsung has long been known for — a “fast executioner” who gets something quickly to market. However, it appears that the innovation Samsung aimed to build is certain level. The company structure is top down and rely much on family member. Since the company has announced its new way of development, innovation is stressed. Softening culture in which the company open in more flexible working conditions such as no more uniform, shortening hard training, recruiting more women, campus culture…

“What I saw in Samsung was a spirit more like what we used to have in large U.S. corporate research labs decades ago,” says Ben Goertzel, a Washington-based author of eight books on intelligence and other topics who lectured at SAIT in November. “Samsung did more than what’s really targeted to their immediate products.”

Mr Lee Kun – hee – SE chairman – warned his employees that Samsung products could all be obsolete in 10 years if they don’t keep up the time [19] . Lee Sun-tae, an analyst at Meritz Securities, agreed ‘As Samsung’s existing businesses such as semiconductors and LCDs are expected to face an intensifying challenge from China in 10 to 20 years, finding new business that can replace existing ones is Lee’s biggest concern’. [20] 

‘Samsung does want to break out of the high-sales, low-margin business model and emulating Apple with its 40-percent margin on iPhone sales or Microsoft’s 70 percent-profit margin from Windows.’ [21] 

VISION – MISSION – GOALS

Vision 2020 – Mission

The Vision of Samsung is “Inspire the World, Create the Future”. Samsung aspires to create superior products and services with cutting-edge technologies that inspire the global communities by leveraging Samsung’s three key strengths: “New Technology,” “Innovative Products,” and “Creative Solutions.”, while delivering new value for Samsung’s core networks – Industry, Partners and Employees. – in late 2009 as a roadmap for the company’s evolution over the next 10 years.

The company’s vision for 2020 rests on three foundations: 1) An industry vision, stressing leadership in new technologies, new markets and new lifestyles; 2) a social vision, grounded in strong stakeholder relationships and a companywide commitment to corporate social responsibility; and 3) a workplace vision, based on management excellence, training and a passionate and creative work environment. (http://www.innovationchallenge.com)

Samsung also established a set of performance goals including reaching US$400 billion in revenues and achieving global recognition as one of the world’s top 5 brands by 2020.

As part of this vision, Samsung has also established three strategic approaches in its management: “Creativity,” “Partnership,” and “Talent.”. In order to motivate its employees, Samsung is builidng a creative corporate culture by promoting creating organizational culture, building a great work place and offering talent management program.

To promote a creative organizational culture:

First, Samsung applies various programs to encourages their employees’ suggestions for work process improvement so that their ideas can bear fruit.

Second, Samsung adops a flexi time program which maximizes the creativity of employees by allowing them to flexibly manage their office hours as long as they work a total of eight hours each day.

Third, Samsung always supports and encourages employees to balance their work and life so that they can enhance their life quality and enjoy greater social interest.

Finally Samsung also provides welfare programs through sharing and caring about their imployess’ health, children’s education and post-retirement life.

To build a Great Work Place:

Samsung had the Great Place to Work (GPTW) of the US to survey their domestic and overseas workforces in 2007 to build up a corporate culture that fits their global stature. Based on the the Great Work Place analysis results, each division and department prepare and implement improvement plans to build a Great Work Place by filling the gaps in five survey categories which include trust, respect, fairness, pride and solidarity.

To offer Talent Management Program

Samsung consider “people” to be the most valuable assest in carrying out their business and applies international labor standard and local labor regulations to enhance employee value while eliminating discrimination in term of gender, race, social position or illegal labor practices.

(http://www.samsung.com/us/aboutsamsung/sustainability/integritymanagement/download/building_a_creative_corporate_culture.pdf)

DESIRABILITY AS AN EMPLOYER

Samsung is a global company with the more anh huong. It offer employees opportunities for innovation, exchange the idea, leadership. The company care about corporate responsibitiy for ben vung development. It’s appear to be a good company to be desired to work for.

Ref

“Policy on target substances – Chemical Management – Environment – Sustainability – About Samsung – Samsung”. Samsung Electronics. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/policyontargetsubstances.html. Retrieved 2010-08-02. 

“Guide to Greener Electronics – Greenpeace International”. http://www.greenpeace.org/international/en/campaigns/toxics/electronics/Guide-to-Greener-Electronics/. Retrieved 2011-01-13. 

“Management of target substances – Chemical Management – Environment – Sustainability – About Samsung – Samsung”. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/managementoftargetsubstances.html. Retrieved 2010-08-02. 

“Calling out Samsung for toxic failure – Greenpeace International”. http://www.greenpeace.org/international/en/news/features/calling-out-samsung-030310/. Retrieved 2010-08-02. 

“Who’s Greener, Samsung or LG?”. Business and Technology Report. http://www.biztechreport.com/story/767-whos-greener-samsung-or-lg. Retrieved 2010-01-13. 

“Samsung leads in green management”. The Korea Times. http://www.koreatimes.co.kr/www/news/tech/2010/08/129_69809.html. Retrieved 2010-07-26. 

“Enviros Applaud Samsung for New Free National Recycling Program”. Electronics TakeBack Coalition. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/policyontargetsubstances.html. Retrieved 2008-09-08.

Samsung Electronics Company (SE) was established in 1969 in South Korea and its head quarter bases in Seoul. SE with 188,000 employees, is one of 67 units of Samsung Group and fuels 60% of its parent’s revenue. The Company has market capitalisation of $143 million as at Dec 2010.

CORE BUSINESS

The major products

Samsung Electronics Co., Ltd. provides consumer electronic products and operates in two business divisions:

Digital media and communication (DMC) division provides:

Digital media products: such as televisions (TVs), air conditioners, refrigerators, washers, ovens, vacuum cleaners …

Communication products: consisting of cell phones, network systems and computers.

Device solution (DS) division provides:

Semiconductors: including memory chips, dynamic random access memory (DRAM), NAND flash memory and Solid State Drives (SSDs), hard disc drives (HDDs) and system large scale integrated circuit (LSI) products

Liquid crystal display (LCD) products: such as panels for TVs, digital information displays (DIDs), notebook PCs and desktop monitors.

Figure 1. Samsung Electronics organisation structrure

Source: Samsung Electronics annual report 2008

The business generates the most revenue & The business generates the most profit

Figure 2. Sales and sales growth from 2006 – 2010

Source: Samsung Electronics annual report 2005 – 2009 and unaudited financial statement 2010

LED TV sales significantly increased mainly in developed markets

Figure 3: Sales contribution by core products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

The four product groups mentioned above account for comparable contribution to SE’s revenue from 2006 – 2010. Amongst them, digital media products make the largest part, approximately 35% of total sales; telecomunication goods rank second making more than a quarter attribution to SE’s revenues. Semiconductor is the third largest contributor with 24% of the Company’s sales in 2010, increase from 18% – 19% in 2008 – 2009. LCD comprises of 20% of the Company’s revenue.

There are a exchange between semiconductor and telecom division to be the top position in SE’s operating profit. Telecom division took the leading post in 2007 – 2009 when the major products of semiconductor division (DRAM and NAND) prices dropped significantly due to weak market demand. In 2010 semiconductor margin surge remarkably to the highest recorded five recent years: 27% thanks to SE technological prowess and cost competitiveness. Hyun-joon Shin (2011). Company report: Samsung Electronics 005930 KS. Tong Yang Securities Inc, ‘operating profit climbed 391% y-y to W10.1tn, widening SEC’s gap over rivals’ [1] . The business contributes 24% in the Company revenue but account for 58% of the Company’s operating profit, the largest contributor.

Although leading in sales, digital division contribute least in SE’s profit. The operating margin of digital division, in contrast, remains weak and become deteriorated due to fierce competition, high raw material and distribution cost.

Figure 4. Operating profit contribution by products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

Table 1. Operating margin by products (%)

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

 

2010

2009

2008

2007

2006

2005

Operating margin

11%

8%

5%

9%

11%

9%

Semiconductor

27%

9%

0%

11%

22%

27%

LCD

7%

6%

11%

12%

6%

7%

Telecom

10%

10%

9%

11%

10%

12%

Digital

1%

6%

1%

4%

3%

1%

The business will drive growth in the next decade

Samsung Electronics President & CEO, Choi Gee-sung has said ‘SE aims to rank among the global top 10 companies in 2020 with $400 billion in revenue’ [2] , 2.5 times of that of 2010. In the earning release of Q4 2010 in January 2011, the company announced spending 21.6 trilion won in 2010 and plan 23 trillion won in 2011 in semiconductor, display, TV and handset units and on research for the next wave of eletronices. However, it is becoming a more and more concern of Samsung management that the fierce competitive and fast moving consumer electronics industry will narrow down the margin. In the message from CEO in 2009 annual report, Mr Choi said ‘ we plan to shift focus from hardware to software and content, and to redirect our business structure toward delivering high-value services and solutions for our products.’ [3] He also stated the company’s target ‘is driving Samsung’s expansion into solar batteries, medical diagnostic bools and biopharmaceuticals.’ [4] 

According to a statement in which Samsung Group unveiled plans to invest 23.3 trillion won by 2020 in five new businesses, including light-emitting diodes and batteries for hybrid cars [5] . In which, ‘SE probably invest about 9.3 trillion won of that total.’ [6] On 25 Feb 2011, Samsung Group announced ‘its units including Samsung Electronics will parner with bio and pharmaceutical services provider Quintiles, part of a plan 2.1 trillion won in investment in the sector.’ [7] 

How successful this company has been since 2007

Table 2. Revenue and profit of Samsung Electronics from 2005 – 2010

Source: Samsung Electronics annual report 2006 – 2009 and unaudited financial statement 2010

 (KRW trillion)

2010

2009

2008

2007

2006

2005

Sales

154.6

139.0

121.3

98.5

85.4

80.6

Yoy growth

11.3%

14.6%

23.1%

15.3%

5.9%

Operating profit

17.3

11.577

6.031

8.973

9.007

7.575

Yoy growth

49.4%

92.0%

-32.8%

-0.4%

18.9%

Net profit

16.15

9.649

5.526

7.421

7.926

7.64

Yoy growth

67.4%

74.6%

-25.5%

-6.4%

3.7%

The company is affected by worldwide economic crisis in 2007 and even worse in 2008, making profit and margin of Samsung dropped significantly. Semiconductor and digital are the most affected business with almost zero and modest operating profit in 2008. In the meanwhile, telecom division achieved stellar growth of smartphones and aggressive expansion market share in emerging market, solidifying Samsung global no. 2 mobile phone maker, after Nokia. However, the company quickly got out of the crisis impact with impressive turn around in 2009 with 14.6% increase in revenue and 74.6% increase in profit. Miyoung Kim from Reuters said about Samsung to be the company ‘which has had better net earnings than any other global tech firm except Microsoft and IBM over the past decade’ and ‘2010 will be another record profit year’ [8] . Miyoung Kim (2011). Special report: Can Samsung change with the tech times?. Reuters

[Caroline Garbiel (2011). Smartphones will be Samsung’s main growth this year] ] The cellphone company was the only one where results improved both on Q409 and the earlier periods of 2010, and executives said they were counting on continuing growth in handsets to be the highlight, and the profit leader, for most of 2011.

CORPORATE RESPONSIBILITIES

How has the company responded to the increasing demands of society for greater corporate responsibility?or to the challenge of sustaninability? Or climate change?

In responded to the greater corporate responsibility, Samsung have made a lot of efforts to reduce greenhouse gas emissions

What evidence is there that the company engages with external stakeholders?

CRISIS MANAGEMENT

Samsung has faced negative public sentiment caused by two case. The first is occurred in 1996 when Kun-Hee Lee gave his son Jay-Yong Lee 6 billion won from stock profit to purchase Everland’s convertible bond at below-market price. With that, Jay-Yong gain sufficient holding to help Lee family to control the group. The case was exposed in the media in 1997. ‘A court, accordingly, convicted two Samsung executives for arranging the deal of illegal convertible bond from chairman to his son in October 2005’ [9] 

The second involved illegal financial supports for presidential candidates in 1997, which led to the accession of former president Kim Dae-Jung. In addition, on July 22 2005, MBC disclosed the tape recording conversation between Samsung vice president to distribute bribes in 1997 to presidential candidates, law and politicians. Chairman Lee and his top aide were sued, but the prosecutorial office decided not to charge him after several months of investigation last December.

In June 2004, Samsung is accused to be in violation of the financial restructuring law was enacted in 1997 to prevent conglomerates from using their financial units to increase control

over their non-financial affiliates. Two financial arms (Samsung Life and Samsung Card) acquiring controlling shares in other

subsidiaries, in excess of the 5% legal limit (Myeong, 2005).

Eventhought the mentioned – above cases are related to congromate Samsung group as a whole and the Chairman Kun-Hee Lee family. However, the effect of crisis effect directly to Samsung affiliates and Samsung Electronics as well. On 7 February 2006, Samsung announced that Chairman Kun-Hee Lee to donate 800 billion won from his personal wealth to society as a full apology. Donator, however, did not mention the designated orientation of the money. The announcement met different response from Korea society, media evalutated was not a sincere apology, or even negatively aingratiation or an excuse, Samsung then decided to use this money for scholarship programs for underprivileged

students in September of 2006, and handed over the management to the Ministry of Education (S. B. Lee, 2006) [10] . This is a valuable lesson for Samsung in communication, especially when the media become powerful in the society and play an information gatekeeping role (Shoemaker & Reese, 1996; White, 1950) and agenda setting role (Wanta, 1997).

During the time, Samsung kept focus to interprete its activity as a full apology and used corrective action for expressing its stance. Samsung mentioned, ‘The Samsung Group deeply repents and apologizes to the public for causing public concern over the

issues of political funding and property inheritance.’ and ‘together with the

donation, the group has also begun to change its management style to enhance corporate transparency, and it plans to drop two lawsuits filed against the government regarding

inheritance tax and accept a financial revision bill.’ [11] 

Leadership.

Samsung Group and Samsung Electronics with 72 and 41 years of success respectively with the leadership of 2 Lee chairman to be father and son. Chang (2007) said that SE relies too heavily on its owner, exposing it to risk. There is no guarantee that a capable person will continue to lead Samsung Group, whose management control has been passed down to family members [12] . Lee’s eldest son, Lee Jae-yong has no proven track record of success. This generation of grand child, could they continue with management control by by family member in the increasing competitive environment.

In addition, SE is striving to moving beyond being a hardware company, clever at copying ideas, to becoming more creative, better adept at software when the market are getting crowded and marginal thin. After returning to SE after a while, Mr Lee expressed his serious concern about SE future and its core business because_____. However, Lee’s well-known top-down management style has been effective in manufacturing businesses, enabling the company to develop and produce goods quickly and cheaply [13] , Chang said. it faces a management challenge [14] .

Skeptical concern about Samsung’s ability to change for creativity and innovation to better compete with Apple, Google and other global competiters.

STRATEGY

What markets has it focused on?

[WIKIPEDIA] Only ten years ago, Samsung’s only goal was to catch up with Japanese rivals. But now it is outperforming major Japanese electronics makers in many categories: in terms of global market share, Samsung is in the world’s top maket of flat-panel TVs and memory chips and ranks second in mobile handsets; it is one of the top suppliers in other home appliances.[24]

To become the top brand in the electronics business, Samsung has spent enormous sums on marketing and branding. Samsung appears in most of the major markets in the world as an international brand. As early as 1993, Mr Lee told Samsung to poll people in emerging markets to find out what products they wanted [15] . Korea domestic market although remained sales value unfluctuated but did decrease in percentage from 2006 to 2009. In the meanwhile, Americas and China increased in value and percentage gradually from year to year as a consequence of the company marketing efforts in the markets with high population and increasing demand for the high technology products. Together with Aisa, the 3 markets have made up more than a half of the companys’s revenue since years.

Figure 5. Samsung Electronics revenues contributed by market

2009 – KRW138.9 trillion

2006- KRW85.4 trillion

However, the majorty of Samsung’s profit contributed by Korea domestic and export. It appeared that income from Korea market keeping high operating margin through years, above 30% (except 2008) whilst other market made a modest margin of 1% – 5%. It could be a result of marketing expensed for penetrating deeply the these market or a result of making advantage of an international company to benefit from the tax incentive from price transferring.

Figure 6. Samsung Electronics operating profit contributed by markets

2009 – KRW11.6 trillion

2006- KRW9.0 trillion

What are its core strengths?

Samsung focus on growing corporate knowledge as its strengths. The company has invested aggessively and consistently in R&D, in both finance and human resources.

Last year, the company trailed only IBM in U.S. patents last year, getting 3,611 to beat Microsoft Corp. and Canon Inc., Wilmington, Delaware-based IFI Claims Patent Services says [16] . Innovation is one of the core strength. In addition, Samsung hase been known as a ‘fast executioner’ [17] . At Samsung, the way of thinking has always been, ‘We can do it faster, better and cheaper’.

Consequently, in 2005, SE has surpassed Sony for the first time, a far more entrenched rival that once owned the electronics category [18] , becoming the world’s top maker of TVs, memory chips and flat-panel screens, and ranks no. 2 in the handset market.

Would you describe the company as innovative?

Samsung had emphasized innovation in its management strategy since the early 2000s and it again highlighted innovation as part of core strategies when it announced the Vision 2020 in which the company set an ambitious goal of reaching the $400-billion sales revenue within 10 years. In order to cement its leadership in the areas of memory chip and TV production, Samsung has invested aggressively in research and development. About 50.000 employees, ¼ of SE’s staff, work everyday in 42 R&D centers around the world.

Samsung was also ranked 11th in the “50 Most Innovative Companies 2010” list put out by Business Week, a five-notch increase from the previous year’s 16th. In the 2010 Business Week innovation ranking, Apple Computer and Google retained the leading positions as in the 2009 list, followed by Microsoft, which gained one notch from 2009’s fourth place. (Read “The 50 Most Innovative Companies 2010” Business Week, April 15, 2010) Table

Sung-sik, in fact, epitomized the qualities Samsung has long been known for — a “fast executioner” who gets something quickly to market. However, it appears that the innovation Samsung aimed to build is certain level. The company structure is top down and rely much on family member. Since the company has announced its new way of development, innovation is stressed. Softening culture in which the company open in more flexible working conditions such as no more uniform, shortening hard training, recruiting more women, campus culture…

“What I saw in Samsung was a spirit more like what we used to have in large U.S. corporate research labs decades ago,” says Ben Goertzel, a Washington-based author of eight books on intelligence and other topics who lectured at SAIT in November. “Samsung did more than what’s really targeted to their immediate products.”

Mr Lee Kun – hee – SE chairman – warned his employees that Samsung products could all be obsolete in 10 years if they don’t keep up the time [19] . Lee Sun-tae, an analyst at Meritz Securities, agreed ‘As Samsung’s existing businesses such as semiconductors and LCDs are expected to face an intensifying challenge from China in 10 to 20 years, finding new business that can replace existing ones is Lee’s biggest concern’. [20] 

‘Samsung does want to break out of the high-sales, low-margin business model and emulating Apple with its 40-percent margin on iPhone sales or Microsoft’s 70 percent-profit margin from Windows.’ [21] 

VISION – MISSION – GOALS

Vision 2020 – Mission

The Vision of Samsung is “Inspire the World, Create the Future”. Samsung aspires to create superior products and services with cutting-edge technologies that inspire the global communities by leveraging Samsung’s three key strengths: “New Technology,” “Innovative Products,” and “Creative Solutions.”, while delivering new value for Samsung’s core networks – Industry, Partners and Employees. – in late 2009 as a roadmap for the company’s evolution over the next 10 years.

The company’s vision for 2020 rests on three foundations: 1) An industry vision, stressing leadership in new technologies, new markets and new lifestyles; 2) a social vision, grounded in strong stakeholder relationships and a companywide commitment to corporate social responsibility; and 3) a workplace vision, based on management excellence, training and a passionate and creative work environment. (http://www.innovationchallenge.com)

Samsung also established a set of performance goals including reaching US$400 billion in revenues and achieving global recognition as one of the world’s top 5 brands by 2020.

As part of this vision, Samsung has also established three strategic approaches in its management: “Creativity,” “Partnership,” and “Talent.”. In order to motivate its employees, Samsung is builidng a creative corporate culture by promoting creating organizational culture, building a great work place and offering talent management program.

To promote a creative organizational culture:

First, Samsung applies various programs to encourages their employees’ suggestions for work process improvement so that their ideas can bear fruit.

Second, Samsung adops a flexi time program which maximizes the creativity of employees by allowing them to flexibly manage their office hours as long as they work a total of eight hours each day.

Third, Samsung always supports and encourages employees to balance their work and life so that they can enhance their life quality and enjoy greater social interest.

Finally Samsung also provides welfare programs through sharing and caring about their imployess’ health, children’s education and post-retirement life.

To build a Great Work Place:

Samsung had the Great Place to Work (GPTW) of the US to survey their domestic and overseas workforces in 2007 to build up a corporate culture that fits their global stature. Based on the the Great Work Place analysis results, each division and department prepare and implement improvement plans to build a Great Work Place by filling the gaps in five survey categories which include trust, respect, fairness, pride and solidarity.

To offer Talent Management Program

Samsung consider “people” to be the most valuable assest in carrying out their business and applies international labor standard and local labor regulations to enhance employee value while eliminating discrimination in term of gender, race, social position or illegal labor practices.

(http://www.samsung.com/us/aboutsamsung/sustainability/integritymanagement/download/building_a_creative_corporate_culture.pdf)

DESIRABILITY AS AN EMPLOYER

Samsung is a global company with the more anh huong. It offer employees opportunities for innovation, exchange the idea, leadership. The company care about corporate responsibitiy for ben vung development. It’s appear to be a good company to be desired to work for.

Ref

“Policy on target substances – Chemical Management – Environment – Sustainability – About Samsung – Samsung”. Samsung Electronics. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/policyontargetsubstances.html. Retrieved 2010-08-02. 

“Guide to Greener Electronics – Greenpeace International”. http://www.greenpeace.org/international/en/campaigns/toxics/electronics/Guide-to-Greener-Electronics/. Retrieved 2011-01-13. 

“Management of target substances – Chemical Management – Environment – Sustainability – About Samsung – Samsung”. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/managementoftargetsubstances.html. Retrieved 2010-08-02. 

“Calling out Samsung for toxic failure – Greenpeace International”. http://www.greenpeace.org/international/en/news/features/calling-out-samsung-030310/. Retrieved 2010-08-02. 

“Who’s Greener, Samsung or LG?”. Business and Technology Report. http://www.biztechreport.com/story/767-whos-greener-samsung-or-lg. Retrieved 2010-01-13. 

“Samsung leads in green management”. The Korea Times. http://www.koreatimes.co.kr/www/news/tech/2010/08/129_69809.html. Retrieved 2010-07-26. 

“Enviros Applaud Samsung for New Free National Recycling Program”. Electronics TakeBack Coalition. http://www.samsung.com/us/aboutsamsung/sustainability/environment/chemicalmanagement/policyontargetsubstances.html. Retrieved 2008-09-08.

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