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Samsung electronics master
- 1. SAMSUNG ELECTRONICS Seoul, Korea Japan/ Korea Trip 2001 Fabio Armani Julian Carey Jennifer Goodwin
- 2. Agenda • Samsung Group– History & Structure • Samsung Electronics – History – Company Focus – Financial Overview – Strategy – Organizational Structure – Challenges
- 3. Samsung Group • Foundedin 1938 – exporter of dried fish, vegetables, and fruits – flour mill and confectionery machines • 1950’s 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) • 1960’s Expansion of Key Industries – entered electronics and chemical industries – 1969 established Samsung Electronics Co.
- 4. Samsung Group % ofSales ($72B) Electronics 28% Machinery & Heavy Equipment 6% Chemicals 2% Financial Services 26% Other 38% • distribution • hotels • amusement theme parks • trading • construction • textile • advertising • baseball team • security • cameras • aircraft • ships • dump trucks • oil trucks • polymerized compounds • plastics • specialty chemicals • life insurance • credit card services • securities trading • finance and trust management services • home appliances • wireless communication • semiconductors
- 5. Samsung Electronics • Establishedin January, 1969 • 1970’s: Bet the future on electronics – laid the groundwork for electronics in Korea – helped the domestic economy grow – paved the way for exports • 1980’s: A more comprehensive electronics company – established plants in Portugal and US – established Semiconductor and Communication corporation – began memory chip business • Early 90’s: Integration and Globalization • Mid-Late 90’s: Implementing new management strategies • New Millenium: Digital Vision
- 6. Focus: 4 CoreMarkets Home Multimedia Mobile Multimedia Personal Multimedia Core Components
- 7. Samsung Electronics Semiconductors 40% Digital Media 29% Telecommunications 23% Home Appliances8% % Sales ($27B) % Operating Profit Semiconductors 79% Digital Media 6% Telecommunications 12% Home Appliances 3%
- 8. Financial Overview • Revenuegrowth and Operating Income suffered in 1996 • 1997: New CEO Jong Yong Yun – major turnaround • new business focus • new management practices – very positive results in 1999, but… Operating Income (billion Won) Revenue (billion Won)
- 9. Stock Performance Common Stock PreferredStock … Samsung is feeling the effects of the downturn in the high-tech market
- 10. Strategy 1997 Turnaround: • Cuta third of workforce, cut debt • Sold and spun off divisions • Set “firewalls” to other Samsung Divisions • New business proposition: profits • Streamlined inventories • Diversification
- 11. Strategy New Economy: • Exodusof 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 can’t survive without adapting to the fast-changing Internet era, and one solution is linking up with startups”
- 12. Strategy Digital Vision: “ACompany 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
- 13. 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
- 14. Organization Structure • 4main groups with 14 divisions Digital Media Semiconductors Information & Communications Home Appliances Samsung Electronics
- 15. Management & Employees •59,000 employees • Development of employees strategic to success • “Making rounds” encouraged as a key management practice
- 16. Recruiting and Training •Heavy investment • Focus on creating agents of change • Expertise in technology and marketing
- 17. Culture • Entrepreneurial • Profitfocused • Decisive • Different from other firms in Korea and within chaebol
- 18. Current Challenges Internal: “Youmust maintain a sense of crisis to stay competitive” • Profits vs. Growth – Financial discipline • Foster creativity • Executives jumping ship for startups
- 19. Current Challenges External: • Abandondependence on cheap commodity products • Emphasis on goods developed in-house – Rivals are outsourcing production and design • Guide the company into the global electronics elite
- 20. 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