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Samsung Economic Research Institute1
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Jung, Ku-Hyun
Samsung Economic Research Institute
January 2005
Samsung Story
Samsung Economic Research Institute2
Samsung Electronics joins ’$10billion club’.
• Samsung Group as a whole also made record profit in 2004.(Won 19 trillion)
• Members of this exclusive club include:
Samsung Economic Research Institute3
0%
10%
20%
30%
40%
0 10 20 30 40 50 60 70 80
삼성전자(54.3, 19.8%)
3M
Intel
Microsoft
AB ElectroLux
Nokia
Hwelet-Packard
Sony
순이익/자기자본
매출액(십억 달러)
평균수익률(16.0%)
평균매출액(42.4)
◈ Samsung vis-à-vis global competitors (2003)
Significance of Samsung’s Rise
Sales (bil. US$)
ROE
ROE Avg.(16.0%)
ROE Avg.(16.0%)
Sales Avg.(42.4)
Sales Avg.(42.4)
SEC
▲
HP
Samsung Economic Research Institute4
◈ Sales / Profit / Market Value- Sales : US$ 13.6 bil. → US$ 96.5 bil. (7-fold increase)
- Profit : US$ 239 mil. → US$ 8.6 bil. (36-fold increase)
- Market Value : approx. US$ 75.1 bil. (Mar. 2004)
Samsung : 1987~2003
0
20
40
60
80
100
120
140
87 89 91 93 95 97 99 01 03(2)
0
2
4
6
8
10
12
Profit
Net sales (tril. Won) Profit before Tax (tril. Won)
Sales
Samsung Economic Research Institute5
◈ Work force : 210,000 employees (2004.12)
135,000 (domestic) / 75,000 (overseas)
◈ Globalization: 67 countries / 287 branches (2004)
◈ 22 World best products (DRAM, Flash memory, TFT-LCD…)
◈ Brand Value
◈ Ranked the 32nd for ‘The Most Admired Company’ (FT, 2004)
Samsung Today
Year 2000 2001 2002 2003 2004
Ranking 43 42 34 25 21Brand Value
(bil. US$) 5.2 6.4 8.3 10.8 12.6
Source: Interbrand / Businessweek (2004. 8.2, p.68)
Samsung Economic Research Institute6
◈ Business Portfolio : Electronics / Finance / Trade & service (64 companies)
Samsung Today
Sales(2003) Profit(2003)
Electronics(51%)
Electronics(90%)
Finance(29%)
Finance (-4%)
Service(12%)
Service (5%)
Chemical (4%)
Shipbuilding (4%)
Shipbuilding (1%)
Chemical (4%)
Samsung Economic Research Institute7
◈ Quantum leap- Domestic → Global company
- Low → High value-added products
- Manufacturing → Technology-driven company
Significance of Samsung’s Rise
Private BrandPrivate BrandOEMOEM
IT industryIT industryLight industryLight industry
Knowledgeintensive
KnowledgeintensiveLabor intensiveLabor intensive
Heavy industryHeavy industry
Capital intensiveCapital intensive
Past Present
Samsung Economic Research Institute8
Paradox of Samsung Management
◈ Management of 4 paradoxes
Big OrganizationSmall
(speedy & flexible)
Diversified Strategy Specialized
Family Governance Professional
JapaneseManagement
SystemAmerican
Legacy from the past
Transformation since 1987
Samsung Economic Research Institute9
Chairman Lee’s “New Management (新經營 )”
◈ The Beginning (1987)
◈ Paradigm Shift in the 1990s
◈ Launch of “New Management” in 1993
◈ Economic Crisis in 1997~98
◈ Lee’s Vision and Perseverance
RestructuringRestructuring
LeadingGlobal
companyin 21C
LeadingGlobal
companyin 21C
Vision
IT RevolutionIT Revolution
Paradigm Shiftin the 1990s
Paradigm Shiftin the 1990s
“NewManagement”
in 1993
“NewManagement”
in 1993
GlobalizationGlobalization
End of Cold WarEnd of Cold War
Economic CrisisIn 1997~98
Economic CrisisIn 1997~98
Samsung Economic Research Institute10
◈ Short history
How It All Happened: the story of semiconductors
Turning points
1974 Korea Semiconductor Co - acquired
1983 Entry into the VLSI Business
1987 Kun-Hee Lee appointed as Chairman
1992 No. 1 in DRAM market worldwide
Developed world's first 64M DRAM
1993~2002 Top in the global memory chip market
2003 No. 1 in Flash memory market worldwide
1996 Unprecedented Worldwide depression in Semiconductor industry - SEC strengthened non-memory business
1996 Unprecedented Worldwide depression in Semiconductor industry - SEC strengthened non-memory business
2001 SEC declined Toshiba’s joint venture proposal in NAND flash memory - 2001 M/S : SEC (26%), Toshiba (45%) - 2004 M/S : SEC (65%), Toshiba (30%)
2001 SEC declined Toshiba’s joint venture proposal in NAND flash memory - 2001 M/S : SEC (26%), Toshiba (45%) - 2004 M/S : SEC (65%), Toshiba (30%)
1988 Samsung Semiconductor & Tele- communications Co. - merged with SEC
1988 Samsung Semiconductor & Tele- communications Co. - merged with SEC
1988 SEC Semiconductor business came out of the red. - US-Japan Semiconductor Agreement
1988 SEC Semiconductor business came out of the red. - US-Japan Semiconductor Agreement
Samsung Economic Research Institute11
Technologydriven
Technologydriven
1. Goal stretching1. Goal stretching
2. Aggressive investments2. Aggressive investments
3. Technology-push3. Technology-push
4. Emphasis on top talents4. Emphasis on top talents
5. Self-driving org. culture5. Self-driving org. culture
6. Speed (time to market)6. Speed (time to market)
7. Synergy from clustering 7. Synergy from clustering
Capital drivenCapital driven
Speed drivenSpeed driven
How It All Happened: the story of semiconductors
Globalcompetition
Globalcompetition
SEC’s Key Success Factors
Semiconductor IndustryCharacteristics
Samsung Economic Research Institute12
Core Competence
Decision-to-actionDecision-to-action
Time-to-marketTime-to-market
Major Factors
R&D capabilityR&D capability
Manufacturing skills Manufacturing skills
Management innovationManagement innovation
Knowledge sharingKnowledge sharing
Cost efficiency Cost efficiency
Digital convergenceDigital convergence
Core Competences
Speed
InnovativeLearning
SynergyEconomies of
scope
Samsung Economic Research Institute13
◈ Core Competence (1) - Speed
Core Competence
Decision-to-actionDecision-to-action Time-to-marketTime-to-market
- Ownership- Empowerment
- Simple decision-making process- Goal stretching / Self-driving
- IT infrastructures (SCM, ERP)- Vertical integration
- Incentive system (PS, PI)- Passion of employees
Culture & System
Major Factors
Speed
Samsung Economic Research Institute14
◈ Core Competence (2) - Learning
Core Competence
R&Dcapability
R&Dcapability
Managementinnovation
Managementinnovation
- Goal stretching / Self-driving- Attention to detail
- Learning-oriented corporate culture
- HR development system- Professional learning teams
- Change agents (6 sigma)- Clustering
Culture & System
Major Factors
Innovative Learning
Manufacturingskills
Manufacturingskills
Samsung Economic Research Institute15
◈ Core Competence (3) – Synergy: economies of scope
Core Competence
Knowledgesharing
Knowledgesharing
Digital Convergence
Digital Convergence
- CEO as a coordinator- Corporate culture: shared values
- HQ’s control & monitoring function- Inter-organizational committees
- Clustering- Knowledge management system
Culture & System
Major Factors
Synergy
Cost efficiency
Cost efficiency
Samsung Economic Research Institute16
Case study #1 – Mobile Phones:Developing intangible competitive advantages
1. Achievements
Design and product innovation b
ecoming a key factor: Innovator i
n mobile phone market (watch p
hone, TV-phone, MP3-phone, ‘int
enna’ phone..)
Global market leadership:
High-end market across all mark
ets
Samsung Brand Value: finally ov
ercoming a ‘me-too product’ ima
ge
Samsung Economic Research Institute17
Case study : Mobile Phones (cont.)
2. Key success factors
Speed: simple decision making
process, cross functional meetings,
short time to market
Innovative Learning: adopting
American technology and improving
it to commercial use.
Mass-customization: Maintaining
multi-platform products and
adapting to global market segments
Synergy: Knowledge, technology,
information, know-how sharing with
other business units in SEC
Samsung Economic Research Institute18
Case study #2 – TFT-LCDs:Replication of SEC semiconductor success
1. Achievements
Similar product and technology
characteristics as memory chips
No. 1 global leader in TFT-LCD as
of 2003 : caught up with advanced
rivals in a short period of time
Leading technological and market
standards
Overwhelming cost leadership :
excellent yield rate
Samsung Economic Research Institute19
Case study : TFT-LCDs (cont.)
2. Key success factors
Synergy: resource transfer from
semiconductor business unit
Innovative Learning: intra-firm
knowledge transfer
Speed: Aggressive investments and
time-to-market (going on now)
Preempt product standards:
alliances with global top companies
Vertical integration and regional
clustering
Samsung Economic Research Institute20
Samsung Management System:Old and New Configuration
[ Old Configuration ]
Leadership
Patriarchal
Strategy
Quantity-driven
Structure
Hierarchical
Process
Attention todetail
Human Resource
Internal Sourcing
Compensation
Seniority System
CulturePride
[ New Configuration ]
Strategy
Quality-driven
Structure
Empowerment
Human Resource
Transfusion
CompensationPerformance
-based
Leadership
Goal-stretching
CultureSelf-driving
Process
Speed
Samsung Economic Research Institute21
Interpretation of Samsung Way
◈ Window of opportunity vs. Strategic thrust
◈ Unique system vs. Do It Better
◈ Pre-1987 vs. Post-1987
◈ Samsung Electronics and Other Business
◈ Chairman Lee’s Leadership and Sustainability
◈ Core competence
Samsung Economic Research Institute22
Who will be next ?
Company RevenueOperating
IncomeOperating Profit
Margin(%)
Samsung Electronics 50,387 10,509 21.0
Hyundai Motors 24,041 1,964 8.0
LG Electronics 21,560 1,093 5.1
POSCO 17,305 4,419 26.0
SK Corporation 15,213 1,413 9.3
KT Corporation 10,434 1,989 19.1
SK Telecom 8,484 2,063 24.3
Korea Gas 8,001 540 6.7
S-OIL Corporation 9,016 960 10.6
LG Philips LCD 7,281 1,511 20.7
$.mil. 2004