Individual MNC Samsung Report International Business Jea Hyul Lee UTD ID: 2021075838

Introduction Samsung Group, one of the biggest multinational conglomerate companies in South Korea, was founded in March 1st, 1938 by Byung-Chull Lee as a small business focusing on exporting dried Korean fish, vegetables, and fruit to Manchuria and Beijing. By 1970, Samsung had successfully ventured into the insurance and electronic markets while continually expanding their business into heavy machinery, chemical production, financial as well as insurance services. This implementation strategy of venturing into various business areas is known as chaebol, the Korean belief that success is based upon the fact that a business should be the best in every facet of the new field it enters. Samsung Group employs the localization strategy, focusing on a number of foreign countries and their respective domestic markets, by having its headquarters in Seoul and diversifying their operations throughout the world mainly in North America, South America, the Middle-East, Africa, and Europe. Because Samsung Group is such a huge conglomerate of different businesses molded into one corporation, this report will focus on the business activities of Samsung Electronics Co., Samsung Groups chief subsidiary which produces a wide range of electronic appliances such as televisions, video and audio equipment, computers, and cellular phones. The report will analyze how Samsung Electronics employs foreign direct investments (FDI) in order to maintain its edge against competitors as well as examine how the company utilizes its intangible and tangible resources to invest heavily on overseas investments. Moreover, after the analysis, I will provide commentary based on my own arguments and view on Samsung Groups ethical behavior regarding chaebol and whether this Korean belief that Samsung has been founded on is ethical on the basis of human values.

Samsung Electronics FDI in China & Japan According to M.W. Pengs textbook, Global Business, foreign direct investment is defined as putting money in activities that control and manage value-added activities in other countries (10% equity stake or more). Moreover, investopedia.com explains foreign direct investment as a company investing overseas through a joint venture or merger. This international expansion strategy of employing foreign direct investment is crucial for Samsung Electronics as it is the companys key to success and maintaining distance over its rivals. An example of Samsung Electronics heavily partaking in FDI was shown in April 22nd, 2011 when the company announced that it will invest an estimated $501 million in China through a joint venture in building a flat-screen television plant in an attempt to place a footing in Chinas fastest-growing flat-screen television market (Lee, 2011). By implementing the localization strategy, Samsung proceeded with this joint venture with the local Chinese government of Suzhou to develop the liquid-crystal-display (or LCD) panel plant. Following its beliefs in chaebol and investing heavily on overseas production, Samsung effectively stepped into Chinas quickly growing flatpanel market. Samsung Electronics further flexed its FDI muscles in 2013 by expanding its electronics production in China when they announced that Samsung Electronics will invest $1.7 billion over the next five years in Kunshan located in Chinas Jiangsu province (Dennis, 2013). Through this venture, Samsung Electronics is now reportedly able to construct more workshops, procure machinery and equipment, as well as establish new research and development institutes. In addition, Samsung also plans to open a plant Xian located in the Shaanxi province in December

that will manufacture NAND flash memory chips which will be Samsungs second biggest memory chip production factory after the Austin plant in the US. Samsung explained that Xian was chosen as the site to open the factory because the water and power are twenty to thirty per cent lower than other Chinese cities and labor costs are forty per cent cheaper (Dennis, 2013). Through this continual process of implementing FDI in China almost every year has retained Samsung Electronics status of being the worlds largest manufacturer of handsets, memory chips, and flat-panel televisions. It is no wonder that Samsung has constantly edged itself out and has maintained its status quo as one of the leading electronic companies in the world. Moreover, as shown in the instance of the capitalizing on the cheaper water, power and labor cost in the Xian memory chip facility, the company effectively utilizes the location aspect of the OLI advantages to make decisions. In addition to China, Samsung Electronics has even ventured into Japan through FDI when the company agreed to buy out the Japanese multinational conglomerate companys entire stake in their liquid crystal display joint venture (BBC News, 2011). By taking over Sonys venture in LCD panel manufacturing, Samsung effectively stepped into the Japanese television market. Through this venture, Samsung Electronics gained the ownership aspect of the OLI advantages by commanding control over the foreign operations of Sony in Japan. This process will enable Samsung to stay ahead of its rivals by giving them the leverage of valuable, organizationally embedded (VRIO) assets overseas in Japan (Peng, 2013).

Samsungs Tangible and Intangible Resources As a multinational conglomerate, Samsung boasted the annual revenue of $247.5 billion in 2011 (Samsung.com). Samsung uses this immense financial capital advantage and tangible resources in order to heavily invest in acquisitions. According to the Wall Street Journal, Samsung has acquired many big overseas investments. For example, it had acquired ASML Holding NV based in the Netherlands with a deal value worth $629 million in August of 2012. In another acquisition, Samsung also procured AST research based in the United States worth about $462 million in April 1997. Moreover, Samsung invested $310 million in the United Kingdoms CSR Plc which focuses on handset operations. All these acquisitions over the world by Samsung have shown how the company efficiently utilizes its financial capital to constantly redefine them. Not only does Samsung focus on tangible resources, it also gives tremendous importance to the intangible assets. Especially in the area of human and innovation aspect of intangible resources, Samsung is constantly looking to build their workforce and gain innovative employees. Lee Kun-Hee, the current chairman of the Samsung Group, is quoted saying One genius can feed millions of others. For the upcoming era where creativity will be the most important driver of business success, we need to hire the best. The economic value of one genius is more than $1 billion. (phonearenia.com, 2012). With their emphasis on hiring creative and innovative employees, Samsung employs workers ranging from all around the world such as Varun Vishwanathan as their software engineer, Esteban Contreras as the social media marketing manager, and Homayoon Shahinfar as the head of mobile technology strategy and sourcing (crunchbase.com).

How Ethical is Samsung? My Personal View While Samsung Group boasts of its humble origins and adhering to its founding principle of providing the best of everything, lately they have come under scrutiny and fire for its unethical use of their power. The Samsung Group has been a family run business empire ever since it was founded in 1938, which defines them as chaebol. And this aspect of the company has resulted in the label of Samsung as almost Mafia-like in their secrecy within the company. Moreover, chaebol companies in Korea are known as a dominating presence and influence in the society and exercise huge political influence (Wright, 2012) which will likely put Samsung in a situation where theyll face whether the company will make ethical or unethical decisions. South Koreans are known, to the point that is infamous, for their pride in their home country. As a result of being from such a tiny country that has reinvented its economy from destitution to boast one of the worlds largest standards of living, it may seem inevitable that Koreans would have such a pride in their country. As a South Korean myself, I find myself sometimes caught in the fervor of the country pride during the Olympics and have seen my parents fierce loyalty to our motherland and have even witnessed their pride for Samsung. However, this can be where the problem lies. As a result of Samsung basically representing the pride of South Korea, the countrys citizens has in a way become delusional and not willing to accept the fact that Samsung has represented the unethical use of their power in the past. In 2008, Lee Kung-Hee, the current chairman of Samsung Group, was forced to step down from his position after his home and offices were raided and confiscated by police as a result of allegedly reports of bribes to court officials and politicians. (Wright, 2012). He was

later found guilty by the Seoul Central District Court on July 16, 2008 for financial wrongdoing and tax evasion and was sentenced to three years in prison and charged with $109 million in fines. However, in 2009, Lee Kun-Hee was pardoned and was reinstated to the company by the South Korean government so that he can help with the bidding to host the 2018 Winter Olympics (Wright, 2012). I believe this whole fiasco shows just what chaebol in Korea can be capable of and how their dominating status in the society can have even the government submitting to them. I think it goes to show that South Koreans are willing to overlook the unethical practices of Samsung for the sake of the nations pride. I do believe having pride for your country is important and I still support Samsung Group, but there are ethical standards that cannot be crossed. Having the South Korean government pardoning Lee Kun-Hee of his crimes for the sake of bidding for the 2018 Winter Olympics to me seems heretical and unheard of. If we want to truly be prideful of our country, I believe that we must instill and adhere to the important human values that define who we as people are.

References "About Samsung." Samsung US. N.p., n.d. Web. 29 Apr. 2013. "CrunchBase, The Free Tech Company Database." Samsung Electronics. N.p., n.d. Web. 30 Apr. 2013. Samsung expands electronics production in China E&T, William Dennis, 18 Feb. 2013, Web. 29 Apr. 2013 Samsung buys Sony's entire stake in LCD joint venture BBC, n.p., 26 Dec. 2011, Web. 29 Apr. 2013 Peng, M. W. 2013. Global business (3nd ed.). Cincinnati: South-Western. Lee, Jung-Ah Samsung Invests in China JV Wall Street Journal, 24 Apr. 2011, Web. 29 Apr. 2013 Lee, Min-Jeong. "Acquisitions Key to Samsung Success." Wall Street Journal. N.p., 10 Apr. 2013. Web. 29 Apr. 2013. Wright, Mic. "Samsung: Power, Corruption, and Lies." The Kernel RSS. N.p., 7 Aug. 2012. Web. 30 Apr. 2013.