Samsung Minicase

Describe Samsung as a conglomerate. What type of diversification does Samsung pursue? Identify possible
factors such as core competencies, economies of scale, and economies of scope that might underlie its success
as a diversified conglomerate (chaebol). Which do you consider its key success factors?

20% 7 Divisions $25.9 bn

Of MV of Korean Stock Samsung Electronics 2016 Operating
Exchange comprises of C&T Corporation Profit Samsung
Samsung affiliated companies Heavy industries Electronics
SDS
Samsung affiliates account for Life Insurance
approx. 15% of total S. Koreas Fire & Marine Insurance
economy Cheil Worldwide

Source: Samsung.com, CNN (Feb 2017)

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Samsung Minicase
Describe Samsung as a conglomerate. What type of diversification does Samsung pursue? Identify possible
factors such as core competencies, economies of scale, and economies of scope that might underlie its success
as a diversified conglomerate (chaebol). Which do you consider its key success factors?

Core Competencies
Diverse service and product offering, product innovation; feet in various industries i.e. electronics,
chemicals, shipbuilding, financial services, construction, media
Operational efficiency and integrated manufacturing process shorter response times to
changing market trends

Economies of Scope
As of end FY2016, 31 subsidiaries under Samsung Electronics (Incl. Telecommunications,
Semiconductor, Electronics, Gaming, Digital Printing)
Competencies from other Samsung divisions other than Electronics i.e. Cheil (marketing), SDS (info
tech advisory, integration and R&D)
Allows extensive vertical and horizontal integration

Company Culture Chaebol at top + merit based at the bottom

Highly talented employee base with opportunity to excel
Wealth and success retention focus at top 25,977,620,000

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Samsung Minicase
How did Mr. Lee turn Samsung Electronics from a sleeping and bureaucratic company into a world leader?

Change in Company
Focus on Expanding Focus on Investment in
Structure to Change
Electronics Division New Growth Channels
Company Culture

Pursuit for more than Merit-based pay and Invest $20 bn by

just leading supplier promotion 2020 in new
and OEM Global Strategic Group channels of revenue
to help integration of growth - LED lighting,
Adamant push for non-Korean employees solar panels, e-vehicle
market share in mobile batteries, biotech
phones drugs, medical

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Samsung Minicase
What type of global strategy is Samsung Electronics pursuing?

1992 Leader in consumer electronics

Currently leader in semiconductor manuf. and supplying but wanted t be more

Making Samsung Electronics more lean and efficient

1996 Trimming costs and selloff of unproductive assets
Achieves operational efficient and integrated manuf process
Shorter lead times for response to changing market trends

Follow first, Innovate Second

2010s Namely with smartphones vs, Apple see what direction other companies are taking
before making catered products

Future Pursue future growth/innovation channels

Invest $20 bn by 2020 in LED lighting, solar panels, e-vehicle batteries, biotech drugs,
medical devices
Samsung Elec. Invests at least 9% of sales revenue into R&D yearly

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Samsung Minicase

What can Samsung Electronics do to sustain its competitive

advantage in smartphones? Should Samsung change its follow
first, innovate second approach as it seeks to build a competitive
position in new product areas other than smartphones?

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 Samsung Minicase
Pursue future growth &
2010s Follow first, Innovate Second Future innovation channels

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Source: Strategy&, July 2017
Apples R&D

Source: Business Insider, Feb 2017

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Apples R&D

Source: Business Insider, Feb 2017

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