SAMSUNG ELECTRONICS

Seoul, Korea
Japan / Korea Trip 2001
Fabio Armani Julian Carey Jennifer Goodwin

Agenda
Samsung Group History & Structure Samsung Electronics
History Company Focus Financial Overview Strategy Organizational Structure Challenges

Samsung Group
Founded in 1938
exporter of dried fish, vegetables, and fruits flour mill and confectionery machines

1950s 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)

1960s Expansion of Key Industries

entered electronics and chemical industries 1969 established Samsung Electronics Co.

Samsung Group
% of Sa s ($7 B)
d str but on hot s amus m nt th m parks trad ng construct on t xt adv rt s ng bas ba t am s cur ty

E ctron cs 8% Oth r 38%

home app ances w reless commun cat on sem conductors

Mach n ry & H avy Equ pm nt 6% Ch m ca s %

cam ras a rcraft sh ps dump trucks o trucks

f nsuranc cr d t card s rv c s s cur t s trad ng f nanc and trust management serv ces

F nanc a S rv c s 6%

po ym r z d compounds p ast cs sp c a ty ch m ca s

Samsung le roni s
Established in January, 1969 1970s: Bet the future on electronics
laid the groundwork for electronics in Korea helped the domestic economy grow paved the way for exports

1980s: A more comprehensive electronics company

established plants in Portugal and US established Semiconductor and Communication corporation began memory chip business

Early 90s: Integration and Globalization Mid-Late 90s: Implementing new management strategies New Millenium: Digital Vision

Fo us: 4 ore
ome ul imedia

arke s
obile ul imedia

Personal

ul imedia

ore omponen s

Samsung le roni s
Sales 2
Digi al Semi ondu ors 40 Digi al edia 29

pera ing Pro i

edia Tele ommuni a ions 12 ome Applian es

ome Applian es

Tele ommuni a ions 2

Semi ondu ors 9

Finan ial
Revenue growth and Operating Income suffered in 1996 1997: New CEO Jong Yong Yun
major turnaround
new business focus new management practices

er iew
Re enue billion Won

pera ing In ome

billion Won

very positive results in 1999, but

S o k Per orman e
Samsung is feeling the effects of the downturn in the high-tech market
ommon S o k Pre erred S o k

S ra egy
1997 Turnaround: Cut a third of workforce, cut debt Sold and spun off divisions Set firewalls to other Samsung Divisions New business proposition: profits Streamlined inventories Diversification

S ra egy
New Economy: Exodus of 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 cant survive without adapting to the fast-changing Internet era, and one solution is linking up with startups

S ra egy
Digital Vision: A Company 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

S ra egy
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

Organiza ion S ru ure

4 main groups with 14 divisions Samsung Electronics

Digital Media

Information & Communications

Semiconductors

Home Appliances

Managemen

mployees

59,000 employees Development of employees strategic to success Making rounds encouraged as a key management practice

Re rui ing and Training

Heavy investment Focus on creating agents of change Expertise in technology and marketing

Cul ure
Entrepreneurial Profit focused Decisive Different from other firms in Korea and within chaebol

Curren Challenges
Internal: You must maintain a sense of crisis to stay competitive Profits vs. Growth
Financial discipline

Foster creativity Executives jumping ship for startups

Curren Challenges
External: Abandon dependence on cheap commodity products Emphasis on goods developed in-house
Rivals are outsourcing production and design

Guide the company into the global electronics elite

Curren 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