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Case Study - Samsung

Compiled by Rohan Wickremasinghe
Dip. Mgmt., MBA (SGU), Dip. B. (BPUSL), AIB (SL), LLB (OUSL-final year), Cert. Astrol. (SL), Dip. Comp. (ICO), Dip. Eng. (DES), H. Dip. Eng.(DES), Cert. B. (CC), CIM-UK (final stage), CIMA-UK (Intermediate) BIT (University of Colombo-Semester 2)

VISITING LECTURER In 1936 lee Bung Chull started a rice mill in Korea. In 1938 he began trading in dried fish and Incorporated under the name Samsung. Had grown to include transportation and real estate businesses as will as the fish and rice businesses. Despite scandals in the early 1960s, Samsung continued to diversify and grow. In 1969it added Samsung electronics, which grew rapidly by disassembling western-designed products and producing similar ones cheaper and frequently better. In the 1970s Samsung added industrial companies and it became one of Koreas leading chaebols or industrial groups. In the 1980s Samsung began to export electronic goods under use own name, although all too frequently they ended up at the law end of the consumer market. One reason is name recognition. More than one-third of Samsungs exports have other companys names on them such as zenith, whirlpool, general electric, J.C. Penney, and sears. This has kept Samsung from developing the name recognition and brand loyalty necessary to move in to the higher end of the consumer market. Lee Kun-He, son of the founder and chair of the company since 1987 is changing all of that. In June 1993, while on a trip to Frankfurt, he got a consul tants report indicatication that the Samsung design center was being poorly managed. To make matters worse, management was ignoring the reports recommendations. Lee was furious and issued his Frankfurt Declaration; quality first no matter what Lee began bringing executives from Korea to where ever in the world he was for meeting. Twenty to forty at a time in round the- clock meeting they met and were chastised for their nonchalance and rogance. By bring thern to foreign setting, lee was able to show them how poorly Samsung products were being displayed and how little customers thought of them. ACEO School was initiated, and all 850 top executives will go through it even truly. Its a six-month process of reeducation, half in Korea and half over seas. While the school, the accusative connote travel by plane. They must use cars, buses and trains so that come in greater contact with the people and their culture in addition. Each year four hundred persons with at least there years with Samsung are sent aboard for a year to lean the language and culture of a foreign country they are then assigned to that country to sell Samsung products. One of lees more important changes, however, is designed to really break down the Korean culture that had dominated the firm. The Korean work ethic calls for managers to

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arrive at the office around 9 AM. And leave at about 8P.M. the work day was usually followed by rounds of drinking at restaurants or night clubs. Lee requires everyone to be work at 7 AM. And to leave at 4 PM. This is such a culture shock that it may deliver his message more strongly than anything else he is doing. Lee predicts that 5 percent of his managers will be unable to make the change at all; they will be let go. Another 25 percent to 30 percent will have a difficult time with the change they will be demoted to positions that they can handle. Only about 10 percent will actually do so well under the new system that they will be promoted as a result. Changing the organization in this way is necessary, lee believes, to being about the creativity and innovativeness he wants Samsung to have. Discussion questions 1. 2. 3. How would you describe the Samsung organization culture before the declaration? After? What are the major obstacles Samsung faces in trying to improve quality and establish it as a high-quality producer of costumer electronic products? How could it overcome those obstacles? If lee asked you to advance him on how to proceed, what would you recommend? Why?

References: susumu Awanohara image is everything far eastern economic review June 23, 1994, pp. 50: jie Aesohn, Samsungs grand ambitions. Business Korea June 1994, pp.23-25; Louis karat,Korea goes for quality fortune april18, 1994, pp 153-159; and Samsungs radical shakeup. business week February 28. 1994, pp 74-76.