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 Sales ($72B)
distribution hotels amusement theme parks trading construction textile advertising baseball team security

Electronics 28% Other 38%

home appliances wireless communication semiconductors

Machinery & Heavy Equipment 6% Chemicals 2%

cameras aircraft ships dump trucks oil trucks

life insurance credit card services securities trading finance and trust management services

Financial Services 26%

polymerized compounds plastics specialty chemicals

Samsung Electronics
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

Focus: 4 Core Markets

Home Multimedia Mobile Multimedia

Personal Multimedia

Core Components

Samsung Electronics
% Sales ($27B) % Operating Profit
Digital Media 6% Semiconductors 40% Digital Media 29% Telecommunications 12% Home Appliances 3%

Home Appliances 8%

Telecommunications 23%

Semiconductors 79%

Financial Overview
Revenue growth and Operating Income suffered in 1996 1997: New CEO Jong Yong Yun
major turnaround
new business focus new management practices
Operating Income
(billion Won)

Revenue (billion Won)

very positive results in 1999, but

Stock Performance
Samsung is feeling the effects of the downturn in the high-tech market
Common Stock Preferred Stock

Strategy
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

Strategy
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

Strategy
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

Strategy
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

Organization Structure
4 main groups with 14 divisions Samsung Electronics

Digital Media

Information & Communications

Semiconductors

Home Appliances

Management & Employees

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

Recruiting and Training

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

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

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

Foster creativity Executives jumping ship for startups

Current 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

Current 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