Samsung Electronics Company | Analysis
Samsung Electronics Company began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, Samsung acquired a semiconductor business which would be a milestone that initiated the future for SEC. Entering the semiconductor industry would also be the beginning of the shift phase for SEC. In 1980, SEC showed the market its ability to mass production. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well-known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch & Harrington, 2008).
SEC was mainly focused in manufacturing; therefore, it’s no surprise that the executives themselves were also focused on their manufacturing plants. Profits that SEC received were soon reinvested into Research & Development, manufacturing, and supply chain activities.
Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SEC’s sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4.6 billion, from $15 billion, over a 5 year period. Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch & Harrington, 2008).
In 2002, SEC posted net profits of $5.9 billion, on $44.6 billion in sales, and as a result in 2003 became “the most widely held stock among all emerging market companies”. Unlike other companies who chose to outsource their manufacturing process, SEC remained committed to its core competence, manufacturing (Quelch & Harrington, 2008). During 1998-2003, SEC invested $19 billion into chip factories and $17 billion into manufacturing facilities for TFT-LCDs, which would be a major component for flat screen TVs and computer screens. Even though SEC was focused in the manufacturing process, it didn’t make SEC a rigid company. To cope with supply-chain demands, the company remained flexible by building 12 manufacturing plants in China during 2003 and setting up R&D facilities in India (Quelch & Harrington, 2008).
With 17,000 scientists, engineers and designers, SEC was able to create an endless amount of digital products. Due to its fast decision-making process and focus on a digital future, SEC was able to move a new product from the drawing board to its commercialization phase in only five months. This ability was almost 3 times faster than its competition (Quelch & Harrington, 2008).
SAMSUNG’S COMPETITIVE ADVANTAGE
Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment. Samsung has always seeks out the opportunities for the company stay ahead of the competitors.
In today’s fast-paced competitive environment, Samsung face the need to be increasingly competitive and adaptive. Samsung strategic entrepreneurship as the means through which the company simultaneously exploits their current competitive advantages while exploring for future opportunities. Achieving a balance between exploration and exploitation consists of more than merely allocating resources evenly between the two processes. Exploration and exploitation are operationally, structurally, and culturally distinct processes.
In order for Samsung to stay gain their competitive advantage; they have utilized their resources to maximize their output or end products. Resources such as human resources, money, machineries and materials are being strategized to stay ahead and be the leader the global market.
The first advantage Samsung has created was by developing the human resources. The company acknowledged the need for the employees to work in conducive working environment. Samsung created a family-friend working environment, which allows the team members participate in the developing and improving ideas. Samsung even sponsored their employees for MBAs and PHDs program to develop and enhance their human resources skills. As a result of years of human capital investment, Samsung has a high concentration of skilled engineers and labour. The company are able to management the human resources and knowledge which will directly impacted Samsung’s operation by producing a higher productivity and quality of the product s and services.
The low cost strategy by Samsung allowed them to be very competitive in the global market. Samsung’s ability to negotiate with supplier, gave them the advantage of cost raw material. Samsung won several awards every year since 1995 for their performance, quality and reliability of their products and services. Hence, this gave the advantage for them to negotiate with suppliers to supply them the raw material at the lowest cost possible or even at premium. Samsung’s high adaptation cultural to new and fast changing market demand made them an aggressive market reader.
As part of their competitive advantage strategy, Samsung setup a centralized research and development (R&D) facilities. Most of their competitors have their R&D facilities and productions facilities geographically scattered around the globe. The centralization gave them to opportunities to continuous explore and exploit greater products and invention for new technology, as well as innovation for existing technology. The Washington Post on 12 November 2012, in the article Apple vs. Samsung: battle of the Innovation Strategies, was number 4 in the 10 most innovative companies after Apple, Google and 3M. However Samsung was at the number 6 spot in the top 10 R&D spender compared to Apple not on the top 20 list. For example, Samsung invested heavily on the new bendable screen technology for smart phone. They planned to launch the new product in 2013, where other competitors are still developing to commercialize the new technology
Most of the innovation for the Samsung products shared the same core design. Samsung flexible product line able them to materialize those ideas to end products with minimal cost occurred. For every new invention and innovation, Samsung does not need to set up a new facility. The results, higher yield against the cost of the production. Lower cost of productions allowed Samsung to offer attractive and competitive price for the consumer. The relatively lower cost gives lots of rooms for the pricing strategy to work with.
Centralization of the R&D facilities and the production facilities, desire Samsung to maximize their resources and machinery. High adaptation to adjust the course of production, able Samsung to produce and broad market their five major products division of Semiconductor, digital technology, telecommunication, LCD and digital appliances. The results, production variety of product mix with lower cost to meet the customer demand. Offering the market with variety or multi product segment, gave Samsung the advantage to other competitors. Example, by providing the varieties of models and product features, Samsung are able to tab to a larger market segment compare to Apple or Nokia. Centralization of R&D also gave Samsung the advantage to keep their intellectual property within their boundary and mass produce at the same time.
Samsung is an aggressive market reader. They are the early adopters of new technology and innovation, while their competitors still in R&D progress or even finding the market niche to commercialize the products. Samsung has an aggressive learning curve, which them an advantage and ability to read the market demand better than other competitors. As the result they are able to produce customized products to meet the customer demand. Samsung stable and strong financial portfolio, gave them the advantage to launch and adopt through aggressive marketing campaign and promotion. Positions themselves before any competitor does by identifying the customer’s need and demand to enhance their lifestyle. The information and data gathered, along with the close monitoring of the market trend, able Samsung to customize to customer need. Samsung have a large product portfolio, which cover broad market and at all level.
Samsung has been in the market since the 60’s and has been well established. Acknowledging and creating the competitive advantage ensure their dominant in the industries. The fact that they are in the top 5 in smart phone vendor and shipment for 3rd quarter 2012, with 31.3% market share, proofed that they are the major player in the industry.
Continuous exploration and exploitation of market and technology through R&D, allow Samsung to be a solution provider for human kind on their daily living. Samsung is a brand name that represents the qualities, technologies, lifestyles and benchmark in the industries.
SAMSUNG’S MANAGEMENT ANALYSIS
The management SWOT analysis covers four dimensions namely; the strengths, weakness, opportunities and threats. By going through a SWOT analysis, you become aware of the most important dimensions that have an impact on the operations of the company. Once a SWOT analysis has been jolted you can come with relevant strategies in order to succeed in the competitive environment.
A good SWOT analysis can help the company and competitors place themselves in the market wisely. Therefore, here we look at the SWOT Analysis of Samsung to give you an idea of how the company is operating in the world.
Samsung has a wide product range, which allows them to grab ample market share from various markets. This allows Samsung to not only earn a high return but it also allows them to diversify their risk and failure. According to many magazines, Samsung holds a significant portion of the market share in nearly all its products.
Samsung is a reputed name and many people are familiar with it around the world. It also has won many awards on its high quality products. It has the ability and resources to use the latest technology and offer new and exciting features frequently. It has won many awards due to its ability to make innovative, sleek and slim products. It has set up many production plants in low cost locations, thus they save on cost of production significantly. It also recently has attracted ample positive press, thus its reputation continues to grow and has a positive impact on the operations of the company.
Samsung never introduces a new design on its own; it always waits and sees to its competitors. Thus, it missed the first mover advantages. It does not charge high price for its products, therefore often people relate the low price to begin a supplier of low quality products. General perception supports that the higher the price, the higher the quality of products. Many Samsung products are not user friendly, therefore consumer often hesitate to switch to Samsung products even if the price and quality is exceptional.
It does not focus on a specific niche; it offers its products to the mass market only. It does not create its own software therefore it often relies on other sources to complete the products. Samsung faces immense competition from new companies and online companies. High set up and operation cost for such a company.
Samsung should make an active effort to offer unique products to customers, in order to grab more market share. It could start creating software’s for their hardware devices and reduce outsourcing. It could launch sub brands to the company, with new and improved strategies. It could open more stores to serve more customers. It could make an effort to launch creative products first, rather than after its competitors.
Samsung should participate in product development and attract more customers. It should also consider participating in various events to attract attention. It could offer additional services to retain existing customers and attract new ones. Increase in the need for mobile phones, Samsung could exploit this need well.
Samsung has linked product lines, which means that if one product line fails due to its own reasons other product lines will also suffer. Samsung production is very scattered; it controls and operates different products while its competitors use their resources and effort on one segment only. Diversification takes a lot of effort and attention. It has set up production plants in low cost areas, which are subject to ample political and economic instability. These instabilities can have an impact overall company it the crisis gets unmanageable. It is facing threats from many other low cost companies.
Various companies have realized the importance of advertising, therefore Samsung will be subject to a lot more competition as advertising creates and draws attention of consumers. Countries all over the world are experiencing a high cost due to high inflation rates in most locations. Many government legislations are now active against the innovative technology due to health and mental concerns.
The above section clearly reveals the SWOT Analysis of Samsung. By going through the SWOT Analysis of Samsung you can understand and further evaluate the company’s performance to your own advantages. However, the above SWOT Analysis of Samsung is limited to certain significant points only. Therefore, when evaluating a company it is best to search online for more SWOT Analysis of Samsung so that you have all the information you need to assess the company.
SAMSUNG’S CORPORATE STRATEGY
4.1 The Eco – Friendly competitiveness
The company have shown high concern in develop Eco – friendly products in order to reduce environmental impact. A wide range of activities were carrying out by Samsung to deliver an innovative eco – friendly products to customers. These activities were guided by their focus on green management, products, workplaces and communities. Samsung green management policy was aim to boost development on greener environment through their business activities.
4.1.1 Eco – Products
In 2004, Samsung develop a system that manages product’s compliance with environmental criteria. It was named as Eco Design Assessment System. This system ensure Samsung product’s comply with environmental criteria such as resource efficiency and eco-friendly materials as what being stated in global environment regulation. (“About Samsung” 2012). The system than was being upgraded by introduces eco – rating system to all developed products. This rating system will rate the product to three categories which are eco – product, good eco- product or premium eco – product. Recently, Samsung has set a goal to ensure that 100% of their products exceed good eco – product by 2013. (“About Samsung” 2012).
In addition, Samsung also believes that its product should have long lifecycles in order to meet environmental care requirement. Therefore, Samsung implemented a strategy that providing reasonable product warranty. Recently, Samsung also come out with innovations that extending the lifecycle of certain product type. Samsung introduce its innovative technology called “smart evolution kit”. This technology enables customers to simply upgrade television processor or software by plugging the business card size kit at the back of television. This technology encourage customer to upgrading rather than replacing.
4.1.2 Recycling Activity
The next strategy take by Samsung is in respond of requirement of recycling laws that increasingly interested by government in Asia and America. Samsung electronics have develop a proper take back systems by collaborate with the government and related industry associations to develop an effective take back system by meeting the obligation. Samsung implement these activities by implement several voluntary take back programs for its product that at the end of their lifecycle. Among them are Samsung Recycle Direct which operates in USA, and India. This program enables people to drop off Samsung products at collection site or Samsung service centre. Samsung also offers take back service for mobile phone and portable products for consumer around the world
Samsung also launched in (Samsung Take back And Recycling) STAR in 2005 to ensure proper recycling process. Under this program, all returned printer cartridge will recycle to something useable. The part that cannot be recycled will be disposed and treated in a safe way. (“About Samsung,”2012)
4.2 Mutual development with business partners
Supplier relationship is crucial to any organization. Suppliers can directly impact the financial performance of an organization as they will influence product development cost, manufacturing schedules, inventory levels and timeliness of delivery goods or services. Samsung realize that it’s worthwhile to have investment focus on this relationship in order to be effective and efficient.
4.2.1 Strengthened relationship with supplier
According to Olsen and Ellram (1997), the link between the characteristic between of the relationship such as trust and cooperation need for further research. In order to be a true global leader in industry, Samsung believe it business partners relationship is a key element. Samsung shared it growth with outstanding suppliers by expanded its support programs to become global companies. The support programs were involved in activities that provide training, technological supports and funds. The communication between Samsung and its supplier were being strengthened by listening to voice of their suppliers from a top management visit on a regular basis.
Recently, Samsung also are in planning to put more sharing growth activity with their key suppliers such as free use of patented technologies, support for patent registration of new technology developed by supplier.
4.2.2 Corporate Social Responsibility
In line with its strategy to support the local communities and its commitment to Corporate Social Responsibility (CSR), Samsung have come out with the strategy to choose and evaluate their supplier by integrating CSR element in the criteria. CSR activities are growing rapidly in many international organizations. These CSR activities provide Samsung with important opportunities and competitive advantages.
Samsung take innovative strategy by conducting annual supplier evaluation including CSR activities and achievement as part of its evaluation. This strategy is aim to give supplier incentives as their participation in CSR activities structure by Samsung to fulfill common code of conduct by Electronic Industry Citizenship Coalition’s (EICC). The CSR evaluation criteria consist of 20 different areas including ban of child labor, occupational safety and health and environment management
4.3 Creative Culture
Samsung realize that high employee’s participation in the company growth is essential in order to let them feel sense of dignity, pride and ownership of organization’s vision. Samsung strategy to build creative organizational culture in strengthen the competencies of their employees are giving great positive impact on Samsung competitiveness. According to Keyton (2012), organizational culture is not a tangible thing, like an iceberg, it is less to be visual seen but imagined by sets of artifacts, value, and assumption that are designed, managed and exposed by organizational members and through their interactions. Samsung comply with this theory by actively promote creative organizational culture that allows their employees to pursue a healthy work life balance in a creative and challenging work environment. Samsung also are welcoming employees that with different background and facilities.
Samsung is committed to create work environment that support the diversity of the global market the serve. Every employee in this company regardless of gender, race, and or country of origin should be treating equally in give a voice. Diversity management strategy takes by Samsung is classify into two basic directions. First, it focuses on diversity for minorities which concern the issues on inequality. The strategy are undertakes in upgrade policy and systems to allow people with diverse traits to work creatively. Second, it focuses on diversity perception on all employees. The strategy is aims to foster creative organizational culture that respect diversity by changing the mindset and perception of all employees.
These diversity strategies are being demonstrated by offering various programs for female and disabled employees. Female employees are being offered to various programs that supports their commitment to both work and home. It includes parental leave and in house child care facilities. Samsung also have implement separate recruitment program for disabled graduate and internship program for disable students. Samsung continuously support diversity for minors by improving facilities for disabled employees in order to build culture as an ideal workplace.
4.3.2 Talent based recruiting of software and design expert
“Future creator challenge” is a talent based recruiting process designed to hire new employees in software engineering and design which two criteria creativity and expertise are the key factors. The recruitment process were not conventionally ask for written exam but let candidate to proof their talents by submitting application as evidence to their resume or certificate. Selected applicants will undergo interview sessions to test their technical ability and evaluation on their ideas and solution. (“Samsung Electronic Sustainability Report” 2012)
SAMSUNG’S COMPETITIVE ANALYSIS
5.1 Competitive analysis on Samsung
A competitive advantage is an advantage gain over competitor by offering customers greater values either through extra benefit, value added criteria or price factors. Competitive advantage is essential for a company like Samsung in order to be sustainable and successful over the long term. The sustainability of Samsung today is the result from the effort has been taken to some key elements of their remarkable triumph.
5.2 Innovations as the essence of sustainable development.
Samsung’s sustainable development is backed by innovation to several forces that become key success for Samsung. The innovation take by Samsung to overall business operation are addressing key issues surrounding quality and cost. Samsung strictly focuses in these issues by undergo innovation process to get lower manufacturing costs, high profits and reach the market swiftly. In this section we’ll look on the factors that encourage innovation in Samsung business operation that at the eventually will lead to competitive advantage.
5.2.1 Effective R&D system
Samsung electronics have developed an effective R&D system at headquarters and product divisions. The engineers will work on long term project or multiple division projects at corporate R&D lab. The lab used by them also is supported by Headquarter and Product division.
In addition, Samsung also develop their R&D centers in various locations. This can help R&D team to identify or observe future trends and opportunity for their technology capabilities and key technologies. This capability is manage effectively by having extensive training system to develop leadership talent. Sophisticated mechanism and evaluation system also are being used to take calculated risk when exploring new markets. This action shows that Samsung are very careful when explore new product opportunity. The team also needs to develop contingency plans to prepare different scenario that might being happen.
5.2.2 Creative talent
Samsung aware that innovation is the main source to being remain competitive in this industry. The only way to improve innovation performance is by employing managers that have right set of skills and always like to experiment and take the risks. This kind of leaders are important in directs the organization in creative work culture. The brave decision take by a leader can encourage new mindset and way of thinking to the subordinates. The awareness of need for innovation has made Samsung implement several actions to demonstrate their focus on it. In four years, Samsung have double up numbers of workers working on design, budget for design were increased by 20 -30 percent annually and more design centers were opened. (“Strategic Direction,” 2005)
5.3 International production capabilities
Recently, Samsung are facing great competition in order to sustain in industry. The competitors have recovered Samsung competitiveness by investing in offshore production. Increased overseas productions are seems to be the key major component in their strategic response. In this section, we’ll discuss on how international production capabilities perform by Samsung lead this company to be competitive in industry by reviewing some major action taken by them.
5.3.1 Expansion of offshore production
Starting in 1970s, Samsung have started to look over international linkage to acquire product designs and marketing outlet and focus on its mass production capability. In 1990s, Samsung have shown rapid expansion of offshore production as their major strategy. The strategies followed by improvement of R&D capabilities to remain they are still competitive in rapidly changing environment.
International production capabilities are important for Samsung in order to reap cost competitiveness by utilizing the low cost resources available in South East Asia. Youngsoo Kim (1998) claimed that Samsung implement this strategy by establishing Singapore based purchasing office in 1991 to speed up the internationalization of production. This key intermediary is aggressively played its role in purchasing and distributes huge amounts of component and its affiliates.
Since 1990s, Samsung productions plants in Asia were in several countries ranging from end products to components including China, Vietnam, Malaysia and India. The presence of Samsung’s production in Asia was increasingly determining its secure position in the industry by having good connection between production capabilities and marketing objectives.
5.3.2 Well trained employees in Asian affiliates
Samsung have to make sure their offshore production sites are producing products that follow the specification decided by them. This is important in order to make Samsung are able to reap cost competitiveness by producing in low cost resource country. Samsung assure this condition by trained the employees in its Asian affiliates or sending Korean trainers to the affiliate.
In 1990, technicians from refrigerator plant in Indonesia were sent to South Korea for conducting a training session for 3 months. One third of Samsung Microwave plant in Malaysia was also being trained in Korea. These actions have benefits Samsung when the ratio of component sourced from nearby regional suppliers had risen above 50 percent. (SMM, September 1993)
KEY DRIVERS FOR FUTURE GROWTH
6.1 Samsung Key drivers for future growth
The involvement of Samsung in electronic and mobile market needs them to survive within the industries for the next 20 years. In the other it means that Samsung have to set their key drivers that can allow them archive as well as a benchmark for the future growth. This key driver also is based on Samsung achievements and capabilities that they have now and then to continue with adding some more new keys to guide them to realize their vision and mission. The keys driver for Samsung future growth is also known as their sustainability in present towards the future. Focusing on Samsung Electronics, Samsung sustainability showed that their performance in surviving the industries and can be also as a benchmark to survive in the future. According to Nidomulu and Prahalad (2009) company that make sustainability a goal will achieve competitive advantage in the future , that mean rethinking business models as well as technologies, products and processes. In 2010, Samsung sustainability performance and plan focusing on talent management, integrity management, green management, social contribution, partners collaboration and products/services. For 2011 they set 9 material issues as a guidance to sustainability in future growth; (1) Creative Organizational Culture (2) Employee Health and Safety (3) Integrity Management (4) Increasing Social Contribution (5) Patent (6) Climate Change and Energy (7) Water Management (8) Mutual Growth (9) Supplier CSR(Corporate Social Responsibilities) based on Samsung Electronics Sustainability Report 2012.
6.2 Samsung Electronic 2011 Sustainability Plan
For Talent Management plan in 2011, Samsung plan to, introduce telecommuting/ work at home scheme for married employees, increase percentage of female executive, set up idea proposal system at oversea research centers and hire new recruits with disabilities. Samsung plan on Integrity Management was to improve compliance program also related activities, declare compliance management and signing of the compliance agreement by employees. Instead of talent and integrity management Samsung also focus on Green Management plan which the plan to set 96% ratio of Eco-product development, set long/mid-term targets for water management, build a global environmental management system and support for outside country partners’ environment management system. In developing Social Contribution Samsung plan to introduce new regional social contribution based on global guidelines (Samsung Hope for Children) and to create tools in assessing impact of social contribution programs. Samsung needs a supportive partner in order to help them achieving their vision and sustain. Partner Collaboration plan for 2011 is to sign agreement for mutual growth as well as conducting monitor on progress in mutual growth and assess partner companies CSR (Corporate Social Responsibilities). The last plan for products and services are to expand outside country service centers and have more subsidiaries company and receive Korea as well as international awards for their products and services. The plan of sustainability was create in 2010 and will be apply in 2011. Samsung key drivers are based on their stakeholder, environment and their threat. It now translate to 9 material issue to be more focusing on that particular factor that can drive them to sustainability in future growth.
6.3 Samsung Electronics Sustainability Reports 2012
Samsung Electronics Sustainability Reports 2012 is based on performance in 2011 and the plan that to be apply in 2012. Samsung rank in 73rd in the most sustainable corporation in the world. Samsung Electronics’ core business including of the manufacture and sales of digital media devices (mobile phone, digital TVs, refrigerators, air conditioners, monitors, printers and communication systems) and components (memory chips). Instead of Samsung headquarters in Korea they now have nine subsidiaries in certain region in the world which responsible in managing production and sales. Beside their successful in hardware manufacturing, Samsung is will become the new leader of the IT industry when they started strengthening theirs soft power capacity. As their vision to realize which includes achieving targeted sales of USD 400 billion, becoming one of the 10 most admired companies and one of the top 5 global brands and in the world. Samsung Electronics manages theirs businesses base to Samsung different types in technology, consumers and market in Device Solutions (DS) or Digital Media and Communications (DMC) division, consolidating their independent operating structure. Digital Media Communications is gathered into Consumer Electronics (CE) and IT and Mobile Communications (IM) divisions. The Consumer Electronics division is in charge of home appliances department and visual display business department. The IT and Mobile division is took charge of managing IT Solutions, wireless businesses, Network business, the Media Solution Center and digital imaging displays . This strategy gives changes which were made to the employment in hiring of soft power experts that become more value than before in the ‘Smart’ era. They had announced their intention to do a technical shift by turn to a soft driven company and made a ‘Software center’ to increase their software capacity until it’s on a right track with their world most wanted manufacturing. Shifts in the Device Solutions (DS) division can also bringing extension of the organizations in charge of controller, software and solution development to make sure different teams. The extension of the software connected organizations was made to realize Samsung Electronics’ vision of creating experience and new value by merging Samsung’s strength in hardware design together with an emotionally attracting user interface and optimized software. Samsung Electronics also enhanced the organization took charge of medical and bio device business then they expanded the Bio Lab at Samsung Technology Research Center into the Bio Research Center. They also appointed bio material experts to consolidate their research in the area and upgraded support for bio medical and bio similar research.
Figure : Samsung Electronics Division Market Share (%) source Samsung Electronics Sustainability Report 2012
They plan to become IT industry restructuring due to the appearance of cross-sector industries and resumed global economic decline. Samsung Electronics plans to make the largest investment ever to tighten the competitiveness advantages of present businesses and set up the foundation of new businesses potential to drive Samsung especially in Electronics Industries growth in the future. In 2011, they invested KRW (Korean Won) 13 trillion in facility expansion for semiconductors manufacturer and KRW (Korean Won) 6.4 trillion in display panel manufacture (10% greater investment than originally planned). They also building R5 (new research center) which is now under construction in the Samsung Digital City (estimate completion 2013) the landmark of IT and R&D will estimate have more than 23 thousand researchers. They also plan to combine more than 15 core component research centers including their memory, semiconductor and LSI research centers. The new center will give the foundation for their research and development in existing product and for the next-generation display technologies and the new non-memory semiconductors.
For the future Samsung Electronics is on establishing a bio-business and medical. For medical industry they invest KRW (Korean Won) 1.2 trillion in expecting sales of KRW (Korean Won) 10 trillion by 2020.. They were also nurturing a bio-similar (bio medicine) and already developed a digital x-ray that using visual information processing and digital technologies in photo-taking. Quintiles (Samsung Electronic Subsidiaries) had established Samsung Bioepis in 2012 and Samsung Biologics in April 2011. In 2016, Samsung Bioepis will start global sales of Bio-similar products and manage international clinical testing. The bio-similar business capacity will consisting of product licensing, manufacture development, clinical testing, and sales capacity. For software development strategy they increase the number of software engineer in order to meet their software development capacity. In order to realize their vision and future growth Samsung has; (1) started the software development to produce more appropriated and smarter software for Samsung gadgets and devices. (2) Initiated the Media Solution Center in the Silicon Valley, America that specializes in software to build service development and capacity on content. (3) Operating training programs and recruiting talented software engineers to maximize their capacity.(4) created a new engaged employees group ‘S’ to conduct core software experts in operating systems, smart TV software and mobile apps ( August 2011). (5) Created a special talent-based employing process for software (‘S’ workforce group) alternative of a more standardized process that exactly like to R&D staff employing. Samsung created a new ‘Software Academy’ (for short-term training) that has the ability to train for more than five thousand employees in order to achieve 50% of software training needs.
6.4 The Live Smart Product and Samsung Stakeholders
People nowadays tend to the term Smart Work, new office working style using the mobile device and Internet. It is assist people to enlarge the scope of collaboration also to improved work productivity. They produce notebook of 50% thinner with transition between application and faster start-up (application of file storage between smart devices and PC). Eco-driver Printer function which saves toner usage with the same quality. The function of Eco-simulator can also save electricity and paper. The smart printing application is enables direct printing from mobile devices (smartphones and tablet PCs).In Smart Life even you are not at home Samsung give your chance to control your air conditioner, washing your cloth and even clean your house . All of Samsung appliance can save electricity and assist your in house job. Samsung Smart Robot Cleaner (based on vacuum technology) has cleaning efficiency of 93% with extended battery life by 30% it is equipped with on-board camera (for smart view function) also with the function of video conference. Samsung Smart Refrigerator assist people to manage food using the touch screen interface that connect to online store (Food Manager Application).
Figure : Samsung Electronic Domestic and Overseas Workforce 2009-2011 (Source Samsung Sustainability Report 2012)
Samsung actively reported their quarterly business results, Corporate Social Responsibilities CSR policies and achievements with their shareholders and investors. The Social Responsible Investment (SRI) companies always make a visit the Samsung Electronics Headquarter in Seoul Korea to discuss CSR issues that equivalent to the electronics industry. They discuss about environmental management targets, waste management and occupational safety issues. In 2011 customer’s inquiries increased dramatically on Samsung Electronics CSR.
Samsung created online open communication platform (LiVE) for employees of all ranks. The LiVE platform allow all employees to post memos, give opinion and communicate among themselves in real time for fast responses/ NGO (Non-Government Organizational) always collecting information, conducting interviews with executive and make site visits to Samsung Electronics. Samsung Electronics has been actively responses to past various issues raised by NGO and always remain communicate with them. Sharing growth among large companies and SMEs (Small Medium Enterprise) was the Government South Korean policy focus in 2011. Samsung Electronics joined in a public-private dialogue by the Shared Growth Committee, be a member of Korea Business Council for Sustainable Development, and actively communicated their opinions on energy-related and climate policies. Samsung Electronics has made variety communication channels to collect opinions from their suppliers. Their supplier grievance and complaint handling system allow them to state their problems and find solutions. They were also responding supplier opinions and collected through seminar and training sessions.
6.5 Samsung 9 Material Issues as Key Driver for Future Growth
The previous three years, Samsung focus their sustainability six key performance area including talent management, integrity management, green management, social contribution, partner’s collaboration and products/services s. However, they have decided to comprise global issues that have the potential to affect their business activities as well as its overall competitiveness in order to gain relationship with their stakeholders. Nine key issues have been selected through the process; Creative Organizational Culture; Employee Health and Safety ; Integrity Management ;Increasing Social Contribution; Patent ;Climate Change and Energy ;Water Management ;Mutual Growth; Supplier CSR
6.5.1 Creative Organizational Structure
The first key driver for future growth is the creative organizational structure it include the work & life balance through work smart; establishing a work culture that encourages learning and development; talent-based recruiting of software and design experts; and diversity management (female employee disable employee, global diversity) in establishing a work culture that encourages learning and development Samsung electronics improving productivity by applying a flexible work schedule, effective time management as employee can arrive at work between 6.00 am and 1.00 pm.
Figure : Samsung Work Smart History
Through Creative Development Research Institute System, Samsung provide their employees with opportunities to attain creative new ideas which take professional incenses and all advantage of their talents towards that encourages taking risks. This system encourages Samsung employees to develop creative idea. During the system they are free from their core job and no penalty occurs if the employee not achieves the goals. The first product came from the institute is the eye can for disable user substitute for pc mouse. Samsung aggressively hiring most talented software engineer in order to archive their goal and vision. In diversity management Samsung hiring more female worker due to flexible working for those whose have small child to take care. The flexible work allowed them to work at home. Beside that Samsung also establish in house child care facilities for their workers. Samsung show their concern on hiring the disable employee and for now they have 1,100 disable worker in the other hand Samsung help them to develop their carrier and give them opportunity to live in better business world and society.
Figure : Samsung sustainability report 2012
6.5.2 Employee Health and Safety
To help employees monitor their health, Samsung Electronics provides annual health checks. Their employees have opportunities to get advice with health experts like doctors and nurses. The leading problem for employee is work stress that risk to personal health also business management. Samsung operating consultation centers, conducting meditation programs and yoga lessons, and volunteer activities to help their workers remain productive in a supportive working environment. Their effort is also in establishing Musculoskeletal Disorder Prevention Center, hiring full-time sports science experts teams, publishing a safety guide on non-work related activities and establishing Employee Health Research Center. The Employee Health Research Center is focusing on 4 areas of research including, analysis of new production processes as well as materials and epidemiology, toxicology of hazardous materials, the work environment ,with a vision of becoming an industry leading occupational health and environment research center.
Figure : The role of Health Research Centre (Source Samsung Sustainability 2012)
6.5.3 Integrity Management
Samsung Electronic integrity management focus on established compliance team towards for realizing their vision in expansion global market. In 2011, they have expanded their Global Legal Affairs & Compliance Team from two hundred to two hundred seventy employee for more effective operation.
Figure : Samsung Integrity Management
The compliance program divides to 3 compliance awareness that is prevention, monitoring and follow-up. In prevention awareness it is include of employee education, compliance manual, compliance self-test system, operation of a help desk, sensing on laws and regulation and report. The monitoring process focusing on regular and non-regular monitoring by members of compliance organization units. The last component is the post management/ follow up that consist analysis of case of incompliance to identify improvement measures and employee training for prevention of recurrence. In order to establish on internal awareness compliance Samsung has to strengthen and developed the training program for existing and new employee.
6.5.4 Increasing Social Contribution
The economic crisis nowadays result to the bigger gap between rich and poor, as well as the increasing unemployment rate, bringing high demand for more responsible capitalism. In the other point of view, the society is demanding the business sector to take action and responsibility for problems occur instead of depending on the government. Rely on that, Samsung Electronics believes that they must take responsible in remaining and improving the sustainability of local communities in within their area. Samsung Electronics has their own mechanize to increasing their fundamental contribution programs in volunteer activities and donations. One of their programs is Samsung Hope For Children that has been conducted in 30 countries with different 9 regions. The program focused on supporting education and good health of youth and children. As same also on Samsung subsidiaries in different countries managed various support programs including low-income youth health benefits, youth education support and job trainings, designed for needs of the children and youth of local communities.
Figure : Samsung Social Contribution
The other social contribution that has been conducted by Samsung Electronics in South Africa are employees volunteer program (employee sent to Sudan, Zambia), engineering academy, solar energy lantern and solar internet school.
The patenting issues on technology now is major problem from preventing imitate of Samsung Electronics product. They have failed in defending their designed against Apple and have been sued in total USD 1 billion. In addition, as the competition in IT technology is ever emphasizing, while the intention of various IT technologies is in trend, the patent resists are bound to become aggressive. Besides that, the rapid technology innovation cycles that has increased patent competition. Samsung Electronics increased the strength of their workforce importantly and reorganized the patent related organization for purpose to protect their know-how in technology .To sustain in technology competition in 2010 the rapid decision making resulting in establishes the Intellectual Property Center (IP Center), that affiliated with the Samsung Advanced Institute of Technology ( including hiring outside expert
Figure : Samsung Patent Applications
Samsung strategy on securing pattern issues is by partnerships. Samsung Electronics proved the huge strength of their patent protection portfolio by signing cross patent contracts which allow a broader cross use of patents with other global IT companies. They collaborate with Qualcomm (mobile phones), Rambus (entire semiconductor products), Sharp (LCD panel module) and in Kodak (camera technology), and in 2010, also followed by deals with Microsoft (MS) and IBM for the cross license of technologies of the mobile phone operation system. The same strategy also applied by Samsung in using pattern license of Google Android operating systems. From the partnership they also gain new innovative in production future technology.
6.5.6 Climate Change and Energy
Concerning of Climate change has become one of the most important global issues. Climate change is already causing many people in daily lives with unexpected weather conditions, flooding and draughts, the function of greenhouse gas (GHG) management has become a key challenge for the global community due to reduce the impact on climate change. Samsung Electronic has establishing Climate Change Mitigation System EM 201 in 2009 They also established a greenhouse gas emission management system that can monitors direct and indirect emissions connected with all business activities including global partners, logistics, manufacturing, product use and worker’s work related travels. Samsung are carefully monitoring each source of Greenhouse Gas emissions and getting reductions to fulfill their corporate responsibility (CSR) in reducing climate change.
Figure : Samsung Climate Change
Product energy efficiency improvement makes reduction average energy consumption of products by 40% and achieving 0.5 W of standby power by 2013. Supplier support is for the establishment of global supplier’s GHG inventory system by offering training and expertise sharing to global suppliers. Implementation if energy management system and establishment of internal energy efficiency certification system subjected to all business sites in Korea. Incorporation of GHG reduction facilities is the reduction F-gas emission from the semiconductor and LCD manufacturing. Samsung Electronics low carbon product certification winner is on LED TV, Note PC and semiconductor.
Figure : Low Carbon Product Certification Winners (Source Samsung Electronics Sustainability Report 2102)
6.5.7 Water Management
The other major factor and issue in this key driver in future growth is how Samsung can manage the water sources (Water Management). Samsung semiconductor manufacture is responsible on daily consumption 0f 7500- 15000 tons of pure water. As a leading semiconductor manufacturer, Samsung is now on high responsible in water management in order to maintain water resources.
Samsung Electronics Water Management Resource policy recognizes the importance of water resources in the sustainability of business and society management, and provides to its protection as a responsible corporate citizen of worldwide community. According to Samsung Electronic Sustainability Report 2012, there are several of code conducts; (1) Strive to minimize water risk impact by our business activities. Analyze the impacts of our products, production activities and services make on water resources and minimize risks by identifying and implementing new technologies; (2) instill an awareness of the importance of water resources as a part of our corporate culture. Integrate the importance of water resource protection and sustainability management into the corporate culture and ensure responsible water resource management by employees with the highest consideration for the impact on local communities and the environment. (3) Proactively cooperate with public water policies. Proactively contribute to the establishment and implementation of water resource management policies by international institutes; the government and local authorities in line with relevant guidelines; (4) disclose our policies and activities on water resource management. Disclose company policies and activities related to water resource use to stakeholders including local communities in a transparent manner.
6.5.8 Mutual Growth
Samsung Electronics expanding their support programs for outstanding 1st tier suppliers to become worldwide companies, and we start providing different support policies for 2nd – and 3rd -tier companies to achieve shared growth. They developed key programs to support supplier shared growth including technological supports, training, also provision of support funds. They then strengthened communication and more carefully listened to their suppliers through an effort including a visit by top management to their suppliers. Samsung announced shared growth implementation policies; financial support programs for 1st and 2nd tier suppliers, support for 2nd tier supplier competitiveness building, increased trade opportunities, technology innovation contest, cultivation of global SMEs (Small Medium Enterprise) and incentives for 1st tier suppliers with good shared growth practice. According to Samsung Sustainability Report 2012 they also plan take different kind of shared growth promotion measures including co-development of core parts for boosting the competitiveness of suppliers, inclusion of shared growth performance indicators in performance assessments of our employees responsible for supplier collaboration and responsive adjustment of raw material price changes in supply contracts, free use of patented technologies, support for patent registration of new technology developed by suppliers.
Figure : Samsung Shared Growth Management Implementation Plan and expected Benefits
Shared growth management implementation plan focus on; establish a supplier support fund; elevated qualified 2nd and 3rd tier suppliers into 1st tier supplier; cultivate global SMEs; implement fast-track ‘ Temporary Supplier Registration Policy’ for SMEs with Innovative ideas or new technology. As for the share growth on expected benefits to suppliers is focusing on; funding for investment in facilities and R&D; access to greater supplier benefits, improved credibility in market; strengthened reputation as official partners of Samsung electronics; increased business opportunities for companies without prior business relationship; increased sales of supplier products with funding and technical support; more transparent and responsive communication between suppliers and Samsung
6.5.9 Supplier CSR (Corporate Social Responsibilities)
Samsung Electronics is enduring by the EICC (Electronic Industry Citizenship Coalition’s) basic code of conduct as a guideline for fulfilling their CSR (corporate social responsibility). They have provided the development of a CSR management structure by supplier companies and incorporated CSR activities as a part of their supplier evaluation criteria to further incentivize their participation in CSR activities. Samsung also applied a 3rd party validation program of supplier CSR activities. Developing Corporate Social Responsibilities activities is a part of supplier evaluation of Samsung Electronics. They have been managing annual supplier evaluations using criteria consisting technological competitiveness and other internal criteria to identify leading suppliers. In additional, the company has provided financial support and collaborative technology development opportunities. In 2011, Corporate Social Responsibilities achievements and activities have been a part of the evaluation criteria previously; they increased their importance in the overall evaluation. The CSR activity evaluation criteria including 20 different areas covering the EICC (Electronic Industry Citizenship Coalition’s) basic code of conduct, consisting a ban on environmental management , child labor and occupational health and safety.
Figure : Samsung Supplier CSR
SAMSUNG TECHNOLOGY PLANNING
Technology planning is a central component in a corporate business planning. It is needed both at the corporate level and the strategic business unit (SBU) level (Steel, 1989). Large company such as Samsung and Apple view technology panning is interrelated with their ability to offer their customers some extra values on their advance technology.
According to (Khalil, 2000), the process used in planning is in itself at least as important as the plan developed. The process includes:
Examining all points of view in the organization.
Setting clear, realistic objectives.
Charting a path or paths toward achieving those objectives.
Obtaining commitment for execution.
Executing and following up on the plan.
In my opinion, it does makes sense that Samsung has the ability to use the resources to use the latest technology and offer new and exciting features frequently. In addition, Samsung has the strength with the design with attractive styling that interest the customers as the result of development of Samsung new products that involve team of product designer. Referring to the message from the CEO of Samsung Electronics in their Annual Report for financial year 2011, they have the cutting-edge hardware in order to strengthened software capability. According to the report, they have achieved unmatched global competitiveness in hardware, and in year 2012 they focused on enhancing their software capabilities in user interface, user experience, and design and brand awareness.
Further, Samsung can draw up its this suggested technology plan, according to Porter et al. (1991), a technology planning framework based on the work of Madox, Anthony, & Wheatley (1987). This framework, shown in Exhibit 1 below follows the general process of strategic planning used by many corporations. It entails forecasting the technology and the market to assess opportunities and needs together with the organization’s strength and weaknesses, developing and implementing a plan of action to achieve the organization’s goal and fulfill the mission.
TECHNOLOGY PLANNING FRAMEWORK
Forecast the technology: This is the starting point of technology planning. Project both internally owned technology and that available in the marketplace over the planning period.
Analyze and forecast the environment: Identify key factors in the organization’s environment, potential states of the environment, key uncertainties, major threats (especially competition) and opportunities.
Analyze and forecast the market: The development of a requirement analysis that identifies the current needs of major customers determines the likelihood that these needs will change and specifies explicit demands that these needs make on the organization’s product or services. The tools of market research and impact assessment will complement each other. However, analytical tools, no matter their sophistication, will never be adequate. It is imperative that this step includes direct contact with potential customers.
Analyze the organization: Delineate the major assets and problem; develop a catalog of available human and material resources; and assess recent performance against stated objectives. Understanding the strength and weaknesses of your organization is critical and cannot be over emphasized. This may be great time to involve external consultants to avoid the errors that arise when members of an organization assess themselves.
Develop the mission: Specify critical assumptions; establish overall organizational objectives and specific target objective for the planning period; and specify criteria by which to measure the attainment of those objectives. This step will provides the central focus of the organization and should include as many participants as possible. Organizations have a much better chance for success when each member understands and feels a sense of ownership in the mission.
Design organizational actions: Create candidate actions; analyze and debate them; develop a consensus strategy limited to a few key actions, possibly attendant on several key contingencies. This is another excellent time to apply the tools of impact assessment.
Put the plan into operation: Develop timely sub-objectives, if appropriate; specify action steps, schedule, and budget; develop tracking mechanism; and specify control mechanism in case performance falls below established standards. During this step, monitoring can be very useful. Technological marketplaces are dynamic, and each firm must maintain a knowledge base of changes and customer reactions to them.
Source: A. Porter et al., Forecasting and Management of Technology. © 1991, John Wiley and Sons Inc. extracted in Khalil (2000).
The first step in technology planning is forecast the technology. In Samsung, they have to predict the future as a matter of crucial issue as the rapid changing technology factor in their organization. They have to face with the technology discontinuities that’s resulted from the launch of the new product with a new technology features. For examples, in their mobile business, news has been spread out to the market on Samsung Bendable screen technologies on their upcoming Smartphones to the market in the mid of next year. The introduction stage of bendable screen technology may resulted to the discontinuties of the flat hard screen of any phones in the market right now. Further, Samsung must forecast on the market perception from now, in order to justify the true market base for their new bendable screen technology. Is it can totally a revolutionary era of screen technology whereby everyone in the world will be change their phones to the bended screen? If yes, it is an answer that the existing hard screen technology by Samsung will be fully discontinued by stages.
The second step in technology planning is analyze and forecast the environment. Firstly, Samsung has to identify their organization’s environment involve that will determines the opportunities and threats on the organization. Organization’s environment involve the task environments; customers, suppliers, distributors, and the general environments; socio-cultural forces, political-legal forces, global forces, economic forces and technological forces. By this factors, Samsung can analyze the potential states of each factors that can bring uncertainties to Samsung. For example, how the new technologies that introduced by the brand new IPhone 5 from Apple can bring some potential threats to Samsung’s product. As we also know that Apple is the nearest competitor to Samsung and had legally claimed that Samsung product was copying their design. Based on the article by (Alexander, 2012), a jury in California decided that Apple should be awarded compensation for rivals Samsung copying their designs. Judge Lucy Koh ruled that Samsung should pay Apple $1 billion after the jury found Samsung infringed six of seven patents for its mobile devices. The verdict may lead to a ban on US sales of hand-held electronics that are deemed to violate Apple’s rights – although Samsung has said it will appeal against the ruling. Samsung Lawyer, John Quinn commented that such decision should not be allowed to stand because it would discourage innovation and limit the rights of consumers to make choices for themselves. In my opinion, Samsung has the rights to innovate its own product in term of technology forecasting in order to cope with the rapid changes in the technology and the complex needs and demands from the market.
We move further to the third step of technology planning; analyze and forecast the market. This is the steps whereby Samsung can generate some details analysis of the needs of their existing and potential customers towards the technology that being used on the next product. According to (Alexander, 2012), the Smartphone industry worth over $200 billion a year. Every day, more than a quarter of all Samsung employees (40000 people) engage in research and development to discover the next generation of powerhouse products that will take everyday life beyond the ordinary and beyond imagination (Samsung, 1995). In Samsung, they look at innovation is crucial to their business in order to fulfill the crucial needs and wants of the consumers. In my o