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  • Published on: 7th September 2019
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1.0 INTRODUCTION

Samsung Electronics

 Formerly called as Samsung Electric Industries

 Headquarters: Suwon, South Korea

 Founder: Lee Byung Chull

 It’s a public multinational electronics company

From year 2014, Samsung electronics has launched their mission statement, \"Inspire the world, Create the future\". Samsung Electronics are not only characterized by their impressive and new technology but also innovative products and creative solution.

Samsung Electric Industries was established as an industry Samsung Group in year 1969 in Suwon, South Korea. During early stage of the company, the products were electronic and electrical appliances such as televisions, washing machines, refrigerators and air conditioner. After that, in year 1970, Samsung NEC was established, cooperating with Japan’s NEC Corporation to manufacture home appliances and audiovisual devices. Samsung industrial subsidiaries includes Samsung Electronics, Samsung Heavy Industries and Samsung Engineering and Samsung C&T, Samsung Life Insurance, Samsung Everland, and Cheil Worldwide. After Lee’s death in 1987, Samsung had separated into 4 business groups which is Samsung Group, Shinsegae Group, CJ Group and Hansol Group. The main competitor of Samsung Electronics in its smartphones business is Apple Inc. Between year 2014 and 2015, share of Samsung smartphone fell by 2.3% while Apple\'s share increased by 34.9%. Samsung Electronics mainly focuses on four areas. First area is digital media business whereby Samsung electronics launched computer devices. Second is semiconductor business area, Samsung develops semiconductor chips. Third is the telecommunication network business area includes multiservice DSLAMs, fax machines and cellular devices while the fourth, LCD business area focuses on producing TFT-LCD and organic light emitting diode.

In year 2005, Samsung Electronics beats Sony and become the world’s twentieth largest. Samsung Electronics launched first mobile phone in year 1988, however the sales were poor since the market is dominated by Motorola. After many years of modifications, in year 2007, Samsung Electronics became the world’s second largest mobile phone maker, overtaking Motorola for the first time.

2.0 CONTENT

2.1 COMPANY PRACTICES (POLC)

2.1.1 Planning

A six-step process that encompasses strategy planning, implementation, and evaluation

Step 1: Identifying the organization’s current mission, goals, and strategies

“Inspire the World, Create the Future”. The vision for Samsung Electronics is stated in its new motto. This vision reflects to Samsung Electronics’ promise to inspire its communities by three key strengths which is – “New Technology”, “Innovative Products”, and “Creative Solution”. Samsung promotes new value of – “Industry, Partners, and Employees” for Samsung’s core networks. Samsung hopes it can brings a better experience for all and do a deed of merit for a better world through these efforts.

Samsung planned out a specific plan to increase $400 billion in revenue and wants to become one of the world’s top 5 brands by year 2020. To approach in its management, Samsung has established 3 strategies which is – “Creativity”, “Partnership”, and “Talent”. Samsung looks forward to explore new area including health, medicine and biotechnology.

Step 2. Doing an External Analysis

Opportunities

Advantageous Economic

Samsung is interiorizing the social shifts due to economic condition of South Korea seems advantageous. Korea’s government gave Samsung a constant policy. Samsung is reasonably equipped to take care of technological changes and maintaining good international relationship with other countries and the local.

Threats

Legislation

The legislation related to industry has been passed frequently. Technological transformation that took place in the industry was very high. Regulatory issues and safeguarding of property rights was main threats in legislation.

Step 3. Doing and Internal Analysis

Strengths

Stable Market and Financial Position

Samsung maintained a very good position against its competitors because customer are loyal and appreciates the brand as well as maintaining a very good relationship with its suppliers and its labourers. This caused Samsung’s financial stand strong and stable compared to its competitors. Besides, production processes and procedures of inventory management are consistent with industrial standards.

Weakness

Unadvanced Product

Samsung is facing hard competition although it’s in a very good position against its competitors. The quality control of Samsung product are not good compared to other phone competitor such as Samsung faced phone recalls due to the quality of its product -- Galaxy Note 7 explosion incident had been reported. Other than that, South Korea’s labour unions are strategically linked for collective bargaining and negotiation. Due to this situation, Samsung need to make some improvement in defining the vision, mission and strategic corporate objectives.

Step 4. Formulating Strategies

According to SWOT analysis, Samsung is focused on improving their product quality to increase its market profit.

Figure above shows that Samsung product (Note 7) had explode during charging (Source from Google)

From the picture above we can see that product quality is an issue that caused Samsung Company to loss its profit.

Quality is a factor which will lead Samsung Company to success as we can see that the sales has increased compared to five years back. Samsung has gone into differentiation strategy to be able to sustain their market in the future so Samsung has introduced Samsung Electronics’ Information System.

Step 5. Implementing Strategies

By using this system, Samsung assigns a serial number to its products, supplier, facility, component and account title at Samsung. Since Samsung introduced the system, it enables easier searching and identification of items and reduced its base reference data and number of codes to less than 200,000 from 900,000. Samsung uses a supplier relationship management (SRM), a part of Information System to facilitate cooperation with partner firms. SRM enables batch processing of parts procurement, product delivery, billing, and payments. SRM provides data and recommendations on the price and quality of the product to the Product Life-cycle Management System (PLM) and these information allows advance forecasts of production costs and product quality.

Step 6. Evaluating Results

Samsung successfully implemented single group wide information system to improve their profit and quality in several major product lines. Thus, differentiation strategy works. Statistic below shows that global net income made by Samsung Electronics between 2005 and 2015.

2.1.2 Organizing

In functional departmentalization, Samsung applies compliance management, Samsung Company operates with compliance teams at all levels of organization to encourage compliance-focused culture throughout the company. Compliance Committee is a top decision making body in the company, its playing role of global legal affairs, overseas regional headquarter, a compliance teams and individual organizations for each business division. Monitoring compliance management of subsidiaries or operating localized compliance programs are the responsible of the regional headquarter office.

In a global legal affairs and compliance team there are more than 400 personnel responsible for compliance management. They are providing employee training and conducting integrated management of information on regulations.

Table : Samsung Electronics Training Development System

Organization Structure for Compliance Management

Samsung has realigned Human Resource Department (HRD) to further increase their quality control for company productivity growth in future. Samsung stresses importance of improving soft competitiveness like emotion, knowledge, culture, and creativity elements. Samsung invested heavily in R&D, design, and branding. Chairman Lee strongly encouraged technology development. Technology was used to transform itself into a world-class company. As a result, Samsung ranks as the world’s number two in the number of patents registered in the United States.

Today, Samsung’s talent management systems, like its regional specialist program and recruitment of foreign talent are among main sources of its competitiveness.

2.1.3 Leading

Chairman Lee Kun-Hee implemented a new leadership and governance structure in Samsung Electronics based on three aspects namely governance structure, owner-manager and professional managers.

1) Chairman Lee Kun-Hee

a) Practised charismatic leadership

- Mr.Lee summons his management team at odd hours for emergency meetings

- Described as unpredictable and stern

- He has his final say in personnel decisions and corporate strategy.

b) Practised visionary leadership

-    Apart from motivating and inspiring his employees, Chairman Lee instils a   healthy sense of crisis that stimulates his employees to achieve ambitious goals

           c) Presents a far-reaching vision and strategic direction

2) Professional Managers at Affiliates

- Performs the role of strategist for the business concerns

(Lead their respective businesses on basis of autonomy)

Insight Leadership

- Chairman Lee’s insight leadership which can grasp business conditions and trends in advance focuses on establishing a vision and setting directions for investment.

Decisive Strategic Decision Making

- Chairman Lee only involves in important decision making on broad strategic matters as owner-manager to determine Samsung’s decision

Samsung Electronics also practises transactional leadership

- Samsung pays hefty performance bonuses to its employees according  to performance of affiliates or divisions

2.1.4 Controlling

Samsung’s Management by Numbers

Samsung’s management by numbers:

i) Policy deployment to employees

- Sets clear goals and specific ways to accomplish those goals and evaluates the degree to which those goals have been accomplished

Samsung’s Global Code of Conduct is founded on five Samsung Business Principles:

  i) We comply with laws and ethical standards

 ii) We maintain a clean organizational culture

iii) We respect customers, shareholders and employees

iv) We care about the environment, health and safety

 v) We are a socially responsible corporate citizen

Samsung’s core values includes people, excellence, integrity and co-prosperity

i) People

a) Human Rights

• Work Environment

• Employment Conditions

 Samsung’s internal ‘Regulation on Salaries and Benefits’

    complies with applicable labour laws and regulations

 Samsung ensures its employees are treated fairly based on

                                        their competence and achievement by adopting globally

                                        recognized standards on performance evaluation

• Equality & Diversity

 Samsung complies with ‘Anti-Discrimination Policy’ by providing

                                        equal opportunities to all qualified employees and applicants.

• Prevention of Child Labour

• Equality & Diversity

• Prevention of Forced Labour

ii) Excellence

a) Customer & Quality Management

• Responsible Sales & Marketing

• Product Quality Management;

 Quality Policy

i) We learn from customer because customer is always correct

ii) We identify defects clearly and respond to customer quickly

iii) We establish and obey appropriate standard

iv) We reduce quality cost through preventive activity

v) We never deliver defective products to customer

b) Green Management

• Environmental Safety Policy

• Eco-friendly Products & Technology

iii) Integrity

a) Data Protection & Privacy

• Handling Information

• Insider Trading

b) Fair Competition

• Fair Contracts

 Samsung complies with relevant laws in making purchase decisions, negotiating, drawing up contracts and managing contracts.

• Tax Policies

c) Anti-corruption

• Gifts, Hospitality & Lobbying

 Samsung complies with local anti-corruption laws and

                                        regulations based on Anti-Corruption and Bribery Policy

iv) Co-prosperity

a) Supply Change Management

• Supplier Management

• Chemical Substances in Product

 Samsung monitors it via supply chain management with respect to Samsung Electronics Standards for Control of Substances

2.2 SUCCESS FACTORS

2.2.1 Speed Creation Capabilities

After the commencement of New Management and reorganization of the company, Samsung had improved its capability to speed up decision making for the investment of new products, allowing Samsung to become the leader in the industries.

Figure 2.1 Samsung’s abilities in speed creation (Source: McGraw-Hill Education, “The Samsung Way”, 2014)

Figure 2.1 shows the key factors that made Samsung’s success are escalating its speed of decision-making process and implementation of the particular. It allows Samsung to grab the opportunities faster than the other competitors in the market.

2.2.2 Collaboration through Convergence

Business structure practiced by Samsung is diversified business structure. One of the major factors that led to Samsung’s success is the merging of those diversified business.

Figure 2.2 Three key elements carried out by Samsung Electronics (Source: McGraw-Hill Education, “The Samsung Way”, 2014)

To collaborate through convergence, Samsung carried out and connected the 3 key elements together and it would then allowed them to conduct the collaboration.

Figure 2.3 Synergy types and culture and systems conducted by Samsung to create the collaboration (Source: McGraw-Hill Education, “The Samsung Way”, 2014)

Figure 2.3 indicates how Samsung increase its sales, reduce the cost and enhance their soft competitiveness to implement the synergy. Furthermore, Samsung standardized their culture and systems to make the organization mechanism in order to achieve the synergy.

2.2.3 Progressive Revolution

Progressive revolution is another success factor of Samsung Electronics. Samsung enhanced its proficiency in technological revolution by focusing on being competitive in technological via uninterrupted resolution to stay ahead in the industry. So, Samsung is always the founder of new market.

Figure 2.4 Samsung’s capabilities in creating progressive revolution (Source: McGraw-Hill Education, “The Samsung Way”, 2014)

Figure 2.4 indicates Samsung has established an internal resolution by investing heavily in R&D, and absorbed more external knowledge by expanding its global R&D network. Samsung created an open-minded learning and resolution culture and improved their systems and processes.

2.3 MAIN CHALLENGES FACED BY SAMSUNG ELECTRONICS OVER THE NEXT 5 YEAR

2.3.1 Rebound

Upholding the external stakeholders’ faith in the financial markets and the government is Samsung’s first challenge.

The Lee family, one of the chaebol in South Korea, has exclusively controls the Samsung group. In year 2015, acquisition of Samsung C&T Corporation and Cheil Industries had strengthened the Lee family’s power.

However, some investors are dissatisfied with the restructure of the company and it triggered critical public opposition to family conglomerate. Conglomerates regulations become more rigid and taxes charged over the corporate are increased. Therefore, Samsung may face restriction due to the growth of political force.

2.3.2 Market challenge

Currently, Samsung emphasise more on hardware development and that could be the reason of declination of its success because the industry is getting very competitive and there is downturn in growth of global economic. By focusing on hardware development is not enough for Samsung to stay ahead in the industry.

Samsung’s earnings were estimated to decline, as its profits in the 4th quarter did not achieve the expectation. In year 2015, Samsung launched their new products, Galaxy Note 5 and Galaxy S6. Due to the existence of strong competitors, it had caused loss of not less than $8 billion in market value. This made Samsung’s shares dropped and the downturn of it might continue in the following years.

3.0 FINDINGS

3.1 PROBLEM WITH CURRENT OPERATION

Samsung Electronics Company faced some major problem that are not easily overcome. Samsung is losing their smartphone markets in the world. Google is a vital problems for Samsung. Samsung uses the android operating system in its smartphone, however, Google regularly undercuts Samsung’s offering by selling unlocked device often directly to customers. While Samsung attempts to layer on their own operating-system cosmetics through TouchWiz, it\'s essentially Android. Samsung doesn’t own its own operating system, it may lead to third-party manufacturers from slipping in and cutting prices while offering equivalent products. Samsung is in a difficult position by chasing a strong competitor like Apple and put pressure on Samsung to utilise the same core operating system as a competitor while Google undercuts Samsung on the hardware price.

In 2016, Samsung’s smartphone has an exploding battery problem, Samsung forced to delay shipments of Galaxy Note 7 smartphone, and knocked $7 billion off its market value. Shipments had been delayed for quality control testing.  The pending of Apple launch burdened Samsung to contain this quickly. Last year, production problems for the curved displays of the Galaxy S6 edge model causes a disappointing sales. Samsung risks a repeat if unable to solve the Galaxy Note 7 problems quickly.

Samsung\'s smartphones have to compete with a number of competitors in the same industry like Xiaomi, Huawei and Apple. Samsung’s smartphone have been increasingly expensive relative to other Android devices like Xiaomi and Huawei give customers a little incentive to choose them over other smartphones that could do the same function. Many Android smartphone could perform the same way or even better than Samsung and cheaper in price compared to Samsung.

3.2 SAMSUNG ELECTRONICS COMPANY’S INADEQUACY

Majority of Samsung devices does not have its own operating system but uses Android which belongs to Google. Adversely, Apple could do it because they already had its own IOS to run their devices. They could re-purposed their existing OS X codebase while Samsung are in a very different position. Samsung has create its own operating system, Tizen OS but it is too young and does not have enough apps. In addition, Tizen has to come out with Apps store or Play store like Android and Apple in order to make Tizen success. Z1 is Samsung’s first attempt to innovate a smartphone that’s totally of its own operating system but is hard to compete with Android and IOS which have been implemented a decade ago.

Samsung also announced that it had stopped selling the Galaxy Note 7 and would replace models that customer had purchased. However, the company’s action was not an official recall and would made it illegal to sell the phone. If Samsung was beginning the recall process, it should immediately report any issues to the Consumer Product Safety Commission (CPSC). The issue of a smartphone recall may lead to consumers would have no any other way of communicating with Samsung in order to replace the faulty phone.

4.0 RECOMMENDATIONS

Google’s Android is well known by others when people talked about the operating system (OS) of Samsung. Samsung has been running Android OS as their official OS since 2009. Although a new OS was created by Samsung during this period but the new OS, Tizen ain’t bringing any threat to Google’s Android.  Hence, this problem could be solved by implementing simplified ideas. Samsung needs time to build its own operating system to make more competitive. All employees must possess great skills in designing programmes. Skilled employees can contribute in enhancing the Tizen OS to compete with other OS. This will enable Samsung to fully develop and create their own smartphones with own OS. From the stated resources, Tizen OS seems hard to develop because there are limited hardware available for the new products of Samsung. Samsung is good at making excellent screen and almost every component of smartphones but the processors produced could not suit the demands of phones sold. Hence, Samsung needs to hire more specialists to solve these problems or cooperate with bigger companies to overcome problems faced.

Recently, explosion of the latest product of Samsung, Note 7 is a hot issue around the world. The explosion was caused by overheating of the phone battery. Samsung received reports claiming that overheating of batteries and phones catch fire.. There is also a precaution that could be taken to ensure the next products would not face the same problem.  Samsung should take this issue seriously and make an innovation change based on the faulty batteries used by the Note 7. Besides, Samsung need to review parts quality standard and specification supplied by the supplier before used in the assembly process. Samsung should improve employee training system to further enhance the skills and knowledge of the team who are designing and testing the batteries. Enhanced employee training is needed to reduce accidents and rate of rejection. In addition, the manufacturers could improve their manufacturing technology by using this Note 7’s issue as a reference in future to produce a better product. Lewin’s 3 steps model can be applied for this situation. Stage 1, Unfreezing includes communication. The team that is involved in the design of Samsung Galaxy Note 7 should be aware of the current problems and increase their willingness to change their behaviour. They should move and not dwell on the past. A change agent should be hired to facilitate change in the team. Stage 2, Changing include training and team building. After experiencing the explosion case, it might be a huge blow to the team. Team-building activities should be conducted to motivate them and help them in bonding after such a devastating issue. It should not be done only for individual with new workplace behaviour. Team building activities can be done to help work groups set goals and develop positive interpersonal relationships, such as setting a goal to develop more convincing and better products in the future. Also, it helps to strengthen the trust and relationship between employees.

5.0 CONCLUSION

Samsung Electronics has proven to be the one of the world greatest information technology company by its revenue. Samsung Electronics is a well-known brand because of the stable service, innovative reliable products

One of the main keys of success of Samsung Electronics is good in their management and decision making, which is Planning, Organizing, Leading and Controlling. In aspect of Planning, Samsung Electronics has good long term and short term objectives and also well planned strategies to achieve those objectives. In aspect of organizing, Samsung Electronics has a good organizational structure. The organization structure of Samsung Electronics is highly differentiated into a hierarchal structure both vertically and horizontally. For the leading aspect, Samsung Electronics has new leadership and governance structure while in aspect of controlling, Samsung Electronics has its own management by numbers. All of these contribute to the success of Samsung Electronics to become such a famous company.

In conclusion, through this assignment, we have learn a lot of new knowledge when we study about Samsung Electronics. This lets us to know the importance of management and how it will affect the success or failure of a company. During the process of doing the assignment, we identified that the knowledge and approach that we have studied during the class will help us to manage the team and complete the assignment smoothly.

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