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Provisional Translation
The Management Strategy of Samsung in East Asia
November 26, 2003
Lee Soo Chul, Executive Vice President, Samsung Corporation
Contents
Changes in the Global Economic Environment,
I and Economic Cooperation in East Asia
II Issues on Korean Economic Cooperation
Samsung’s Global Management and Management Strategy
III in East Asia
1
I. Changes in the Global Economic Environment and Economic
Cooperation in East Asia
Threats against global trade liberalization
Failure to reach consensus at the WTO Ministerial Conference in Cancun:
Multilateralism → Bilateralism, regionalism
Strengthening of regional economic cooperation regimes
Bilateral/regional trade agreements: 184 as of May 2003
Expanding economic cooperation in the EU, NAFTA, and CIS regions
Emergence of China and the potential of ASEAN
China, the World’s Factory—Trade volume in 2002: $620.8 billion (6th in the
world)
ASEAN—Population: 570 million, total trade volume: $700 billion
Accelerated promotion of economic cooperation among ASEAN, Korea, China,
and Japan
2
II. Issues on Korean Economic Cooperation
Korean Views on a Korea-Japan FTA
Increasing necessity of regional trade expansion and sense of urgency
Reinforcement of economic blocs, relative disadvantages of countries outside the
region, etc .
Expectations: modernization of industrial structure; market expansion
Concerns: trade imbalance; excessive dependence on Japanese technology
Consent to an FTA in principle, but harbor certain concerns.
Cooperation between Korean and Japanese entrepreneurs is important.
Korean businesses must strive to develop technologies and improve quality in order
to enhance their competitiveness.
3
II. Issues on Korean Economic Cooperation
Developing Korea into a Business Hub in Northeast Asia
Business hub in Northeast Asia
Logistics base Business center
- Ports, airports - Invite multinational corporations to locate
their Asian headquarters in Korea
- Financial center in Northeast Asia
Improvement of core facilities System modernization Improvement of the environment
Area development
- Incheon International Airport - Improvement of laws and - Designation of Incheon, Bus - Operating environment
- Busan/Gwangyang ports systems an, and Gwangyang as Speci (Tax, foreign exchange, labor/
- Customs-Free Zones, al Economic Zones, and deve
-> The Eurasian Silk Road management relationships, etc.)
international logistics support lopment thereof - Living environment
centers - Expansion of IT (Education, housing, culture, etc.)
infrastructure
Relaxed tensions on the peninsula and Favorable environment
south-north economic cooperation for foreign people and firms
4
II. Issues on Korean Economic Cooperation
Trade structure of Korea, China, and Japan
□ Korea’s trade with China ($100 million)
1990 1995 2002
Export 6 91 238
Import 23 74 174
Trade
balance △17 17 64
□ China’s trade with Japan ($100 million) □ Japan’s trade with Korea ($100 million)
1990 1995 2002 1990 1995 2002
Export 120 359 618 Export 185 326 299
Import 61 219 400 Import 126 170 151
Trade
balance 59 140 218 Trade
balance 59 156 148
5
III. Samsung’s Global Management and Management Strategy in East Asia
Samsung’s overseas operations 116 subsidiaries in 67 countries
Sales from local subsidiaries in 2001: $29 billion
SEG,SSEG (Electronics) FFT branch (Corporation)
SDIG (SDI), SCD (Corning)
Local corporation for Electro-Mechanics
SECA(Electronics) SER (Electronics)
SEBN,ELS (Electronics)
SEMUK,SEUK,SSEL (Electronics)
SENA (Electronics)
STP (Corporation)
SAS,SEA,STA,SISA,SSI (Electronics) SEP (Electronics) Kazakhstan (Corporation)
SHE (Electronics)
NY,LA (Corporation), San Jose corporation SEF (Electronics), SHPOL (Electronics)
SPEM (Electro-mechanics) Corporation
(Electro-mechanics) SEI (Electronics), Corporation TSED,SSEC,TSEC,TTSEC,SST,SESS (Electronics)
SDIA (SDI), SDSA (SDS), SOA (Techwin) SESA (Electronics) TSOE (Techwin), TSEM,DSEM (Electro-Mechanics)
UNION (Techwin)
NY corporation (Life Insurance, Securities) SSDI,TSDI (SDI), TSSC,SSG (Corning)
SDSC (SDS)
SEM,SAMEX (Electronics) SDIH(SDI) SET (Electronics), Corporation
SDIM (SDI) SGE (Electronics) SIEL (Electronics)
SEMSA (Electro-mechanics) SAVINA (Electronics) SEMPHIL (Electro-Mechanics)
TSE (Electronics) SEPCO (Electronics)
SEMTHAI (Electro-Mechanics)
SELA (Electronics) SECL SDMA,SEMA (Electronics)
SDIM (SDI)
SCM (Corning), Corporation
SAPL (Electronics)
Corporation/Electro-Mechanics
SEDA (Electronics) SEIN (Electronics), Fire & Marine Insurance
SDIB (SDI)
SEAU (Electronics)
Sidney (Corporation)
SSA (Electronics)
SEASA (Electronics)
6
III. Samsung’s Global Management and Management Strategy in East Asia
Samsung’s business performance
Over 5 years (1998 to 2002) -- Brand value
Sales and net income increased 1.6 times $10.8 billion in 2003 (25th in the
and 45 times, respectively. world)
Sales in 2010: 1.9 times that of 2002 ($8.3 billion in 2002, 34th)
Pre-tax profit expected to increase $70 billion in 2010
2.1 times
Sales Net Income
116.8 (US$ Bil)
72.0 8.9
0.2
1998 2002 (Source: INTERBRAND)
7
III. Samsung’s Global Management and Management Strategy in East Asia
Overseas investment strategy
1980s: Globalization’s beginnings
Established sales subsidiaries mainly in developed countries.
Built production facilities in Southeast Asia and Eastern Europe for roundabout export.
Early 1990s: Acceleration of Global operation
Responding to the international trend of regional trading blocs
→ entered local markets.
Entered the Brazilian, Indian, and Chinese markets.
Expansion into the U.K., Mexico, Malaysia, and other countries together with Samsun
g’s partners and affiliated companies.
Late 1990s: Restructuring stagnated businesses due to quantity-oriented
overseas operations, and shifting the strategy to IT business
Established new subsidiaries in China, India, and other emerging markets.
2000s : Differentiation based on local characteristics
Aspiring to enhance the synergy effect of the entire company.
8
III. Samsung’s Global Management and Management Strategy in East Asia
Management strategy by market
Center for local marketing,
and introduction of new Production facilities to secure
Technologies and information entry into local markets
Parts/semimanufactures
Europe
- Produce high-price-range products
U.S.A - Local marketing center - R&D and design centers
- R&D center - Local marketing center
(product development, Finished products - Establish regional control
design) headquarters
Technologies
Global strategy control
Base for headquarters Second most
roundabout export fundamental market
Korea - R&D -Second domestic demand
- Produce low-to-medium China market
Mexico class products - Develop and produce high
value-added products -Production site for the
- Produce and supply parts global market
-Develop international
-Utilize rich human resources
management resources
New export market
Production site for
Center for Introducing
multiple purposes
new technologies
-Production for roundabout
Southeast export
Japan
Asia - Supply parts to the U.S.A.
-R&D center
and Europe
- Production for re-import to Korea －Local marketing center
-Establish procurement and
regional control headquarters
9
III. Samsung’s Global Management and Management Strategy in East Asia
Operations in China
Electronics, Electro-
Mechanics,
Tianjin
68 locations nationwide SDI, Corning, etc.
26 production facilities 天津
北京 ▣
● Electronics
Beijing ●
Sales in 2002: $7.7 billion
威海
Sales in 2003: $10 billion Weihai
中國 蘇州
●
▣ 上海 Shanghai
Souzhou ● 寧波
China
Ningbo Heavy Industry
Shenzhen
Dongguan 深圳
深 Ìã
R&D Center 東莞● ● ● Electronics, SDI,
● ▣ 惠州
順德 Corning
Shunde 香港 Huizhou
Electro-Mechanics
Hong Kong
Corporation
10
III. Samsung’s Global Management and Management Strategy in East Asia
Chinese market strategy
Advance into the global market more aggressively utilizing China as a production
center.
Increase production facilities, operate R&D centers, and secure excellent human
resources.
Increase production facilities: 19 in 1999 → 26 in 2002
R&D: Establish related R&D centers (including communication research facilities),
when building factories.
Secure high-quality human resources under the initiative of the Head Office in Korea.
Implement a strategy that emphasizes brand (image) in order to differentiate
the company’s products from others.
Adopt a two-way sales strategy.
Export of products made in China directed by the Head Office in Korea.
Domestic sales in China conducted mainly by local sales subsidiaries.
11
III. Samsung’s Global Management and Management Strategy in East Asia
Operations in Southeast Asia
Electronics-related corporations
21 locations in 6 countries
Sales in 2000: $3.1 billion
Sales in 2002: $4.2 billion
(38% growth)
Samsung Corporation, Dai-ichi
Kikaku,
Samsung Fire & Marine Insurance,
Samsung Heavy Industry, etc.
Electronics, Electro-mechanics
Electronics, SDI,
Corning
12
III. Samsung’s Global Management and Management Strategy in East Asia
Southeast Asia market strategy
Enhance brand value.
Increase top market share products in each country and expand sales of
high-end products.
Supply aspect (production costs) → Demand aspect (market and earning
opportunities)
Enhance synergy effect of affiliated companies.
Introduce innovative processes and implement bench marking among affiliated
companies.
Conduct joint sales activities.
Secure high-quality human resources.
13
Thank You
Lee Soo Chul, Executive Vice President, Samsung Corporation
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