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Agc Samsung Presentation
Agc Samsung Presentation
By Frank Gilliam
Samsung Electronics, South Korea: Strategic Planning, Business Development & Turna
Performed various interim management roles at both high growth and distressed
businesses working to stabilize operations during crisis situations. Consultant at KPMG, Oracle and PwC advising CFOs of the Fortune 1000. Work history includes:
Orchestrated turnaround of a $2 billion Korean electronics business serving wireless, consumer electronics & PC end-markets outperforming industry by 140% CAGR5 years post implementation. Resolved liquidity crisis after assigned CFO responsibilities by the board of directors restructuring working capital & short-term debt. Recovered clients equity through interim management of a distressed mid-cap, 1,200 workforce, Taiwanese corporation implementing financial and operational restructuring plans. Interim CEO and CFO for high-growth financial services business in Chengdu, China. Directed operations and established control over corporate finance & accounting functions.
Todays Discussion
Franks Experiences at Samsung Electronics
Presentation Agenda
Company Overview Strategic Planning New Business Development Turnaround & Restructurings Key Success Factors and Q&A
The views in this presentation are the perspective of one person. Samsung is a huge company different people with different roles working in different parts of the organization will come to different conclusions.
Samsung Overview
Excels as a fast follower competing on price, speed to market and product features in large established markets Strong engineering, cost control, Korean culture, prefers execution risks over new market risks Struggles in markets outside of these core strengths
Quick Comparison of Two Great Companies with Strong and Very Different Cultures
Autonomy
Samsung is Not
A Marketing Company
Until recently, has struggled to build effective brands after investing billions
Entrepreneurial
Nurtures Creativity
Samsung culture often not compatible with fostering creativity
Not comfortable seeding emerging businesses that have new market risks
Awards given to teams for cost reduction efforts. E.g., tough supplier negotiations
Back-office processes capable of accurately tracking costs down to product line level
Example 2
Will resist throwing out an approach with accumulated costs to start over despite becoming increasingly impractical
COUNTER PRODUCTIVE
Example 3
Project with lower overall costs that exceed initial budget versus one padded to be higher then completed under budget
APPEARANCE VS. REALITY
MANAGEMENT INEFFICIENCY
Values conformity, punctuality, dedication to the job, following rigid project plans, neat & tidy work conditions
Values freedom, social interaction, complicated problems to solve, extra sensitive & quirky
Senior Mgmt
EE, Hard Science, R&D Backgrounds
Marketing Idiots
Considered home for poor performers that couldnt design
Data / HW Focus
Excels when product features can be quantified: speed, density, resolution
Software Deficiencies
More difficult to quantity (e.g., UI) & separate into discrete parts for development
Presentation Agenda
Company Overview Strategic Planning New Business Development Turnaround & Restructurings Key Success Factors and Q&A
Strategic Planning
Late 90s Chairman Lee believed culture was too Korean to become thriving internationally company producing higher value products
Recruited MBAs from top 10 B schools, moved to Korea for hands on training by senior executives then rollout to manage businesses internationally
Program had many problems initially high turnover, cultural issues improved gradually over time: separate HR tracks, rotations, assigned mentors
Presentation Agenda
Company Overview Strategic Planning New Business Development Turnaround & Restructurings Key Success Factors and Q&A
Western IT Firms
Decentralized Bottom Up
Samsung
Centralized Top Down
No No No
Potentially career ending
Purpose to develop Prior project revealed weakness new businesses internally focused in core markets forecasting severe on new emerging downturn in 3-5 markets as part of diversification years strategy
Stage 1 Select high level areas to investigate WHO? CEO, SVPs, NBD
Prioritize where new business WHAT? development resources should be focused Approve budget and assign BU resources to assist NBD*
DELIVERABLES Business cases for selection by CEO Completed strategic, market and financial evaluations Quarterly Reviews Assign program manager, establish operating budget & performance metrics Ongoing
WHEN?
Annually
Industry Participants/web
Customer care Where to compete Required resources abouts by segment How to compete Deployment Control points Competition Competitively economics Partnerships Industry evolution advantaged value Follow through proposition scenarios
Market Attractiveness
Position Attractiveness
Financials
Established Markets
Late entrant to large market with flat industry profits and full of competitors
New Markets
Zero competitors in new market that does not yet exist
YES!
Culture Clash
Business development team versus business units
New Business Development Background & Culture Mostly westerners recruited from business schools Marketing professionals, strategy consultants, engineers Stronger external networks with weak internal networks Market-focused, big stories BUs lack vision, see the world as half empty. Hung up on small details Business Units Koreans recruited locally from engineering programs Design & development, R&D
Prior Positions
Networks
Focus
Customer
Marketing Sales
Business Focus
Logistics / Distribution
Data Sheets Latency, Voltage, Density, Mhz, Cache Reference Packaging Designs Product Focus Firmware Circuit Diagrams Development Tools PIN Outs Process Tech CMOS, Analog, Mixed Signal
Manufacturing
Business Units
Presentation Agenda
Company Overview Strategic Planning New Business Development Turnaround & Restructurings Key Success Factors and Q&A
Restructuring Programs
Turning around poor performing business units
RED
YELLOW
GREEN
1
Strategic & Operational Health Assessment
2
Liquidity Improvement Planning
3
Stabilization Planning
4
Quality Earnings Planning
Samsung Objective
Return to positive margins & improve strategic positioning Operational & strategic then financial Group consensus through directing steering committee
SVPs from S&M, DD, HR, product & strategic planning depts.
Months & years
3
4
Industry Avg.
-
FY 1 Current
100 million
FY 1 Potential
100 million
DSOs
AR
11% of sales
9% of sales
Liquidity Improvement
BILLING, AR & CASH RECEIPTS Item
1
$1.9 million
Credit Approved?
Result
5 days DSO decrease 50% decrease in bad debt 2 days DSO decrease
Comments
Review of online shipping log shows invoices are sent 5 days after products are shipped as bills of lading are hand delivered at the end of the week. Credit dept. reviewing less than 10% of invoices due to legacy issues before upgrading to automated credit check system. Company is not actively managing float. Review of settlement dates shows 2 day delay due to aggressive value dating by companys bank.
Sales Invoice 1
Credits Sales into Sales Journal All sales issued with 30 days of credit
CUSTOMER
Credits AR System
Profit analysis tracing margins to core set of activities Strengthening controls across the organization Revising metrics, standard costs & budgets
Financial Restructuring
Optimize capital structure lowering cost of capital
- Clients Only Samsungs CFO Office handled these issues
PATH FORWARD
Barrier 2 - MARGINS
Lack of quality accounting data and/or company not properly segmented for useful reporting
Barrier 1 - LIQUIDITY
Unable to accurately forecast cash flow
Few effective liquidity controls installed throughout the organization
Analysis Revealed
Delivered poorly functioning samples lacking items required by customer technical reference designs, software stacks, supporting documentation etc. CEO moved up deadlines and cut budgets forcing VPs to deliver bad products early
Reason
Managing higher-value solutions business same as core business focusing on price and speed SVPs would not argue to the CEO he was using the wrong metrics to run the new business
Benchmarking
The safe way to tell your boss he is wrong
Tell the Korean CEO of a $20billion business in front of his vice presidents that the main problem is him?
Option #1
Benchmark a respected company facing a similar situation Show how that CEO used the wrong metrics for managing the new business
Option #2
Presentation Agenda
Company Overview Strategic Planning New Business Development Turnaround & Restructurings Key Success Factors and Q&A
Know Yourself
Strengths, weaknesses, obstacles to change
Do or Do Not
Few things done half way - changing business models, entering new markets..
Focus on Core
Continual focus on improving core business
Dont enter cell phones mature market, falling profit margins, full of competitors with better tech.
Must embrace large scale M&A to keep up with Intel & TI. Cant continue to grow organically
Acquire Hynix to build market share and contribute to strong Korean economy
Financial Hurdles
Strategic decisions still had to pass financial reviews - M&A, operating poor performing business etc.
Q & A time