BM1807

ACTIVITY
Samsung
Samsung is one of the biggest conglomerates globally and the largest “chaebol” or family-owned
business in South Korea. Established in 1938 by Lee Byung-chul as a trading company selling noodles and
dried seafood, Samsung has since diversified into various industries, including electronics, chemicals,
shipbuilding, financial services, and construction. As a result, Samsung is widely diversified with over 80
standalone subsidiaries. The conglomerate accounts for a fifth of all South Korean exports.
In 1987, Lee Kun-hee, the youngest son of the founder, took over as the chairman of the conglomerate.
His strategic intent was to make Samsung a world leader in high-tech industries such as consumer
electronics. To execute his strategy, Lee Kun-hee focused first on gaining market share by invading
markets from the bottom up with lower-priced products at an acceptable value. Over time, quality and
consumer perception became more important. Samsung’s image, however, was overshadowed by Sony
and Motorola, the undisputed world leaders in consumer electronics and mobile phones during this
time. During a 1993 trip, Lee Kun-hee saw firsthand how poorly Samsung’s electronics were perceived in
the United States and Europe, and he vowed to change that. Back in Korea, to show his disappointment
and determination alike, he destroyed 150,000 brand-new Samsung cell phones in a large bonfire in
front of all 2,000 employees of Samsung’s Gami factory. Many employees credit this as the pivotal
moment in redefining Samsung Electronics’ strategic focus and initiating a successful turnaround.
Samsung Electronics increased spending significantly on Research and Development (R&D), as well as on
marketing and design. Meanwhile, Lee Kun-hee was undertaking a complete overhaul of the
conglomerate’s structure to change Samsung’s sclerotic culture to a culture that deeply values seniority;
he introduced merit-based pay and promotion. Lee Kun-hee, who holds an MBA degree from George
Washington University, hired Western managers and designers into leading positions and sent
homegrown talent to learn best business practices from other firms wherever they could be found. Lee
Kun-hee also set up the Global Strategic Group to assist non-Korean MBAs and PhDs with a smooth
transition into their positions in a largely homogenous cadre of Korean executives. In addition, he moved
Samsung to the high-end market, offering premium consumer electronics such as flat-screen TVs,
appliances, semiconductors, and mobile devices such as its famous Galaxy line of smartphones.

Answer the following questions: (3 items x 10 points)

1. What is/are the triggering event/s that act/s as stimulus/stimuli for strategic change in the given
case?

 The triggering factors that stimulated strategy change in the firm were first, Lee Kun-
new hee's strategic aim to make Samsung a world leader in high-tech sectors as the
new chairman of the conglomerate. Due to his new strategy, we reached the next
triggering event, the Strategic Inflection Point. This event occurred because Lee Kun-
strategy hee's was slashed by competitors in the same industries, who were aware that
the conglomerate was undergoing a major shift in its new or disruptive industry and
technologies.

2. Which characteristic/s of strategic decisions is/are described in the case study?

 One of the characteristics of strategic decision described in the said case was the rare
characteristic of Lee Kun-strategic Hee's decision to enter the high-tech industries without
precedent to follow in the company's previous experience or strategies; the decision to
transition to the said industry was truly rare and new for the conglomerate or company.
Next, this strategic choice was significant because, despite the setbacks in his approach,
Lee Kun-hee created a critical moment for his staff by burning 150,000 Samsung
smartphones in front of them, demonstrating his dissatisfaction and desire to achieve his
 objectives. In order to fulfill the above objectives, Samsung Electronics also focuses on
R&D, marketing, and design, as well as outsourcing certain managers and designers.

Finally, thanks to the outsourcing of certain managers and designers, as well as the
resolve of the whole management, Samsung Electronics was able to reduce organizational
difficulties and foresee future actions in order to meet some of our organization's
objectives.

3. How will Samsung maintain its successful market position by using one of the modes in strategic
decision-making?

 Because the environment in which Samsung operates is changing rapidly, including

changes in trends, it is important to build consensus and develop needed resources
before committing an entire corporation to a specific strategy, Samsung will be able to
maintain its successful market by using Logical Incrementalism.

02 Activity 1 *Property of STI

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