Globalization

Globalization is an economical phenomena that occurs when a good or service brings people together from many different nations. Samsung Electronics is currently one of the top conglomerates in the international market. The company’s globalization strategy brings together goods, services, labor and people in order to produce technological innovations to create capital.

Samsung Electronics is a global manufacturer of consumer electronic goods and telecommunication products. It also is the global leader in monitors and televisions and is the largest producer of DRAM, SRAM and flash memory (Datamonitor, 2008, p. 5). With its firm spot in the market, Samsung continues to lead the market by maintaining a positive brand image. After the Asian financial crisis in 1997 occurred, Samsung realized the need to restore their brand image. Samsung took steps towards reviving the brand by focusing on research and development in order to create innovative products while still keeping in mind the importance of high product quality.

The Asian financial crisis of 1997 left banks unable to pay their international debt and created an unstable currency (Kwon, 2004, p. 425). The financial crisis occurred because of many different reasons, but the lack of government support in conglomerate lending caused too many unsecure loans to be made in order for continual growth. Therefore, conglomerates were financially being supported by inefficient financial services because of the lack of government supervision. The large amounts of borrowing continued into the 1990’s until December of 1997, the debt/equity ratio was 450 percent. This was almost twice the amount of the previous year and in turn, caused the won to depreciate. Because there was no government management, the Korean economy continued to develop but was knee deep in debt (Kwon, 2004, p. 426).

Samsung Electronics replaced their old brand image post 1997, by focusing on efficiencies and profits rather than continuing to expand and grow. Now for the first time, Samsung was looking at how to produce efficiently in order to increase profits rather than looking at the big picture of company size and market share. Samsung changed the brand image by centering in on research and development to deliver new innovative products to the market while stressing the importance of product quality in order to add value to the product. Samsung vividly modeled the golden triangle in order to turn around their brand image (Slywotzky, 2007, p. 17). Prior to 1997, Samsung’s brand was known for having similar products as competitors, but was known as “cheap” products. Also, because Samsung set low prices there was no way for the company to sell premium priced goods. While Samsung was facing declining profits, little product differentiation and lack of brand image added to the downwards slope (Slywotzky, 2007, p. 17). However, Samsung’s CEO Jong-Yong Yun identified the importance of continually innovating and speed to market due to electronic goods quick depreciation in value. As a result of the much needed brand enhancement, Samsung began focusing on research and development to deliver better products at a faster rate. With innovative products being produced faster than competitors, Samsung was now a leader in the industry rather than trailing behind competitors. While creating new products, Samsung gave more power to the designers rather than engineers in order to keep up with current trends (Slywotzky, 2007, p. 17).  Samsung opened an in-house design school where engineers, designers and marketers went to classes six days a week in order to learn the latest designs and to create a competitive advantage. However, designs were aimed towards specific cultures all over the world in order to globalize their products. Also, the extreme stress on product quality was proven when Samsung took the entire inventory of faulty wireless phones, about $50 million worth of phones, was ordered to be destroyed. Also, employee’s exercised the quality movement by wearing headbands that read “Quality First.” By transitioning the image of the products, Samsung was forced to remove their “cheap” TV’s in order to not misrepresent the company’s new vision and mission (Slywotzky, 2007, p. 17). Nevertheless, the loss in revenues was necessary in order to develop and strengthen their new brand image. Another tough strategic business decision Samsung was forced to make was to make sure the brand image and position of their retailers was consistent with theirs. However, the world’s largest and most powerful retailer, Wal-Mart, no longer fit in the same market as Samsung. Therefore, Samsung decided to pull all of its products out of Wal-Mart. Although both of the examples of strategic business decisions involved extreme short term losses, the long term gain is much more significant (Slywotzky, 2007, p. 17). One other way Samsung established its new brand image was through extensive marketing, advertising and branding. Samsung now spends near $3 billion per year on marketing and advertising, made a two year deal with New Line Cinema for strategic product placements, and is one of the sponsors for the Olympic Games (Brooke, 2005, p. 3). With Samsung’s new brand image and recurrent innovative products, Samsung is neck and neck with Sony for the lead in the consumer electronics market (Slywotzky, 2007, p. 18).  

In order for Samsung to grow and continue to put their attention towards globalization, the labor and philosophy of Samsung’s people must be in alignment with the company. To enhance business performance and globalize Samsung, Samsung Global Strategy Group was created. According to Samsung’s information website, Samsung Global Strategy Group was formed in the late 1990’s after the Asian financial crisis in order to develop a pool of global managers. Samsung Chairman, Kun-Hee Lee believes that SGSG is necessary because “We need high caliber foreigners who can reveal to us a fresh perspective on trends and the latest information. Let us develop these foreign staff to become global managers abroad by familiarizing them with Samsung through a two to three year posting in the Chairman’s Office.” SGSG’s mission is to “enhance Samsung’s business performance and global reach, while simultaneously developing a pool of talented global managers.” Samsung says that professionals associated with SGSG and partner companies are gaining the knowledge of Korea and experience through Samsung to become strong global managers. The SGSG’s daily roles play a large part in the performance of the entire Samsung Group by continuously offering different perspectives and original innovative ideas. Samsung trusts that by senior management within Samsung and SGSG joining forces, this step’s up globalization efforts. SGSG develops strategic, new business development and advisory services to Samsung affiliate companies. These activities are designed in order to receive new perspectives that could increase the efficiency of strategic planning and business operations, and to provide global strategist’s part of SGSG an opportunity to transition to a global career with one of Samsung’s affiliates. The three major duties of SGSG are:

1. Planning and executing major consulting projects, usually lasting between three to six months, and based within SGSG.
2. Dispatch of members to the domestic operations of major affiliates for general management or project purposes.
3. Permanent assignment of members to a global career within the domestic and international operations of a group affiliate.

According to Samsung, these activities will allow global strategists to develop a great deal of knowledge about the Korean culture, business and language while also learning the internal operations of the Samsung Group. After the SGSG program, graduates will develop professional expertise, knowledge of Samsungs Corporation and a sense of cultural awareness in order to help Samsung grow and aid in steps towards globalization.

            Also, another way that Samsung restructured their labor in order to grow as a global company was by identifying that it was time to change by using time as the method for changing. Samsung’s chairman saw “time as a tool for change,” and they created a new structure for employee’s labor organization. The new labor organization consisted of employee’s beginning work at seven in the morning and heading home at four in the afternoon (Lee, 2005, p. 1). The case study performed by Heejin Lee determined that the new work hours aided in organizational change by creating a sense of crisis for change, by innovating new ways of working and by molding employee’s attention towards the value of their time as a resource. The 7-4 scheme described in Lee’s case study, was implemented because of the wide spread belief that time is the center of organizational culture and organizational change. The new temporal system affected the surface level of organizational culture but also created a new organizational culture for Samsung. The 7-4 system not only changed the working hours of employee’s, but it also affected the fundamental aspects of work and life by creating an underlying impact on time. This new temporal scheme not only changed the employee’s work hours, but it made them change the way they valued their work and time. In order for Samsung to continue to grow and develop as a multinational corporation, it is necessary to recognize the large role that organizational change plays in the process of changing and developing the company. Without continuous improvements in organizational culture, the company will not be able to keep up with technological innovations and won’t be able to capitalize on the issue of time (Lee, 2005, p. 4).  

            Samsung’s revival since the late 1990’s has caused the stock to go up about 20 fold. During 2000 till 2004, sales had doubled: from $27 billion to $55 billion. Samsung is currently the world’s most valuable non-U.S technology company (Slywotzky, 2007, p. 18). Samsung is now worth more and has twice the market capitalization of its competitor Sony (Brooke, 2005, p.2). Also, the company is now able to have premium prices similar to Sony. Because of the globalization of Samsung and the focus on design and innovation, they are now viewed as a top brand that offers top of the line, high quality products. In January of 2006, Samsung Electronics had exceeded $100 billion in market value. Also, Samsung’s shares had increased 5.1%, causing the company’s capitalization to boost to $103 billion, a company record (Cho, 2006, p1). In order to maintain high quality and innovative products, Samsung is preparing to double its spending to $40 billion on research and development. Also, Samsung has made this job a team process, having nearly 30% of all employees contributing research, development and design (Slywotzky, 2007, p.19).

            Samsung has been able to pick its self up after the Asian financial crisis and turn around to grow into one of the top electronic companies as a result of taking action rather than reacting to the crisis as a victim. Not only does Samsung Electronics globalize their company by maintaining their position as a top distributor of electronic products in foreign markets, they also globalize their company by innovating their employees roles, organizing labor structure, uphold a strong brand image to reflect their vision and mission, and continuously make advancements in technology through extensive research and development.