Provisional Translation
The Management Strategy of Samsung in East Asia
November 26, 2003
Lee Soo Chul, Executive Vice President, Samsung Corporation
Contents
I
Changes in the Global Economic Environment,
and Economic Cooperation in East Asia
II
Issues on Korean Economic Cooperation
III
Samsung’s Global Management and Management Strategy
in East Asia
1
I.
Changes in the Global Economic Environment and Economic
Cooperation in East Asia
ƒ
Threats against global trade liberalization
¾
Failure to reach consensus at the WTO Ministerial Conference in Cancun:
Multilateralism → Bilateralism, regionalism
ƒ
ƒ
Strengthening of regional economic cooperation regimes
¾
Bilateral/regional trade agreements: 184 as of May 2003
¾
Expanding economic cooperation in the EU, NAFTA, and CIS regions
Emergence of China and the potential of ASEAN
¾
China, the World’s Factory—Trade volume in 2002: $620.8 billion (6th in the
world)
¾
¾
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
ƒ
Increasing necessity of regional trade expansion and sense of urgency
¾
Reinforcement of economic blocs, relative disadvantages of countries outside the
region, etc .
ƒ
Expectations: modernization of industrial structure; market expansion
Concerns: trade imbalance; excessive dependence on Japanese technology
ƒ
Consent to an FTA in principle, but harbor certain concerns.
¾
Cooperation between Korean and Japanese entrepreneurs is important.
¾
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
- Invite multinational corporations to locate
their Asian headquarters in Korea
- Financial center in Northeast Asia
- Ports, airports
Improvement of core facilities
- Incheon International Airport
- Busan/Gwangyang ports
-> The Eurasian Silk Road
System modernization
- Improvement of laws and
systems
- Customs-Free Zones,
Area development
- Designation of Incheon, Bus
an, and Gwangyang as Speci
al Economic Zones, and deve
international logistics support
lopment thereof
centers
- Expansion of IT
Improvement of the environment
- Operating environment
(Tax, foreign exchange,　labor/
management relationships, etc.)
- Living environment
(Education, housing, culture, etc.)
infrastructure
Relaxed tensions on the peninsula and
south-north economic cooperation
Favorable environment
for foreign people and firms
4
II. Issues on Korean Economic Cooperation
Trade structure of Korea, China, and Japan
□ Korea’s trade with China
1990
($100 million)
1995
2002
Export
6
91
238
Import
23
74
174
△17
17
64
Trade
balance
□ China’s trade with Japan
($100 million)
1990
1995
2002
Export
120
359
618
Import
61
219
Trade
balance
59
140
□ Japan’s trade with Korea
($100 million)
1990
1995
2002
Export
185
326
299
400
Import
126
170
151
218
Trade
balance
59
156
148
5
III. Samsung’s Global Management and Management Strategy in East Asia
Samsung’s overseas operations
ƒ
ƒ
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)
NY,LA (Corporation), San Jose corporation
(Electro-mechanics)
SDIA (SDI), SDSA (SDS), SOA (Techwin)
NY corporation (Life Insurance, Securities)
SEP (Electronics)
SHE (Electronics)
(Electronics)
SPEM (Electro-mechanics)
SEF (Electronics), SHPOL
Corporation
SEI (Electronics), Corporation
SESA (Electronics)
SEM,SAMEX (Electronics)
SDIM (SDI)
SEMSA (Electro-mechanics)
Kazakhstan (Corporation)
TSED,SSEC,TSEC,TTSEC,SST,SESS (Electronics)
TSOE (Techwin), TSEM,DSEM (Electro-Mechanics)UNION (Techwin)
SSDI,TSDI (SDI), TSSC,SSG (Corning)
SDSC (SDS)
SGE (Electronics) SIEL (Electronics)
SDIH(SDI)
SET (Electronics), Corporation
SAVINA (Electronics) SEMPHIL (Electro-Mechanics)
SEPCO (Electronics)
TSE (Electronics)
SEMTHAI (Electro-Mechanics)
SECL
SDMA,SEMA (Electronics)
SDIM (SDI)
SCM (Corning), Corporation
SAPL (Electronics)
Corporation/Electro-Mechanics
SELA (Electronics)
SEIN (Electronics), Fire & Marine Insurance
SEDA (Electronics)
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
ƒ
Over 5 years (1998 to 2002) -Sales and net income increased 1.6 times
and 45 times, respectively.
¾
Sales in 2010: 1.9 times that of 2002
Pre-tax profit expected to increase
2.1 times
Sales
ƒ
Brand value
¾ $10.8 billion in 2003 (25th in the
world)
($8.3 billion in 2002, 34th)
¾ $70 billion in 2010
Net Income
116.8
(US$ Bil)
8.9
72.0
0.2
1998
2002
(Source: INTERBRAND)
7
III. Samsung’s Global Management and Management Strategy in East Asia
Overseas investment strategy
ƒ
1980s: Globalization’s beginnings
¾ Established sales subsidiaries mainly in developed countries.
¾ Built production facilities in Southeast Asia and Eastern Europe for roundabout export.
ƒ
Early 1990s: Acceleration of Global operation
¾ Responding to the international trend of regional trading blocs
→ entered local markets.
¾ Entered the Brazilian, Indian, and Chinese markets.
¾ Expansion into the U.K., Mexico, Malaysia, and other countries together with Samsun
g’s partners and affiliated companies.
ƒ
Late 1990s: Restructuring stagnated businesses due to quantity-oriented
overseas operations, and shifting the strategy to IT business
¾
ƒ
Established new subsidiaries in China, India, and other emerging markets.
2000s : Differentiation based on local characteristics
¾ 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
Technologies and information
U.S.A - Local marketing center
- R&D center
(product development,
design)
Parts/semimanufactures
Production facilities to secure
entry into local markets
Europe
Finished products
- Produce high-price-range products
- R&D and design centers
- Local marketing center
- Establish regional control
headquarters
Technologies
Global strategy control
headquarters
Base for
roundabout export
- Produce low-to-medium
Mexico class products
- Produce and supply parts
Korea
- R&D
- Develop and produce high
value-added products
-Develop international
management resources
-Production for roundabout
and Europe
- Production for re-import to Korea
-Establish procurement and
regional control headquarters
China
-Second domestic demand
market
-Production site for the
global market
-Utilize rich human resources
New export market
Center for Introducing
new technologies
Production site for
multiple purposes
Southeast export
Asia
- Supply parts to the U.S.A.
Second most
fundamental market
Japan
-R&D center
－Local marketing center
9
III. Samsung’s Global Management and Management Strategy in East Asia
Operations in China
ƒ
ƒ
ƒ
Electronics, ElectroMechanics,
SDI, Corning, etc.
Tianjin
68 locations nationwide
¾ 26 production facilities
北京
▣
天津
●
Electronics
Beijing
Sales in 2002: $7.7 billion
●
威海
Sales in 2003: $10 billion
Weihai
中國
China
蘇州
▣
●
●
Souzhou
上海 Shanghai
寧波
Ningbo
Heavy Industry
Shenzhen
Dongguan
R&D Center
Electro-Mechanics
東莞●
●
順德
Shunde
深圳
深
Ìã
●
▣
●
惠州
香港
Huizhou
Electronics, SDI,
Corning
Hong Kong
Corporation
10
III. Samsung’s Global Management and Management Strategy in East Asia
Chinese market strategy
ƒ
ƒ
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.
¾
Increase production facilities: 19 in 1999 → 26 in 2002
¾
R&D: Establish related R&D centers (including communication research facilities),
when building factories.
¾
Secure high-quality human resources under the initiative of the Head Office in Korea.
ƒ
Implement a strategy that emphasizes brand (image) in order to differentiate
the company’s products from others.
ƒ
Adopt a two-way sales strategy.
¾ Export of products made in China directed by the Head Office in Korea.
¾ 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
ƒ
Electronics-related corporations
¾
21 locations in 6 countries
¾
Sales in 2000: $3.1 billion
Sales in 2002: $4.2 billion
¾
(38% growth)
ƒ
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
ƒ
ƒ
Enhance brand value.
Increase top market share products in each country and expand sales of
high-end products.
¾
ƒ
ƒ
Supply aspect (production costs) → Demand aspect (market and earning
opportunities)
Enhance synergy effect of affiliated companies.
¾
Introduce innovative processes and implement bench marking among affiliated
companies.
¾
Conduct joint sales activities.
Secure high-quality human resources.
13
Thank You
Lee Soo Chul, Executive Vice President, Samsung Corporation